1987 (10) TMI 54 - HC - Central Excise

Summary

Issues:
Interpretation of Central Excises and Salt Act, 1944 regarding the liability of iron castings to excise duty prior to 1-8-1983 and the applicability of exemption notifications.

Analysis:
The case involved 27 petitioners, small scale foundries operating in Hyderabad Urban Agglomeration and Nizamabad district, manufacturing iron castings using old iron scrap and pig iron as raw material. The Assistant Collector, Central Excise, informed them of the obligation to obtain an L4 license under the Act due to the liability of iron castings to excise duty under Item 25 of the Central Excise Act. The petitioners challenged this in a writ petition, arguing that their iron castings were not liable to excise duty and they were not required to obtain the license. The Department contended that the iron castings were indeed liable to duty under Item 25, even with the exemption under Rule 8 by Notification No. 74/62. The single Judge dismissed the writ petition.

The controversy revolved around the period before 1-8-1983 when Items 25 and 26AA were amended. Post-amendment, the manufacture of iron castings by the petitioners was exempt from duty, and they were not required to obtain the L4 license. The exemption notification No. 74/62 exempted iron in any crude form produced from old iron or steel scrap from excise duty, and it was acknowledged that the pig iron used had already suffered excise duty.

The appellants argued that since pig iron, scrap iron, and iron casts were all contained in Item No. 25, the levy of duty on iron casts was unjustified. They also relied on a Supreme Court decision. The Revenue contended that iron casts were different commodities from the raw materials used and were liable to duty unless exempted. The court analyzed the language of Items 25 and 26AA, emphasizing that iron in any crude form was treated as one commodity. The conversion of one type of iron in crude form into another did not attract excise duty, as the duty was already paid on the commodity. The court held that the appellants were not obliged to obtain the L4 license even before 1-8-1983.

An application for appeal to the Supreme Court was made but was refused as no substantial question of law of general importance requiring consideration was found.

In conclusion, the judgment allowed the appeal of the petitioners, holding that they were not required to obtain the L4 license for manufacturing iron castings, even before 1-8-1983.