1980 (1) TMI 92 - HC - Central Excise

Summary

Issues Involved:
1. Whether the petitioner's Lather Shaving Cream and Shampoo are commercially known as "soap".
2. Whether the process of adding water, perfume, and color to liquid soap constitutes "manufacture".
3. Whether the petitioner's products attract excise duty under Item 15 of the Central Excise Tariff.

Summary:

Issue 1: Commercial Recognition as "Soap"
The court examined whether the petitioner's Lather Shaving Cream and Shampoo were commercially known as "soap" during the relevant period. The Assistant Collector and the Appellate Collector had classified these products as "Toilet Soap" under Item 15 of the Central Excise Tariff, asserting that their use and composition were similar to soap. However, the court emphasized that the crucial factor was whether these products were "known commercially" as "soap". The court found that neither the appellate nor the revisional authorities had established that the products were commercially recognized as "soap". The court concluded that the burden of proof lay with the department, which had failed to demonstrate that the petitioner's products were commercially known as "soap".

Issue 2: Process of Manufacture
The court addressed whether the process of adding water, perfume, and color to liquid soap constituted "manufacture". Citing the Supreme Court's definition of "manufacture" as bringing into existence a new substance with a distinctive name, character, or use, the court held that merely adding these elements to liquid soap did not transform it into a new product. Therefore, the petitioner's process did not amount to "manufacture".

Issue 3: Applicability of Excise Duty under Item 15
The court examined whether the petitioner's products attracted excise duty under Item 15, which pertains to "Soap" defined as "all varieties of the product known commercially as soap". The court noted that the legislature had incorporated shampoos and shaving creams under Item 14F (Cosmetics and Toilet Preparations) effective from 1st March 1971 and 1st March 1973, respectively, rather than under Item 15. This indicated that these products were not regarded as "known commercially" as "soap" during the relevant period. Consequently, the court held that the petitioner's products did not attract duty under Item 15.

Conclusion:
The court set aside the impugned orders and allowed the petition. The respondents were directed to refund the petitioner the sum of Rs. 17,03,134.99 within four months, and the bank guarantee furnished by the petitioner was discharged. The rule was made absolute with no order as to costs.