1980 (10) TMI 72 - HC - Central Excise

Issues Involved:
1. Interpretation of Section 3 of the Central Excises and Salt Act, 1944, and Rules 9 and 49.
2. Whether the intermediate product (resin) in the manufacture of varnish is liable to excise duty.
3. Validity of the orders demanding excise duty and requiring a separate license for resin manufacture.
4. Refund of excise duty paid under protest.

Detailed Analysis:

1. Interpretation of Section 3 of the Central Excises and Salt Act, 1944, and Rules 9 and 49:
The court examined the legislative intent behind the levy and collection of excise duty, emphasizing that "no duty is payable on intermediate products if the intermediate products by themselves are not the end products being manufactured by a particular factory provided, however, the intermediate products and the end products are obtained by one continuous uninterrupted integrated process as opposed to distinct or independent processes." The court highlighted that "removal is the essence of the crystallization of the charge" and that the "power to collect duty is only on removal." This interpretation was crucial in determining the applicability of excise duty on the intermediate products in question.

2. Whether the intermediate product (resin) in the manufacture of varnish is liable to excise duty:
The petitioner argued that the process of manufacturing varnish was a "single continuous process" and that any intermediate product (resin) was not "removed" within the meaning of Rule 9 read with Rule 49. The court agreed, stating that "the two stages of production of resin and the manufacture of varnish were integrated" and that the intermediate product "never comes out of the plant." The court concluded that "no excise duty is leviable merely because in the process of manufacture of varnish an intermediate product which may be described as resin also emerges."

3. Validity of the orders demanding excise duty and requiring a separate license for resin manufacture:
The court reviewed the sequence of events leading to the demands for excise duty and the requirement for a separate license. It noted that the Assistant Collector of Central Excise had held that the petitioner was manufacturing polyester resin and phenolic resin liable to excise duty under Tariff Item No. 15A(1)(i). However, the court found that the orders "calling upon it to take out a separate licence for the manufacture of resins" and "requiring it to pay excise duty in respect of the resins manufactured by it" were invalid, as the intermediate product was part of a single uninterrupted process of manufacturing varnish.

4. Refund of excise duty paid under protest:
The petitioner sought refunds for the excise duty paid under protest. The court directed the respondents to refund the excise duty collected, stating: "We direct, in C.W. 219/78, the issue of a writ of certiorari quashing (a) the orders dated 6-6-1974 and 11-2-1975 of the second respondent (Exhibits 'G' & 'H'); (b) the orders dated 5-3-1975 and 30.9.1975 of the third respondent (Exhibits 'J', & 'P'); and (c) the orders dated 6-12-1977 and 17-11-1977 of the first respondent (Exhibits 'L' & 'R') and the issue of a writ of mandamus directing the respondents to refund to the petitioners the excise duty of Rs. 5,00,283.17 in respect of the period from July, 1974 to 15th February, 1975 illegally collected from it." Similarly, in C.W. 220/78, the court directed the refund of Rs. 871.93 collected from the petitioner.

Conclusion:
The court allowed the writ petitions, quashing the orders demanding excise duty and requiring a separate license for resin manufacture. It directed the respondents to refund the excise duty collected from the petitioner. The judgment emphasized the interpretation of excise duty laws concerning intermediate products in a continuous manufacturing process, aligning with previous decisions in similar cases.

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