PRAKASH NARAIN, C. J. ( 1 ) THIS batch of writ petitions (viz. C. W. 1858 of 1981; C. W. 1113 of 1981,c. W. 1190 of 1982, and C. W. 2568 of 1982) filed by thepetitioners under Article 226 of the Constitution of Indiahave been heard together and are being disposed of by acommon judgment as all the petitions raise identical questionof law The facts as such are not in dispute. " ( 2 ) TO understand the controversy it will be pertinent tobriefly notice some facts. As common questions of lawalone have been raised, we will only set out the facts incivil Writ No. 1858 of 1982. ( 3 ) PETITIONER No. 1 is a company registered under the companies Act, 1913 and is an existing company within themeaning of the Companies Act, 1956. Petitioner No. 2 isa director and shareholder of the first petitioner. A composite Spinning and Weaving Mill is owned and run by thefirst petitioner in which yarn is spun and ultimately converted into fabrics of different types. According to the petitioners, yarn is obtained at an intermediary stage as an intermediary. product for use in its composite mill in which thesaid cotton yarn is ultimately utilised for making fabrics ofdifferent types. Cotton yarn, as such attracts, excise dutyunder Tariff Item 18 A, Cellulosic Spun Yarn falls undertariff Item 18 and Non-Cellulosic Spun Yarn falling undertariff Item 18e are also obtained and further processedwithin the composite mill in the manufacture of cottonfabrics or man-made fabrics as the case may be. In thesepetitions there is no dispute raised with regard to duty ofexcise on the end product, namely, the different kinds offabrics produced by the petitioners. Some yarn which isnot Utilised for making fabrics is also cleared by the petitioners from its factory. There is no dispute regarding theduty payable thereon. The dispute relates to the liabilityto pay duty in respect of yarn which is further processedin the composite factory to obtain fabrics. According to. the petitioners no duty of excise can be levied and collectedin respect of yarn obtained within the petitioners compositemill which is further processed in the manufacture of fabrics. This contention of the petitioner has been upheldby this Court in a judgment of a Bench of this Court dated 16/10/1980 in Civil Writ No. 664 of 1979, M\s. J. K. Cotton Spinning and Weaving Mills Co. Ltd. , v. Union ofindia (l ). This contention of the petitioner has been upheldby this Court in a judgment of a Bench of this Court dated 16/10/1980 in Civil Writ No. 664 of 1979, M\s. J. K. Cotton Spinning and Weaving Mills Co. Ltd. , v. Union ofindia (l ). According to the petitioners the continuemanufacturing fabrics from yarn spun in their own factoryand in accordance with the law settled by this Court theyare not liable to pay any duty on the intermediary product. They contend that the spun yarn, which is. not cleared as yarn, does not leave the stream of production and ina continuous process of manufacture is ultimately converted into fabrics. Such yarn obtained by the petitioners isprocessed in an integrated process to obtain fabrics byundergoing various processes. Some processes to whichsuch yam is further subjected are preparatory processesfor the purpose of weaving (vide paragraph 5 of the writpetition ). These further processes, according to the petitioners, facilitate the weaving of the yam into fabrics. Explaining the processes, it is said that for the purpose ofweaving yarn into fabrics, yarn is taken on warp beam. Thefabrics consist of a warp and a weft. The warp is takenfrom the said warp beam. A number of such beams areput on a creel of the sizing machine. The next stage preparatory for weaving is called draw in where the yam endsare passed through the Reeds and Healds. The warp isthus ready for weaving and in the process of weaving theweft is passed through the warp and thereafter the processof weaving is completed. The fabric is then de-sized andthe starching material is washed out. It is then bleachedand dyed etc. according to the requirement. It is contended that the various processes to which yarn is subjectedare processes which are preparatory for the purpose ofweaving and the yarn remains within the stream of production in the manufacture of fabrics. ( 4 ) THE questions that arise for determination in thepresent case are whether excise duty can be charged on spun Yarn or sized Yarn which in a continuous processof manufacture is utilised in the composite mill for producing fabrics and if duty can be charged for the intermediaryproduct, whether it has to be charged on un-sized yarn or spun Yarn or on both. ( 5 ) THE Central Excises and Salt Act, 1944, hereinafterreferred to the Act, is a consolidating and amending lawrelating to central duties of excise on goods manufacturedor produced in India and to salt. Section 3 of the saidact declares that there shall be levied and collected in suchmanner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates,set forth in the First Schedule to the Act. Section 4 ofthe Act lays down that where under the Act, the duty ofexcise is chargeable on any excisable goods with referenceto value, how the said value would be arrived at. Section9 deals with offences and penalties. It lays down that anyone contravening any of the provisions of a notificationissued under section 6 or of section 8, or of a rule madeunder clause (iii) of sub-section (2) of section 37 andthereby does or does not do certain things shall be punishable in the manner provided. Section II lays down thatthe sums recoverable by way of duty under the Act or therules thereunder may be recovered even by attachment ofsale of excisable goods belonging to persons from whomduty is to be recovered and even the procedure normallyfollowed for recovery of revenue may be followed. Chapteriii sets out powers of search, seizure and arrest. Thischapter then deals with adjudication of confiscation andpenalties. This is over and above the liability for prosecution already adverted to. Section 37 gives the Central Government power to make rules to carry into effect the purposes of this Act. In pursuance of this power the Centralexcise Rules, 1944 were promulgated by notification dated 28/02/1944. The two rules with which we areprimarily concerned are Rules 9 and 49, which originallyread as under : Rule 9. Section 37 gives the Central Government power to make rules to carry into effect the purposes of this Act. In pursuance of this power the Centralexcise Rules, 1944 were promulgated by notification dated 28/02/1944. The two rules with which we areprimarily concerned are Rules 9 and 49, which originallyread as under : Rule 9. Time and Manner of Payment of Dutyno excisable goods shall be removed from anyplace where they are produced, cured or manufactured or any premises appurtenant thereto,which may be specified by the Collector inthis behalf, whether for consumption, exportor manufacture of any other commodity in oroutside such place, until the excise duty leviable thereon has been paid at such place andin such manner as is prescribed in these rulesor as the Collector may require, and excepton presentation of an application in the proper form and on obtaining the permission ofthe proper officer on the form. rule 49. Duty Chargeable only on Removal ofthe goods from the factory premises or froman approved place of storage. Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the placeor premises specified under rule 9 or are aboutto be removed from a store-room or other placeof storage approved by the Collector underrule 47". ( 6 ) BY various decisions rendered by the High Courtsin India, it was held that an intermediary product obtainedin a composite mill could not be subjected to levy of exciseduty unless the said product was utilised or consumed byitself. Suchintermediary product did not attract exciseduty and none could be levied or collected, if it was, whathas been prescribed in the judgments as an "in process product" and was utilised or consumed in a continuous process of manufacture for obtaining another end product. The result of these decisions was that factories which hadgenerally been paying excise duty even on such intermediary product stopped paying duty and even claimed refundwhere duty had earlier been paid on an incorrect impression of law. The revenue naturally suffered. In manycases, the Government filed appeals in the Supreme Courtor applied for grant of special leave to appeal. As it wasnot possible to have those cases decided by the Supremecourt expeditiously, the Central Government decided to amend the law. The revenue naturally suffered. In manycases, the Government filed appeals in the Supreme Courtor applied for grant of special leave to appeal. As it wasnot possible to have those cases decided by the Supremecourt expeditiously, the Central Government decided to amend the law. Accordingly, while enacting thefinance Act of 1982, the Parliament enacted Section 51,which reads as under : "retrospective effect for certain amendments tocentral Excise Rules and Validation. (1)The amendments made in rules 9 and 49 of thecentral Excise Rules, 1944 by the notificationof the Government of India in the Ministry offinance (Department of Revenue) No. G. S. R. 74 (E) dated the 20th day of February, 1982,shall be deemed to have and to have always hadeffect on and from the date on which the Centralexcise Rules, 1944 came into force. (2) Anyaction or thing taken or done or purporting tohave been taken or done before the 20th dayof February 1982, under the Central Excise Actand the Central Excise Rules, 1944 shall bedeemed to be, and to have always been, for allpurposes, as validly and effectively taken ordone as if the amendments referred to in subsection (1) had been in force at all materialtimes, and accordingly, notwithstanding anythingcontained in any judgment, decree or order ofany court, tribunal or other authority. (a) all duties of excise levied, assessed or collected or purporting to have been levied, assessed or collected before the 20th day of February 1982 on any excisable goods under thecentral Excises Act, shall be deemed to be,and shall be deemed to have always been, asvalidily levied, assessed or collected as if theamendments referred to in sub-section (1)had been in force at all material times; (b) no suit or other proceedings shall be main tained or continued in any court for therefund of, and no enforcement shall be madeby any court of any decree or order directing the refund of, any such duties of excisewhich have been collected and which wouldhave been validly collected if the amendmentsreferred to in sub-section (1) had been inforce at all "material times; (c) refund shall be made of all such duties of ex cise which have been collected but whichwould not have been so collected if theamendments referred to in sub-section (1)had been in force at all material times; (d) recovery shall be made of all such duties ofexcise which have not been collected or, asthe case may be which have been refundedbut which would have been collected or, asthe case may be, would not have been re funded if the amendments referred to in sub section (1) had been in force at all materialtimes;explanation, For the removal of doubts, it is here by declared that no act or omission on the partof any person shall be punishable as an offencewhich would not have been so punishable if thissection had not came into force. " ( 7 ) RULES 9 and 49 were earlier amended by the Centralgovernment by Notification No. 20182-CE issued on February 20, 1982. The amendment in the said two rulescomprised of addition of explanations. Amended rules 9and 49 read as under : "rule 9. Time and manner of payment of duty. (1) No excisable goods shall be removed fromany place where they are produced, cured errmanufactured or any premises appurtenantthereto, which may be specified by the Collectorin this behalf, whether for consumption, exportor manufacture of any other commodity in oroutside such place, until the excise duty leviablethereon has been paid at such place and in suchmanner as is prescribed in these rules or as thecollector may require and except on presentation of any application in the proper form andon obtaining the permission of the proper officeron the form :explanation. For the purposes of this rule excisablegoods produced, cured or manufactured in anyplace and consumed or utilised (i) as such or after subjection to any process orprocesses. ; or (ii) for the manufacture of any other commodity,whether in a continuous process or otherise, in such place or any premises appurtenant thereto, specified by the Collectorunder Sub-rule (1) shall be deemed to havebeen removed from such place or premisesimmediately before such consumption or utilisation. " "rule 49 Duty chargeable only on removal of thegoods from the