1970 (8) TMI 82 - HC - Central Excise

Summary

Issues Involved:

1. Whether the polymer chips produced by the petitioner are covered under Item 15A(iii) of the First Schedule of the Central Excises and Salt Act, 1944.
2. Whether the petitioner's appeal to the Central Board of Revenue constitutes an adequate remedy precluding the writ petition.
3. Whether the polymer chips are marketable goods and thus subject to excise duty.
4. Whether the polymer chips are removed from the place of manufacture, thereby attracting excise duty.

Issue-wise Detailed Analysis:

1. Coverage under Item 15A(iii):

The main contention in the writ petition is whether polymer chips obtained at an intermediate stage in the manufacture of Nylon 6 yarn fall under Item 15A(iii) of Schedule I of the Central Excises and Salt Act, 1944, which covers "Plastics, All Sorts: (iii) Not otherwise specified." The petitioner argued that polymer chips are not plastics and cannot be classified under Item 15A(iii). The court examined various definitions and expert opinions, concluding that polymer chips, as produced by the petitioner, are not known or used in the plastic industry and are specifically designed for textile fiber production. Therefore, they do not fall under the category of plastics as understood in the trade and market.

2. Adequacy of Appeal to Central Board of Revenue:

The petitioner argued that the appeal to the Central Board of Revenue is not an adequate remedy because the Board had already decided that polymer chips are liable to excise duty under Item 15A(iii). The court noted that the appeal process might be illusory and not efficacious, especially given the significant financial impact on the petitioner and the delay in resolving the appeal. The court also considered that the petitioner had undertaken to withdraw the appeal, thereby focusing solely on the writ petition. The court found that under these exceptional circumstances, the writ petition was maintainable despite the existence of an alternative remedy.

3. Marketability of Polymer Chips:

The petitioner contended that polymer chips are not marketable goods and thus should not attract excise duty. The court examined the facts and found that polymer chips are indeed known in the market, as evidenced by their previous import under the trade name 'Ultramid BS'. The court concluded that the polymer chips are goods known to the market and can be bought and sold, thus making them subject to excise duty.

4. Removal from Place of Manufacture:

The petitioner argued that polymer chips are not removed from the place of manufacture, as required under Rules 9 and 49 of the Central Excise Rules, to attract excise duty. The court found that the polymer chips are manufactured in one part of the premises and then moved to another part for further processing into Nylon 6 yarn. This movement constitutes removal from the place of manufacture, thereby attracting excise duty.

Conclusion:

The court concluded that the polymer chips produced by the petitioner are not covered under Item 15A(iii) of the First Schedule of the Central Excises and Salt Act, 1944, as they are not known or used as plastics in the trade and market. Consequently, the impugned order of the respondent dated 1-2-1963 was quashed, and the respondent was restrained from recovering excise duty from the petitioner based on that order. The court did not find merit in the petitioner's arguments regarding the adequacy of the appeal process and the marketability and removal of polymer chips, but these points became moot given the primary finding on the coverage under Item 15A(iii).