1979 (6) TMI 33 - HC - Central Excise

Classification of goods - Canons of interpretation - Power driven pump - Connotation of - Accessories - Interest

Summary

Issues Involved:
1. Interpretation of the word "pump" in Item 30-A of the Schedule to the Central Excises and Salt Act, 1944.
2. Legality of excise duty levied on accessories sold with power-driven pumps.
3. Refund of excise duty collected under protest.
4. Permanent injunction against the collection of excise duty on accessories.

Detailed Analysis:

1. Interpretation of the word "pump" in Item 30-A:
The core issue revolves around the interpretation of the term "pump" in Item 30-A of the Central Excises and Salt Act, 1944. The court examined whether accessories like column assembly and discharge head assembly are integral parts of the pump or merely accessories. The court applied the common parlance test, emphasizing how those familiar with the subject would understand the term. The court concluded that the essential function of a pump is to build up pressure and convert mechanical energy into kinetic energy of the liquid, which is performed by the bowl assembly. The column assembly and discharge head assembly, which merely guide water and house the shaft, are considered accessories, not integral parts of the pump.

2. Legality of excise duty levied on accessories sold with power-driven pumps:
The petitioner argued that excise duty should not be levied on accessories sold with power-driven pumps if the prices of such accessories are shown separately in the invoices. The court agreed, noting that accessories do not perform the essential function of a pump. The Assistant Collector's orders, which included accessories under Item 30-A, were found to be based on a misunderstanding of the term "pump." The court emphasized that accessories merely add to the effectiveness of the pump but do not constitute the pump itself.

3. Refund of excise duty collected under protest:
The petitioner sought a refund of Rs. 32,74,127.82, which was paid under protest as excise duty on accessories. The court ruled in favor of the petitioner, directing the respondents to refund the collected amount. The court also ordered interest at twelve percent per annum on the refunded amount, following the precedent set in previous cases involving illegal collection of money by the Excise authorities.

4. Permanent injunction against the collection of excise duty on accessories:
The petitioner requested a permanent injunction to prevent the respondents from collecting excise duty on accessories sold with power-driven pumps. The court granted this request, issuing a writ of mandamus to permanently restrain the respondents from levying excise duty under Item 30-A on accessories, provided the prices of such accessories are separately shown in the invoices.

Conclusion:
The court allowed the Special Civil Application, quashing the orders dated June 16, 1976, and March 31, 1978, passed by the Assistant Collector and the Central Government, respectively. The respondents were directed to refund the excise duty collected on accessories with interest and were permanently restrained from levying excise duty on accessories sold with power-driven pumps where prices are separately shown in the invoices. The respondents were also ordered to pay the costs of the Special Civil Application to the petitioner.