1972 (12) TMI 38 - SC - Central Excise

Whether the process of manufacture had been completed before the mid-night of 28th February? Held that - There was a certificate given by an expert on behalf of the appellants and there were copies of two letters written by departmental chemists, which accidentally fell into the hands of the appellants, to the effect that before the mid-night of 28th February, 1961 these goods were in a chemically completely manufactured stage. The argument has throughout proceeded on the basis that it is not enough that the goods in question are chemically in a completely manufactured stage and that if there are physical changes brought about later it will still be a manufacture. It was even mentioned by the respondents that the dye- stuff in lumps were not subject to excise duty. We consider it advisable that the matter should be remanded back to the Bombay High Court to enable both parties to produce evidence on the disputed questions.

Summary

Issues:
1. Interpretation of the definition of 'manufacture' under the Central Excises and Salt Act, 1944.
2. Determination of whether the process of manufacturing dyes derived from coal tar and coal tar derivatives was completed before the specified date.
3. Assessment of whether blending and pulverizing constituted a manufacturing process.
4. Evaluation of evidence presented to determine the completion of the manufacturing process.
5. Decision on remanding the matter back to the Bombay High Court for further evidence and clarification.

Analysis:
The Supreme Court heard an appeal against the High Court of Bombay's judgment regarding the refund of Excise Duty on dyes derived from coal tar and coal tar derivatives. The dispute centered around whether the manufacturing process was completed before the specified date of 28th February, 1961. The appellants argued that pulverizing and blending were not processes incidental to the completion of the manufactured product. The Central Excise authorities contended that these processes resulted in the creation of a new product. The definition of 'manufacture' under the Central Excises and Salt Act, 1944, Section 2, Clause (f) was crucial in this interpretation.

The High Court concluded that the chemical process alone did not result in the production of a new substance recognized by the mercantile community. However, the Supreme Court found insufficient evidence to support this conclusion or to determine the nature of blending conducted by the appellants. Expert certificates and departmental chemists' letters indicated that the goods were chemically manufactured before the specified date. The Court emphasized the need for additional evidence and remanded the matter back to the Bombay High Court for further examination.

The Supreme Court refrained from expressing a definitive opinion due to the lack of conclusive evidence. The remand was deemed necessary for both parties to present additional evidence on the disputed aspects. Any relief granted by the Bombay High Court to the appellants would remain unaffected. The decision on costs for the appeal would be contingent on the subsequent order issued by the Bombay High Court. The case highlighted the importance of thorough evidence and interpretation of legal definitions in excise duty disputes, necessitating a detailed review by the lower court.