1981 (4) TMI 104 - HC - Central Excise

Summary

Issues:
Classification of acetylene gas for excise duty, interpretation of Central Excises and Salt Act, 1944, removal of acetylene gas under Central Excise Rules.

Analysis:
1. The petitioners, a Petrochemicals Company, manufacture acetylene black which is chargeable under Central Excise Tariff Item 64. The issue arose when the Excise Department classified acetylene gas obtained in the petitioner's factory under a different tariff item, leading to a dispute over excise duty liability.

2. The petitioners argued that acetylene gas was an intermediate product in the continuous process of manufacturing acetylene black and should not be considered a manufactured good attracting excise duty. They also contended that acetylene gas did not qualify as "goods" under the Central Excises and Salt Act, 1944.

3. The respondents claimed that the acetylene gas was excisable goods and that the petitioners were liable for duty, citing Rule 9 of the Central Excise Rules regarding the removal of goods within the factory premises. However, the petitioners argued that the acetylene gas was consumed entirely for captive use within the manufacturing process.

4. The court examined precedents, including decisions from the Division Bench of the High Court and the Delhi High Court, which supported the petitioners' argument that excise duty was not leviable on intermediate products in a continuous manufacturing process unless there was a removal for sale or consumption.

5. The court found in favor of the petitioners, ruling that the acetylene gas, being an intermediate product in the uninterrupted manufacturing process of acetylene black, was not liable for excise duty. The court rejected the contention that Rule 173G of the Central Excise Rules, which deals with duty on goods consumed within the factory, applied to intermediate products in the manufacturing process.

6. Consequently, the court quashed the orders rejecting the petitioners' refund claims and directed the respondents to refund the excise duty collected from the petitioners. The court clarified that no interest would be payable on the refund amount and ordered the refund to be processed within one month, with no costs awarded in the case.