Ballarpur Industries Limited vs The Assistant Commissioner

B.R. Gavai, J.—The petitioner challenges Order No.69/97 dated 4.12.1997, Order No.68/97 dated 4.12.1997 and Order No.108/97 dated 29.12.1997 passed by respondent no.1 and the show cause notice dated 02.11.1998 issued by respondent no.1.

The facts in brief giving rise to the present writ petition are as under:-

The petitioner, a Public Limited Company, is engaged in the manufacture of paper and paperboards in it''s various factories one of which is situated at Ashti, district Gadchiroli. The paper, paperboard and articles manufactured by the petitioner are excisable goods, chargeable to excise duty and are classified under Chapter 48 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as "the Tariff Act" for short). In exercise of the powers conferred u/s 5-A of the Central Excise and Salt Act, 1944 (hereinafter referred to as "the said Act" for short), the Central Government issued Notification No. 8/1996 dated 27.03.1996. The notification prescribes excise duty at concessional rate of 10% ad valorem on paper, paperboard, articles made therefrom. By subsequent notification No. 28/96 dated 11.09.1996 a modification is made to the notification dated 27.03.1996 thereby providing that the minimum weight of pulp of unconventional raw material shall be 75% in place of 50%.

According to the petitioner, the petitioner at the relevant time was manufacturing the paper using 80 to 85% of unconventional pulp and as such was entitled to the exemption under the said notifications. After filing the classification list as required under the Rules, the petitioner claimed concessional rate of duty for various periods. It appears that on 22.08.1996, the Inspector, Central Excise, Ballarpur drew samples under test memo. According to the petitioner in the said sample, bamboo pulp used by the petitioner company was to the extent of 16% only and rest was the pulp made from the waste paper. It appears that subsequently a sample was taken by the Officer of the respondent of the finished product which was sent to the Chemical Examiner. The Chemical Examiner vide report dated 15.11.1996 found that the sample consists of wood pulp and as such cannot be considered to be made of unconventional pulp having the extent of 50% and above. Accordingly three show cause notices came to be issued to the petitioner, the first one was for the period between July, 1996 and September, 1996; the second one was for the period between September, 1996 and January, 1997 and the third one was for the period between February, 1997 and May,1997. The show cause notices were replied to by the petitioner. However, finding the contentions as raised by the petitioner to be not satisfactory, the impugned orders as mentioned in the foregoing paras came to be passed thereby imposing various amount of duties along with the interest as specified in the orders. On the very same ground, another show cause notice dated 02.01.1998 also came to be issued for the period from June, 1997 to October, 1997, which is also impugned in the present writ petition.

A notice was issued by the Division Bench of this Court on 11.02.1998. The respondents were duly served when the matter was listed on 23.03.1998. However, for the reasons best known, the respondents chose not to appear. The Division Bench of this Court consisting of S/Shri B.N. Srikrishna (His Lordship as then was) and S.P.Kulkarni, JJ. passed the following order:-

"Rule returnable early. Notice before admission was given to the respondents but they have chosen not to appear. In these circumstances, we reluctantly grant ad interim relief in terms of prayer clause (ii)."

After almost 16 years, the petition came up for hearing before this Court on Monday the 9th June, 2014 i.e. reopening day after vacation. However, Mr. S.K. Mishra, learned ASGI requested for an adjournment till today on the ground that the Officer instructing him was not available till Thursday and he would not be in a position to assist the Court in the absence of the said Officer. Accordingly we have adjourned the matter for today. We have extensively heard Mr. V.R. Thakur, learned counsel appearing on behalf of the petitioner and Mr. S.K. Mishra , learned ASGI appearing on behalf of the respondents.

