1982 (6) TMI 52 - HC - Central Excise

Summary

Issues Involved:
1. Whether the untrimmed hardboard stock was fully manufactured before the crucial time and thus not subject to excise duty.
2. Whether the process of trimming is ancillary to the manufacture of hardboard under Section 2(f) of the Central Excises and Salt Act, 1944.
3. Whether the statutory authorities erred in their decision-making process by ignoring relevant evidence.

Detailed Analysis:

1. Whether the untrimmed hardboard stock was fully manufactured before the crucial time and thus not subject to excise duty:

The petitioner argued that the hardboard stock was fully manufactured before the critical mid-night of 23/24-4-1962, and thus, should not be subject to excise duty. The authorities, however, contended that the hardboard was not fully manufactured as it was untrimmed, and trimming was necessary to complete the manufacturing process. The court emphasized that the levy of excise duty is on goods produced or manufactured in India, and the taxable event is the manufacture of goods, not their sale or dispatch. The court referred to the definitions and interpretations of "goods" and "manufacture" as established by the Supreme Court, which state that goods must be something that can ordinarily come to the market to be bought and sold and known to the market. The court concluded that the determination of whether the untrimmed hardboard was a fully manufactured product depended on whether it was known to the commercial market as such.

2. Whether the process of trimming is ancillary to the manufacture of hardboard under Section 2(f) of the Central Excises and Salt Act, 1944:

The authorities argued that trimming is a process incidental to the completion of the manufacture of hardboard, making the untrimmed hardboard a semi-manufactured product. The court examined Section 2(f) of the Act, which includes any process incidental or ancillary to the completion of a manufactured product. The court noted that if untrimmed hardboard is regarded and accepted in the market as hardboard, trimming cannot be considered a process incidental to the completion of the manufactured product. The court found that the authorities' assertion that no buyer would be willing to buy untrimmed hardboard was unsupported by evidence, and the petitioner's consistent claim that untrimmed hardboard is also known and sold in the market was not adequately addressed by the authorities.

3. Whether the statutory authorities erred in their decision-making process by ignoring relevant evidence:

The petitioner presented a certificate (Ext. P5) from MAC-WOOD AGENCIES of Calcutta, stating that they had been receiving untrimmed hardboard from the petitioner for several years. The court observed that the authorities, particularly in Ext. P4 order, ignored this certificate and made assumptions about trade practices without any basis or material. The court criticized the authorities for not considering Ext. P5 and for making unsupported assertions about the marketability of untrimmed hardboard. The court concluded that the authorities' orders were based on misconceptions of law and ignored relevant material, rendering the orders vitiated.

Conclusion:

The court set aside Ext. P4 order and remanded the matter for fresh consideration by the first respondent. The first respondent was directed to dispose of the revision in accordance with the law, giving both the petitioner and the department an opportunity to produce further materials. The original petition was allowed without costs.