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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, UPENDRA LAL WAGHRAY
Bombay Iron Foundry - Appellant
Versus
Collector of Central Excise, Hyderabad - Respondent
Decided On : 01-01-86
CENTRAL EXCISE ACT, 1944 - SECTIONS 2(d), 3, 4, 8 - IRON CASTINGS - EXEMPTION FROM DUTY - NOTIFICATION NO. 74/62, DATED 24-4-1962 UNDER RULE 8 - INTERPRETATION - HELD, IRON CASTINGS MANUFACTURED BY THE APPELLANTS ARE EXEMPT FROM DUTY EVEN THOUGH PIG IRON IS USED AS A RAW MATERIAL AND THE APPELLANTS ARE NOT OBLIGED TO TAKE OUT L4 LICENCE.
Fact of the Case:
The appellants, operating small-scale foundries in Hyderabad and Nizamabad, used old iron scrap and pig iron to manufacture iron castings. They were recognized as small-scale industries by the state government and obtained pig iron from them. The Assistant Collector of Central Excise informed them that they were required to take an L4 license under the Central Excise Act, 1944, as the product was liable to excise duty under Item 25 of Schedule I of the Act. The appellants challenged this decision, arguing that their iron castings were not liable to excise duty and that they were not required to take out an L4 license. The writ petition was dismissed by the single judge.
Finding of the Court:
The court held that the appellants were not required to take out an L4 license for the manufacture of iron castings. The court interpreted Items 25 and 26aa of Schedule I to the Central Excise Act, 1944, prior to and after amendment on 1-8-1983, and found that iron in any crude form, including pig iron and iron castings, was treated as one commodity in distinction with the products of iron mentioned in Item 26aa. The court also examined the applicability of the exemption notification under Rule 8 and held that the appellants were exempt from duty even though they used pig iron as a raw material.
Issues: Whether the iron castings manufactured by the appellants were liable to excise duty under Item 25 of Schedule I to the Central Excise Act, 1944.
Ratio Decidendi: The court held that the iron castings manufactured by the appellants were not liable to excise duty because: (1) Items 25 and 26aa of Schedule I to the Central Excise Act, 1944, prior to amendment on 1-8-1983, indicated that iron in any crude form, including pig iron and iron castings, was treated as one commodity in distinction with the products of iron mentioned in Item 26aa; (2) the levy of duty on iron castings would result in the levy of excise duty twice on crude iron, which was not contemplated by the scheme of the Item; and (3) the exemption notification under Rule 8 applied to the appellants because they used old iron or steel scrap along with pig iron for the production of iron castings.
Final Decision: The appeal was allowed, and the appellants were held not to be required to take out an L4 license for the manufacture of iron castings.
( 1 ) THE writ Appeal is filed by 27 petitioners against the judgment of the learned single Judge dismissing the writ petition.
( 2 ) THE appellants are operating Small Scale Foundries in the Hyderabad Urban Agglomeration and in Nizamabad district. For the production (manufacture of iron castings, they use old iron scrap and pig iron as raw material. They are all recognised as Small Scale Industries by the State Government authorities and they get their requirements of pig iron from them. The assistant Collector, Central Excise, by his letter/dated 21-8-1981 informed the petitioners that because pig iron is also used as a raw material in the manufacture of iron castings, produced by them they obliged to take L4 licence under the Act, as the product is liable to excise duty under item 25 -shedule I of the Central Excise Act The petitioners have filed writ petition questioning the correctness of the view of the Assistant collector and his jurisdiction contending that the Iron casting manufactured by them are not liable to Excise duty and that they are not obliged to take out L4 licence. the writ petition was opposed by the Department contending that in view of Item of Shedule I to the Act the Iron Castings manufactured by the petitioners are liable to duty and even the exemption granted under Rule 8 ny Notification No. 74/62, dated 24-4-1962 will not help the petitioners, as ping iron is used as a part of raw material. The writ petition was dismissed by the learned single Judge.
( 3 ) IT is now brought to our notice that the Items 25 and 26aa have been amended with effect from 1-861983 and, consequently, old notification under Rule 8 was also rescinded and new Notification No. 208/83 has come into force form the same date. This new notification has also been amended by Notification No. 38, dated 1-3-1983 and Notification No. 79, dated 10-2-1986 but these amendments to the new exemption notification do not affect the controversy in this case. It is common ground that after 1-8-1983 the manufacture of iron castings by the petitioners is exempt from duty even though pig iron is used as a raw material and the appellants are not obliged to take out L4 licence. The controversy is only regarding the period prior to 1-8- 1983.
( 4 ) IT is useful to extract Items 25 and 26aa of Schedule I to the Central Excise and Salt Act 1944 prior to and after amendment on 1-8- 1983: Prior to amendment:" 25. IRON IN ANY CRUDE FORM including pig iron, scrap iron, molten iron or iron cast in any other shape or size. (seventy ruppee per metric tonne ). "26aa. IRON OR STEEL PRODUCTS. THE FOLLOWING NAMELY:- (i ). . . . . . (v) All the other steel castings, not otherwise specified. After amendment: Item 26aa is omitted. Item 25 is made very comprehensive. The relevant extract form Item 25 reads as follows:"25. Iron and steel, and products thereof, the following namely:- (1) Pigiron, cast iron and spiegeleisen in pigs, blocks, lumps and similar forms; and molter iron. (2) to (15) X X X X X X X X X (16) Castings of iron or steel, not otherwise specified: (i) of iron (ii) of steel. . . . . . . . . . "
( 5 ) THE exemption Notification No. 74/62, dated 24-4-1962 under Rule 8 reads as follows:" Exemption to iron in any crude form produced from old iron or steel Scrap : In exercise of the powers conferred by sub-rule (1) Rule 8 of the Central Excise Rules, 1944 The central Government hereby exempts iron in any crude form including pig iron, scrap iron molten iron or iron cast in any other shape or size falling under Item No. 25 of the First shedule to the Central Excise and Salt Act 1944 (1 of 1944) and produced out of old iron or steel scrap or scrap obtained form duty paid virgin metal, with effect form 1st March, 1964 from the payment of Excise duty leviable thereon. "it is not in dispute (vide counter-affidavit fled in the writ appeal that the pig iron used by the appellants supplied by the State Government authorities. therefore, pig iro
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