Grasim Industries Limited and Another vs Union of India (UOI) and Another

Jawahar Lal Gupta, J.—The petitioners herein made an attempt to recover two amounts of Rs. 45,71,565.21 and Rs. 91,996.65 before the Assistant Collector of Central Excise. Vide order dated April 28,1987, the application submitted by the petitioners on March 19,1987, was allowed to the extent that a refund of Rs.30,805.05 was permitted. The claim for the refund of the remaining amount was rejected on the ground that it was barred by limitation u/s 11B of the Central Excise and Salt Act, 1944, (hereinafter referred to as the Act). Aggrieved by the order, the petitioner-company along with one of the shareholders, who is also its Vice President, has approached this Court through the present petition. A few facts may be noticed.

The petitioner company is engaged in the manufacture of textile fabrics of different varieties. It produces certain varieties of yarns containing different percentages of polyester, viscose, acrylic and cotton. From the year 1977 to 1980, it is averred, that the company paid excise duty under the mistaken belief that the goods produced by it were covered under Tariff Item Nos. 18 III(ii) and 18-E. It is claimed that in fact the yarns produced by the company fell under Tariff Item No. 68 and were covered under the exemption granted by the Govt, of India. According to the petitioners, no duty was leviable on the yarn produced by them. The petitioners claim to have discovered this factual position when the Custom, Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as the Tribunal) decided the matter by an order conveyed to the company on January 22,1987. It is averred that after the receipt of the order, the petitioner-company realised its mistake regarding the payment of excise duty for the period from June 18, 1977 to January 24, 1980 and accordingly moved an application for refund of the amounts paid under a mistake of law. Its claim for the major part of the amount having been declined by the orders mentioned above, the company has approached this Court through the present petition. It has been inter alia averred that the yarn in question had not been sold to the consumers and, therefore, there was no question of the petitioners having recovered the excise duty from the consumers. According to the petitioners, the yarn was consumed in the manufacture of fabrics either within the factory of production or in another factory belonging to them at Gwalior. On this premises, it has been averred that the excise duly has not been recovered from the consumers. A number of ground have been raised for challenging the impugned order.

The petitioners had initially filed Civil Writ Petition No. 1491 of 1987 before the High Court of Delhi. That petition was withdrawn "with liberty to take such steps as are permissible under the law". Accordingly, leave was granted and the petition was dismissed as withdrawn. The petitioners do not appear to have taken any further steps, like filing of appeal etc. and have approached this Court through the present petition.

On behalf of the respondents, Mr. Ashutosh Mohunta claimed to have filed written statement. Copy thereof was, however, not available on the record of the case. With the consent of the Learned Counsel for the parties, a copy of the written statement has been taken on record. Besides controverting the claim made in the petition, a preliminary objection has been raised that the petitioners having not availed of the statutory remedies of appeal etc. under Sections 35 and 35B of the Act, the present petition is not maintainable in law.

I have heard Mr. J.K. Sibal, learned Counsel for the petitioners and Mr. Ashutosh Mohunta for the respondents. Mr, Sibal has contended that in accordance with the decision rendered by the Tribunal on December 23, 1986 (a copy of which has been produced as Annexure P-4), the expression "predominates in weight" used in Tariff Item 18 can only mean that the man-made fibre of cellulosic origin should be more than 50% of the total weight of the yarn. He submits that in view of the fact that the man-made fibre of non-cellulosic origin is either 48% or 47%, it cannot be said that the man-made fibre of non-cellulosic origin predominates. Accordingly, the learned Counsel contends that the fibre/ yarn produced by the petitioners fell under Tariff Item 68 only and no duty could have been charged thereon. The duty having been paid under a mistake of law, the petitioners are entitled to the refund claimed by them. On the other hand, Mr. Ashutosh Mohunta contends that the excise duty having been paid without any protest, the claim for refund after the expiry of so many years is barred in view of the provisions of Section 11B of the Act. He further submits that the claim of the petitioners that the product is covered under Tariff Item No. 68 is wholly untenable. Learned Counsel also raised a contention that the petitioners had an effective alternative remedy u/s 35 of the Act. Consequently, according to the learned Counsel, the present petition is not maintainable. He further submits that in any event, the petitioners were not entitled to refund in view of the provisions of the Central Excises and Customs Laws (Amendment) Act, 1991 (Act 40 of 1991).

