Excise duty is leviable on the manufacture of goods and not on the sale.

Padmanabhan, J.

The question that arises for consideration in this writ appeal is whether the porcelain shells which are used in the manufacture of lightning arresters by the respondents, Messrs W.S. Insulators of India Ltd., are liable to excise duty under tariff item 23-B of the First Schedule to the Central Excises and Salt Act.

2.The respondents manufacture, among others, lightning arresters with the technical collaboration of Messrs Westing House Electric International Company, U.S.A. For the purpose of manufacturing the lightning arrester the respondents also manufacture what is called a shell made of porcelain; shells are manufactured according to a particular design for use in the manufacture of lightning arresters. The appellants sought to levy excise duty on these porcelain shells on the basis that they constituted porcelainware within the meaning of tariff item 23-B of the First Schedule of the Central Excises and Salt Act. It may be stated in this context that the respondents have a licence under the Act for the manufacture of chinaware and porcelainware which are excisable under tariff item 23-B, of the First Schedule to the Act. The respondents opposed the levy of excise duty on the porcelain shells. The stand of the respondents was that the porcelain shells do no constitute goods within the meaning of the Act on the manufacture of which excise duty was leviable. These porcelain shells are not known in common parlance as porcelainware and as such cannot fall within the meaning of porcelainware in tariff item 23 of the First Schedule to the Act. The porcelain shells are used only in the manufacture of lightning arresters. The lightning arrester is an integrated unit from which the porcelain shell cannot be separated and treated as porcelainware. The respondents also contended that in any event the entire stock of porcelain goods are cleared only for captive consumption and consequently no excise duty would be leviable, even assuming that these porcelain shells fell within the meaning of porcelainware of tariff item 23 B of the First Schedule to the Act. Since the appellants did not accept the contention of the respondents and held that excise duty was leviable on the porcelain shells used in the manufacture of lightning arresters, the respondents filed W.P. 3163 of 1973 to call for the records in No. 115 of 1973, dated 27-1-1973, 5-2-1973 on the file of the Ministry of Finance, Government of India, New Delhi, in A. No. 661/70 dated 12-1-1972, on the file of the Deputy Collector of Central Excise, Madras, and in Order No. 3/70 dated 12-9-1970 on the file of the Superintendent of Central Excise, Guindy mixed Range, Madras-32, and quash the order passed on 27-1-1973/5-2-1973 by the Ministry of Finance, Government of India, New Delhi, in their Order No. 115 of 1973 confirming the orders in A. No. 661/70 passed on 12-1-1972 by the Deputy Collector of Central Excise, Madras and in Order No. 3 of 1970 dated 12-9-1970 passed by the Superintendent of Central Excise, Guindy mixed Range, Madras-32. Ramanujam J. held that no excise duty could be levied on the porcelain content of the lightning arresters manufactured by the respondents. In this view, the learned Judge allowed the writ petition. This writ appeal has been filed against the judgment of Ramanujam J.

3.Mr. K.N. Balasubramaniam the learned Central Government Standing Counsel, urged the following contentions. The respondents held a licence under the Act to manufacture porcelain. The shell being made of porcelain will be porcelainware within the meaning of Tariff Item 23-B of the First Schedule to the Act. Consequently, excise duty is leviable on the porcelain shell which is used in the manufacture of lightning arresters. The learned Standing Counsel laid emphasis on the fact that the appellants are levying excise duty only on the porcelain component of the lightning arresters and not on the lightning arresters as an integrated unit. The fact that the porcela