Judgement

BHARGAVA, J. :- This appeal by certificate arises out of proceedings started by institution of a suit by the respondents, challenging the imposition of excise duty on circles of kansi and brass prepared hi the process of manufacturing utensils. The facts, which have been found by the High Court of Punjab and Haryana and the lower courts and which are not disputed, are that the respondents carry on business, at Rewari, of manufacturing kansi and brass utensils. For that purpose, they procure copper, tin and zinc. Kansi is prepared as an alloy of copper and tin, and brass as an alloy of copper and zinc. These alloys are prepared by melting the metals and mixing them together. These alloys are then converted into billets. These billets are thus of two kinds, viz., of kansi and of brass. These billets are then sent by the respondents to their agent who runs a rolling mill in Rewari, and the rolling mills roll the bulets into uncut circles. Subsequently, these uncut circles are trimmed and, after further work on them, they are converted into utensils and sold as such in the market by the respondents. The appellant imposed excise duty at the stage when the rolling mills prepared circles from the billets under Item 26-A of the First Schedule read with Section 3 of the Central Excises and Salt Act. No. 1 of 1944 (hereinafter referred to as "the Act"). The relevant provisions of the Act are, for convenience reproduced below:-

Item 26-A of the First Schedule is as follows:

" Description of goods Rate of duty

Copper and copper alloys containing not less than fifty per cent, by weight of copper,-

(1) In any crude form including ingots, bars, blocks, slabs, billets, shots and pellets. Three hundred rupees per metric tonne.

(2) Manufactures, the following, namely, plates, sheets, circles, strips and foils in any form or size. Five hundred rupees per metric tonne.

(3) Pipes and tubes . . . Ten per cent, ad valorem."

2. Section 3 (1) reads as follows:

"There shall be levied and collected in such manner 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."

It may be added that we have quoted this item as it stood at the relevant time and have ignored the subsequent amendment under which the rates have been increased.

3. The excise duty was levied by the appellant on the basis that, at the stage when the billets were rolled into circles, the process of manufacture of circles was complete and, consequently, these circles because liable to excise duty at the rate mentioned against Item 26-A (2) quoted above. The respondents claimed that the product, as it appeared in the form of uncut circles after rolling of billets by the rolling mills, could not be called circles in the sense in which this word is used in Item 26-A (2); and, further, that the circles were prepared without undergoing any such changes as could be held to amount to manufacture, so that the circles at that stage were not liable to excise duty under this item. The trial Court decreed the suit, holding that these circles were not liable to excise duty; and that decree was upheld by the appellate Court and, in second appeal, by the High Court. It is this decision that has been challenged in this appeal by the Union of India, after obtaining certificate under Article 133 (1) (c) of the Constitution from the High Court.

4. It appears to us that, on a plain reading of the provisions of the Act and Item 26-A of the First Schedule, the contention raised on behalf of the appellant must be accepted. Under Section 3, all excisable goods set forth in the First Schedule, which are produced or manufactured in India, are made liable to excise duty at the rates mentioned in the Schedule. Item 26-A (2) clearly mentions the manufacture, amongst others, of circles in any form or size. There can b