factory premises or from anapproved place of storage. (1) Payment ofduty shall not be required in respect of excisable goods made in a factory until they areabout to be issued out of the place or premisesspecified under rule 9 or are about to be removed from a store-room or other place ofstorage approved by the Collector under rule47 :explanation. For the purposes of this rule, excisable goods made in a factory and consumed orutilised (i) as such or after subjection to any process orprocesses; or (ii) for the manufacture of any other commoditywhether in a continuous process or otherwise, in such factory or place or premisesspecified under rule 9 or store-room or otherplace of storage approved by the Collectorunder rule 47, shall be deemed to have beenissued out of, or removed from such factory,place, premises, store-room or other place orstorage, as the case may be, immediately before such consumption or utilisation. " ( 8 ) THE result of enacting of Section 51 of the Financeact, 1982 was that the amended rules 9 and 49 set out aboveare deemed to have come into force with effect from thedate when the Central Excise Rules, 1944 came into force,i. e. , 2/08/1945. ( 9 ) ONE other fact may be noticed by us at this stage. Section 11 A of the Act was enacted by the amending Act 25of 1978. This sets out limitation within which proceedings may be initiated for recovery of duty not levied or unpaid or short levied or short paid or erroneously refunded. The same amending Act 25 of 1978 also inserted in the Actsection 11b, which fix the limitation for making an application for refund of excise duty erroneously paid or when according to the manufacturer orproducer, he was not liableto pay the same. Section 11a substituted Rule 10 as originally promulgated while Section 11 B replaced Rule II asoriginally promulgated. The same amending Act 25 of 1978 also inserted in the Actsection 11b, which fix the limitation for making an application for refund of excise duty erroneously paid or when according to the manufacturer orproducer, he was not liableto pay the same. Section 11a substituted Rule 10 as originally promulgated while Section 11 B replaced Rule II asoriginally promulgated. The two original rules also providedfor the period within which duty could be claimed orrefund could be asked for. In this case we are primarilyconcerned with Section 11a and, therefore, it will be advantageous to read the said provision. "section IIA. Recovery of duties not levied or notpaid or short levied or short-paid or erroneous ly refunded. (1) When any duty of excise has not beenlevied or paid or has been short-levied or short-paid or erroneously refunded, a Central Exciseofficer may, within six months from the rele vant date, serve notice on the person charge able with the duty which has not been leviedor paid or which has been short-levied or shortpaid or to whom the refund has erroneouslybeen made, requiring him to show cause why heshould not pay the amount specified in thenotice:provided that where any duty of excise hasnot been levied or paid or has been short-leviedor short paid or erroneously refunded byreason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or ofthe rules made thereunder with intent to evadepayment of duty, by such person or his agent,the provisions of this sub-section shall haveeffect, as if for the words "six months", thewords "five years" were substituted. Explanation. Where the service of thenotice is stayed by an order of a court, theperiod of such stay shall be excluded in corn -. puting the aforesaid period of six months orfive years, as the case may be. (2) The Assistant Collector of Central Exciseshall, after considering the representation ifany, made by the person on whom notice isserved under sub-section (1), determine theamount of duty of excise due from such person (not being in excess of the amount specified inthe notice) and thereupon such person shallpay the amount so determined. (2) The Assistant Collector of Central Exciseshall, after considering the representation ifany, made by the person on whom notice isserved under sub-section (1), determine theamount of duty of excise due from such person (not being in excess of the amount specified inthe notice) and thereupon such person shallpay the amount so determined. (3) For the purposes of this section (i) "refund" includes rebate of duty of excise onexcisable goods exported out of India or onexcisable materials used in the manufactureof goods which are exported out of India; (ii) "relevant date" means, (a) in the case of excisable goods on whichduty of excise has not been levied or paidor has been short-levied or short paid (A) where under the rules made under thisact a monthly return, showing particulars of the duty paid on the excisablegoods removed during the month towhich the said return relates, is to befiled by a manufacturer or producer ora licensee of a warehouse, as the casemay be, the date on which such returnis so filed; (B) where no monthly return as aforesaid isfiled, the last date on which such returnis to be filed under the said rules; (C) in any other case. the date on which theduty is to bepaid under this Act or therules made thereunder; (b) in a case where duty of excise is provisionally assessied under this Act or the. rules madethereunder, the date of adjustment of dutyafter the final assessment thereof; (c) in the case of excisable goods on which dutyof excise has been erroneously refunded, thedate of such refund. " ( 10 ) AS a consequence of the amendment of rules 9 and49 read with Section 51 of the Finance Act, 1982, the petitioners have become liable to pay duty even on an intermediary product or "in-process product", though the same isutilised in their composite mill for the manufacture of anend product. Petitioners, therefore, challenge the validity and vires of Section 51 of the Finance Act as well asthe explanations added to Rules 9 and 49. In the alternate they submit that the law settled by this Court and byother Courts regarding the requirement of "removal" priorto levy and collection of duty should still be applied despite amendments in Rules 9 and 49. In the alternate they submit that the law settled by this Court and byother Courts regarding the requirement of "removal" priorto levy and collection of duty should still be applied despite amendments in Rules 9 and 49. ( 11 ) THE challenge to Section 51 