1989 (7) TMI 102 - HC - Central Excise

Summary

Issues:
Challenge to Notifications, Jurisdiction of Central Excise, Definition of "Manufacture," Prematurity of Writ Petition

Challenge to Notifications:
The petitioners challenged Notification No. 176/77 and Notification No. 89/79, along with a notice to show cause, as ultra vires and arbitrary. They argued that the proceedings initiated by the respondents were illegal and without jurisdiction due to lack of satisfaction of conditions under Rule 201 of the Rules. The petitioners claimed that the job work they undertook did not fall under the Central Excises and Salt Act, 1944, and the notice to show cause was flawed and prejudged. They sought the quashing of the notice based on these grounds.

Jurisdiction of Central Excise:
The court examined whether the petitioners were actually engaged in manufacturing activities as defined in Section 2(f) of the Central Excises and Salt Act, 1944, or if they were only performing job work. The respondents justified the issuance of the notice to show cause, asserting that the items manufactured by the petitioners had marketability. The court found that the respondents' actions were justified and that the petitioners had opportunities to present relevant facts for adjudication.

Definition of "Manufacture":
Counsel for the petitioners cited legal precedents to argue that the activities undertaken by the petitioners did not amount to "manufacture" as defined in the Act. They referenced cases where the conversion of certain materials did not constitute manufacturing under the law. The court emphasized that manufacturing involves the emergence of a new article with distinct characteristics, not merely a change in substance. It was noted that if the petitioners could demonstrate that their work was only job work and not subject to excise duty, they could challenge any adverse order before the appropriate forum.

Prematurity of Writ Petition:
The court found the writ petition to be premature, having stalled the proceedings for a decade. It observed that the petitioners had not exhausted the available remedies before seeking relief from the court. The court discharged the Rule without costs, allowing the petitioners to provide an explanation within four weeks to the show cause notice. The authorities were directed to proceed with the matter in accordance with the law, emphasizing that the respondents had not fulfilled their duties properly during the proceedings. All interim orders were vacated, and the respondents were prohibited from enforcing the notice of demand until the explanation was disposed of.