Following submissions are made by Mr. Thakur, the learned counsel for the petitioner:-

The notification provides that a manufacturer would be entitled to concessional rate in case of the paper, paperboard or articles made therefrom manufactured, starting from the stage of pulp, in a factory and such pulp contains not less than 50% by weight of pulp made from the materials other than bamboo, hard woods, soft woods, reeds, (other than sarkanda) or rags. It is submitted that subsequently the said requirement of 50% has been increased to 75% by a subsequent Notification dated 11.09.1996. It is the bone of contention of Mr. Thakur that what is relevant for the purposes of exemption is as to whether 75% or above of the weight of the pulp is made from the materials other than the bamboo, hard woods, soft woods, reeds etc. He submits that if 75% or more of pulp made from unconventional materials is used while manufacturing the paper etc., the petitioner would be entitled to exemption. The learned counsel submits that by the communication dated 24.09.1997, the Central Board of Excise and Customs (for short CBEC), which is a supreme administrative authority insofar as the respondents are concerned, has itself clarified that any raw material not covered under the terms of bamboo, hardwoods, soft-woods is to be treated as an unconventional raw material for the purpose of granting exemption. The learned counsel further submits that not only this but the Full Bench of the CEGAT has also taken a view that what was relevant for grant of exemption was the use of unconventional pulp while manufacturing the paper and the Notification does not exclude the use of waste paper in the manufacturing of paper for the purpose of availing the benefit of the notification.

The learned counsel on facts submits that in a given situation the waste paper used by the assessee which use may be more than 80% by the assessee, the said waste paper may itself contain a large amount of bamboo wood etc. and as such the resultant product may contain the fibrous material more than the permissible extent. The learned counsel, therefore, submits that the method adopted by the respondents in sending the final product for analysis was totally erroneous. It is submitted that on the basis of the trade notice dated 29.10.1997, the respondents ought to have taken into consideration the records maintained by the assessee which were verified by the authorities themselves from time to time and upon perusal of the same passed the orders. The learned counsel, therefore, submits that the petition deserves to be allowed and the impugned orders need to be quashed and set aside. The learned counsel further submits that even the show cause notice which is issued on the basis of the erroneous assumption is also not liable to stand the scrutiny of law.

As against this, Mr. Mishra, learned Assistant Solicitor General of India, has with vehemence opposed the petition. The first limb of opposition by the learned ASGI is on the basis of availability of the alternative remedy to the petitioner. The learned ASGI armed with a plethora of judgments of the Apex Court as well as the Division Bench of this Court, submits that in central excise matters this Court should not at all entertain the petition when an alternative remedy is available to the assessee. The learned ASGI submits that though the petition may be pending in this Court for last 16 years, the Court must throw away the petition on the ground of alternative remedy. The learned ASGI in this respect relies on the judgments of the Apex Court and High Courts of Andhra Pradesh and Madras in the case of Alembic Glass Industries Ltd. vs. Union of India 1998 (97) E.L.T. 28 (S.C.); in the case of Union of India (UOI) Vs. Bajaj Tempo Limited and Others, ; in the case of Ceat Ltd. Vs. Assistant Collector, ; in the case of Nivaram Pharma Pvt. Ltd. Vs. The customs, Excise and Gold (Control) Appellate Tribunal, South Regional Bench, The Commissioner of Central Excise (Appeals) and The Assistant Commissioner of Central Excise, Madras IV Division, . The learned ASGI further relies on the judgment of the Division Bench of this Court in the case of Ispat Industries Limited Vs. Union of India (UOI) and The Deputy Commissioner of Central Excise, and in the case of Indoworth India Ltd. Vs. Customs, Excise and Service Tax Appellate Tribunal and Commissioner of Customs and Central Excise, . It is further contention of the learned ASGI for the respondents that when a complete adjudication machinery is provided under the statute right from the level of the Assistant Commissioner, Commissioner, CESTAT, this Court and the Apex Court, this Court should not permit the petitioner to bypass the said remedy and approach this Court directly. The learned ASGI further submits that if this is permitted, then every person will rush to this Court without availing of the remedy available to him. It is further submitted that when the petitioner has submitted itself to the jurisdiction of the Assistant Commissioner and after having invited an order, it is not permissible for it now to say that the Assistant Commissioner has erroneously passed an order and approach this Court directly bypassing the statutory remedy. The learned ASGI further submits that the petition challenging the show cause notice itself would not be tenable.

