1980 (10) TMI 63 - HC - Central Excise

Intermediate product - Liability to duty - Removal of Goods - Place of Manufacture - Polymer Chips - Dutiability - Constitution - Alternate remedy

Issues Involved:
1. Preliminary Objection on the Maintainability of the Writ Petition
2. Classification of Polymer Chips under Item 15A(iii) of the Central Excise Tariff
3. Excise Duty Liability on Polymer Chips as Marketable Goods
4. Removal of Polymer Chips within the Meaning of Section 3 read with Rules 9 and 49 of the Central Excise Rules

Detailed Analysis:

1. Preliminary Objection on the Maintainability of the Writ Petition:

The department argued that the writ petition should be dismissed as the petitioner had not exhausted the alternative remedy of appeal provided in the Act. The learned single Judge rejected this preliminary objection, noting that the Central Board of Revenue had already decided the issue, making the remedy of appeal and revision illusory. The High Court agreed with this assessment, emphasizing that the writ petition was not liable to rejection on this preliminary ground.

2. Classification of Polymer Chips under Item 15A(iii) of the Central Excise Tariff:

The department contended that the polymer chips produced by the company fell under Item 15A(iii) of the Central Excise Tariff, which covers "Plastics, not otherwise specified." The learned single Judge, after a detailed consideration of the dictionary, scientific, and commercial meanings of the term "Plastic," concluded that the polymer chips did not fall under Item 15A. The High Court did not find it necessary to delve into this issue further, given their decision on the removal aspect.

3. Excise Duty Liability on Polymer Chips as Marketable Goods:

The company argued that even if the polymer chips could be classified under Item 15A, they were not marketable goods and hence not liable to excise duty. The learned single Judge rejected this contention, noting that the polymer chips produced were similar to those imported under the trade name 'Ultramid B.S.' and could be considered marketable. However, the High Court did not address this issue in detail, as their decision on the removal aspect was sufficient to dispose of the appeal.

4. Removal of Polymer Chips within the Meaning of Section 3 read with Rules 9 and 49 of the Central Excise Rules:

The core issue revolved around whether the polymer chips were "removed" within the meaning of the Act and Rules. The High Court relied on earlier decisions, including Caltex Oil Refinery (India) Ltd. v. Union of India and Modi Carpets Ltd. v. Union of India, which clarified that intermediate products in a continuous manufacturing process are not liable to excise duty unless there is a distinct process or removal for consumption.

The High Court found that the company's process of manufacturing Nylon 6 yarn from caprolactum was a single, continuous process. The polymer chips were not removed from the place of manufacture but were part of an integrated process. The transmission of polymer chips from one part of the plant to another did not constitute "removal" under the Act. Therefore, the polymer chips were not liable to excise duty.

Conclusion:

The High Court dismissed the appeal, upholding the learned single Judge's decision that no excise duty could be levied on the polymer chips obtained by the company. The court did not find it necessary to address the issues of classification under Item 15A and marketability, as the decision on the removal aspect was sufficient to resolve the case. No order as to costs was made.

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