1988 (2) TMI 449 - HC - VAT and Sales Tax

Summary

Issues:
1. Jurisdiction of excise authorities to issue show cause notice for payment of excise duty on waste and scrap derived from dismantling condemned barges.
2. Whether dismantling of a barge constitutes "manufacture" under excise law.
3. Alleged discrimination in taxation of waste and scrap from ships compared to other products.

Analysis:

1. The petitioners challenged a show cause notice issued by excise authorities, contending that dismantling condemned barges and selling the scrap did not amount to "manufacture," thus excise duty should not be levied. The argument relied on cases indicating that the notice was without jurisdiction. However, the court referred to a case involving ship dismantling, where it was held that the process fell within the definition of "manufacture." The court noted that if "manufacture" applied to the petitioners' operation, the excise department was competent to issue the notice, rejecting the contention that the notice was invalid.

2. The court considered whether dismantling a barge could be considered "manufacture" under excise law. Referring to a previous case, the court noted that the process of dismantling a ship could be classified as "manufacture" as it resulted in obtaining new commercial commodities like iron and steel scrap. The court highlighted that if the word "manufacture" applied to the petitioners' operation, the excise department had the authority to issue the show cause notice, distinguishing the case from previous instances where notices were issued in excess of jurisdiction.

3. The petitioners also argued that the taxation of waste and scrap from ships under specific tariff items implied discrimination, citing a case where similar tariff items were struck down. However, the court emphasized that once an article is classified under a distinct entry, the basis of classification cannot be questioned unless proven improper. As no evidence was presented to challenge the classification, the court dismissed the argument of discrimination and upheld the validity of the tariff items. The court concluded by dismissing the petition, allowing the petitioners to present their contentions before the authorities during the enquiry process.