On merits, the learned ASGI submits that the duty is chargeable on a final product and not on raw material and as such the contention of the petitioner that the composition of the raw material is required to be taken into consideration is without substance. The learned ASGI submits that the waste paper theory as propounded by the petitioner is not to be found in the Notification. The learned ASGI relying on settled principles of law that the notification has to be construed strictly, submits that since the notification does not recognise the waste paper theory, the contention of the petitioner should be rejected. The learned ASGI further submits that the communication of CBEC and the trade notice issued by the Commissioner are prospective in nature. The learned ASGI submits that since the impugned orders and the show cause notice are for a period prior to the issuance of the communication by the CBEC, the same would not be retrospectively made applicable. The learned ASGI submits that in any case the Notifications on the basis of which the petition has been filed, are not included in the directives of the CBEC and as such the same would not be applicable to the petitioner''s case.

We will first deal with the preliminary objection raised by the learned ASGI. The first objection is regarding availability of an alternative remedy. No doubt that normally this Court would not exercise its extra ordinary jurisdiction under Article 226 of the Constitution of India when an alternative statutory remedy is available to a party. No doubt the learned ASGI is right in contending that the petitioner is having an alternative remedy. However, it is to be noted that prior to admitting the present matter, this Court had issued notice before admission to the respondents. For the reasons best known to them, the respondents have chosen not to respond to the notice issued by this Court. The perusal of the order dated 23.03.1998 passed by this Court which we have reproduced hereinabove, would show that, in what circumstances Rule and interim relief was granted by this Court. The petition pends thereafter for a 16 long years. As would be discussed hereinafter, the question involved in the present matter is on a narrow compass, though the learned ASGI with his expertise has attempted to widen the same. In our considered view it will not be in the interest of justice to throw away the litigation after making it wait in the corridors of justice for the last 16 years. We find support in that regard from the judgment of the Apex Court in the case of L. Hirday Narain Vs. Income Tax Officer, Bareilly, It will be relevant to refer to para 12 of the said judgment:

"An order u/s 35 of the income tax Act is not appealable. It is- true that a petition to revise the order could be moved before the Commissioner of income tax. But Hirday Narain moved a petition in the High Court of Allahabad and the High Court entertained that petition. If the High Court had not entertained his petition, Hirday Narain could have moved the Commissioner in revision, because at the date on which the petition was moved the period prescribed by s. 33A of the Act had not expired. We are unable to hold that because a revision application could have been moved for an order correcting the order of the income tax Officer under s. 35, but was not moved, the High Court would be justified in dismissing as not maintainable the petition which was entertained and was heard on the merits.

The High Court observed that under s. 35 of the Indian income tax Act, 1922, the jurisdiction of the income tax Officer is, discretionary. If thereby it is intended that the income tax Officer has discretion to exercise or not to exercise the power to rectify, the view is in our judgment erroneous. Section 35 enacts that the Commissioner or Appellate Assistant Commissioner or the income tax Officer may rectify any mistake apparent from the record. If a statute invests a public Officer with authority to do an act in a specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when a party interested and having a right to apply moves in that behalf and circumstances for exercise of authority are ''shown to exist. Even if the words used in the statute are prima facie enabling the Courts will readily infer a duty to exercise power which is invested in aid of enforcement of a right -public or private-of a citizen.

