1988 (3) TMI 68 - HC - Central Excise

Summary

Issues:
Interpretation of Notification No. 119/75 regarding excise duty exemption for job work manufacturing.

Detailed Analysis:

Issue 1: Interpretation of Notification No. 119/75
The petitioner, a Limited Company manufacturing parts of transmission towers from raw materials supplied by customers, sought exemption under Notification No. 119/75 from excise duty leviable on the final product. The Assistant Collector of Central Excise contended that the notification only applied to units engaged in processing work, not manufacturing. The petitioner argued that since it was engaged in manufacturing even on a job work basis, it was entitled to the exemption. The Court analyzed the notification, which exempted goods manufactured in a factory as job work from excess excise duty. The explanation defined job work as where an article intended for manufacturing process is supplied and returned after undergoing the process. The Court emphasized that job work involves manufacturing activities, as clarified by the notification's language, and the exemption must apply to factories engaged in manufacturing articles from raw materials supplied by customers.

Issue 2: Precedent and Interpretation
The Court referred to a Division Bench judgment of the Gujarat High Court in a similar case, where it was held that job workers charging for labor and incidental costs after manufacturing processes were exempt from excise duty under the same notification. The Court noted that manufacturing activities are essential for excise duty imposition, and the exemption was intended for job workers producing manufactured articles. Another judgment by Bharucha J. followed the same interpretation. The Court emphasized that the notification applied to units engaged in job work resulting in manufactured articles, not just processing. The petitioner's manufacturing activities clearly fell under the exemption criteria, and the respondent's view was deemed erroneous and the demand notices illegal.

Conclusion:
The Court held in favor of the petitioner, ruling that Notification No. 119/75 applied to units engaged in job work manufacturing resulting in manufactured articles. The demand notices were set aside, and the petitioner was entitled to cost reimbursement. The Bank guarantee, if provided, was canceled, and the petitioner was to receive it promptly. The judgment clarified the scope of the notification and emphasized that manufacturing activities under job work qualified for excise duty exemption.