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High Court Of Delhi
DELHI CLOTH AND GENERAL MILLS COMPANY LIMITED - Appellant
Versus
JOINT SECRETARY, GOVT.OF INDIA - Respondent
Civil 1358 of 1975
Decided On : 02/16/1978
EXCISE DUTY - CALCIUM CARBIDE - GOODS - VALUE - REMOVAL FROM FACTORY - CENTRAL EXCISE AND SALT ACT, 1944 (1 OF 1944), SEC. 3, 4, 2(E) - CARBIDE OF CALCIUM RULES, 1937, R. 9, 49.
Fact of the Case:
The petitioner manufactured calcium carbide and used it for the generation of acetylene gas in their acetylene gas plant. The petitioner did not sell calcium carbide as such. The Central Excise authorities held that calcium carbide manufactured by the petitioner was assessable to levy and collection of excise duty.
Finding of the Court:
The court held that the calcium carbide manufactured by the petitioner was not "goods" within the meaning of the Act as it did not comply with the safety precautions prescribed by the Carbide of Calcium Rules, 1937. The court also held that the product was not marketable and, therefore, its value could not be determined under section 4 of the Act. The court further held that the product was not removed from the petitioner's factory and, therefore, the question of levy and collection of duty did not arise.
Issues: 1. Whether the calcium carbide manufactured by the petitioner was "goods" within the meaning of the Act? 2. Whether the value of the product could be determined under section 4 of the Act? 3. Whether the product was removed from the petitioner's factory?
Ratio Decidendi: 1. The court held that the calcium carbide manufactured by the petitioner was not "goods" within the meaning of the Act as it did not comply with the safety precautions prescribed by the Carbide of Calcium Rules, 1937. The court also held that the product was not marketable and, therefore, its value could not be determined under section 4 of the Act. The court further held that the product was not removed from the petitioner's factory and, therefore, the question of levy and collection of duty did not arise. 2. The court held that the calcium carbide manufactured by the petitioner was not "goods" within the meaning of the Act as it did not comply with the safety precautions prescribed by the Carbide of Calcium Rules, 1937. The court also held that the product was not marketable and, therefore, its value could not be determined under section 4 of the Act. The court further held that the product was not removed from the petitioner's factory and, therefore, the question of levy and collection of duty did not arise.
Final Decision: The court quashed the impugned orders of the Superintendent, dated 5th January, 1972, of the appellate Collector, dated 25th November, 1972 and of the Central Government, dated 16th September, 1975.
( 1 ) THE levy and collection of excise duty on goods listed in the First Schedule to the Central Excise and Salt Act, 1944 (hereinafter) referred to as the Act) can be done only after the relevant requirements of the Act and the Rules are satisfied. In the present case, the following requirements of section 3 and 4 of the Act and Rules 9 and 49 of the Rules framed thereunder are relevant:-
(1) The duty can be imposed only on "goods", i. e. things which have an economic significance, that is value, utility, exchangeability, etc.
(2) Since the Calcium Carbide listed under entry 14aa of the Schedule is assessable to duty ad valorem, its value would be deemed to be the cash price for which an article of the like kind and quality is sold or capable of being sold.
(3) The value has to be determined at the time of the removal of the article chargeable to duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production.
(4) "factory" is defined by section 2 (e) to mean any premises, including the precincts thereof, wherein or in any part of which excisable goods are manufactured subject to any manufacturing process connected with their production.
( 2 ) WE are concerned with the Act and the Rules as they existed from 1-3-1970 when the goods produced by the petitioner became liable to duty on the insertion of entry 14aa in the First Schedule to the Act to 30-9-1975 when the Act was amended. The existing clause (b) of sub-section (1) of section 4 of the Act is not, therefore, applicable to this case. Similarly, the residuary entry 68 making assessable to duty all other goods not elsewhere specified, manufactured in a factory but not excluded by the said item is also not applicable.
( 3 ) THE undisputed facts are that the petitioner used to manufacture Calcium Carbide and sell the same till 1967. In the petitioner s factory various chemicals are manufactured by separate plants. There is an independent plant in which Calcium Carbide is manufactured. Since, 1967 however, the petitioner started using Calcium Carbide manufactured at its factory for the manufacture of acetylene gas in their acetylene gas plant. Since the whole quantity of Calcium Carbide produced by the petitioner is consumed in the manufacture of acetylene gas, the petitioner does not sell Calcium Carbide as such. The Calcium Carbide produced in the petitioner s factory is tapped from the furnace in liquid form and is placed in small trolly trays, where it is allowed to cool and solidify. The solid is then broken into cakes of desired sizes.
( 4 ) THE petitioner contends that the calcium carbide manufactured by it is only of intermediary product, which is used for the generation of acctylene gas in the same factory. This intermediary product is not known to the market as calcium carbide for the following reasons:
1. It is not "goods" as known to the market. By its very properties, calcium carbide in its naked form, turns into dust if it comes into contact with air in the atmosphere due to the reaction of the moisture in the air on it. It can become goods" only when it attains commercial purity and is put into containers as prescribed by the provisions of Chapter III of the Carbide of calcium Rules, 1937. The calcium carbide used by the petitioner for the generation of acetylene gas does not comply with these statutory provisions and is not, therefore, "goods".
2. Since It is not marketable, its assessable value cannot be found under section 4, because no such article of the like kind and quality is sold or is capable of being sold.
3. It is not removed by the petitioner from its factory and hence the question of levy and collection of duty on it at the time of its removal does not arise.
4. The calcium carbide plant and the plant for the production of acetylene gas are both situated in one factory of the petitioner. The passage of calcium carbide from the former plant to the latter plant is no
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