Hordillia Chemicals Ltd. and another vs Union of India and others

The petitioners manufacture, inter alia, Cumene, the chemical name whereof is Isopropyl Benzene. The petitioners are the only manufacturers of Cumene in India. They use Cumene for the manufacture of Phenol and Acetone in the factory in which they make it.

The petitioners are entitled to and received the benefit of an exemption notification dated 21st December 1967 issued in exercise of the powers conferred by Rule 8 of the Central Excise Rules, 1944. The notification reads thus :

"In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the excisable goods falling under Items 6 to 11A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) produced in any premises (other than the premises wherein refining of crude petroleum or shale of blending of non-duty paid petroleum product is carried on) declared under sub-rule (2) of Rule 140 of the Central Excise Rules, 1944, to be a refinery, and -

(a) Utilised in the refinery in which the said excisable goods are produced, for the manufacture of other goods or as fuel for such manufacture (excluding fuel used for any internal combustion engine) or both;

(b) allowed to escape the atmosphere by flare system or otherwise; or

(c) cleared to another factory outside the refinery in accordance with the procedure set out in Chapter X of the Central Excise Rules, 1944 for use in the manufacture of any of the commodities specified in the Schedule hereto annexed otherwise than as fuel from the whole of the duty of excise leviable thereon u/s 3 of the Central Excises and Salt Act, 1944 (1 of 1944);

Provided that any of the excisable goods having its flashing point below seventy-six degrees Fahrenheit''s thermometer and less than 7 by volume of which distils above 215 deg. C, and cleared under this clause for use as industrial fuel (but not as fuel for internal combustion engine) shall be exempt from so much of the duty leviable thereon as is in excess of -

(a) Rs. 103.43 per kilolitre at fifteen degrees of centigrade thermometer in the case of goods falling under Item Nos. 6, 7, 8 and 9 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944); and

(b) Rs. 98.50 per kilolitre at 15 deg. C in the case of goods falling under Item Nos. 10 to 11A of the aforesaid First Schedule :

Provided further that nothing contained in this notification shall apply to excisable goods, falling under Item No. 9 of the aforesaid First Schedule, having its flashing point below seventy-six degrees of Fahrenheit''s thermometer and not less than 7 by volume of which distils above 215 deg. C

SCHEDULE

Antibiotics

Carbon Blacks

Chemicals

Chemicals formulations

Dye-stuffs and dye-stuff intermediates

Pesticides

Pharmaceuticals

Plastics

Plasticisers

Polyisobutylenes

Synthetic fibres

Synthetic rubbers.

(Notification No. 276/67-C.E., dated 21-2-1967 as amended by Notifications No. 121/68-C.E. dated 20-5-1968; No. 11/63-C.E., dated 22-2-1969; No. 148/70-C.E., dated 23-7-1970; No. 356/77-C.E., dated 16-12-1977; No. 42/79-C.E., dated 1-3-1979 and No. 116/79-C.E., dated 16-3-1979)".

That the petitioners are a refinery is borne out by a photostat copy of the order in that behalf (which is ordered and marked Ex-A).

The petitioners, when short of Cumene, import it. A consignment of 2,000 M.Ts of Cumene imported by the petitioners arrived in Bombay in or around November 1982. The petitioners were asked by the Customs authorities to pay additional duty thereon.

Additional duty is leviable under the provisions of Section 3 of the Customs Tariff Act, 1975, which inter-alia reads as follows :

"Levy of Additional Duty equal to Excise Duty" "(i) Any article which is imported into India shall, in addition, be liable to a duty (hereinafter in this section referred to as "the additional duty") equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value the additional duty to which the imported article shall be so liable shall be calculated at that percentage of value of imported article.

Explanation : In this section, the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or if a like article is not produced or manufactured which would be leviable on the class or description of the article to which the imported article belongs and where such duty is leviable at different rates the highest duty.

The provisions of Customs Act, 1962 (52 of 1962) and the Rules and Regulations made thereunder including those relating to drawbacks, refunds and exemptions from duties shall be so far as may be applied to the duty chargeable under this Section as they apply in relation to duties leviable under that Act".

It is the contention of Mr. Taleyarkhan, learned counsel for the petitioners, that, inasmuch as no excise duty is leviable on Cumene by reason of the exemption notification aforementioned, on additional duty is payable on the said consignment of Cumene imported by the petitioners. Mr. Taleyarkhan drew my attention to the judgment of a Division Bench of this court in Century Enka Ltd. v. Union of India, 1982 E.L.T. 64 (Bom.). It was there held that the plain reading of Section 3 of the Customs Tariff Act made it clear that additional duty cannot be levied on an article imported into India if such article when manufactured in India is exempt from the payment of excise duty. It was futile to urge, as the Customs authorities had there done, that an exemption notification issued under the Central Excise Act had to bearing on the liability to pay additional duty under the Customs Tariff Act. The judgment proceeded to consider the submission made on behalf of the Customs authorities that the exemption notification there concerned provided for the exemption only on a certain condition. The Division Bench observed that it was true that the raw material was exempt from the payment of excise duty provided it was used in the manufacture of the stated finished product. The petitioners had averred that the material imported was to be used in their factory for such manufacture. The Customs authorities had not filed any affidavit in reply. The correspondence between the parties left no doubt that the Customs authorities did not dispute the accuracy of the statement. In the circumstance, the Division Bench was satisfied that the conditions mentioned in the exemption notification were satisfied.

In O.O.C.J., Writ Petition No. 660 of 1981, M/s. Shri Ambuja Petrochemicals Ltd. v. Union of India, I had occasion to consider the exemption notification dated 21st December, 1967 which I have quoted above in the context of the levy of additional duty on another item covered by it. Being bound by the aforesaid decision in the Century Enka''s case, I made that petition absolute by my judgment and order dated 27th November, 1984.

Being bound by the judgment in Century Enka''s case and following it, I hold that the petitioners are entitled to the clearance of the said consignment of Cumene without having to pay additional duty thereon.

The petition succeeds and is made absolute in terms of prayer (a). No order as to costs.

The petitioners have, under the terms of an interim order dated 25th November, 1981, furnished a bank guarantee. The bank guarantee shall stand discharged.