1978 (6) TMI 54 - HC - Central Excise

Summary

Issues Involved:
1. Interpretation of Notification No. 119 of 1975.
2. Levy of excise duty on job work charges versus total value of articles.
3. Discrepancy in interpretation of the notification across different states.

Summary:

1. Interpretation of Notification No. 119 of 1975:
The core issue revolves around the interpretation of Notification No. 119 of 1975 issued by the Government of India on April 30, 1975. The notification exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, manufactured in a factory as a job work, from so much of the duty of excise leviable thereon as is in excess of duty calculated on the basis of the amount charged for the job work. The explanation provided in the notification defines "job work" as a process where an article supplied to the job worker undergoes a manufacturing process and is returned to the supplier after the intended process, with charges levied only for the job work done.

2. Levy of Excise Duty on Job Work Charges versus Total Value of Articles:
The petitioners, who are job manufacturers, argued that excise duty should be levied only on the job work charges and not on the total value of the articles, including the materials supplied by the customers. The excise authorities, however, sought to levy excise duty at the rate of one percent ad valorem on the total value of the articles, including the value of the materials supplied by the customers. The court clarified that the article supplied by the customer must undergo the intended manufacturing process and be returned to the customer, with excise duty payable only on the job work charges. The court emphasized that the notification's intent was to exempt job workers from paying duty on the total value of the articles, thereby making the notification meaningful and not redundant.

3. Discrepancy in Interpretation Across Different States:
The court noted the inconsistency in the interpretation of the notification by excise authorities in different states. While authorities in Maharashtra and Haryana interpreted the notification to mean that excise duty should be levied only on the job work charges, authorities in Gujarat interpreted it to levy duty on the total value of the articles. The court criticized this discrepancy, stating that it causes extreme hardship to industrialists in Gujarat and emphasized the need for a uniform interpretation across the country. The court suggested that the Central Board should provide clear directions to ensure consistent interpretation nationwide.

Conclusion:
The court quashed and set aside the orders by the excise authorities to levy excise duty on the total value of the articles when they leave the job worker's factory. The court allowed the special civil applications, directed the excise authorities to pay the charges for furnishing bank guarantees, and awarded costs to the petitioners. The court underscored the importance of uniform interpretation of notifications to avoid unfair disadvantages to job working factories in different states.