1981 (8) TMI 72 - HC - Central Excise

Manufacture - Stage of completion and levy - Power - Interpretation - Judicial or dictionary meanings - Process or Processing - Licensing - Seizure

Issues Involved:
1. Excise duty applicability on detergent powder.
2. Exemption under Notification No. 101/66.
3. Requirement of a manufacturing license under Notification No. 111/78.
4. Validity of the seizure of goods by the Excise Department.
5. Maintainability of the petition due to alternative remedies.

Detailed Analysis:

1. Excise Duty Applicability on Detergent Powder:

The petitioners, who manufacture detergent powder, claimed that their product was exempt from excise duty under Notification No. 101/66. The Excise Department contended that the manufacturing process involved the use of power, thereby making the product liable for excise duty under Item No. 15AA of the Central Excises and Salt Act, 1944.

2. Exemption Under Notification No. 101/66:

The core issue was whether the use of power in transferring raw materials (alkyd benzene and sulphuric acid) from tankers to storage tanks disqualified the petitioners from the exemption. The petitioners argued that the use of power was limited to transferring raw materials and did not constitute a part of the manufacturing process. The court found that no process of manufacture involving power occurred until the raw materials reached the reaction vessel. The court concluded that the detergent powder was indeed exempt from excise duty as per Notification No. 101/66.

3. Requirement of a Manufacturing License Under Notification No. 111/78:

Since the detergent powder was exempt from excise duty, the petitioners claimed they were also exempt from obtaining a manufacturing license under Notification No. 111/78. The court upheld this claim, stating that the exemption from excise duty under Notification No. 101/66 automatically applied to the licensing requirement under Notification No. 111/78.

4. Validity of the Seizure of Goods by the Excise Department:

The Excise Department had seized the petitioners' goods on the ground that excise duty was not paid. The court found that the seizure was unjustified since the goods were exempt from excise duty. The seizure was quashed, and the court ordered the return of the bank guarantee furnished by the petitioners for the release of the seized goods.

5. Maintainability of the Petition Due to Alternative Remedies:

The respondents argued that the petition should be dismissed due to the availability of alternative remedies through departmental adjudication. The court dismissed this argument, stating that the facts were not in dispute and that the issue could be resolved without further departmental adjudication. The court also noted that the existence of an alternative remedy does not bar the maintainability of the petition, especially when the seizure was based on an incorrect interpretation of the exemption notification.

Conclusion:

The court allowed the petition, holding that the detergent powder manufactured by the petitioners was exempt from excise duty under Notification No. 101/66 and that the petitioners were not required to obtain a manufacturing license under Notification No. 111/78. The seizure of goods was quashed, and the respondents were ordered to return the bank guarantee and cover the costs incurred by the petitioners. The court also rejected the respondents' application for leave to appeal to the Supreme Court, stating that the judgment merely applied established principles laid down by the Supreme Court.

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