of the Finance Act,1982 is not that there is no legislative competence in Parliament or that a validity Act or retrospective legislationcannot be passed. The contention is that sub-section (1)of Section 51 makes the amended Rules 9 and 49 operative from 1944, which is arbitrary and almost unconscious-able. Furthermore, though the explanation under subsection (2) of Section 51 of the Finance Act does awaywith the liability for prosecution and punishment deemed offence for past deemed acts, no provision is made forrelief from penalties, and forfeitures contemplated by thevarious provisions of the Act and the Rules, other thanoffences and punishments postulated by the Act. It is alsosaid that clause (d) of sub-section (2) of Section 51 ofthe Finance Act suffers from the vice of arbitrariness aspast transactions of as much 30 years could be reopened,causing excessive hardships. With regard to the unconstitutionaiity of amended Rules 9 and 49, the submission madeare as under : "1. The amended rule is arbitrary and unreasonableinasmuch as the goods which in fact are notremoved from the factory and which are incapable of removal because of thenature and construction of the plant or thenature and character of the manufacturingprocess, are fictionally treated as having removed. As a consequence of the fiction, the petitioners are exposed to huge liabilities for excise duty and also to penalties and confiscation in respect of acts and transactions whichin reality have not taken place. As a result of the amendment of the rules,the petitioners are also exposed to excessivehardship in complying with the statutory provisions. ( 11 ) THE amended rules 9 and 49 make no attemptto distinguish between products and processeswhich are fundamentally dissimilar and different. All are treated with the same brushwithout recognising the essential and pertinentdifferences obtaining between them. There has been no attempt at a rationalclassification and in the present case inequality arises by treating unequal situations andtransactions in a uniform manner. In any event retrospective effect givento amendment to rules 9 and 49 is unconstitutional for the following amongst otherreasons : (i) Length of retrospective effect viz. There has been no attempt at a rationalclassification and in the present case inequality arises by treating unequal situations andtransactions in a uniform manner. In any event retrospective effect givento amendment to rules 9 and 49 is unconstitutional for the following amongst otherreasons : (i) Length of retrospective effect viz. 38 yearsreckoned from the date of the commencementof the Excise Act which was 28/02/1944; consequently, the petitioners will becalled upon to pay enormous amounts ofduty in respect of the entire quantity of- goods which had come into existence andhave been captively consumed within thefactory premises and the petitioner will notbe liable to pass on this burden to itscustomers and will have to bear the same outof its own pocket. This will have the consequence of adversely affecting petitioners business; (ii) the law affects an indirect tax as it is wellknown that the excise duty is normallypassed on to the purchaser; in the presentcase, it will be impossible and \ or commercially impracticable to recover past dutiesfrom the customers; (iii) vast amount of monetary liability is involved; (iv) the substantive liablity is imposed for thefirst time on a captive product; thus it isa new tax imposedfor the first time and thattoo with retrospective effect and again, muchafter the law was laid down in favour ofpetitioners coupled with the fact that therehave been a succession of decisions of thishon ble Court and other Hon ble Highcourts taking a similar view as stated above ; (v) the most objectionable part is that thepetitioners will be expose to personalpenalties and confiscation of their goodsand plant and machinery by virtue of theretrospective operation of the amendedrule read with rules 9 (2) and 173q. It issignificant to note that the explanationto Section 51 does not contain anyexception in respect of penalties andconfiscations under the Act. III. Retrospective operation of the amendmentto the rules is in violation of Article 20sub-rule (i) of the Constitution. An Actin contravention of Rule 9 or rule 173 Qis an offence as defined in Section 3, subsection 38 of the General Clauses Act andtherefore an offence within the meaning ofart. 20, sub-article (i ). Convicted of anoffence means adjudged guilty of any actor omission punishable by law. As a result of the retrospective operation of theamended rules, the petitioners can be foundguilty of contravention of Rule 9 or Rule173q by the Excise Authorities under theact. 20, sub-article (i ). Convicted of anoffence means adjudged guilty of any actor omission punishable by law. As a result of the retrospective operation of theamended rules, the petitioners can be foundguilty of contravention of Rule 9 or Rule173q by the Excise Authorities under theact. " ( 12 ) BEFORE we deal with the contentions raised on behalf of the petitioners, we may briefly notice some of thedecisions given prior to the impugned amendments. M\s. Nirlon Synthetics Fibres and Chemicals Ltd. filed a petitionunder Article 226 of the constitution challenging the legalityof excise duty sought to be levied on polymer Chips (otherwise called Nylon Six Chips), under Item 15a inschedule I to the Act. By a petition filed in the Bombayhigh Court in 1964, it was held by a judgment dated 30/04/1970 that reading rules 9 and 49. as thenin force, together, if the rule making authority wanted toinclude "removal" of the excisable articles occurring withinthe equipment, machinery, or any part or parts thereof,such as vessel, tubes or pipes, it could have done so whileframing rules 9 and 49. Rules 9 and 49 speak of removal"from factory premises or spcified place or premises andnot parts of plants etc. It was further observed that acontinuous or integrated process of manufacture was notwithin the contemplation of the scheme of the Act andthe Rules framed thereunder, as operating upto May 1968. Therefore, prior to 1968, "removal" within the factorycould not be regarded as removal within the Rule 49 butthereafter it could be by virtue of the promulgation ofrules 173a to 173k by a notification dated 11/05/1968,in which the expression "home use" was used. Thus asfar as respondents were