Case: Century Spinning and Manufacturing Company Limited Vs. Union of India

( 1 ) THE 1st petitioner company owns a factory known as Century Rayon situated at Shahad near kalyan. The 2nd petitioner is the principal officer and shareholder of the 1st petitioner company. The petitioner company, for brief, inter alia manufactures rayon tyre yarn. The said rayon tyre yarn is then arranged in parallel rowsand loosely held together by cotton threads runningto hold them in the said position. This arrangement is popularly known as warpsheet or tyre cord warpsheet. According to the petitioners, the said warpsheet is classifiable under Tariff Item No. 22 or in the alternative under Tariff Item No.2 ) PRIOR to 1st March 1975, the petitioner company paid excise duty on rayon tyre yarn which was manufactured, as aforesaid, by holding the rayon tyre yarn in parallelarrangement held together with loose cotton threadsThe respondent department accepted the petitioners contention and the classification made in the returns and they were allowed to clear the said warpsheet. No separate duty was paid on yarn and warpsheet as it was correctly understood that warpsheet was not subject to separate excise3 ) BY a letter dated 4th March 1975, the Superintendent, Central Excise, Kalyan, intimated the petitioner company that a new Tariff Item, namely Tariff Item No. 68, has been introduced and called upon the petitioner company to declare the goods falling under Tariff Item No. 68 and follow the prescribed procedure for clearance of the said goods on payment of excise duty. Despite the said letter, while correspondence between the parties was going on, the respondent department cleared the petitioner companys product warpsheet respondent department cleared the petitioner companys product warpsheet under Tariff Item No. 18 upto the period of4 ) FOR the period8, the petitioners resisted and paid excise duty under Tariff item No. 18, immediately followed by the following show causeShow cause notice dated 17th November 1978 (Exhibit T); (ii) Show cause notice dated 6th April 1979 (Exhibit `w), (iii) Show cause notice dated 16th April 1979 (Exhibit `x); and (iv) Show cause notice dated 18th July 1979 (Exhibit `z ). By these show cause notices, the respondents asked the petitioners to pay : (1) Short levy on the tyre cord warpsheet; (2) Short levy on the rayon tyre cord; and (3) levy of duty on the rayon content in the warpsheet5 ) ON 7th June 1979, the respondent department fixed a date for final hearing of the first show cause notice. The hearing was held on 3rd July, 1979, but by order dated 22nd August 1979 at exhibitthe respondent department disposed of all the four cause notices mentioned above. The petitioner, feeling aggrieved by the said order, whereby the contention of the petitioner company was rejected by, inter alia, holding that the warpsheet manufactured by the petitioner company was classifiable under Tariff Item No. 68, has preferred this writ6 ) RULE was issued and after hearing both parties, interim stay order injunction were ordered on 11th October, 1979

Court's reasoning:
For understanding the product better, on our request the petitioners produced the warpsheet. It was explained to us that ordinary rayon yarn when twisted becomes a rayon cord and a set of rayon cords kept parallel lengthwise if loosely held by cotton thread in the same position is conveniently called a warpsheet or a rayon tyre cord warpsheet. The end parts at the end of the warpsheet are merely to hold the warpsheet, but are not a part of the product which is used in the manufacture of the tyre. Ultimately the end parts are waste product. Thus what is the usable part is the manufactured rayon cords which is supplied by the petitioner company to various tyre10 ) IN view of the settled position, we have no hesitation to hold that the warpsheet or the rayon tyre cord warpsheet is not `goods as contended by the respondent department and cannot be covered by Tariff Item No. 68. The conclusion arrived at in the impugned order at Exhibittherefore, is totally erroneous. We, therefore, declare that the said product can only be classified under Tariff Item No. 18. ( 11 ) THIS will dispose of the respondents contention in show cause notice dated 16th November 1978 at Exhibit `t. ( 12 ) AS regards the 2nd and 4th show cause notices at Exhibits `w and `z, they relate to the levy of excise on the rayon content in the warpsheets exported. For this purpose also the reasoning of the department is that it is a product freely marketable and exported out of India and, therefore, they have claimed levy of excise duty on the rayon content in the warpsheets. Since, however, we have held that warpsheets is nothing but rayon cord and is a product which is used in the manufacture of tyre, under Rule 13 of the Central Excise Rules this product is totally exempt from any levy for export. This will dispose of the 2nd and 4th show cause notices at Exhibits `w and `z respectively. ( 13 ) LASTLY remains the 3rd show cause notice at Exhibit `x which is for short levy of rayon cord. We need not go into the contention of the department on this aspect for the simple reason that this issue has been already decided by the Assistant Collector of Central Excise. Reference may be made to the additional affidavit filed by the petitioner on 20th February 1992 wherein it is stated, and not disputed by the department, that on remand from the High Court the Assistant collector has decided that rayon cord is classifiable under Tariff Item No. 18 as contended by the petitioner and thereafter since 1983 the same view has been followed by the department. This dispose of the third show cause notice at Exhibit `x.( 14 ) AT the stage of final hearing, Shri R. V. Desai, the learned counsel for the department, urged that since there is an alternate statutory remedy available to the petitioner of preferring an appeal to the Tribunal, this writ petition should not be entertained by this Court under Article 226 of the constitution of India. This submission is merely to be stated to be rejected for the simple reason that Rule was issued after hearing both the parties in the year 1979 and it is too late in the day at the stage of final hearing of the petition in the year 1992 to take a preliminary objection for the exercise of ourpowers under Article 226 of the Constitution. Even otherwise we find that our order is based on Supreme Courts decision cited above and the decision of the department itself, leaving no scope for further discussion.