COLLECTOR OF CENTRAL EXCISE, CHANDIGARHversusDECENT DYEING CO.

        COLLECTOR OF CENTRAL EXCISE, CHANDIGARH
A                          v.
                                                                               ....
                   DECENT DYEING CO.

                            DECEMBER 7, 1989

B          [SABYASACHI MUKHARJI AND B.C. RAY, JJ.J

         Central Excises and Salt Act, 1944: Section 35L(b) and Rule
    9(2)-Assessee-Dyeing acrylic yarn on 1ob charges-Levy of excise
    duty-Legality of.

        The Respondent Company was in the business of dyeing acrylic
C yarn received from traders and manufacturers of hoisery goods on job
  basis. It was paying duty at the rate of Rs.IO per K.G. in terms of
  Notification No. 125/75-CE dated 12.5.1975 on the presumption that
  base yarn had discharged duty liability before it was received for
  dyeing. A show casue notice under section 9(2) of the Central Excise
D Rules, 1944 was issued by the Assistant Collector of Central Excise
  demanding an amount of Rs.4,300 as central excise duty © Rs.24 per
  K.G. on 180 Kgs. for the period May 1976 to July 1976. The demand
  was resisted by the Respondent Company contending that duty on base
  yarn was payable by the Manufacturers and the burden of showing that
  this had not been paid by the Manufacturers was on the Revenue which
E was not accepted and on appeal by the Assessee the Appellate Collector
  of Central Excise confirmed the demand. On further appeal, .however,
  the Appellate Tribunal upheld the contention of the Respondent holding
  that the Manufacturer was liable to pay duty on the base yarn since
  purchasers could naturally assume that the duty on base yarn would
  have already been paid by the Manufacturer and that it was for the
F Department to verify the fact of such payment and take action against
  the manufacturer, if duty had not been paid particularly when in this
  case the Assessee had disclosed the names of persons/manufacturers
  from whom it had received the yarn for dyeing while the matter was
  pending before the Collector.
          Dismissing the appeals preferred by the Revenue, this Court,
G
        HELD: Excise is a duty on manufacture. The liability of payment
  of this duty is on the manufacturer. The language of the Notification
  No. 125/75 dated 12th May 1975 indicates that only the duty for the
  time being leviable on the base yarn, if not already paid, plus ten rupees
  per kg. was the liability. The description of manufacture was textured
H yarn produced out of base yarn. [434B]

                                      430
COLLECTOROFCENTRALEXCISEv. DECENT DYEING [M             "<HARJl,J.] 431

      It would be intolerable if the purcnasers were required to as-
certain whether excise duty had already been paid as they have no         A
means of knowing it, .It has to be borne in mind that duty of excise is
jlrimarily a duty levied on a manufacturer or a producer in respect of
the c_ommodity manufactured or produced, A processor is in the similar
position as purchaser of the goods, [434D-EI
     Sulekh Ram & Sons v, Union of India & Ors., [1978[ ELT J 525         B
and Governor General in Council v, Province of Madras, 72 Indian
Appeals 91, referred to.
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2151-
52 (NM) of 1986 etc.
      From the Order dated 8.5. 1984 of the Customs Excise and Gold       C
Control/Appellate Tribunal, New Delhi in Appeal No. 2530/83-IJ &
Cross objections 27/84, Order No. 258/84-D and Misc. Order No. 67
84-D.
    A.K. Ganguli, P. Parmeswarnn and Hemani Sharma for the
Appellant.                                                                D
      Gobinda Mukhoty and P .N. Gupta for the Respondent.
      The Judgment of the Court was delivered by
      SABYASACHI MUKHARJI, J. This is an appeal under section
35L(b) of the Central Excises & Salt Act, 1944 (hereinafter referred to
as 'the Act') against the judgment and order of the Customs, Excise       E
and.Gold (Control) Appellate Tribunal, New Delhi (hereinafter refer-
red to as 'the Tribunal') dated 8th May, 1984.
      The appeal is by the revenue. The respondent, Decent Dyeing
Co., was dyeing acrylic yam on job charges. The acrylic yam was being
received by the respondent from traders in the market or from the         F
manufacturers of hoisery goods and were returning the same to them
after completing the required process. The respondent was paying
duty at the rate ofRs.10 per kg. in terms of notification No. 125/75-CE
dated 12th May, 1975 on the presumption that base yam had dis-
charged duty liability before it was received for dyeing. A show cause
notice requiring the respondent to show cause to the Assistant            G
Collector of Central Excise as to why central excise duty amounting to
Rs.4,300 at Rs.24 per Kg. leviable on 180 kgs. (as applicable to base
yam under tariff item 18(i) of the Central Excise Tariff) should not be
demanded under rule 9(2) of the Central Excise Rules, 1944, was
issued to the respondent. The Assistant Collector of Central Excise
directed the respondent to deposit an amount of Rs.4,300 on the basis     H
     432         SUPREME COURT REPORTS               [1989] Supp. 2 S.C.R.

