1984 (9) TMI 59 - HC - Central Excise

Plant and machinery installed in an industrial unit - Excisable goods ceases to be excisable after exemption

Summary

Issues:
1. Whether the Petitioner Company is required to obtain a license for running the Ice Factory as per Central Excise Authorities' actions.
2. Whether the Petitioner Company is entitled to exemption from excise duty for manufacturing woollen and shoddy yarns.
3. Whether the total value of capital investment in plant and machinery for both units of the Petitioner Company can be clubbed together for exemption grant.
4. Whether the ice produced by the Petitioner Company is exempt from excise duty if clearance does not exceed a certain limit.
5. Whether the Petitioner is legally obliged to take a license for manufacturing excisable goods even if the goods are exempt from excise duty.

Analysis:
1. The Petitioner Company, engaged in manufacturing woollen yarns and ice, sought relief from the High Court against being compelled to obtain a license for its Ice Factory. The Court disposed of the petition after considering arguments from both parties and concluded that the Petitioner was not required to obtain a license for manufacturing woollen and shoddy yarns as they were wholly exempt from excise duty under rule 8(1) of the Central Excise Rules. The Court directed the Central Excise Authorities not to compel the Petitioner to take a license for manufacturing ice if the clearance did not exceed a specified limit.

2. The Court examined the exemption status of the woollen and shoddy yarns manufactured by the Petitioner and found them to be wholly exempt from excise duty under rule 8(1) and exempted from the operation of rule 174. This exemption meant that the Petitioner was not required to obtain a license for manufacturing these goods, as clarified by rule 174A. Therefore, the Petitioner was entitled to exemption from excise duty for manufacturing woollen and shoddy yarns.

3. The Court addressed the issue of whether the total value of capital investment in plant and machinery for both units of the Petitioner Company could be combined for exemption grant. The Respondents argued that since the total investment exceeded a certain amount, the Petitioner was not entitled to exemption. However, the Court rejected this argument, stating that the condition for exemption required the two commodities to fall under the same tariff item, which was not the case here. Therefore, the Petitioner was not required to obtain a license based on the total investment made in the two units.

4. The Court considered whether the ice produced by the Petitioner was exempt from excise duty if the clearance did not exceed a specified limit. It was found that the ice was exempt from excise duty if the clearance did not exceed a certain amount in a calendar year. Since there was no evidence that the clearance exceeded this limit, the Petitioner was entitled to exemption from excise duty on the ice produced.

5. Lastly, the Court addressed the argument that the Petitioner was legally obliged to take a license for manufacturing excisable goods even if they were exempt from excise duty. The Court cited precedent and legal interpretations to establish that once goods were exempt from excise duty, they were considered to be taken out of the First Schedule to the Act and were no longer classified as excisable goods. Therefore, the Petitioner was not required to obtain a license for manufacturing the exempted goods, including ice.