Union of India vs Hindu Undivided Family Business Ram Lal Mansukh Rai and another

S.B. Capoor, Act. C.J.—This regular second appeal arises in a suit for permanent injunction, which was instituted by the plaintiffs against two defendants (1) Union of India through the Secretary-in charge Central Excise New Delhi, and (2) Union Metal Works, Rewari. The appellant before this Court is only the Union of India.

The plaintiffs carry on business at Rewari of manufacturing Kansi and brass utensils. Kansi being an alloy of copper and tin, and brass of copper and zinc. In the process of manufacturing of the utensils the plaintiffs, after melting the metals prepare billets of Kansi and brass, which they send to the rolling miles in Rewari, one of them being defendant No. 2, for rolling into uncut circles. Subsequently these uncut circles are subjected to various manufacturing processes in the premises of the plaintiffs'' and ultimately assume the shape of utensils. The employees of defendant No. 1 did not permit a particular consignment of circles to be taken out of the Union Metal Works without prior payment of excise duty at the rate of Rs. 170/- per metric tone. So defendant No. 2 as plaintiffs'' agent paid Rs. 111.04 P. on the 28th June, 1963, which he subsequently recovered from the plaintiffs. It was urged on behalf of the plaintiffs that this levy of excise duty was illegal and recovery of the amount of Rs. 111.04 P. was claimed. The suit proceeded ex-parte against defendant No. 2 and on the pleas raised by defendant No. 1 the following issues were framed :

(1) Has this Court no jurisdiction ?

(2) Is the suit barred as pleaded ?

(3) Has the plaintiff locus standi to sue ?

(4) Did defendant No. 2 act a? the agent of the plaintiff as alleged ?

(5) Is the defendant entitled to charge the excise duty for the goods in question ?

(6) Is the plaintiff estopped from filing this suit by his conduct ?

(7) Relief.

The learned trial Court found all the material issues in favour of the plaintiffs and decreed their suit. These findings were affirmed by the lower appellate Court (Senior Subordinate Judge, Gurgaon) in the appeal before him by the Union of India.

In the appeal before us only two matters have been raised :

(1) That the civil court had no jurisdiction to entertain the suit, and

(2) That the defendant was entitled to charge excise duty in question.

So far as the first point is concerned, reliance on behalf of the appellant is on sections 35, 36 and 40 of the Central Excises and Salt Act, 1944, (Act No. 1 of 1944) hereinafter to be referred to as the Act. It is pointed out that against the adjudication of the duty by the Central Excise Officer appeal is provided u/s 35, and u/s 36 re-visional power is conferred on the Central Government. u/s 40(1) it is provided that no suit shall lie against the Central Government or against any officer of the Government: in respect of any order passed in good faith or any act in good faith done or ordered to be done under this Act. It will thus be seen that while a. forum is provided for appeal and revision, there is no express exclusion of the jurisdiction of the civil courts to question any assessment of duty or any order of confiscation or penalty which is outside the scope of the Act or the Rules made thereunder. Mr. C.D. Dewan, on behalf of the appellant, sought on the question of jurisdiction to derive support, from the Full Bench judgment of this Court in Kelash Nath v. Municipal Committee, Batala (1962) 61 P.L.R. 530 but that decision proceeded on the wordings of sections 84 and 86 of the Punjab Municipal Act (Act No. III of 1911). While section 84 provided for appeals against assessment or few of any tax or against the refusal to refund any tax and for a subsequent stage of reference to the High Court, section 86 laid down that no objection shall be. taken to any valuation or assessment, nor shall the liability of any person to be assessed or taxed be questioned in any other manner or by any other authority than was provided in the Act, and similarly no refund of any tax shall be claimable by any person otherwise than in accordance with the provisions of the Act and the rules made thereunder. It is well settled that even in a case where a statute created a liability and provided a remedy, the civil court''s jurisdiction is not completely ousted. A suit in a civil court will always lie to question the order of a tribunal created by a statute, even if its order is. expressly or by necessary implication, made final, if the said tribunal abuses its power or does not act under the Act but in violation of its provisions-see Firm, Seth Radha Kishan v. Administrator Municipal Committee Ludhiana AIR 1963 S.C. 1647. If the levy of the tax is outside the scope of the Act and the Rules and Orders made thereunder, the civil court''s jurisdiction is not ousted by anything in the sections of the Central Excises and Salt Act, 1944, cited by the Learned Counsel for the appellant.

