1968 (12) TMI 30 - HC - Central Excise

Packing is not a process of manufacture - Chinaware, procelainware, glass and glassware - Packing whether amounts to manufacture - Order - Merger

Summary

Issues:
Challenge to excise duty on China and porcelainwares and glass and glasswares under the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Background and Facts:
The petitioners, Shree Durga Glass Works and Orissa Industries Ltd., challenged the imposition of excise duty on their manufactured goods, China and porcelainwares, and glass and glasswares. These goods were initially duty-free but were later included in the First Schedule of the Act for excise duty collection from April 20, 1961. The petitioners declared their existing stock as per prescribed procedures, but the Excise Officers demanded duty on goods unsold after a certain date, despite being in stock since February 28, 1961.

2. Legal Proceedings:
The petitioners appealed to various authorities, including the Collector and the Central Board of Revenue, all of which upheld the imposition of excise duty. The petitioners then filed the present Rules challenging the orders.

3. Legal Contention:
The main argument presented by the petitioners' counsel was that packing should not be considered part of the manufacturing process for the goods in question. The crux of the issue was whether packing constituted a process incidental to the completion of the manufactured product, as defined under Section 2(f) of the Act.

4. Court's Interpretation and Precedent:
The court referred to a Supreme Court decision that clarified the distinction between processing and manufacturing, emphasizing that manufacturing involves bringing into existence a new substance known to the market. The court noted that packing, although claimed as processing, should not be equated with the completion of manufacturing. It cited a Bombay High Court decision supporting the view that goods could be considered fully manufactured even without packing, especially if they could be delivered to customers without packaging.

5. Judgment and Conclusion:
The court concluded that the authorities' justification for levying excise duty based on the goods not being fully packed was invalid. It held that packing should not be considered incidental or ancillary to the completion of manufacturing. As a result, the court quashed the impugned orders, allowing the petitions to succeed without costs. The court issued a writ in the nature of Certiorari and mandamus accordingly.

6. Validity of Trade Notice:
A point raised by the respondents regarding the validity of a trade notice issued under Rule 233 of the Central Excise Rules was deemed irrelevant since the impugned orders were quashed, rendering the issue moot.

In conclusion, the High Court of Calcutta ruled in favor of the petitioners, quashing the orders imposing excise duty on China and porcelainwares and glass and glasswares, emphasizing that packing should not be considered part of the manufacturing process for excise duty purposes.