concerned the law in cases like thepresent one was declared to be in their favour. ( 13 ) ON 3/04/1972, a Bench of this court delivereda judgment in Caltex Oil Refining (India) Limited v. Union of India and others, 1979 ELT (J581x2 ). On thispetition under Article 226 of the Constitution the petitionercomplained of rejection of claim made by it for refund ofexcise duty, earlier paid allegedly by mistake or undermis-apprehension or on account of an incorrect interpretation of the relevant law on burner fuel oil on which dutyhad been levied and collected as an end product by classifying it as furnace oil. The writ petition was dismissed. The writ petition was dismissed. Dealing with the concept "removal" within rule 49, as itthen stood, approving an earlier decision of this Court incivil Writ No. 115-D of 1963, J. K. Synthetics Ltd. , Kotav. The Collector of Central Excise, Delhi (3) as well asjudgment of the Bombay High Court in Nirlon Syntheticfibres and Chemicals Limited, adverted to earlier, it washeld that the scheme of the Act and the Rules did notcontemplate the imposition of excise duty on an intermediary product utilised for producing an end product in acontinuous and integrated process of manufacture until therules were amended in 1968. It was held that though therules contemplate consumption within the place of manufacture as "removal", the consumption of the product contemplated by rule 9 is consumption of the product by itselfand not by converting it into another product as in the caseof Polymer Chips. Unless the continuous process snaps,there could be no removal. Thus it was for the first time,in the context matter before this Court, that the rule regarding "in processed product" or intermediary product beingutilised by itself or being utilised for manufacture of anotherproduct without snapping the process of manufacture, waspropounded. Inasmuch as the judgment was against thepetitioners, the respondents had no opportunity to get thisview tested by taking an appeal to the Supreme Court. ( 14 ) ON 28/03/1974, a learned Single Judge of theallahabad High Court decided a petition filed in 1973, inwhich also a question was raised with regard to leviability of excise duty on an intermediary product. This judgment was reported in Nagrat Paints v. Union of India, 1978e. L. T. (J39) (4 ). The learned Single Judge said thatunder Rule 9 duty is leviable only if the excisable articleis removed from the place where it is manufactured or produced for consumption, export or manufacture of any othercommodity. In that case, he noticed, there was no findinggiven by the authorities that Alkyd Resin was removed, fromthe place where it was produced, for consumption, export ormanufacture of any other commodity. Indeed, it was admitted that the conversion of V. N. E. Oil into Alkyd is onlyan intermediary stage in the manufacture of paints and vernishes. Therefore, he held that no duty was leviable onalkyd Resin and the credit allowed for the use of V. N. E. Oil in the manufacture of paints and varnishes was properlyavailable to the petitioner. Indeed, it was admitted that the conversion of V. N. E. Oil into Alkyd is onlyan intermediary stage in the manufacture of paints and vernishes. Therefore, he held that no duty was leviable onalkyd Resin and the credit allowed for the use of V. N. E. Oil in the manufacture of paints and varnishes was properlyavailable to the petitioner. We are not aware as to whetherany appeal was taken from this decision to the Supremecourt. ( 15 ) ON 16/02/1978 this Court decided Civilwrit No. 1358 of 1975 in Delhi Cloth and General Mills Co. Ltd. and another v. Joint Secretary, Government of India andanother, 1978 E. L. T. (J 121) (5 ). One of the propositionswhich came up for determination was whether the calciumcarbide manufactured by the petitioner as an intermediaryproduct, which is used for the generation of acetylene gas inthe same factory could attract duty. It was, contended thatit does not do so because it is not "goods" within the meaningof provisions of the Act and is also not removed from thefactory but is consumped for getting acetylene gas. Thevalue of the intermediary product could not be determinedunder Section 4 of the Act. The Bench held thatthe crucialrequisite of Section 4 was the value had to be determinedat the time of the removal of the article chargeable with dutyfrom the factory. The petitioner had alleged that the articlemanufactured by it was not removed from the factory butwas straightway used to generate acetylene gas by the transferof the article from one plant to another in the same factory. There was no denial by the respondents of this assertion. All that was said was that removal from one plant to anotherwas removal within the meaning of Section 4. It was notdisputed that both plants were in the same factory. It was heldthat since there was no traverse by the respondents of pleading of the petitioner that the movement took place within thefactory such movement could not be regarded as removal. Thus this was one of the first cases which went against therevenue. We are told that an appeal has been filed in thesupreme Court. ( 16 ) ON 16/04/1980 a Bench of this Court decidedcivil Writ No. 506 of 1979: Modi Carpets Limited and another v. Union of India and others, 1980 E. L. T. 320 (6 ). Inthe judgment of the Bench rendered by one of us (BN. We are told that an appeal has been filed in thesupreme Court. ( 16 ) ON 16/04/1980 a Bench of this Court decidedcivil Writ No. 506 of 1979: Modi Carpets Limited and another v. Union of India and others, 1980 E. L. T. 320 (6 ). Inthe judgment of the Bench rendered by one of us (BN. Kirpal, J) it was held reading the pleadings in the context ofinterpreting Rules 9 and 49 : "reading the aforesaid provisions together it isevident that duty can be charged only whenexcisable goods are removed from the placeof manufacture, in this case the factory, andat the value which it may have at the time of removal from the place of manufacture. Thequestion which now arises is whether any dutycan be levied when there is no removal from theplace of manufacture. It is an admitted case of the parties that the silver which is obtainedby the petitioners is consumed within the verypremises in which it is manufactured, namely,within the spinning section of the factory. Weare of the opinion that in this view of the matteras there is no removal