COTTON SPINNING AND WEAVING MILLS LTD. & ANR. versus UNION OF INDIA & ORS.

Citation: [1988] 1 S.C.R. 700 · Decided: 30-10-1987 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Cited by 7 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
J .K. COTTON SPINNING AND WEA YING MILLS LTD. & 
. 
... 
ANR. 
~-
v. 
UNION OF INDIA & ORS. 
OCTOBER 30, 1987 
B 
[R.S. PATHAK, C.J., RANGANATH MISRA 
\-·-
AND MURARI MOHON DUTT, JJ.] 
Levy of excise duty on yarn obtained at an intermediate stage in 
... 
the process of manufacture of fabrics-Amended rules 9 and 49 of the 
c Central Excise Rules, 1944-lnterpretation thereof 
_J 
The appellant No. 1, J.K. Cotton Spinning and Weaving Mills 
Limited, has a composite mill wherein it manufactures fabrics of diffe-
rent types, for which yarn is obtained at an intermediate stage, and the 
yarn is processed in an integrated process in the said composite mill for 
D weaving the same into fabrics. 
The Central Board of Excise issued a Circular dated September 
24, 1980, purporting to interpret the rules 9 and 49 of the Central 
Excise Rules, 1944 (the Rules) and directing the subordinate excise 
authorities to levy and collect excise duty in accordance therewith. llte 
~-
E Board further directed vide the said Circular that the use of the goods 
in the manufacture of another commodity even within the place/ 
premises specified in this behalf by the Central Excise Officers in terms 
of the powers conferred under rile 9 of the Rules, would attract duty. -
As the implementation of the Circular worked to the prejudice of the 
F appellants, they filed a writ petition in the High Court, challenging the 
validity of the Circular. 
' 
). 
During the pendency of the said writ petition, the Central Gov-
ernment issued a Notification dated February 20, 1982, amending the 
rules 9 and 49 of the Rules, with section 51 of the Finance Act, 1982, 
G providing that the amendments in the rules 9 and 49 shall be deemed to 
have, and to have always had, the effect with retrospective effect from 
the date on which the Rules came into force i.e. February 28, 1944. 
)
Upon the amendments of the rules 9 and 49, with retrospective effect of 
>-..~"' 
the amendments, the appellants amended their writ petition above-said 
to challenge the constitutional validity of Section 51 of the Finance Act 
I 
H abovementioned and the amendments to the rules 9 and 49. 
700 
---f 
' ---
J.K. COTION MILLS v. U.0.1. 
701 
The High Court allowed the writ petition in part. It held (i) that 
section 5I and the rules 9 and 49 as amended were valid, (ii) the 
retrospective effect allowed by section 5I would be subj•ct to the pro'vi· 
sions of sections IIA and IIB of the Central Excises and Salt Act, 
1944 (the Act), (iii) the yarn produced at an intermediate stage in the 
mill of the appellants and subjected to the integrated process of weaving 
into fabrics, would be liable to payment of excise duty in view of the 
amended provisions of the rules 9 and 49, but the sized yarn actually 
put into the integrated process would not again attract excise duty. The 
appellants then filed this appeal (Civil Appeal No. 297 of 1983) before 
this Court by certificate. 
Dismissing the Appeal, the Court, 
HELD: The decisions of various High Courts cited, deal with the 
rules 9 and 49 of the Central Excise Rules, I944, as they stood before 
they were amended by the Government Notification dated February 20, 
I982. In this case, what is involved is the interpretation of the said two 
rules after their amendment and the constitutional validity of the rules 
as amended. The amendments to the rules 9 and 49 are quite legal and 
valid. Section Sl of the Finance Act, 1982, giving retrospective effect to 
the said amendments is also legal and valid. The apprehension of the 
appellants that the amendments to rules 9 and 49 having been made 
retrospective from the date the rules were framed, that is, February 28, 
I944, the appellants may be called upon to pay enormous amounts of 
duty in respect of the intermediate goods which have come into exist-
ence and again consumed in the integrated process of manufacture of 
another commodity, is not right. In view of section I IA of the Finance 
Act, there is no cause for such an apprehension. Under Section llA(l), 
the excise authorities cannot recover duties not levied or not paid or 
short-levied or short-paid or erroneously refunded beyond the period of 
six months, the proviso lo section IIA not being applicable in the 
present· case. Thus though section SI has given retrospective effect 
to the amendments of rules 9 and 49, it must be subject to the 
provision of section llA of the Act. Section 5I does not contain 
any non-obstante clause, nor 

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