JUDGMENT
1. This Petition seeks to challange the view taken by the authorities under the Central Excise & Salt Act, 1944, hereinafter referred to as “the Excise Act”, regarding an item, being Item 14D under the First Schedule of the said Act. The first Petitioner is a private limited company incorporated under the Companies Actg and having its registered office as well as factory at Poona. The second Petititoner is a shereholder at the same time holding the position of the vice president of the first Petitioner company. The First Petitioner, as already mentioned above, owns a factory at Poona which is engaged in manufacturing in-organic and pigments and chemicals. Among the chemicals which are manufactured by the first petitioner are Meta- Nitro-Para Toluidine, hereinafter referred to as “MNPT” and Meta- Nitro-Para Anisdine, hereinafter referred to as “MNPA”. Both these chemicals belong to what has been described as Arometic Amine groups and are utilised, according to the Peitioners, in the manufacture of pigment dystuff which in turn are used for the manufacture of paints and orinting inks. There is argument between the parties that MNPT is a synthetic organic derivative and is know in the trade as fast base used in the manufacture of pigment. There is however dispute between the parties about its use in the dyeing process. No reference will hereafter gave up thier challenge to the levy of excise duty on that produt. This Petition therefore has confited tis challange to the levy of excise duty under Item 14D of the First Schedule to the Act in respect of synthetic organic derivative of MNPT alone.
2. In the year 1968 the Petitioners were called upon the Excise Department of Poona to pay excise duty on the manufacture of MNPT at the rate mentioned against Item 14D in the First Schedule. the item as it stands in its applicability to the petitioners’ product was introduced on 1st of March, 1962 and p;rescribed 25% ad valorem duty. That entry may be reproduced :
“14D. Synthetic organic dyesutffs(including pigment Twenty five dyestuffs) and synthetic organic derivatives used in per cent any dyeing porocess. ad valorem.”
IN reply to the demand made by the Excise Department for the payment of excise duty on MNPT, the Petitioners reprtesented that MNPT was not liable to any excise duty under Item 14D because according to them that product was not by itself capable of being used in the dyeing process. After the Petitioners were heard in support of their representation, the Assistant Collectors of Central Excise, Poona-II by his letter dated 17th of February,1969 informed the petitioners that in his opinion the prtoduct MNPT was capable of being used in a dying process and therefore the Petitioners maust pay appropriate duty under Item 14D of the First Schedule of the Act. the contention of the Petitioners that the product was not liable to duty on the ground that the same was being used in the further manufacture of pigment dystuff in the Petitioners’ own factory was alos rejected by the Assistant Collectors who held that there was no provision for exempting sunthetic organic derivatives used for the manufacture of pigment dusetuff. Against this order the Petitioners preferred an appeal which was heard and dismissed by the Collector of Central Excise, Poona, by his order No. V-14D (2) 3/Rech. B/69/270 dated 2nd of November 1970. While rejecting the appeal preferrred by the Petitioners the Collector also took the view that MNPT is used in dyeing silk, nylon and cellulose ascetate in conjuction with other chemical and therefore it was liable to duty.
3. against this order passed ppeal by the Collector, the Petitioners preferred a revision application to the Government of India. The revision application was heard by the Joint Secretazry to the Government in the Department of Revenue and Insuredsnce in the Ministry of Fiance. Before the revisional authority sone additional meterial in support of their case was placed by the Petitioners. They tendered affdavits of two persons who weresd acquainted with the manufacture of chemical to the effect that MNPT was used mainly in the manufactur of pigments and it was not capable of being used in any deying process by itself. A public notic issued by the Assistant Collectors of Central Excise of Poona was alos produced before the revisional authority. That notice mentioned that the Board of Central Excise had been advised that Aniline oil was being used substantially by industries for purpose other than dueing in textil industries. The notice further proceeds to tpoint out that by reson of theis the Board was of the view that Aniline Oil was achemical agent falling outside the purview of Item 14D of the Central Excise. Relance placed by the Petitioners on this notice, which is dated 7th of july 1972, was for the purpose of pointing out that the Excise Department itself had taken a view in respect of another synthetic organic derivasted that if it were used mainly for purpose other than dyeing then it was not liable to excise duty under Item 14D. Some information relating to the production of MNPT was alos placed before the revisional authority inthe form of a table which disclosed that of the total of MNPT in the country nearly 97.8% was used in the manyufacture of Pigments. This table sought to buttress the claim of the Petitioners that MNPT, a synthetic organic derivative, if not used predominantly in the dying process was not liable to excise duty. At this stage three contentions which were urged before the revisional authority below and which have been urged before us may be enumerated.