The facts in the present case are almost identical. The petition has been admitted prior to 16 years and is pending before this Court. By now it is settled principle of law that an exercise of jurisdiction by this Court under Article 226 of the Constitution of India in the availability of an alternative remedy is a rule of self restraint and not a hard and fast rule. No straight jacket formula can be formulated to decide as to when this Court should exercise the jurisdiction in the availability of an alternative remedy and when it should not. The judgments on which the learned ASGI has relied, are mostly arising out of the petitions which were either entertained or not entertained and dismissed in limine. In that view of the matter we find that it would not be necessary to refer to the judgments relied on by Mr. Mishra, learned ASGI in that regard. It is further to be noted that the Constitution Bench of the Apex Court in the case of A.V. Venkateswaran, Collector of Customs, Bombay Vs. Ramchand Sobhraj Wadhwani and Another, has held that where the order levying duty at the higher rate is based on an incorrect interpretation of the tariff entry and that too on the Board''s ruling, the alternative remedy would not operate as a bar in exercising writ jurisdiction under Article 226 of the Constitution of India. In the present case, as would be discussed by us hereinafter, it would be clear that the impugned orders are based on either ignorance of the directives of the CBEC and the Commissioner of Central Excise, Nagpur or without correctly interpreting the same. In that view of the matter, we are not inclined to accept the contention of the learned ASGI, insofar as the non-exercise of the jurisdiction on the ground of alternative remedy is concerned. For the same reason, we are not inclined to accept the contention of the learned ASGI that since the complete machinery is provided under the statute, we should throw away the petition after having entertained the petition for last 16 years. The contention of Mr. Mishra that if this is permitted every person will rush to this Court, is heard only to be rejected. The learned ASGI is himself aware of various petitions wherein he has appeared and which have been dismissed by the Benches to which either of us are party, on the ground of availability of alternative remedy. However, that has been done at the threshold. The same analogy cannot be applied to the petition which is pending before this Court for last 16 years.

Insofar as the next submission that having submitted to the jurisdiction of the authority, the petitioner now cannot be permitted to come to this Court is concerned, in our considered view the said submission has also to be rejected. The coordinate Bench of this Court prior to 16 years has admitted the present writ petition. Apart from that if the Authority commits an illegality and continues to do so, then this Court cannot be expected to close its doors.

Having rejected the submissions made by the learned ASGI insofar as preliminary objections are concerned, now we proceed to consider the matter on merits. It will be relevant to refer to the relevant part of the Notification dated 23.07.1996 which reads thus:-

The only change in the Notification dated 01.03.1997 is that the requirement of 50% pulp made from unconventional pulp material has been increased from 50 to 75% and as such it would not be necessary to again reproduce the part of Notification dated 01.03.1997. It could thus be clearly seen that the Notification prescribes a concessional tariff in case of paper and paperboard or articles made therefrom manufactured, starting from the stage of pulp, in a factory and such pulp contains not less than 75% by weight of pulp made from materials other than bamboo, hard woods, soft woods, reeds (other than sarkanda) or rags. It could thus be seen that what is required as per the notification for grant of exemption is that 75% or more of the pulp used in manufacturing of the paper etc. shall be from unconventional material. It appears that the purpose of granting such exemption has been to protect the environment, inasmuch as reduction of conventional material for the pulp, like bamboo, hard woods, soft woods, reeds etc., would promote safeguarding of the national wealth of the nation. It further appears that there was a confusion amongst the various authorities as to whether any raw material not covered under the terms of bamboo, hard woods, soft woods, reeds etc., is to be treated as unconventional raw material for the purposes of granting exemption under Notification Nos. 22/94, 73/95 and 4/97. The CBEC vide communication dated 24.09.1997 has issued a clarification and specifically provided that any raw material not covered under the terms of bamboo, hardwoods, soft-woods etc. is to be treated as an unconventional raw material for the purpose of granting exemption under various notifications. The perusal of the Notification No. 22/94 which is reproduced at Annexure-E of the paper book, would reveal that the said Notification is pari materia identical with the Notification No. 4/97 dated 01.03.1997. Not only this, but on the basis of the said communication by CBEC, Commissioner of Central Excise, Nagpur, himself has issued a trade notice dated 29.10.1997 thereby prescribing the procedure which should be followed while considering a case of assessee for grant of exemption.

