1976 Supreme(Cal) 173

High Court Of Calcutta
SABYASACHI MUKHERJI
UNION CARBIDE CO.LTD. - Appellant
Versus
ASSISTANT COLLECTOR OF CENTRAL EXCISE - Respondent
Matter 96  Of  1975
Decided On : 05/10/1976

The taxable event is the manufacture or production of the goods. It is not necessary to attract duty that the goods should be sold. If excisable goods are produced or manufactured that is sufficient to attract duty. Whether the goods are consumed, sold or not used thereafter is wholly irrelevant.

Headnote:

CENTRAL EXCISE - MANUFACTURE - PRE-END IN PROCESS ARTICLE - EXIGIBILITY OF DUTY - REPETITIVE DUTY - JURISDICTION TO ISSUE NOTICE - REFUND OF DUTY - LIMITATION - UNJUST ENRICHMENT.

Fact of the Case:

The petitioner, a manufacturer of zinc calots, challenged the order of the Appellate Collector holding that zinc calots are not exigible to duty under tariff item 26b (2) and the notice of demand issued under Rule 9 (2) of the Central Excise Rules, 1944, for the period from 3rd March, 1971 to the end of March, 1974, on the ground that zinc sheets and strips from which calots are manufactured are assessable to central excise duty under Tariff Item 26b (2). The petitioner also claimed a refund of the sum of Rs. 2,24,16,981.00 alleged to have been collected illegally on zinc calots for the period from May 1961 to February 1975.

Finding of the Court:

1. The rough-rolled zinc prepared or produced by the petitioner in the process discussed is not exigible to duty under tariff item 26b (2) of the First Schedule to the Central Excises and Salt Act, 1944. 2. The notice issued under Rule 9 (2) of the Central Excise Rules, 1944, is invalid inasmuch as the goods in question had not been removed clandestinely, but the said notice can be treated as notice under Rule 10 to the extent applicable and for the period enforceable provided rough rolled zincs out of which zinc calots are punched, are exigible to duty as zinc sheets or strips. 3. The petitioner is entitled to refund of excise duty paid on zinc calots for the period from May, 1961 to February, 1975, subject to the condition that if it is ultimately held that rough-rolled zincs out of which calots are punched are assessable to duty then the demand notice for the same dated 26th April, 1974 in so far as is within the period covered by rule 10 from the date 26th April, 1974 would be enforceable gainst the petitioner. But before enforcing the same, the respondent should give credit to the petitioner for the amount realised from the petitioner. on account of duty for zinc calots, on account of duty for zinc calots.

Issues: 1. Whether a pre-end in process article manufactured is exigible to duty under the provisions of the Central Excises and Salt Act, 1944. 2. If so, when such duties have not been paid over the years, whether such duties can be realised by the Government. 3. Where the manufacturer has over the years paid duties on the basis that such duties were payayle on one of the items manufactured by it which has been subsequently held by the authorities to be not dutiable, can the manufacturer enforce refund of the duties paid in an application under Article 226 of the Constitution.

Ratio Decidendi: 1. The taxable event is the manufacture or production of the goods. It is not necessary to attract duty that the goods should be sold. If excisable goods are produced or manufactured that is sufficient to attract duty. Whether the goods are consumed, sold or not used thereafter is wholly irrelevant. 2. The duty is on manufacture or production of goods. Manufacture implies a change but every change in the raw material is not manufacture eligible to duty. To be manufacture eligible to duty there must be such transformation that a new and different article which can ordinarily come to the market to be bought and sold and known to the market having a distinctive name, character and use must emerge. 3. In interpreting the meaning of the words in fiscal statute where the words are not defined the acceptance of the words by trade and their popular meaning should be the guide and should be taken as the meaning. 4. The fact that an item of gas was specified in the Standards Institution Specification was certainly an evidence which must be judged in proper light. If, however, in the context of dispute that the item does not conform to the specification laid down in the Standards Institution, then wether the article produced which was not according to the standard would be sub-standard or was known in the market as that kind of goods or not would have to be judged on evidence independent of this specification. 5. If there are separate and different processes of manufacture, and each process results in such transformation that a new and distinct article known in the market as such comes into being then each process would be subject to duty. 6. In order to attract Sub-rule (2) of Rule 9 the excisable goods must in contravention of Sub-rule (1) be desposited in or removed from any place specified therein, the producer or manufacturer thereof is made liable to pay duty leviable on such goods on written demand made by proper officer and also would be liable to penalty which may extend to Rs. 2,000/- and also liable to confiscation. 7. In order to attract Rule 10a, as has been held by the Supreme Court in the decision noted hereinbefore, the other rules should be found to be inapplicable. Rule 10a was a residuary provision.

Final Decision: 1. The order of the Appellate Collector dated 03rd January, 1975 passed by the Appellate Collector in so far as it held that rough rolled zincs out of which zinc calots are punched are assessable to Central Excise Duty is set aside and he will re-consider the matter in accordance with law and in accordance with the observations made in this judgment after giving reasonable opportunity to the parties for adducing such further evidence as he considered necessary. In so far as he held that zinc calots are not exigible to duty the same is upheld. 2. Until that decision is made the order of the Assistant Collector dated 05th July, 1972 should not be given effect to and the demand notice dated 26th April, 1974 and the show cause notice should not be given effect to. 3. If it is ultimately held by the Appellate Collector that rough-rolled zincs out of which calots are punched are not dutiable then the said demand notice and the said show cause notice in respect of the demand notice should not be given effect to any further and the petitioner would be entitled to take such steps as it would be entitled to under the law to claim refund of duties paid, for zinc calots, including apylying to the respondent authorities for claiming such refund. And in that even the respondent authorities would consider such application in accordance with law. 4. If, on the other hand, it is held that rough-rolled zincs out of which zinc calots are punched are assessable to duty then the demand notice for the same dated 26th April, 1974 in so far as is within the period covered by rule 10 from the date 26th April, 1974 would be enforceable gainst the petitioner. But before enforcing the same, the respondent should give credit to the petitioner for the amount realised from the petitioner. on account of duty for zinc calots, on account of duty for zinc calots. 5. In case it is held that rough-rolled zincs out of which calots are made are exigible to duty then classification list made by the petitioner under Rule 173 (b) (2) should be amended accordingly and the petitioner should be directed to amend the classification list. In case it be held that rough rolled zincs are not assessable toduty as zinc sheets or strips after disposal of the matter by the Appellate Collector the petitioner should be directed to amend or vary the classification list accordingly. 6. Until the said decision is made and the said adjustments are given effect to the petitioner should go on paying the duties in terms and in the manner the petitioner has been paying pursuant to the interim order of this court and on final order being passed adjustment or refund should be made accordingly, as the case may be. 7. This order will not in any way prejudice the right of the petitioner to institute such proceeding for claiming refund of the balance sum on account of duty on zine calots as the petitioner is entitled to under the law. 8. The Appellate Collector will give his decision within four months from this date.