A of the demand of duty at Rs.24 per kg. on 180.00 kgs. and directed the
  respondent to deposit the said amount under the proper head. On
  appeal, the Appellate Collector of Central Excise confirmed the said
  demand.

           There was an appeal and the Appellate Tribunal upheld the
l3   contention of the respondent. The Appellate Tribunal found that the
     case related to a demand for payment of differential duty for the
     period May, 1976 to July, 1976 with reference to texturing 'Of base
     acrylic yam received by the respondent from the manufacturers of
     such b'8e yam. The respondent, the Tribunal held, had cleared such
     textured yam on payment of duty at Rs.10 per kg. claiming the benefit
     of notification No. 125/75. The differential duty payment was Rs.24
C    per kg. leviable on the base yam. Jhe respondent denied their liability
     but it was upheld as mentioned hereinbefore. It was countended on
     behalf of the appellant before the Tribunal that duty on base yam was
     payable by the manufacturers of the base yam only and the burden of
     showing that the said duty had not been paid by the· manufacturers was
D    on the revenue. The authorities had, however, held that the appellant
     was liable to.pay the differential duty since the appellant had failed to
     prove the payment of duty on the base yam and, therefore, the said
     oders were b1ld. On the other ·hand, on behalf of the revenue, it was
     contended .that it was for the respondent to prove that the duty had
     been paid on the base yam and if the appellant was paying the duty of
E    Rs.10 per kg. only under notification relied upon and in the absence of
     proof of payment of duty, the base yam, the orders of the lower
     authorities making the respondent liable to pay the duty were correctly
     passed. The Tribunal found that the respondent was not the
     manufacturer of base acrylic yam. The work done by the respon!lent
     on the base yam was by way of texturising the same. In respect of the,
F    same, the duty payable 6n the textured yam produced out of base yam
     is the duty for the time .being leviable on the base yam, if not already,
     paid plus Rs.20 per kg. Under notification No. 125/75, the duty was
     reduced to the duty for the time being leviable on the base yam, if not
     already paid, plus Rs.10 per kg.

G        In this connection, it is relevant to refer to notification No,. 125/
   75. The notification, which was issued under sub-rule (1) of rule 8 of
   the Central Excise Rules, 1944, stated that the Government exempted
   the texturised yam of the description specified in column (3) of the
   Table annexed thereto and falling under sub-items of item No. 18 of
   the First Schedule to the Act as are specified in the corresponding
lf entries in column (2) of the said Table, from so much of the duty of
COLLECTOR OF CENTRAL EXCISE v. DECENT DYEING [MUKHARJI, J .] 433

excise leviale thereon as is in excess of the duty specified in the
corresponding entries in column (4) of the said Table. The relevant       A
portion of the Table annexed to the said notification reads as follows:


S. No. Sub-Item No. Description                  Rate of duty
                                                                          B
1.     (ii)           Textured Yarn produced The duty for the time
                      out of base yarn.      being leviab~e on the
                                             base yarn, if not
                                             already paid plus ten
                                             rupees per kilogram.