from the place of manufacture, no duty of excise can be levied andrecovered. " ( 17 ) THE judgment in Delhi Cloth and General Mills Co. Ltd. and another (Supra) was noticed. The High Courtdisagree with the contrary view expressed by the Gujarathigh Court in Maneklal Harilal Spg. and Mfg. Co. Ltd. v. Union of India and others, 1978 E. L. T. (J. 618) (7 ). Referring to Rule 173g, it was held that the said provision onlyprovides for the manner or time of the payment of the duty. It postulates that duty is leviable. The question as to whenduty can be levied and collected has to be decided by a jointreading of rules 9 and 49. ( 18 ) THE same view was reiterated by the same Benchof this Court in Synthetics and Chemicals Limited, Bombayv. Government of India, 1980 ELT 675 (8 ). In J. K. Cotton Spinning and Weaving Mills Co. Ltd. and v. Unionof India and others, 1981 ELT 887 this Bench in the caseof the petitioners in C. W. 664 of 1979, held the petitionerto be entitled to refund of duty approving the view takenby this Court earlier on the construction of Rules 9 and 49. In J. K. Cotton Spinning and Weaving Mills Co. Ltd. and v. Unionof India and others, 1981 ELT 887 this Bench in the caseof the petitioners in C. W. 664 of 1979, held the petitionerto be entitled to refund of duty approving the view takenby this Court earlier on the construction of Rules 9 and 49. It was held that the yarn manufactured by the petitionersin that case and wound up on the cones was assessable undertariff Item 18e. If the yarn was removed at that stage. An excisable commodity came into existence immediately theyam was manufactured. Thereafter, sizing the yarn didnot change the nature of the commodity and thus sizedyarn was not the commodity remove for purpose of manufacture of fabrics. This judgment was delivered on 16/10/1980. We are told that against the judgment of thiscourt the Central Government has gone up in appeal to thesupreme Court. ( 19 ) THE position, therefore, was that upto 1968 or even1978 by and large manufacture of intermediary productswhich were utilised further in continuous processes of manufacture for producing another product were paying duty onthe intermediary product. As a consequence of the variousdecisions given by the Courts in India, many manufacturerscame to the Court and got stay orders for payment of dutyon intermediary products in cases where the intermediaryproduct was obtained as an "in-process product" for fabrication of an end product in factories having an integratedcontinuous process of manufacture of the end product. Therewere some High Courts, like the Gujarat High Court, whichhad taken the view that the intermediary product did attractduty even if it was an "in process product" utilised in acontinuous process of manufacture for obtaining an endproduct. The Central Government could rightly take theview that the Act which is a Central Act could, therefore. not be uniformally enforced and there was also the problemof revenue being adversely affected. Therefore, Rules 9 and49 were required to be amended by the Central Government. These amendments were made. The Parliament, in its wisdom, by enacting Section 51 of the Finance Act, 1982 madethe amended Rules 9 and 49 retrospective or retroactivein operation. Section 51 of the Finance Act is thus notonly a valaditing law but also a law enabling the Centralgovernment and its agencies to enforce the excise rules andin particular Rules 9 and 49 uniformly throughout thecountry. The Parliament, in its wisdom, by enacting Section 51 of the Finance Act, 1982 madethe amended Rules 9 and 49 retrospective or retroactivein operation. Section 51 of the Finance Act is thus notonly a valaditing law but also a law enabling the Centralgovernment and its agencies to enforce the excise rules andin particular Rules 9 and 49 uniformly throughout thecountry. The amendment thus brought about was also condusive to or necessary in the interest of earning revenue. This is in nutshell the respondents answer to the challengeputforth by the petitioners. ( 20 ) THE present batch of cases deal with spinning millsor spinning sections of the composite mills. Spun yarn isa commercial commodity known to the market and factuallycomes into existence. In a composite mill the spun yarn isfirst sized and then processed to make fabrics. Therefore,the question of goods incapable of removal because of thevery nature of the manufacturing process does not reallyarise. Learned counsel for the petitioners, therefore, inthe present set of cases has notaddressed any arguments onthe first contention noticed earlier and does not press fordetermination of the issue. We also, therefore, refrain frommaking any observation on this point. ( 21 ) MR. Soli Sorabji, learned counsel for the petitionerscontends that despite amendments made in Rules 9 and 49and enactment of Section 51 of the Finance Act the requirement to specify the "place" where goods are produced,cured or manufactured or the "premises" appurtenant tosuch place is still mandatory. Therefore, he contends, unlessthe "place" or "premises" are specified utilisation of intermediary product within the factory cannot be subjected tolevy or collection of duty as the same are not physicallyremoved from the factory. Learned counsel is assumingthat in the absence of specification of a "place" or a "premises" the factory itself may be regarded as the place orpremises from which the goods required to be removed beforelevy of duty. He of course, does not concede that withoutthe factory as such being specified as the place or premises,within the meaning of Rules 9 and 49 removal from thefactory would attract duty. He assumes it only because thiscourt in several decisions has taken the view that where aplace or premises is not specified it is the removal from the factory which would be the point of time when levy isto be made and collected. He assumes it only because thiscourt in several decisions has taken the view that where aplace or premises is not specified it is the removal from the factory which would be the point of time when levy isto be made and collected. In respect of this contention herelies on the various judgements of this Court, noticedearlier, in which it has been held that till there is removalfrom the factory under Rule 49 duty cannot be levied andcollected. In particular, he refers to a judgement of thiscourt in C. W. 115-D of 