1986 (4) TMI 51 - SC - Central Excise

Whether the manufacture of aluminium cans or torch bodies is liable to excise duty under Entry 27(e) of the First Schedule to the Central Excises and Salt Act, 1944? Held that - The margin of profit included in the price was arrived at notionally, in order merely to comply with the demand of the excise authorities for the submission of price lists. The conduct of the appellant in the past, having regard to the circumstances of the case, cannot serve as evidence of the marketability of the aluminium cans. Indeed, subsequent price lists were submitted under protest by the appellant, who maintained that the article did not attract excise duty. Thus the aluminium cans produced by the appellant cannot be described as excisable goods and therefore do not fall within the terms of S. 3 of the Central Excises and Salt Act, 1944 read with Entry 27 of the First Schedule thereto. Appeal allowed.

Summary

Issues:
Whether the manufacture of aluminium cans or torch bodies is liable to excise duty under Entry 27(e) of the Central Excises and Salt Act, 1944.

Analysis:
The appellant, a public limited company, manufactured flashlights, dry cell batteries, chemicals, and plastics. The issue arose when the excise authorities levied excise duty on aluminium cans produced by the appellant. The appellant argued that aluminium cans were not marketable goods and were solely used in the production of flashlights. The High Court initially allowed the writ petition, but on appeal, it was reversed. The High Court held that the manufacture of aluminium cans fell under Entry 27(e) of the Act, which includes extruded shapes and sections. The appellant contended that the aluminium cans were not goods as they were not marketable.

The Supreme Court analyzed the definition of "goods" for excise duty purposes, emphasizing that excise duty applies to articles capable of being sold to consumers. The Court referred to previous judgments highlighting that goods must be marketable to attract excise duty. The crucial question was whether the aluminium cans produced were capable of sale to a consumer. The Court noted that the appellant used the cans internally for flashlight production and did not sell them in the market. The cans, in their initial form, were not suitable for use in flashlights and required further processing to become a finished product. The Court found no evidence of marketability for the aluminium cans.

The Court dismissed the appeal, setting aside the High Court's decision. It held that the aluminium cans produced by the appellant did not qualify as excisable goods under the Act. The Court emphasized that the past treatment of the cans as excisable goods by the appellant was due to a mistaken belief and did not prove marketability. Consequently, the appellant was not liable to pay excise duty on the aluminium cans. The Court awarded costs to the appellant for the appeal.