       Admittedly, the respondent had paid duty at Rs.10 per kg. and c
had been allowed to clear the goods. The demand for differential duty
by way of duty payable on the base yarn was not in dispute. On the
base yarn, the Tribunal held, the manufacturer was liable to pay duty
only since purchasers of the base yarn from the markef could naturally
assume that duty on the base yarn would have been paid by the D
manufacturer before removal aird that it was for the department to
verify the fact of such payment and take action against the
manufacturer if base duty had not been paid. Under the relevant tariff
item, the duty, as mentioned before, was fixed as the duty for the time
being leviable on the base yarn, if not already paid, plus Rs.20 per kg.
(reduced to Rs.10 per kg. under the notification). The notification E
does not change the basic position so far as base duty is concerned
from the aforesaid stand. The Tribunal held that the revenue was
entitled to claim duty inclusive of the duty paid on base yarn only on
proof that the duty on the base yarn had not been already paid, unless
otherwise, in the normal course, the'ptesumption inevitable, in view of
the nature of the business, be that the duty on base yarn had been F
paid. If that is so, that cannot be the responsibility or the burden of the
respondent to prove that the duty on base yarn had already been paid.
It further appears that when the appeal was filed before the Collector,
the respondent had disclosed the names of the persons from whom
they had received the yarn as also the names of the manufacturers
enclosing the copies of the relevant record. But even then the revenue G
had not chosen to verify these facts and the Collector (Appeals) had
passed his order on the basis that it was for the respondent to prove the
actual payment of base duty. This approach is not proper approach. It
is not correct to state that the respondent alone should have special
knowledge of the fact of payment of base duty and it was therefore for
the respondent to prove the said fact. In that view of the matter, the H
    434         SUPREME COURT REPORTS                [ 1989] Supp. 2 S.C.R.

A Tribunal held in favour of the respondent. We are of the opinion that
  the Tribunal was right.


           Excise is a duty on manufacture. The liability of payment of this
    duty is on the manufacturer. The language of the notification referred
B   to hereinbefore indicates that only the duty for the time being leviable
    on the base yam, if not already paid plus ten rupees per kg. was the
    liability. The description of manufacture.was textured yam produced
    out of base yam. We are clearly of the opinion that in view of the facts
    and the circumstances of the case, the Tribunal was right in the view it
    took. In this connection, it is instructive to refer to rule 49 of the
C   Central Excise Rules, 1944, which deals with duty chargeable only on
    the removal of the goods from the factory premises or from an
    approved place of storage. Reference was also made before the
    Tribunal and our attention was also drawn to the decision of the Delhi
    High Court in Sulekh Ram & Sons v. Union of India & Ors., [1978]
    ELT J 525, where under rule 9 of the Central Excise Rules, it was held
D   by the Delhi High Court that under excise system, no goods can be
    removed from the place of manufacturer without first paying the
    excise duty, therefore, a purchaser can presume that goods are duty
    paid. It would be intolerable if the purchasers were required to ascer-
    tain whether excise duty had already been paid as they have no means
    of knowing it. It has to be borne in mind that duty of excise is primarily
E   a duty levied on a manufacturer or a producer in respect of the
    commodity manufactured or produced. See the observations of Lord
    Simonds in Governor General in Council v. Province of Madras, 72
    Indian Appeals 91. In a situation of this nature, the Delhi High Court
    held that the processor was in the similar position as a purchaser of the
    goods. In that view of the matter, we are of the opinion that the
F   Tribunal was right in the view it took.


         We have heard learned counsel for the appellant and considered
    the matter. We find no merit in the appeal for the reasons mentioned
    above.
G

         In that view of the matter, this appeal must fail and is accordingly
    dismissed without any order as to costs.

                                                            Appeals dismissed.
H
COLLECTOR OF CENTRAL EXCISE v. NAVRANG DYEING (MUKHARJI, J .] 435


           CIVIL APPEAL NOS. 2141-42 (NM) OF 1986.                     A

           Collector of Central Excise,
           Chandigarh

           Versus
                                                                       B
           1. Mis Navrang Dyeing Co. & Ors.

           2. Mis Capital Dyeing Co

      This is an appeal under s. 35L(b) of the Act from the judgment
and order of the Tribunal dated 11th April, 1984. For the reasons in   C
civil Appeals Nos. 2151-52, these appeals must also fail and are
accordingly dismissed without any order as to costs.

R.N.J.                                            Appeal dismissed.




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