(1) MNPT which is a synthetic organic darivative becomes liable to excise duty only whcn it is used predominantly in a dying process and not otherwose. Merely because it is capable of being used in the dyeing process, it does not render itself liable under Item 14D.
(2) The product is also not liable to excise duty because be itself it is not used in any dyeing process. It can be so used only in conjunction with other products.
(3) Since almost the entire production of MNPT of the Petitioners’ factory is used in the factory itself in the manufacture of pigments, no excise duty is payable because such duty is payable only on a produt which is removed from the factory.
As far as the second contention mantioned above is concerned, we straightway reject the same because we are satisfied on the arguments advanced and the material placed in these proceedings the MNPT is used in the dyeing process through alongwith other products. Merely because it cannot be used except in conjuctionwith other products, it cannot escape the liability under Item 14D. It is only if it was transformed into some other product before being used in the dyeing process than irts liability for being taxed under Item 14D could have been queationed. the revisional authority by his judgment and order dated 2nd of June, 1972 rejected also the otgher two contentions of the Petiitoners., On the question of the predominat use the revisional authorioty held as follows :
“…So long as the product is a synthetic organic derivative of the type used in any dyeing process, it would attractg levy of excise duty under Item 14D of the Central Excise Tariff, no matter to what extent is is used actually in a dyeing process…”
In other words he categoricallly rejected the theory of pedominant use set up by the Petitioners. One other contention vizs. that no duty was leviable because the product was used within the factory the revisional authority stated that :
“…this plea is illconceived because Rule 49 has to be read in conjection with Rule 9 which expressely provides that duty will ve to tbe paid on goods when removed in or outside the place of manufacture…”
The aforsaid order dated 2nd of June 1972, which is numbered as Oreder No.894 of 1972 is the subject matter of challange in this petition under Article 226 of the Constitution. It may be stated at this stage that the proceedings decscribed so far related to the liability of the Petitioner to pay excise duty for the year ending 31st January, 1969. The Petitioners have mentioned in this petition that subsequent to the order which is the subject matter of the challanges they have from time to time upto 31st of December 1972 paid duty as mentioned in /exh. D to the Petition. the total amount of duty paid on MNPT from 8th of August, 1968 to 31st of December, 1972 is mentioned to be Rs. 6,44,174.88. The reliefs claimed in this petition include the writ of mandamus for the refund of duty so paid as mentioned above. The prayer for setting aside the three orders mentioned above is naturally the main prayer.
4. Before the arguments in support of the petition are consided, it would be appropreiate to dispose of preliminaly obnjections which have been reaised by the learned Counsel appearing for the respondetns who are the Union of India and two officers of the Central Excise. The objection to the main tainability of the petition has been tasken on the ground that there is no error of jurisdiction in the passing of the orders which the authorities below have passed inasmush as they were authorised to pass such orders. According to Mr. Sukhtankar, the learned counsel appearing for the Respondents, it is an order of assessment of excise duty which is intra vires iof the Act under which that order is passed and mearly because it is a wrong order, assuming it to be so, the same cannot be challanged in a petition under Article 226 of the Constitution. We have no hestation in rejecting the same because in our view the juridiction of the High court under Article 226 of the Constitution to examine the legality of an order passed by assuming the juridiction where none exists cannot be questioned. If on a proper interpretation of the item in the Scheduls of the Central Excise Act it is found that the item is not liable to Central Excise, then the order passed must be hjeld to be an illegal order or on order without the juridiction liable to be set aside by this court in exercise of its powers under Articles 226 of the Constitution. The other two preliminary objections could be clubbed together. It has been contended that for the period subsequent to 31st of January, 1969 the petitioners have not exhausted the remedy provided by way of an appeal and revision and they cannot be allowed in such circumstasnses to invoke the writ juridiction of this court under Article 226 of to the constitution. As a further extension of the same argument,it has been contended that for the refund of the duty which is already paid, through under protest, a suit is an appropriate remedy. We are unable to uphold theseprelimanary objections because in our opinion the error of law committed by the authorities below in respect of the vary first assessment, if corrcted, will entirle the petitioners to claim refund of the amounts which they have paid. the rule of exhaustion of alternative remedy is wholly inapplicable in the present case because the authority who have taken a particular view in respect of a particular item manufactured by the petitioners are not expected to take a different view merely because the assessment relates to a subsequent period. In such circumstance it is unnecessary to drive the petitioners to the so-called alternative remdy. We also alternative remedy such as civil suit is more appropriate. It may be mentioned that this petition claiming among other things refund of excise duty which has alredy been paid is not intended to circumvent a law such as the law of limitation. The petitioners can always file a suit for the reefund of duty paid under mistake of law whcih can only be established after the present petition is decided within three years from the date of the decision. If the law is laid down in this petiiton and if thereafter the Peitioners can file a suit there is no reson why a relief which can be given only on theis of a law should be denied to the Petitioners and why they should be driven to file a separate suit. Rejecting all the preliminary objections reised on behalf of the Respondents we now proceed to consider this petiion on merits.
