1987 (8) TMI 108 - HC - Central Excise

Issues:
Challenge to levy of cess on jute yarn under Section 9(1) of the Industries (Development and Regulation) Act, 1951. Interpretation of the Act and Rules regarding the levy of cess on intermediary products like jute yarn. Impact of amended Rules 9 and 49 of the Central Excise Rules on the levy of cess.

Analysis:

1. The petitioners contested the imposition of cess on jute yarn produced during the manufacturing of jute products under Section 9(1) of the Industries (Development and Regulation) Act, 1951. The Central Government, through a notice, specified the class of goods on which duty of excise, in the form of cess, shall be levied. The contention raised was twofold: first, whether jute yarn could be subjected to cess under the Act, and second, whether the jute yarn, an intermediary product, could be marketed independently. The court held that the levy of cess on jute yarn was permissible under the Act, emphasizing that the purpose of the Act was distinct from the Central Excise Act, and the cess collected was to be utilized for industrial development. The court also clarified that jute yarn, being a marketable commodity, could be subject to cess even though it is used in the production of end products within the factory.

2. The Supreme Court, in a related case, emphasized that the nature and character of a product at its final stage of production determine its liability for excise duty. The court highlighted that processes like bleaching and heat setting are integral to the manufacturing process and clarified the classification of products for excise duty purposes. The standing counsel for the Central Government argued that the amendment of Rules 9 and 49 of the Excise Rules made intermediary products dutiable under the Excise Act. The court referred to previous judgments regarding the removal of goods from the factory premises for excise duty purposes and the retrospective effect of amendments clarifying the treatment of intermediary products.

3. The court further discussed the marketability of jute yarn as an independent product and its classification as an excisable entity under the amended Rules 9 and 49. It was emphasized that the jute yarn, even when consumed within the factory for end product manufacturing, remains subject to duty due to its marketability. The court dismissed the writ petitions, upholding the levy of cess on jute yarn as a marketable commodity, in line with the amended rules. The court highlighted that the impact of the amended provisions, introduced with retrospective effect, cannot be overlooked, and jute yarn's status as an excisable entity is not contingent on its removal from the factory premises.

4. In conclusion, the court affirmed the sustainability of the levy of cess on jute yarn under the amended Rules 9 and 49, emphasizing its marketability and independent excisable character. The court rejected the argument against considering the effect of the amended provisions, stating that the jute yarn's intermediary role in end product manufacturing does not exempt it from duty. The judgment emphasized the importance of recognizing jute yarn as a marketable commodity subject to cess, irrespective of its utilization within the factory for production purposes.

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