Are the petitioners entitled to the refund claimed by them? Was the excise duty paid under a mistake of law?

The relevant entries which call for examination may be noticed. These are 18-III(ii), 18-E and 68. Only the relevant portions may be extracted. These read as under:-

III. Cellulosic Spun Yam--

Yarn, in which man-made fibre of cellulosic origin predominates in weight and, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power -

(ii) containing more than one-sixth by weight of non-cellulosic fibre on the total fibre content. Eighteen rupees per kilogram .

Explanation III.--Where two or more of the following fibres, that is to say,-

(a) man-made fibre of cellulosic origin;

(b) cotton;

(c) wool or acrylic fibre, or both;

(d) silk (including silk noil);

(e) jute (including Bimplipatam jute or mesta fibre);

(f) man-made fibre of non-cellulosic origin, other than acrylic fibre;

(g) flax;

(h) ramie,

in any yarn are equal in weight, then, such one of those fibres the predominance of which would render such yarn fall under that sub-item or Item (hereinafter in this Explanation referred to as the applicable sub-item or Item), among the sub-items and Items Nos. 18 III, 18-A, 18-B, 18-C, 18-D, 18-E, 18-F and 18-FI and 18-FII, which, read with the relevant notification, if any, for the time being in force issued under the Central Excise Rules, 1944, involves the highest amount of duty, shall be deemed to be predominant in such yarn and accordingly such yarn shall be deemed to fall under the applicable sub-item or item as the case may be.

18-E. Non-cellulosic spun yam--

Spun (discontinuous) yarn, in which man-made fibres of non-cellulosic origin other than acrylic fibre, predominate in weight and, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. Twenty-four rupees per kilogram .

Explanation--Explanation III under sub-item III of Item No. 18 shall, so far as may be, apply in relation to this item as it applies in relation to that Item.

All other goods, not elsewhere specified, but excluding--

(a) alcohol, all sorts, including alcoholic liquors for human consumption; Eight percent

(b) opium, Indian hemp and other narcotic drugs and narcotics; and ad valorem

(c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).

A perusal of the Tariff Item 18-III shows that Excise duty is leviable thereunder when "man-made fibre of cellulosic origin predominates in weight". What does "predominates in weight" mean? Webster''s Third New International Dictionary (1981 Edition) inter alia describes the word "predominates" to mean--(i) to exert controlling power and influence, (ii) to hold advantage of numbers and quantity. "Predominance" has been inter alia described as numerical superiority. In Corpus Juris Secundum "predominant" has been described as--"in its natural and ordinary signification, something greater or superior in power and influence to others with which it is connected or compared". "Predominate" has been inter alia described as meaning "to have superior strength, power, or authority".

In the context of Tariff Item 18-III, predominance does not mean absolute majority. It can only mean "an advantage of number or quantity". It can only imply numerical superiority. If a fibre has three ingredients, say in the ratio of 40:30:30, the Item which weighs 40% can be said to be predominant in weight. This appears to be even the legislative interest [intent?]. A perusal of explanation III to Item 18(III) shows that a particular fibre can have as many as eight ingredients. Even if the weight of all the yarns is equal, the legislature provides that "such one of those fibres, the predominance of which would render such yarn fall under that sub-item. which involves the highest amount of duty shall be deemed to be predominant in such yarn." A perusal of the Explanation, in my view leaves no doubt that "pre-dominance in weight" does not mean that the man-made fibre of cellulosic origin should be more than 50% by weight. If the contention of the learned Counsel for the petitioners is accepted, it would become very easy for every manufacturer of yarn to keep each one of the ingredients at 50% or below and thus avoid payment of excise duty. On a perusal of the relevant entries, I am of the view that the yarn produced by the petitioners does not fall under Tariff Item 68. In this view of the matter, it is apparent, that the excise duty was correctly levied and was rightly paid by the petitioners. There was no mistake of law and as such the question of refund does not arise.

In the view that I have taken, it is not necessary for me to examine the other contentions regarding limitation or the maintainability of the petition on account of the availability of alternative remedies under the Act. In may view, the levy was not illegal and as such the petitioners are entitled to no refund.

Accordingly, the writ petition is dismissed. The respondents shall be entitled to their costs which are assessed at Rs.3000/-