5. Item 14D under which excise duty is sought tio be levied by the Respondents has already been reproduced above. there is no dispute that MNPT, a product manufactured by the Petitioners, is a synthetic orgainc derivative. what is disputed by the Petitioners is their liability to pay excise duty. According to the petitoners, no excise duty is leviable on the said product unless the same is substaintially used a deying process. It is not disputed that it is capable of being used in a deying process or it is sometimes used in dyeing process. According to the Petitionerrs, MNPT is predominantoy or manily used in the manufacture of pigments and only a small percentage of the total manufacture of MNPT is used in the dyeing process. Accordign to Mr. Taraporewalla, appearing in support of the Petition, the word “use” does not mean usable or capable of being used. It means that the product must in fact and in substance be used in the dyeing process. A stray ora rare use of the said product made in the deying process does not render that product liable to the excise duty. In support of his contention he referred to table which was tendered before the revisional authority and which according to the petitioners shows that 97.8 per cent of the MNPT manufactured in the country is used in the manufactur of pigments and only 2.2.% is used for other purpose including the purpose of deying process. He then refered to a judgment of the superme Coprt in M/s. Annanurna Carbon Industries v. State of Adhra of Pradesh . the fact of that case disclose that are carbons known as Cinema Arc Carbon were the subject matter of a levy under the Andhra Pradesh General Sale Tax Act, 1957 under the entry No. 4. of Schedule 1 to the said Act. that entry read as follows :
” Cinematographic equipment including cameras projectors,and sound recording and reproducing equipment, lenses. films and parts and accessories required for use therewith.”
6. The question that fell for determination before the Supreme Court was whether the words “required for use therewith” meant for dominant or main use in connection with ciematogtaphic equipment. After analysing several decisions in connection with the subject and after lysing the concept involved in the product, the Supreme Court held that the entry under consideration linked the taxable object with its general or ordinery use. Though the entry itself did not contian the name of the item “Arc Carbon” it was found to be included in the word “accessories”. The Supereme Court proceeded to hold that the accessories referred to in the entry necessarily meant accessories required for common use in connection with cinematographic equipment. It was noticed that the Arc Carbon was used and was capable of being used in several other equipment, such as search lights, signalling, stage lighting, etc. This fact, said the Supreme Court, could not detract from the classification to which the carbon arcs blonged. That is determined by their ordinery or commonly known purpose or use.
7. This reliance placed by Mr. Taraporwalla on the decision of the Supreme Court in Annapurna’s case is, in our opinion, justified. If according to the petitioners the synthetic organice derivaties viz. MNPT is very rarely used in the dyeing process, it could not be the function of the Legislature to subject such a synthetic derivative along with other syanthetic organic darivatives 14D. In the context in which rthe word “used” is used, in appears to us that it necessarily means predoninantly used of commonly used. If the ordinery or common purpose or use of MNPT is not the dyeing process, then it cannot be regarded as asynthethc organic derivative used in the dyeing process. The mention of the words”synthetic organic derivative used un any dying proces” shows rthat the legislature did intend to exclude some synthetic organic derviative from the liability to pay excise duty under Item 14D. Only those derivatives which were used in a dyeing process were made subject to duty under Item 14D. If it is permissible together the intention of the legislature in using the word “use” it may be stated that it could not have been shch intention to rope in a product which is rarely or uncommonly used in a dyeing process. Considering the interpretative methods used by the Supreme Court in Annapurna’s case it would not be unresonable to hold that it is the common, ordinery, main or predomint use of a synthethic organic dericvative that is to be considered while judging while judgiong its liability to duty under Item 14D.
10. There is however one item i.e. 14.1(4A) which is as follows :
“Dispersed organic pigments ordinerily used for the printing of textiles, whether in the form of powder,paste, or in emulsion.”
