1983 (6) TMI 174 - HC - Central Excise

Summary

Issues Involved:

1. Liability of the petitioners to pay excise duty as manufacturers.
2. Constitutional validity of the Amendment Act.
3. Whether the processes of bleaching, dyeing, printing, and finishing constitute manufacturing.
4. Retrospective imposition of excise duty.
5. Determination of excisable value of goods.

1. Liability of the Petitioners to Pay Excise Duty as Manufacturers:

The petitioners, engaged in processing cotton and man-made fabrics, argued that they should not be liable to excise duty as manufacturers since their processes do not involve spinning or weaving. They claimed that their activities were independent processes and did not amount to manufacturing under the Central Excises and Salt Act, 1944.

2. Constitutional Validity of the Amendment Act:

The petitioners challenged the constitutional validity of the Amendment Act, which retrospectively amended the definition of "manufacture" in Section 2(f) of the Excise Act to include processes like bleaching, dyeing, and printing. They argued that the Amendment Act was ultra vires of entry 84 of List I of the Seventh Schedule to the Constitution of India.

3. Whether the Processes of Bleaching, Dyeing, Printing, and Finishing Constitute Manufacturing:

The court held that the processes of bleaching, dyeing, printing, and finishing do constitute manufacturing. It was emphasized that these processes result in a new and different article with a distinctive name, character, or use, thus qualifying as manufacturing under the Excise Act.

4. Retrospective Imposition of Excise Duty:

The court rejected the argument that the retrospective imposition of excise duty by the Amendment Act was an unreasonable restriction on the petitioners' fundamental rights under Article 19(1)(g) of the Constitution. The court noted that retrospective taxation is permissible and does not inherently constitute an unreasonable restriction.

5. Determination of Excisable Value of Goods:

The court addressed the petitioners' contention that excisable value should be based on the manufacturing cost and profit of the job work done. It was clarified that excisable value is determined under Section 4 of the Excise Act, which considers the normal price at which goods are sold in wholesale trade. The court also noted that Rule 56A provides for credit for duty already paid on materials used in manufacturing.

Conclusion:

The court found no substance in the challenges raised by the petitioners and upheld the validity of the Amendment Act. The petitions for directions for refund were rejected, and the rules issued in all petitions were discharged. The request for a stay of the judgment's operation and applications for leave to appeal to the Supreme Court were also rejected.