1967 (9) TMI 153 - HC - Central Excise

Summary

Issues Involved:
1. Jurisdiction under Article 226 vs. Article 131 of the Constitution.
2. Interpretation of Item 26-AA of the First Schedule to the Central Excises and Salt Act, 1944.
3. Classification of agricultural implements as iron or steel products.
4. Applicability of excise duty on agricultural implements manufactured from iron and steel products.

Issue-wise Detailed Analysis:

1. Jurisdiction under Article 226 vs. Article 131 of the Constitution:
The court addressed whether its power under Article 226 of the Constitution was excluded by Article 131, which grants exclusive jurisdiction to the Supreme Court in disputes between the Government of India and a State. The court found that the Central Government was not a disputant but functioned as a tribunal when it disposed of the revision petition under Section 36 of the Excise Act. The court cited multiple Supreme Court decisions, including M. P. Industries Ltd. v. Union of India and Indo-China S. Navign. Co. v. Jasjit Singh, affirming that the Central Government acts as a tribunal in such cases. Consequently, the court held that Article 131 was not applicable, and the writ petition was maintainable under Article 226.

2. Interpretation of Item 26-AA of the First Schedule to the Central Excises and Salt Act, 1944:
The court examined the scope of Item 26-AA, which imposes excise duty on specified iron or steel products. The key question was whether agricultural implements manufactured by the State Government's factory fell within this item. The court noted that the products in question were manufactured from pre-existing iron and steel products (flats, squares, and rods) rather than from raw materials like pig iron or steel ingots. The court interpreted that Item 26-AA referred to products directly manufactured from raw materials, not from already manufactured products.

3. Classification of Agricultural Implements as Iron or Steel Products:
The court analyzed whether the agricultural implements could be classified as "iron or steel products" under Item 26-AA. It concluded that the term "iron or steel products" in Item 26-AA referred to products manufactured directly from raw materials such as pig iron or steel ingots. Since the agricultural implements were manufactured from pre-existing iron and steel products, they did not fall under this classification. The court supported this interpretation by referring to a notification under Rule 8 of the Central Excise Rules, which exempted products made from duty-paid raw materials from further excise duty.

4. Applicability of Excise Duty on Agricultural Implements Manufactured from Iron and Steel Products:
The court further examined whether agricultural implements could be considered "rolled, forged or extruded shapes and sections" under Item 26-AA. It determined that the named items in the clause (bars, rods, coils, wires, etc.) were raw iron or steel products in various forms, not finished goods like agricultural implements. The court emphasized that the words "shapes and sections" had a technical meaning, referring to pieces of metal with specific cross-sections, and agricultural implements did not fit this description. Therefore, the court concluded that the agricultural implements were not excisable under Item 26-AA.

Conclusion:
The court quashed the impugned demand for excise duty on agricultural implements manufactured by the State Government's factory. It set aside the orders made by the Collector and the Central Government in revision. The court directed that all amounts collected as excise duty under Item 26-AA in respect of the agricultural implements be refunded. The petition was allowed, and no costs were awarded.