The use of the words ” ordinerily used” in this entry may be for the purpose of decribing the product “dispersed organic pigments” and to that extent lends support to the argument of Mr. Sukhtankar. It may however be noted that Item 14D. with which we are concerned, was introduced in the Schdule of the Excise Act with Effect from 1st of March, 1962 while the irtem of dispresed organinc pigments was inserted with effect from 1st of March, 1964, that is to say, neartly 2 years after the item with which we are concerned was placed on the statute book. IN such a situation it is possible to hold that the Legislature used a specified expression in the later enactment as a message of abount caution. As the Supreme Court has pointed out in Harish Chandra v.Triloki Singh, A.I.R. 1957 S.C. 44, relying upon a passage out in Maxwell, an intention to alter law which was previously applicable is not necessarily to be inferred by the use of a somewhat different expression in a later enactment. In a given case the Court can Draw an inference that additional words were used under the influence of excessive caution. That a Legislature can use words by way of aboundant caution is also recoguised by the Supreme Court in Union of India v. Gujrtat Woollen Felt Mills. . Apart from these consideration we are content to rest our decision on the entry as it stands in Item 14D and the use of the word”used ” in the context of the products mentioned therein to the light of the decision of the Supreme Court in Annapurna’s case. We are therefore satisfied that the word “used” in Item 14D menans substantially or commonly used and not used rerly or occasionally or capable of being used.
11. The question whether MNPT is substantially or commonly used in the dyeing process, is essentially a question of fact which canont be decided in the absence of adequate evidence in that regard. The material in support of this contention of theirs was placed by the petitioners only before the revisional authority. It is proper that authority lower the revisional authority should consider this question in the light of proper evidence. With this view which we take we are lnclined to remand the case to the appeal court blow despite the fact that the details of total production given in the table annexed to this petition have not been in terms denied by the affidavit-in-reply to this petition. While it is true, as Mr. Sukhrtankar complaints, that the Petitioner ought to have at the earliest opportunity placed adequate terial before the Court of First instance or at the latest the Court of appeal it also cannotbe gainsaid that a taxing authority must satisfy itself before proceeding to tax that the item is taxable strictly according to the terms of the statute. IN this view of the matter it will be in the interest of justice that the question should be decided by the Collector of Central Excise, Poona who is the appellate aauthority in the light of material that may be placed before him by the petitioners and also in the light of the material which may otherwise be brought to his notice.
12. On the question of the non-liability of the petitioners to pay tax on the ground that the product MNPT manufactured by item is used in the factory itself, we notice that the revisional authority has commintted a patent error of law. The revisional authority has mentioned that rule 9 rede with ryule 49 of Central Rules provides that will have to be paid on goods when removed in or outside the place of manufacture. We have carefully read both the rules and we are unable to aubscribed to the view which the revision authority has taken. Rule 9 provides that no excisable goods shall be removed from any place wheere they are produced or in premises appurtenant thereto whether for consumption, export or manufacture of any other commodity in or outside such place untill the excise duty leviable thereo has been paid. The words” in or outside” occurring in rule 9 do not qualify the words “sahll be removed” on the other hand they go with the words immediately preceding them. Rule 49 does not contain the word “in” at all. Rule 9 as it stand without the support of any other rule does not, in our opinion, make an articleliable to excisable duty if it is removed in a place where it is manufacture … Mr. Sukhtankar, however, pointed out that the order of the revisional authority is supportable by reference to the provisions contained in Chapter VII-A of the Central Excise Rules which are applicable to what is known as self-removed procedure. Unfortunately, the authorities belwo did not view the liability to pay tax in the light of the provision contained in Chapter VII-A also.
13. Some debate took place at the Bar before use on the basis of two decisions – one of the Division Bench and one of the single Judge on the question of the liability of a product for excise duty on the ground that it removed from the factory or removed in the factory. In Appeal No. 122 of 1972 decied on 20th of January, 1978, the Division Bench of this Court (Madan J. sitting with Kantawala C.J.), it was held that excise duty was payable only if the goods were removed from the premises in which they were manufactured. We however find from the facts of that case that decision is wholly inapplicable to the present case because in that case there was no question of home consumption of the goods manufactured. In the decision of the single Judge, Tulzapurkar J. as he then was. in Misc. Petition No. 491 of 1964 decied on 30th of April,1970 the provision of Chapter VII-A were found to be inapplicable on the date on which the liability was to be considered. In our opinion, therefore, both these decisions do not cover the situation which has arisen in the present case. The Collector will therefore be free to consider the question afresh.
14. In the result, we partly aiiow this petition and make the rule absolute only in terms of clause (a). We remit the case to the Collector of Central Excise, Poona who will (a) conside whether the product MNPT is commonly or normally used in the dyeing process and then decied its liability for tax, under Item 14D of the Schedule to the Central Excise Act in the light of the observations made above in the Judgment (b) consider, after deciding the question in (a) above, whether in the light of the provisions of Chapter VII-A of the Central Excise Rules the Petitioners are or not liable to pay tax despite the fact that the product MNPT manufactured by them is consumed in the production of other production in their own factory and not removed from their factory premises. In view of the partial success of the petitioners and in view of the fact that the remand become partly at least inevitable on account of their failure to produce evidence at the apporopriate time, we direct that the parties shall bear their respective costs in this patition.
