J.M.P. Manufacturing Company vs Union of India (UOI) and Others

M.M. Punchhi, J.—The writ petitioner is a Private Limited Company. It is in the business of manufacturing Malleable Iron Castings Inserts. This component goes towards manufacturing of fabricating concrete sleepers used for laying railway tracks. In each concrete sleeper 4 MIC Inserts (the abbreviated term) are used. The concrete sleepers are laid by the Railways itself. This apparently is a new device, for otherwise timber sleepers were used in railway tracks in the past. The MIC Inserts are supplied by the petitioner company to Indian Railways directly and it is the Railways who in turn use it to manufacture or fabricate the concrete sleepers.

Dispute has arisen between the petitioner and the Central Excise authorities as to whether MIC Inserts fall within item 7302 of the Central Excise Tariff. According to the excise authorities the MIC Insert is "material specialised for jointing or fixing rails" and would thus be dutiable at the rate of 15 per cent ad valorem. The petitioner claims that the MIC Insert per se is not a material specialised for jointing or fixing rails. It is rather the concrete sleeper as such. It is further maintained on behalf of the petitioner that the MIC Insert looses its identity once it gets embedded in the concrete sleeper, and what the petitioner manufactures does not go directly as a material specialised for jointing or fixing rails. On this reasoning, the petitioner claims that the component manufactured by it falls under item 73.07 of the Central Excise Tariff and being an item of iron was chargeable at the rate of Rs. 80/- per ton. It is further claimed that payment of excise duty on that item was even exempt under notification dated August 1, 1983, as amended on March 1, 1984, appended with the writ petition as Annexure P-20.

It is well settled that whether an item falls under one or the other head of the Central Excise Tariff is" a question of law and this Court is not debarred from going into such a question under Article 226 of the Constitution. But at the same time it does not mean that questions of law cannot be left to the departmental authorities to decide. Ordinarily a matter like the present one should be left to be decided by the authorities dealing with the subject. The matter as such is not free from doubt.

Learned counsel for the petitioner, however, contends that there is a directive of the Board to its subordinate officers, apparent from telex message Annexure P-22, to the effect that MIC Inserts would appear to be classifiable under the more specific heading 73.02 of the Central Excise Tariff. This apparently has been issued as a clarification. The respondents, however, maintain that this view is not binding on the quasi judicial authorities who determine the matter. Here the Collector, Central Excise, Chandigarh, has pronounced against the petitioner vide order dated April 2, 1987, Annexure P-25, whereby, on the interpretation of the head, he has demanded duty, imposed penalty and proposed confiscation of the goods seized. Additionally, he has imposed a fine on the petitioner. The said order is beyond any doubt appealable to the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi. A second view in that forum can legitimately be looked forward to. And as the objection has been taken, it would be more appropriate for the petitioner to agitate the matter in the appellate forum. This, is my view after hearing learned counsel at considerable length.

It is worthy of note here that when the goods of the petitioner were seized, it approached this Court by means of this petition on December 30, 1986. When this Court was seisin of the matter, a show cause notice was issued to the petitioner, which ultimately culminated in the order dated April 2, 1987. In those circumstances, the petitioner amended the writ petition so as to challenge the order dated April 2, 1987. The petitioner, in such a situation, diligently kept agitating the matter in this Court. But since the petitioner is now being relegated to the remedy of appeal, it is ordered that the period spent from April 2, 1987, till date shall stand excluded for computing the period of limitation for filing the appeal. Deduction of such period would be the legitimate due to the petitioner, especially when it is being relegated to a departmental appeal on the objection of the respondents.

For reasons recorded in the interim order dated June 4, 1987, the petitioner, without prejudice to its rights, obtained a provisional licence to manufacture the item concerned and pay duty under item 7302.90 of the Central Excise Tariff chargeable at the rate of 15 per cent ad valorem. The licence was to be valid initially for a period of three months. That licence shall ordinarily remain valid for the said period and without prejudice to the rights of the petitioner. Further, realisation of the amount, demanded by the Collector, Central Excise, Chandigarh, vide order dated April 2, 1987, was stayed subject to the petitioner''s furnishing security of property, moveable and immovable, twice the value of the amount, to the satisfaction of the Collector, Central Excise, Chandigarh. That order shall remain in operation for a period of 60 days during which the petitioner may, if so advised, approach the Appellate Tribunal to seek its further extension/modification/variation as it suits its interests. After the expiry of 60 days from today, unless extended/modified/varied by the Appellate Tribunal beforehand, the stay granted by this Court shall stand vacated. Similarly the temporary licence granted to the petitioner, unless extended/renewed under orders of the Appellate Tribunal beforehand, shall stand expired by efflux of time.

With these directions, the objection of the respondent is sustained and the petitioner is relegated to its appellate remedy. The writ petition is disposed of accordingly. In the circumstances, however, there shall be no order as to costs.