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1981 Supreme(P&H) 123
PUNJAB & HARYANA HIGH COURT
K.S.Tiwana and M.M.Punchhi JJ.
Food Specialities Ltd.
Versus
Appellate Collector, Central Excise And Customs And Ors.
Civil Writ Petition No. 466 of 1981,
Decided On : MAY 18, 1981
The removal of excisable goods from the place of production, manufacture or cure or from an approved store-room or place of storage attracts levy of excise duty.
Headnote:
EXCISE DUTY - Levy of excise duty on metal containers used in the manufacture of prepared or preserved foods in unit containers - Whether metal containers are excisable goods - Whether removal of metal containers from the place of their production to the place of manufacture of prepared or preserved foods attracts levy of excise duty - Interpretation of Section 4, Rules 9 and 49 of the Central Excises and Salt Act, 1944 and Rules 10 and 10A of the Central Excise Rules, 1944.
Fact of the Case:
The petitioner, a manufacturer of prepared or preserved foods in unit containers, also manufactured metal containers used in the packaging of the food products. The petitioner obtained licenses under the Central Excises and Salt Act, 1944 (the Act) for the manufacture of both metal containers and prepared or preserved foods. The petitioner claimed that the metal containers were not sold in the market but were used for internal consumption in the factory. The excise authorities, however, levied excise duty on the metal containers, claiming that they were excisable goods and that their removal from the place of production to the place of manufacture of prepared or preserved foods attracted levy of excise duty.
Finding of the Court:
The Court held that the metal containers were excisable goods and that their removal from the place of production to the place of manufacture of prepared or preserved foods attracted levy of excise duty. The Court interpreted Section 4, Rules 9 and 49 of the Act and Rules 10 and 10A of the Rules to hold that the removal of goods from the place of production, manufacture or cure or from an approved store-room or place of storage attracted levy of duty. The Court also held that the petitioner's activity of transferring the metal containers from the place of their production to the place of manufacture of prepared or preserved foods did not attract the ratio of decisions in Modi Carpets case, J.K. Cotton Spinning & Weaving Mills case and Oudh Sugar Mills case, which dealt with the issue of whether the removal of goods from one part of a composite plant to another part of the same plant attracted levy of excise duty.
Issues: 1. Whether metal containers are excisable goods? 2. Whether removal of metal containers from the place of their production to the place of manufacture of prepared or preserved foods attracts levy of excise duty?
Ratio Decidendi: 1. The Court held that metal containers are excisable goods because they are specifically mentioned in Tariff Item No. 46 of the First Schedule of the Act, which imposes ad valorem excise duty on "Metal containers not elsewhere specified". 2. The Court held that the removal of metal containers from the place of their production to the place of manufacture of prepared or preserved foods attracts levy of excise duty because it is a removal of goods from the place where they are produced or manufactured, which is prohibited under Rule 9 of the Rules unless the excise duty leviable thereon has been paid.
Final Decision: The Court dismissed both the writ petitions filed by the petitioner, challenging the levy of excise duty on metal containers and the validity of Rule 10A of the Rules.
M.M.Punchhi, J.
1. These are two writ petitions (C.W.P. No. 466 of 1981 and No. 1109 of 1980) filed by Messrs Food Specialities Limited, Moga, to challenge the validity and levy of excise duty in respect of metal containers, which are employed in the manufacture of prepared or preserved foods in unit containers ordinarily intended for sale.
2. The petitioner-Company manufactures various articles of food, inter alia, condensed milk as well. That condensed milk is put into tin containers of unit size for the purposes of marketing. The goods thus prepared fall under Tariff Item No. IB of the First Schedule of the Central Excises and Salt Act, 1944 (hereinafter called the Act) which attracts ad valorem duty. To be precise, it is termed as "Prepared or preserved foods put up in unit containers and ordinarily intended for sale". On the other hand, Tariff Item No. 46 in the aforesaid Schedule provides imposing ad valorem excise duty on "Metal containers not elsewhere specified". The explanation added thereto with regard to containers has the borrowed meaning assigned to it in Explanation to Item No.27. That explanation provides that "Containers" means "Containers ordinarily intended for packaging of goods for sale, including casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or unassembled condition and containers known commercially as flattened or folded containers. The petitioner-Company manufactures tin containers and employs them for the purpose of filling in them condensed milk so as to produce the net product of prepared and preserved food put up in unit containers (hereinafter shortly referred as P.P. Foods). Both the Tariff Items having attracted imposition of excise duty, the petitioner obtained licences under the Act to manufacture or to produce the said items. The fabricating process of the tin containers as described by the petitioner-Company is through a mechanical automatic process which is given below :
(a) Full tinplate sheets are cut on two machines (slitters) into strips having the exact dimensions of the developed body of a SCM tin. These strips are then known as "Body blanks".
(b) These body blanks are fed to a "Body maker" where they are shaped and seamed (side locked) in order to form the cylindrical part of the tins.
(c) Through conveyors, the bodies are sent to a "flanger" where flanges are made to prepare the tin to receive the ends.
(d) The flanged bodies then travel, on conveyors, to a seamer where one end is seamed on the body leaving the other end open.
(e) The bodies without bottom end travel towards the filling room through a sterilizer.
(f) The sterilized bodies are then filled with condensed milk and seamed with the second end which is embossed with the manufacturing code.
(g) The filled tins are then labelled and packed. Note. - On one line, full tinplate sheets are cut in strips which are then sent to a press for manufacture of ends. One part of these ends is fed on the seamer at Point (d) above and the second part is fed, after sterilisation, to the seamer at Point (f) above. The operations (b) to (g) are made in a single continuous line at a speed of 155 tins/minute. It takes about 8 minutes to complete the operations from the body blanks to the packing of the filled/ labelled tins."
3. The P.P. Foods so manufactured are claimed to be removed under the Self Removal Procedure of the Central Excise Rules. In accordance with Rule 173C of the said Rules, the price-list of goods assessable to ad valorem duty was submitted for the first time by the petitioner Company to the Superintendent, Central Excise, Ludhiana, when the duty on metal containers under Tariff Item No. 46 had come to be levied with effect from 1-3-1970. Incidentally, the jurisdiction at a later time came to be vested in the Superintendent, Central Excise, Moga. At the time when the jurisdiction vested in the concerned authority at Ludhiana, the Superintendent is said to have approved the list
