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1990 Supreme(MP) 333
A.G. Qureshi, Y Suryavanshi J.
Ram Chand Sharma
vs
Collector, Customs And Central ...
DECIDED ON : 31 August, 1990
A person who hires labour in the production or manufacture of excisable goods and engages in the production or manufacture on his own account shall be a manufacturer.
Headnote:
CENTRAL EXCISE - EXEMPTION - HDPE WOVEN SACKS - NOTIFICATION - INTERPRETATION - MANUFACTURER - DEFINITION - PETITIONERS ARE NOT MANUFACTURERS - NOT LIABLE FOR PENALTY OR VIOLATION OF RULES - SHOW CAUSE NOTICE QUASHED.
Fact of the Case:
Petitioners, engaged in stitching and printing HDPE woven sacks, challenged the show cause notice issued by the Central Excise Authorities for confiscation of HDPE sacks seized from their premises. They claimed exemption from excise duty under the Notification issued by the Central Government, which exempted woven sacks of polymers of ethylene or propylene from the whole of the duty of excise.
Finding of the Court:
The Court held that the petitioners were not manufacturers as they were only doing job work on behalf of the principals, who owned the raw material and received the finished goods. The Court relied on the definition of 'manufacture' and 'manufacturer' under Section 2(f) of the Central Excises and Salt Act, 1944, and the Supreme Court's decision in Shree Agency v. S.K. Bhattacharjee and Ors.
Issues: 1. Whether the petitioners are manufacturers of HDPE woven sacks? 2. Whether the petitioners are liable for imposition of penalty or violation of any Rules?
Ratio Decidendi: 1. The Court held that the petitioners were not manufacturers as they were only doing job work on behalf of the principals, who owned the raw material and received the finished goods. 2. The Court held that since the petitioners were not manufacturers, they were not liable for imposition of any penalty or violation of any Rules.
Final Decision: The Court partly allowed the petition, quashed the show cause notice issued against the petitioners, and held that they were not liable for imposition of any penalty or violation of any Rules.
A.G. Qureshi, J.
1. This is a petition filed by two petitioners jointly. Petitioner No. 1 carries on the business of stitching H.D.P.E. woven sacks and petitioner No. 2 carries on the business of printing H.D.P.E. woven sacks. According to the petitioners, on receiving orders from their customers they receive H.D.P.E. fabrics from the manufacturers/dealers directed by the customers. The petitioners only do the job work of stitching and printing the sacks. In case the customers desire delivery outside Indore, then as per their instructions the sacks are despatched through the transport as directed by them. The Central Government in exercise of its powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, has exempted woven sacks of polymers of ethylene or propylene or its combination thereof, falling under Heading No. 46.01 or 63.01 of the Schedule from the whole of the duty of excise specified in that Schedule vide Notification No. 223/86-C.E., dated 3-4-1986. The aforesaid notification was again amended by Notification No. 453/86-C.E., dated 20-11-1986. In the earlier Notification dated 3-4-1986, the Government has exempted woven sacks of polymers of ethylene or propylene or a combination thereof from the whole of the duty of excise leviable thereon but by the latter Notification dated 20-11-1986 the exemption was made applicable if only such woven sacks of polymers of ethylene or propylene or as the case may be, a combination thereof, are manufactured on flat knitting looms. Thereafter the Central Government again issued a Notification No. 3/87-C.E., dated 7-1-1987 further amending Notifications dated 3-4-1986 and 20-11-1986, wherein it was provided that woven sacks of polymers of ethylene or propylene or a combination thereof were exempted falling under Heading No. 46.01 or 63.01 of the Schedule to the Central Excise Tariff Act, 1985 from the whole of the duty of excise leviable thereon, which is specified in the said Schedule, but the exemption was applicable only if the aforesaid sacks were not manufactured on circular looms. As such, the HDPE woven sacks manufactured on circular looms are not exempt from the excise duty but the other HDPE woven sacks which are not manufactured on the circular looms are subject to the excise duty.
2. The case of the petitioners is that petitioner No. 1 works only on stitching machine and does the job work of stitching HDPE woven sacks on the orders of the customers. He is not manufacturing the aforesaid sacks on circular looms and he is also not in possession of any circular looms. Similarly petitioner No. 2 is only doing the job of printing the HDPE woven sacks. A raid was conducted by the Central Excise Authority on the premises of the petitioners and a seizure memo was prepared of the seizure of HDPE woven sacks from both the petitioners. Thereupon the petitioner No. 1 sent a letter dated 2-8-1988 to the Collector, Central Excise, Indore, stating that he is not in possession of any circular looms. Therefore, HDPE woven sacks seized by respondent Nos. 3 and 4 are not liable to excise duty vide the aforementioned notifications of the Central Government. He, therefore, demanded immediate release of the goods. He again sent a letter reiterating the earlier demands but even after the expiry of six months, the seized goods have not been released. The petitioners have averred that the seizure of the goods is completely illegal, arbitrary and without jurisdiction. The petitioners, therefore, had filed Writ Petition No. 1204 of 1988 before this Court. The aforesaid petition was dismissed by this Court vide order dated 1-12-1989 holding it as premature.
3. The respondent No. 5 after completion of the investigation issued a show cause notice to both the petitioners along with four Ors. on January 18, 1989. In the aforesaid show cause notice the petitioners were asked to show cause as to why the seized HDPE sacks should not be confiscated under the Rules and why penalty shoul
