1972 (4) TMI 37 - HC - Central Excise

Intermediate products - Liability to duty - Excise duty - Manner of collection - Non-excisable goods - Connotation of

Summary

Issues Involved:
1. Interpretation of expressions in the Excise Act.
2. Excise duty on production versus stages of production.
3. Removal of goods under Rule 49 of the Excise Rules.
4. Jurisdiction of the Assistant Collector's order dated 3rd September, 1965.
5. Estoppel against statute and inherent power of review.
6. Burden of proof in fiscal statutes.
7. Strict construction of fiscal and penal statutes.

Detailed Analysis:

1. Interpretation of Expressions in the Excise Act:
The petitioner argued that expressions used in the Excise Act must be understood in the commercial or trade sense and not the scientific or laboratory sense. Specifically, the petitioner contended that Burner Fuel Oil, having high viscosity, is not considered Furnace Oil in trade terms. The respondents countered that the oil in question was actually Furnace Oil and liable to excise duty as a finished product.

2. Excise Duty on Production Versus Stages of Production:
The petitioner claimed that excise duty is on the end product and not on intermediate stages of production. Burner Fuel Oil, being an intermediate product, was not marketable without further processing and thus should not attract excise duty. The court noted that excise duty is levied on production but collected upon removal. The legislative intent is that no duty is payable on intermediate products if they are part of a continuous, uninterrupted integrated process. However, the court found that the oil in question, once stored in Tanks 170 and 171, was a finished product used for heating and not further processing, thus attracting excise duty.

3. Removal of Goods Under Rule 49 of the Excise Rules:
The petitioner argued that there was no removal of Burner Fuel Oil within the meaning of Rule 49, which is a condition precedent to the recovery of excise duty. The court held that removal includes consumption within the place of manufacture. The moment the oil was used for heating purposes, it was considered removed and thus liable for excise duty.

4. Jurisdiction of the Assistant Collector's Order Dated 3rd September, 1965:
The petitioner contended that the Assistant Collector's order dated 3rd September, 1965, was without jurisdiction as it reviewed an earlier order without statutory authority. The court found that the earlier order dated 14th June, 1965, had sent the claim for pre-audit and was not a final order. Therefore, the subsequent order was not a review but a continuation of the process.

5. Estoppel Against Statute and Inherent Power of Review:
The petitioner argued that there is no estoppel against statute and no inherent power of review. The court did not find it necessary to delve deeply into this issue as it held that the order of 3rd September, 1965, was not a review but a continuation of the earlier process.

6. Burden of Proof in Fiscal Statutes:
The petitioner asserted that in fiscal statutes, the burden is on the Department to prove all necessary ingredients justifying the tax. The court agreed but found that the respondents had sufficiently demonstrated that the oil in question was a finished product and thus liable to excise duty.

7. Strict Construction of Fiscal and Penal Statutes:
The petitioner argued for a strict construction of fiscal statutes, favoring the citizen in case of doubt. The court acknowledged this principle but found that the facts of the case clearly indicated that the oil in question was a finished product and liable to excise duty.

Conclusion:
The court dismissed the petition, holding that the oil in question was a finished product, liable to excise duty upon removal for consumption within the factory. The petitioner's claims for refund were rejected, and the impugned orders were upheld. The court also addressed technical objections regarding the timeliness of the refund claims but ultimately decided the case on substantive grounds. The petition was dismissed with costs.