1991 (2) TMI 129 - HC - Central Excise

Summary

Issues Involved:
1. Legality and validity of the order passed by the Collector, Central Excise.
2. Entitlement to benefits of Exemption Notification No. 94/70.
3. Definition and scope of 'manufacture' and 'process' under the Central Excises & Salt Act, 1944.
4. Use of power in the manufacturing process and its implications on exemption eligibility.

Issue-wise Detailed Analysis:

1. Legality and validity of the order passed by the Collector, Central Excise:
The petitioner challenged the order by the Collector, Central Excise, which held that the petitioner had manufactured tin containers with the aid of power, making them ineligible for the benefits of Exemption Notification No. 94/70. The Collector's order dated December 20, 1978, imposed excise duty on 49,885 metal containers and a penalty of Rs. 2,000/- under Rule 173Q(1). The petitioner contested this order on both factual and legal grounds.

2. Entitlement to benefits of Exemption Notification No. 94/70:
The petitioner claimed exemption under Notification No. 94/70, which provided that metal containers manufactured without the aid of power were exempt from excise duty. The Collector found that the tin sheets used by the petitioner were printed by M/s. Gujarat Metal Box, Ahmedabad, using power-operated machines. Since the printing was deemed a part of the manufacturing process, the containers were considered to be manufactured with the aid of power, thus disqualifying the petitioner from the exemption.

3. Definition and scope of 'manufacture' and 'process' under the Central Excises & Salt Act, 1944:
The court examined whether the activities performed on the tin sheets constituted a 'process' or 'manufacture' under Section 2(f) of the Central Excises & Salt Act, 1944. The term 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product. The court referred to the Supreme Court's decision in Chowgule & Co. Pvt. Ltd. v. Union of India, which stated that any operation resulting in a change in the commodity amounts to processing. The court concluded that printing and lacquering the sheets brought about a physical and visible change, thus constituting a process.

4. Use of power in the manufacturing process and its implications on exemption eligibility:
The court held that the use of power in printing and lacquering the sheets by M/s. Gujarat Metal Box was integral to the manufacturing process of the containers. The administrative officer of the petitioner company admitted that power was used in the printing process. Therefore, the manufacturing process involved the use of power, making the petitioner ineligible for the exemption under Notification No. 94/70. The court distinguished this case from previous judgments where the processes were not directly related to the manufacture of the final product.

Conclusion:
The court upheld the order of the Collector, Central Excise, rejecting the petitioner's claim for exemption and confirming the imposition of excise duty and penalty. The petition was rejected, and the interim relief was vacated.