1981 (4) TMI 105 - HC - Central Excise

Molasses - Liability to duty - Manufacture - Excise duty - Site plan approved - Removal - Connotation of - Taxable event - Issued and removal - Distinction between

Issues Involved:
1. Inclusion of molasses in Item 15CC of the 1st Schedule to the Central Excises and Salt Act, 1944.
2. Validity of the demand notice for excise duty on molasses.
3. Whether molasses used for captive consumption within the same factory premises is subject to excise duty.
4. Interpretation of Rules 9 and 49 of the Central Excise Rules.
5. Specification of place of manufacture or production by the Collector.

Detailed Analysis:

1. Inclusion of Molasses in Item 15CC of the 1st Schedule to the Central Excises and Salt Act, 1944
The court noted that for the first time in the Finance Act, 1980, effective from midnight of 18/19th June 1980, molasses was included in the 1st Schedule to the Central Excises and Salt Act, 1944, as Item No. 15-CC, thereby making it excisable goods within the meaning of the Act.

2. Validity of the Demand Notice for Excise Duty on Molasses
The petitioners sought to quash the demand notice for excise duty on molasses used for captive consumption. The court examined the charging section under the Central Excises and Salt Act, 1944, specifically Section 3(1), which authorizes the levy on the manufacture or production of goods. The court concluded that molasses, being a by-product or intermediate product in sugar manufacturing, is an excisable article under Section 3 of the Act.

3. Whether Molasses Used for Captive Consumption within the Same Factory Premises is Subject to Excise Duty
The court addressed the argument that molasses used for captive consumption within the same factory premises should not attract excise duty. The court found that the process of manufacturing alcohol from molasses is not an integrated continuous process with sugar manufacturing. The distilleries hold separate licenses for manufacturing alcohol, indicating distinct and separate processes. Therefore, the court held that molasses used for captive consumption is subject to excise duty before its removal for the manufacture of another product.

4. Interpretation of Rules 9 and 49 of the Central Excise Rules
The court analyzed Rules 9 and 49 of the Central Excise Rules, which govern the time and manner of payment of duty and the chargeability of duty upon the removal of goods from the factory premises. The court concluded that Rule 9 puts a bar on the removal of excisable goods from the place of production unless duty is paid. Rule 49 specifies that duty is chargeable only upon the removal of goods from the factory premises or an approved place of storage. The court held that these rules do not negate the liability incurred under Section 3 of the Act.

5. Specification of Place of Manufacture or Production by the Collector
The court examined the petitioners' argument that the place of manufacture or production of molasses had not been specified by the Collector, thereby barring the levy and collection of excise duty. The court found that the petitioners had provided a site-plan and specified storage tanks in their license application (Form AI-IV), which was approved by the Collector. Thus, the place of manufacture was duly specified as required under Rule 9 of the Central Excise Rules.

Conclusion:
The court dismissed the writ petitions, holding that:
- Molasses is an excisable article under the Central Excises and Salt Act, 1944.
- Molasses used for captive consumption within the same factory premises is subject to excise duty.
- Rules 9 and 49 of the Central Excise Rules do not bar the levy and collection of excise duty on molasses.
- The place of manufacture or production of molasses was duly specified by the Collector.

The petitions were dismissed with costs, and the request for a certificate for leave to appeal to the Supreme Court was refused, as the case did not involve any substantial question of law of general importance.

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