The perusal of the record would reveal that the petitioner''s another factory in the State of Orissa has also been assessed for grant of similar exemption by the authorities therein. It will be relevant to refer to the order passed by the Deputy Commissioner, Central Excise and Customs, Rayagada Division, Rayagada (Orissa) dated 21.06.2000 which reads thus:-

"Coming to the merits of the case I observe that waster papers are completely separate and new material coming into existence during the production of final product in the factory of assessee. So even if they are manufactured out of pulp containing conventional raw materials they should be treated separately as a single product other than bamboo, hard wood etc. The Tribunal in the matter of 1999 (107) ELT 631 has already held that the exemption notifications does not exclude the use of waste paper in manufacturing paper for the purpose of availing benefit of notification and as such Department cannot exclude its use by implication. Hon''ble Tribunal has also held that Department cannot go back to find out how the waster paper was manufactured. Going by the Central Board of Excise and Customs Circular F. No. 61/16/97-CX.4 dated 24.9.97 as circulated vide Bhubaneshwar Commissionerate Trade Notice No.92/GL-78/97 dated 27.10.97 it also becomes clear that waster papers should be taken as an unconventional raw material."

It could thus be clearly seen that the Authority in Orissa has clearly held that even if the product is manufactured out of the pulp containing waste paper, the same has to be treated as an unconventional raw material and benefit has to be accordingly given to the assessee. The Full Bench of the CEGAT in the case of 1999 (107) ELT 631 has held thus:-

"We have considered the submissions of the ld. DR and perused the records. There is no force in the submissions of the department that as waste paper was made out of wood, the total percentage of wood made out of wood was more than 50%. The Notification No.25/84 exempted paper and paper board manufactured out of pulp containing not less than 50% by weight of pulp made from materials (other than bamboo; hardwoods, softwoods, reeds and rags). It is not the case of the department that the pulp used by them was containing more than 50% materials such as bamboo, hardwoods, softwoods, reeds and rags. The Notification does not exclude the use of waster paper in the manufacturing of paper for the purpose of availing the benefit of Notification. When Notification does not exclude the use of "waste paper", the department cannot exclude its use by implication. The only material fact is that the paper was manufactured out of pulp containing not less than 50 per cent by weight of pulp made from materials other than bamboo, hardwoods, softwoods, reeds or rags. The department cannot go back to find out as to how the waster paper used in the manufacture of pulp, was manufactured. Accordingly the benefit of Notification is available to the Respondents as they have satisfied the condition specified in the Notification about the pulp. Further, the Central Board of Excise and Customs, under letter F. No.61/16/97-CX.4 dated 24.9.1997, has clarified that any raw material not covered under the terms of bamboo, hardwoods, softwoods, is to be treated as an unconventional raw material for the purpose of granting exemption under Notification Nos. 22/94-C.E., dated 1.3.1994; 73/95-C.E., dated 20.3.1995 and 4/97-C.E., dated 1.3.1997. The wordings of one of the Notification i.e. 22/94 C.E. are identical to Notification No.25/84 as the Notification provides a concessional rate of duty to Paper and Paper Board or articles made therefrom if such paper and paper board or articles have been manufactured out of pulp containing not less than 75% by weight of pulp made from materials other than bamboo, hardwoods, softwoods, reeds (other than sarkanda) or rags. The Department is bound by the clarification issued by the Board and it cannot be claimed by them that use of waste paper will make the paper, manufactured by the Appellants, non eligible to the benefit of the Notification No.25/84-C.E. Accordingly, we do not find any reason to interfere with the impugned order passed by the Collector (Appeals) and reject the appeal filed by the Revenue."

