1973 (2) TMI 53 - HC - Central Excise

Printed and lacquered extruded aluminium tubes and plain extruded tubes - Distinction between - Plain extruded tubes

Issues Involved:

1. Whether printing and lacquering of extruded shapes and sections or tubes and pipes of aluminium is liable to payment of duty under the Central Excises and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Whether printing and lacquering of extruded shapes and sections or tubes and pipes of aluminium is liable to payment of duty under the Central Excises and Salt Act, 1944:

The petitioner, a company incorporated under the Companies Act, 1956, had been manufacturing extruded aluminium collapsible tubes and held a license for manufacturing extruded shapes and sections. After surrendering its license in April 1970, the petitioner began purchasing plain tubes and containers from the market and engaged in printing and lacquering them. The Central Excise authorities questioned whether the petitioner had ceased all manufacturing operations, including incidental processes like printing and lacquering. The petitioner contended that no Central Excise duty was applicable on such processes and requested a hearing if the authorities disagreed. Subsequently, the Superintendent of Central Excise issued a notice requiring the petitioner to obtain a Central Excise L-4 license, asserting that printing and lacquering were incidental to the manufacturing process of extruded tubes and pipes. The Assistant Collector of Central Excise dismissed the petitioner's appeal against this notice.

The court examined Section 3 of the Central Excises and Salt Act, 1944, which is the charging section for excise duty on excisable goods, defined in Section 2(d) of the Act. Item 27 in the First Schedule specifies aluminium and sub-item (e) includes "extruded shapes and sections including extruded pipes and tubes." The respondents argued that printing and lacquering of duty-paid plain extruded tubes were covered by sub-item (e) of Item 27. However, the petitioner contended that this sub-item did not apply to the printing and lacquering of duty-paid extruded tubes.

The court noted that the petitioners were purchasing duty-paid plain extruded tubes and only printing and lacquering them, which did not involve any further process of extrusion. The court emphasized that extrusion refers to the process of forming a tube from a metal slug or dump, which had already been applied by the original manufacturers. Therefore, printing and lacquering did not constitute a manufacturing process under sub-item (e) of Item 27.

The court also analyzed the definition of "manufacture" in Section 2(f) of the Act, which includes any process incidental or ancillary to the completion of a manufactured product. The court concluded that printing and lacquering were not incidental or ancillary to the completion of the manufacture of plain extruded tubes, as these tubes were already marketable commodities. The processes of printing and lacquering were independent of the manufacturing process and were aimed at enhancing the salability of the tubes, not completing their manufacture.

The court referred to several Supreme Court decisions to support its conclusion. In South Bihar Sugar Mills v. Union of India, the Supreme Court held that "manufacture" implies a change that results in a new and different article with a distinctive name, character, or use. Applying this test, the court found that printed and lacquered extruded tubes did not have a distinctive name, character, or use compared to plain extruded tubes. Both types of tubes served the same purpose and had the same characteristics, thus not constituting a new substance.

In Allenbury Engineers Pvt. Ltd. v. Ramkrishana Dalmia, the Supreme Court reiterated that "manufacture" requires a transformation resulting in a new and different article. The court found that printing and lacquering did not bring about such a transformation in the extruded tubes.

In Union of India v. Delhi Cloth and General Mills and Co. Ltd., the Supreme Court emphasized that manufacturing involves creating a new substance, not merely producing a change in an existing substance. The court found that printing and lacquering did not create a new substance but merely changed the form of the extruded tubes.

In Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai Rewari, the Supreme Court held that excise duty could be levied at different stages of manufacturing if specified by the legislature. However, the court found no such intention in Item 27 to levy duty on both plain extruded tubes and printed and lacquered tubes.

Based on these analyses, the court concluded that the petitioner was not liable to obtain a license under Section 6 of the Act for printing and lacquering plain extruded tubes of aluminium. The impugned notice and order were deemed void and ultra vires, and a writ of Certiorari was issued to quash them, along with a writ of Mandamus directing the respondents to desist from enforcing them against the petitioner. The petition was allowed with costs.

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