1983 (8) TMI 61 - HC - Central Excise

Exemption notification treating manufacturers as non-manufacturers and vice versa invalid - Footwear

Summary

Issues:
Validity of the Explanation appended to the notification dated 9-5-1977 under Rule 8 of the Central Excise Rules and the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. The petitioner, a footwear manufacturer, challenged the validity of the Explanation added to the notification dated 9-5-1977, which deemed manufacturers as non-manufacturers and vice versa, affecting exemptions for small-scale manufacturers. The petitioner contended that this Explanation violated Rule 8 of the Rules and the Act.

2. The Central Government, through the Assistant Collector of Central Excise, imposed a short levy of excise duty on the petitioner based on this Explanation. The petitioner sought relief under Article 226 of the Constitution, challenging the assessment order and demand notice issued as a consequence.

3. The petitioner argued that the Explanation contradicted the Act and the Rules by treating manufacturers as non-manufacturers and vice versa. The petitioner relied on a Patna High Court ruling in a similar case to support this contention.

4. The Central Government's counsel argued that the Explanation was a valid condition imposed by the Central Government to grant exemptions from excise duties, in line with the Act and the Rules.

5. The court noted that excise duties are levied on manufactured goods and manufacturers, as established by various legal precedents. Rule 8 allows the Government to grant exemptions but does not authorize treating manufacturers as non-manufacturers and vice versa.

6. The court found that the Explanation in question went against the Act and the Rules, disrupting the concept of manufactured goods and manufacturers on whom excise duties are levied. It held that the Explanation could not be considered a valid term or condition under Rule 8.

7. Referring to the Patna High Court ruling in a similar case, the court agreed with the decision to strike down the Explanation, as it did not align with the legal principles governing excise duties and manufacturing.

8. The court concluded that the Explanation appended to the notification dated 9-5-1977 was invalid and ordered its striking down. Consequently, the assessment order and demand notice based on this Explanation were quashed.

9. The court made the final orders to strike down the Explanation, quash the assessment order, and direct the parties to bear their own costs, thereby resolving the legal dispute in favor of the petitioner.