1963, adverted to earlier, and saysthat utilisation of the goods within the composite factoryor mill cannot be regarded as issued out" of the specifiedplace unless the place is actually by on order specified. There is a fallacy in this argument. If the amended Rules9 and 49 are valied by attraction of a fiction the yarnwhich is the intermediary product, will be regarded ashaving been "issued out" or "removed" just before the yarnis utilised for further processing relevant to weaving cloth. The explanation to Rule 49 which brings about this fictionis a clear in its terms. Referring to the decision of thiscourt in Caltex case (Supra) and Modi Carpet s case (Supra), it is urged that removal contemplated by the rulesis removal by itself of the commodity in question and notutilisation of the commodity for being converted into another. This would not be a correct reading of our judgements. Inthe context of the un-amended rules 9 and 49 we had laiddown that removal had to be of the commodity manufactured by itself and not that and "in-processed product"could be subjected to duty without physical removal whichalone attracted levy under the un-amended Rules 9 and 49. If the fiction brought in by the amended rules is valid thenutilisation of the product for manufacture of another product would be removal within the meaning of the amendedrules. The term "issued out" in Rule 49 and "removed" inrule 9 as well as in Rule 49 must conform to the intentionof the) amended rules. Indeed, in Caltex case (Supra) thiscourt had already made it clear that utilisation within thefactory itself can in certain circumstances attract levy ofduty. That principle has been clarified by the explanationadded to Rules 9 and 49 by the amendment. Indeed, in Caltex case (Supra) thiscourt had already made it clear that utilisation within thefactory itself can in certain circumstances attract levy ofduty. That principle has been clarified by the explanationadded to Rules 9 and 49 by the amendment. ( 22 ) WE are not impressed with argument that thewords "such" used in the explanation to Rule 49 should beso construed as to refer to any place in a factory, as contended on behalf of the respondents. Indeed, nothing turnson it. On our reading of the amended rules utilisation ofexcisable goods even in a continuous process, so long asthe. goods are identifiable and capable of physicalremoval would attract duty whether infact they are physically removed or not. Indeed, in one way of looking at itthe matter there will always be physical removal, eithermanually or mechanically, when goods go "within the pipeline" for. being utilised to be converted into another typeof goods, lender the un-amended Rules 9 and 49 we heldthat such utilisation would not amount to being "issuedout" from the factory in the absence Of place of a premisesbeing specified under Rule 9. The amended rules thisview has been, so to say, nullified. ( 23 ) IT is then contended on behalf of the petitioners thatthere would be difficulty in maintaining the accounts andrecords and in any case for the past there would be no records. This aspect need not detain us. From a reading of the rules, it is apparant that appropriate forms can beprescribed depending upon the nature of industry or factory. Rule 49a lays down the procedure for collection of dutyleviable on cellulosic spun yarn and cotton yarn along withduty on cotton fabrics. Rule 53 deals with how daily stock account is to be kept. This rule says that the same will bekept in such form as the Collector may in any particularcase or class of cases allow. Rule 54 speaks of how monthlyreturns have to be submitted. There are other similar ruleswhich deal with this aspect and we see no difficulty in theaccount being properly maintained. ( 24 ) ONE more dafficulty has been mentioned by petitioners counsel. It is submitted that in working the amended rules 9 and 49 it would be difficult if not wellhigh impossible to -levy excise duty with referenceto value as postulated by Section 4 of the Act The difficulty is more imaginary than real. ( 24 ) ONE more dafficulty has been mentioned by petitioners counsel. It is submitted that in working the amended rules 9 and 49 it would be difficult if not wellhigh impossible to -levy excise duty with referenceto value as postulated by Section 4 of the Act The difficulty is more imaginary than real. In regard to such goodswhere duty is chargeable with reference to value it is notnecessary to value the goods which are supposed io be the"in process" goods. If such goods are marketable and arein fact marketed by anyone else then that valuation can bethe basis of fixing the value- of the "in-process" goods. Indeed, clause (b) of sub-section (1) in Section 4 itself makesthis position clear. ( 25 ) WE now come to the challenge to the vires of therules as well as Section 51 of the Finance Act. It is concededthat merely because the rule operate retrospectively by virtueof the provisions of Section 51 of the Finance Act, it wouldnot makethe rules or the section ultra vires the legislatureor the legislating authority. What is contended is that ifthe retroactivity is unreasonable to the extent that the wholelegislation appears to be arbitral then the provisions can bestruck down as being ultra vires, the doctrine of ultravires being invoked in the context of the arbitrariness andunreasonableness. Article 19 (l) (g) of the Constitution itis urged, could also in such circumstances be invoked to testwhether the provisions of law are arbitrary or unreasonable. Mr. Sorabji s main contention, therefore, is that making therules operative from 1945 makes them violative of Article19 ()) (g) of the Constitution as per se the rules becoma unreasonable. The trader or the business community or theindustry cannot be expected to he called upon to pay taxes retrospectively from 1945. The effect of the amended rules isthat all clearances made in the past, which previously did notattract duty, would now attract duty. Inasmuch as clearanceshave been made or are deemed to have been made withoutpayment of duty the provisions for penalties and forfeitures aswell as prosecution would also be attracted. ( 26 ) LEARNED Solicitor General appearing on behalf ofthe respondents has contended that. Section 51 of thefinance Act must be given full play and thus the retroactiveoperation has got to be with effect from 1945 when theexcise rules were