1982 (9) TMI 66 - HC - Central Excise

Porcelain shells or porcelain housing used in lightning arresters are not porcelainware - Goods - Excise duty - Liability to duty

Issues Involved:
1. Liability of porcelain shells used in lightning arresters to excise duty under tariff item 23-B of the Central Excises and Salt Act.
2. Definition and marketability of goods under the Act.
3. Interpretation of tariff item 23-B and its applicability to porcelain shells.
4. Impact of the Finance Act, 1979, on the classification of porcelain shells.
5. Whether captive consumption affects the liability to excise duty.

Detailed Analysis:

1. Liability of Porcelain Shells to Excise Duty:
The primary issue in this case is whether the porcelain shells used in the manufacture of lightning arresters by the respondents are liable to excise duty under tariff item 23-B of the First Schedule to the Central Excises and Salt Act. The appellants argued that the porcelain shells constitute porcelainware and are thus excisable. The respondents contended that these shells are not goods within the meaning of the Act and are not known in common parlance as porcelainware, as they are used solely in the manufacture of lightning arresters and are not marketable as separate items.

2. Definition and Marketability of Goods:
The court examined the definition of "goods" under the Act, noting that excise duty is levied on the manufacture or production of goods in India. The term "goods" is not defined in the Act, but the court referred to various dictionary definitions and previous Supreme Court judgments. The court emphasized that for an item to be considered "goods," it must be something that can ordinarily come to the market to be bought and sold. The court cited the Supreme Court's decision in Union of India v. Delhi Cloth and General Mills, which held that excise duty is on the manufacture of goods and not on their sale. The court concluded that the porcelain shells do not constitute goods within the meaning of the Act, as they are not marketable as separate items.

3. Interpretation of Tariff Item 23-B:
Tariff item 23-B of the First Schedule to the Act covers "Chinaware and porcelainware all sorts," including tableware, sanitaryware, glazed tiles, and items not otherwise specified. The court examined whether the porcelain shells fall within the meaning of porcelainware. The court referred to the decision in English Electric Co. v. Supdt. of Central Excise, where it was held that high rupturing capacity fuselinks, which contain porcelain, do not fall within the meaning of porcelainware under tariff item 23-B. The court concluded that the porcelain shells or housing manufactured by the respondents do not constitute porcelainware within the meaning of tariff item 23-B, as they are not articles of commerce and are not known as such to the commercial community.

4. Impact of the Finance Act, 1979:
The Finance Act, 1979, introduced an Explanation to tariff item 23-B, stating that the item does not include electrical insulators or electrical insulating fittings or parts of such insulators or insulating fittings. The court noted that after the introduction of this Explanation, there is no dispute that the porcelain shells used in lightning arresters are not liable to excise duty under tariff item 23-B. The court did not find it necessary to address arguments related to the scope of the Explanation, as it had already concluded that the porcelain shells do not fall within the meaning of porcelainware under tariff item 23-B.

5. Captive Consumption:
The respondents argued that even if the porcelain shells fall within the meaning of porcelainware, they are not liable to excise duty as the entire stock is used for captive consumption in the manufacture of lightning arresters. The court did not express an opinion on this contention, as it had already concluded that the porcelain shells are not porcelainware within the meaning of tariff item 23-B.

Conclusion:
The court dismissed the writ appeal, agreeing with the learned Single Judge's conclusion that the porcelain shells used in the manufacture of lightning arresters are not liable to excise duty under tariff item 23-B of the First Schedule to the Central Excises and Salt Act. The court found no merit in the appeal and refused the appellants' request for a certificate for appeal to the Supreme Court under Article 133(1) of the Constitution of India, as the judgment was based on the decision of the Supreme Court and did not raise any substantial question of law of general importance.

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