1979 (8) TMI 79 - HC - Central Excise

Cut or broken steel ingots Mild steel rounds manufactured from duty paid mild steel ingots - Liability to duty

Summary

Issues:
Whether mild steel rounds manufactured from mild steel ingots on which excise duty has been paid are further liable to duty under Item 26AA of the First Schedule to the Central Excises and Salt Act, 1944.

Analysis:
The petitioners, a manufacturing firm, produced mild steel rounds and flats from duty-paid steel ingots. They claimed exemption from duty under specific notifications issued by the Government of India. However, they received show cause notices for non-payment of excise duty and were asked to pay substantial amounts. Despite their replies and appeals, the demands were confirmed, and they ultimately paid the duty. Subsequently, they faced another show cause notice for alleged contraventions of excise rules and imposition of penalties.

The main issue revolved around the interpretation of Notification No. 206/63 dated 30-11-1963 as amended by Notification No. 123/65 dated 14-8-1965, which exempted certain iron and steel products from duty if made from duty-paid ingots cut or broken but not rolled. The critical point was whether the steel ingots used by the petitioners were cut or broken before being rolled into mild steel rods. The petitioners argued that the ingots were broken into pieces before rolling, making them eligible for the exemption.

The High Court analyzed the notifications and relevant provisions to determine the eligibility for duty exemption. It was established that the petitioners' manufacturing process aligned with the conditions specified in the notifications. The court referred to precedents from other High Courts supporting the interpretation that cutting or breaking of ingots need not necessarily occur at the source of supply but could take place in the factory before rolling. Consequently, the court held in favor of the petitioners, quashing the demands and penalties imposed by the excise authorities.

In conclusion, the court ruled in favor of the petitioners, setting aside the orders for duty payment and penalty imposition. The respondents were restrained from recovering the penalty amount. The writ petitions were allowed, and no costs were awarded in the matter.