first promulgated. ( 26 ) LEARNED Solicitor General appearing on behalf ofthe respondents has contended that. Section 51 of thefinance Act must be given full play and thus the retroactiveoperation has got to be with effect from 1945 when theexcise rules were first promulgated. If that was not donethe very purpose of the amendment would be lost. Themandate of the legislation, according to him, ;s to givepower to refund and to collect where there was no powerto refund or collect prior to the amendment of rules 9 and49. Indeed, the power to collect and refund is now given bysection 51 of the Finance Act, which in terms must beregarded as a legislation independent of the Act but sanctified by Article 265 of the Constitution. Learned Solicitorgeneral further contends that keeping in view the possibility of criminal provisions being attracted by giving retrospective effect from 1945, in terms the explanation undersection 51 makes it clear that criminal liability will notbe attracted. Therefore, the Legislation is both reasonableand intra vires. The contention that Section 51 of the Finance Act creates only civil liability to pay tax and so is inthe nature of a validation Act. Mr. Sorabji has very strenuously urged that on the ground of unreasonable retrospectivity the provisions should be struck down even if onlycivil liability is held to be attracted. The civil liabilitywould include levy of penalties and even confiscation, whichwould be most unreasonable. ( 27 ) BOTH parties have brought to our notice a largenumber of decisions in support of their rival contentions. It is neither necessary nor desirable to notice them in theview that we are going to take of this legislation. ( 28 ) IN our view. Rules 9 and 49 must be deemed tohave been enacted in the rules from 1945. This wouldmean that duty had to be levied and collected in accordancewith the provisions of the Act and the rules from 1945. Section 51 of the Finance Act, does no more than this,besides making the penal provisions inapplicable for pasttransactions. It does not touch any of the other provisionsof the Act or the rules. This means, that levy, collection, assessments of penalties etc. would all have to be done inaccordance with the provisions of the Act and the rules asin force from time to time. It does not touch any of the other provisionsof the Act or the rules. This means, that levy, collection, assessments of penalties etc. would all have to be done inaccordance with the provisions of the Act and the rules asin force from time to time. Prior to the enforcement ofsection 11a and 11b of the Act with effect from 17/11/1980 by the Amending Act 25 of 1978, the limitationfor recovery of duty not levied or not paid or short leviedor short paid or erroneously refunded on the one hand andclaim for refund of duty on the other were governed by rulesin this regard, adverted to by us earlier. Thereafter, recoveries and refunds are governed by theprovisions of Sections 11a and 11b. We cannot persuade ourselves to acceptthe argument of the learned Solicitor General that Section51 of the Finance Act over-rides the effect of Sections 11aand 11b of the Act. The particularisation by Section 51 ofthe Finance Act cannot have the effect of repealing Sections11a and 11b of the Act. The excise authorities had nopower to levy and collect excise duty on in-process goodsand this is what seems to have been remedied by the amendment of the rules. We cannot read Section 51 of the Financeact to mean that the levy and collection can be made forpast deemed clearances by ignoring the other provisions ofthe Act and the rules. We also cannot accept the learnedsolicitor General s argument that Section 51 of the Financeact should be read as limited to actions postulated byclauses (a) to (d) only and not permit levy of penalties etc. We, however, agree with the argument that no prosecutionfor past alleged breaches can now be ordered. ( 29 ) IN the view that we have taken, the argument ofmr. Sorabji of unreasonableness on account of length ofretroactivity loses all force. We, therefore, hold that Section51 and Rules 9 and 49 as amended are valid. ( 30 ) THERE is only one other point which remains to bedealt with and that is with regard to sized yarn or un-sizedyarn being liable to levy of duty in factories where spinningand weaving is done in a composite mill having a continuous integrated process of manufacture. To us the positionadmits of no doubt. The goods that come into existenceafter spinning is yarn which is unsized. Merely because thegoods are sized the nature of the goods is not changed. To us the positionadmits of no doubt. The goods that come into existenceafter spinning is yarn which is unsized. Merely because thegoods are sized the nature of the goods is not changed. Sizing is only a process in manufacturing fabrics and doesnot amount to manufacturing new goods. Sized yarn is notnew goods which come into existence. We clarify, if unsized yarn is cleared from the factory or a place specifiedunder Rule 9 or goes into the main stream of the market,then the unsized yarn would attract duty. Similarly, if sizedyarn is cleared in the same way then sized would attractduty. The question before us is whether sized or unsizedyarn would be liable for duty in an integrated process ofmanufacture. Sizing is relevant to weaving and not to spinning. It is a process necessary for weaving cloth and not to spinning yarn. Therefore, reading the amended rule 49, theutilisation of yarn in a continuous process of manufacture"immediately before such consumption or transaction",would have reference to unsized yarn and not sized yarn. The deemed "issue out" or "removal" for purposes of weaving would be "issue out" or "removal" of unsized yarn. Once this deemed removal takes place the unsized yarn isfirst sizeid, the process being the first process in the manyprocesses, which ultimately results in weaving being completed and cloth being fabricated. ( 31 ) WE may notice here that in Civil Writ No. 1190of 1981 the Bombay High Court has already given thisrelief to the petitioners though a Letters Patent Appeal issaid to be pending. ( 32 ) NO other point really arises for decision. The rule ismade absolute in each of the petitions disposed of by thiscommon judgment in the above terms. Petitions areallowed partially. In the circumstances of the case theparties are left to bear their own costs.