No doubt that the said judgment of the CEGAT is not binding on us. However, the same will have a persuasive value. The CEGAT has in clear terms held that the Notification, which is in pari material to the Notification in the present case, does not exclude the use of waster paper in the manufacturing of paper for the purpose of availing the benefit of Notification. It clearly held that when the Notification does not exclude the use of "waster paper", the department cannot exclude its use by implication. As such the only question that could be gone into by the authority is as to whether while manufacturing the paper etc. the assessee has used bamboo, hard woods, soft woods, reeds etc. more than the permissible limit. If the use of such conventional material is more than 25% or 50% as per the relevant notifications, the assessee would not be entitled to the exemption. However, if the use of the conventional material is less than 50% or 25%, he would be entitled to exemption.

If a waste paper is used as a raw material and if such waste paper itself contains the conventional material, then the resultant product may contain the conventional material more than the permissible limit. As such the method that is adopted by the respondent-Authority would not truly depict as to whether the use of the material at the stage of preparation of pulp was within the permissible limit or not. No doubt that we do not possess any expertise in such matters. However, the Commissioner of Central Excise , Nagpur on the basis of the communication of the CBEC has itself now clarified the entire procedure which should be gone into while considering as to whether the assessee is entitled to exemption or not.

We are not impressed with the submission of Mr. Mishra that the said trade notice dated 29.10.1997 and the communication of the CBEC dated 24.09.1997 cannot be made retrospectively available, inasmuch as the period for which the orders are passed against the petitioner are prior to the issuance of the said trade circular and the communication. The communication of the CBEC and the subsequent trade notice only clarify as to what is provided under the Notification. The said trade notice or the communication do not have effect of either substituting or replacing as to what is provided under the Notification. The said communication and the trade notice are only clarificatory in nature and provide for the manner in which the procedure has to be followed for determining as to whether an assessee is entitled to exemption or not. In any case though the period for which the show cause notices were issued to the petitioner, are prior to the communication of the CBEC and the trade notice issued by the Commissioner and the impugned orders are passed much thereafter. The communication of the CBEC is dated 24.09.1997 whereas the trade notice is dated 29.10.1997. The impugned orders are passed on 04.12.1997. The Assistant Commissioner of Central Excise who is undoubtedly an Authority inferior to the Commissioner of Central Excise and the CBEC ought to have taken into consideration the said communication and the trade notice.

To a pertinent query, Mr. Mishra in his usual fairness has submitted that after the issuance of the trade notice and the communication by the CBEC, the respondents are now following the procedure as prescribed under the trade notice dated 29.10.1997.

Leaving aside the legal position, but on a common sense ground, we find that, if on the basis of the same notification if prior to 29.10.1997 a different procedure is permitted to be followed and after 29.10.1997 a different procedure is permitted to be followed on the basis of the same notification, it would amount to giving discriminatory treatment in the case of same assessee for different period. In this view of the matter on the basis of common sense logic also, we do not find that the approach adopted by the respondents is sustainable in law. We accordingly partly allow the petition.

The impugned Order Nos. 69/97 dated 4.12.1997, 68/97 dated 4.12.1997 and Order No.108/97 dated 29.12.1997 are quashed and set aside and the matter is remitted back to the respondent no.1-Authority for deciding it afresh in accordance with what is held by us hereinabove and in the light of the communication of the Central Board of Excise and Customs dated 24.09.1997 and the trade notice dated 29.10.1997 issued by the Customs and Central Excise, Nagpur. Insofar as the challenge to the show cause notice dated 02.11.1998 is concerned, we dismiss the petition and direct the petitioner to submit to the authority of the respondent no.1. On the reply being filed by the petitioner, the respondent no.1 shall also decide the proceedings on the basis of the show cause notice dated 02.01.1998, in accordance with what is held by us hereinabove and particularly the communication of the Central Board of Excise and Customs dated 24.09.1997 and the trade notice issued by the Commissioner of Customs and Central Excise, Nagpur dated 29.10.1997 and in the event the record as required under the trade notice was not required to be maintained during the relevant period, then on the basis of the record which the petitioner was required to be maintained statutorily.

Rule in the above terms. No costs.