I am, therefore, in agreement with the conclusion of the courts below that civil courts had the jurisdiction in deciding this matter.

Coming now to the merits, duty is imposed under item 26-A of the First Schedule to the Act and the relevant paragraph is as follows:

Copper and copper alloys containing not less than fifty per cent by weight of copper, and during the course of manufacture, the following namely, plates, sheets, circles, strips and foils in any form or size.

The case of the plaintiffs was that when the rolling mill converted the billets into uncut circles, it was not manufacturing anything and was just changing the shape of the raw material from billets into a circular form, and it was this raw material which was subsequently utilised by the plaintiffs for the manufacture of utensils. The details of the manufacturing process have been described by the trial Court, which made a local inspection, and it is not contended that the description was wrong. The trial Court as also the lower appellate Court proceeded to apply the principles laid down by their Lordships of the Supreme Court in Union of India v. Delhi Cloth and General Mills Company Ltd. AIR 1966 S.C. 791, and its conclusion, which was endorsed by the lower appellate Court, was that the change of shape effected in the rolling mill from billets to uncut circles was mere processing and could not be equated with manufacture as that term has been interpreted in Union of India v. Delhi Cloth and General Mills Company Ltd, (supra). The question under consideration in that case was whether excise duty could under items 12 and 13 of Schedule I to the Act be levied on intermediate process in the manufacture of vanaspati in which process the raw oil was purified but not deodorised. It was held that on that intermediate process excise duty was not leviable under item 12 which was "vegetable non-essential oil, all sorts, in or in relation to the manufacture of which any process was ordinarily carried on with the aid of power", but it was leviable under item 13 as "vegetable product". The ratio was that at that particular stage no new substance known to the market had been brought into existence but the raw material had merely undergone some change which could be equated with processing but not with manufacturing. Their Lordships considered the definition of ''manufacture" as given in section 2 (f) of the Act and held that the word ''manufacture'' has been used as generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. They also held that the word "goods" in the term "excisable goods" as used in clause (d) of section 2 of the Act made it clear that to become goods an article must be something which would ordinarily come to the market to be bought and sold. Taking the two words "goods" and "manufacture" together, it would follow that in order to make liable to the excise duty a new substance known to the market should be brought into existence.

After hearing the argument of the Learned Counsel for the parties I am in agreement with the view of the Courts below that on the ratio laid down by their Lordships of the Supreme Court in Union of India v. Delhi Cloth and General Mills Company Ltd (supra), there was no legal basis for the demand of the excise duty which was in question in the suit giving rise to this appeal, and this conclusion is further supported by a recent decision of the Supreme Court in The The State of Madhya Bharat (Now The State of Madhya Pradesh) and Others Vs. Hiralal Ji, . In the case giving rise to that appeal the question arose whether iron bars flats and plates converted from scrap iron by re-rolling fell within the ambit of a notification made by the Madhya Bharat Government, u/s 5 of the Madhya Bharat Sales Tax Act, 1950, whereby iron and steel had been exempted from sales tax, or whether these could be taxed as "goods prepared from any metal other than gold" within the meaning of another item in the list of articles assessable. It was held that iron and steel used as raw material for manufacturing other goods were exempted from taxation and so long as iron and steel continued to be raw materials, they enjoyed the exemption. The scrap iron purchased was merely re-rolled into bars, flats and plates, which was a process for convenience of sale and they did not in the process lose their character as iron and steel. On the same analogy it can very well be argued that when the billets of Kansi and brass were rolled into uncut circles, they did not lose their character as raw materials for the manufacture of utensils and had not undergone "any stage of manufacture".

In the result, the judgments and decrees of the court below are maintained and the appeal is dismissed with costs.

R.S. Narula, J.

I agree.