1986 (4) TMI 58 - HC - Central Excise

Summary

Issues Involved:
1. Whether the processes of drilling, trimming, and chamferring brake linings constitute 'manufacture' u/s 2(f) of the Central Excises and Salt Act, 1944.
2. Whether the petitioners are required to take out a license under Rule 174 of the Central Excise Rules, 1944, read with S.6 of the Act.
3. Whether the petitioners are liable to pay the differential duty on past clearances of brake linings.
4. Imposition of a penalty of Rs. 200 under Rule 173-Q of the Central Excise Rules, 1944.

Summary of Judgment:

1. Interpretation of 'Manufacture' u/s 2(f):
The primary issue revolved around whether the processes of drilling, trimming, and chamferring performed by the petitioners on brake linings purchased from Messrs. Rane Brake Linings Ltd. and other manufacturers constitute 'manufacture' u/s 2(f) of the Central Excises and Salt Act, 1944. The court noted that the definition of 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product. The factual materials demonstrated that the brake linings purchased were incomplete and could not be used without the processes performed by the petitioners. The court held that these processes were essential, incidental, or ancillary to the completion of the brake linings as a manufactured product, thereby attracting the mischief of 'manufacture' as defined in the Act.

2. Requirement for License:
The second respondent directed the petitioners to take out a license under Rule 174 of the Central Excise Rules, 1944, read with S.6 of the Act. The court upheld this directive, affirming that the petitioners, by engaging in the processes of drilling, trimming, and chamferring, were indeed manufacturing brake linings and thus required to comply with the licensing formalities.

3. Liability for Differential Duty:
The petitioners were ordered to pay the appropriate duty on past clearances of brake linings, taking into account the duty already paid on the goods by Messrs. Rane Brake Linings Ltd. The court supported the respondents' view that the petitioners were liable for the differential duty between what was leviable on the products as marketed by them and the duty already collected at the time of clearance from the original manufacturers.

4. Imposition of Penalty:
The second respondent imposed a penalty of Rs. 200 under Rule 173-Q of the Central Excise Rules, 1944. The court did not find any reason to interfere with this imposition, thereby upholding the penalty.

Conclusion:
The court dismissed the writ appeal, endorsing the view that the processes performed by the petitioners constituted 'manufacture' u/s 2(f) of the Act, necessitating compliance with licensing requirements and payment of differential duty. The court also upheld the imposition of a penalty under Rule 173-Q of the Central Excise Rules, 1944. No order as to costs was made.