1993 (3) TMI 109 - HC - Central Excise

Issues Involved:
1. Legality of the refusal to grant exemption under Rule 7 of the Bombay Municipal Corporation Exemption from Octroi (Free Gift, etc.) Rules, 1966.
2. Determination of whether the activity of reducing the thickness of wire bars constitutes processing or manufacturing.
3. Finality of the Municipal Commissioner's decision regarding the exemption.

Detailed Analysis:

1. Legality of the refusal to grant exemption under Rule 7:

The Bombay Municipal Corporation (BMC) appealed against the trial Judge's decision, which held that the Corporation was not justified in refusing the benefit of exemption under Rule 7 of the Bombay Municipal Corporation Exemption from Octroi (Free Gift, etc.) Rules, 1966, to the respondent Company. The trial Judge also issued an injunction restraining the Corporation from refusing the exemption and directed the Corporation to refund the octroi duty collected on such imports from April 29, 1983, onwards. Rule 7 provides that articles liable to octroi temporarily imported into Greater Bombay for purposes like processing are exempted from octroi on certain conditions. The Company had applied for the 'R' form facility under this rule, asserting that the process did not involve any change in form, condition, or appearance except to the extent inherent in the processing. However, the Deputy Assessor and Collector denied the request, citing a lack of suitable provision in the Act and the Rules. The Company then filed a writ petition under Article 226 of the Constitution of India, claiming that it satisfied all the ingredients of Rule 7. The Corporation resisted, arguing that the process was a manufacturing activity, not processing, and that the list of processing activities under sub-rule (6)(b) of Rule 7 did not include the Company's activity. The trial Judge ruled in favor of the Company, concluding that the activity was purely processing and not manufacturing, thus qualifying for the exemption under Rule 7.

2. Determination of whether the activity of reducing the thickness of wire bars constitutes processing or manufacturing:

The primary question was whether the activity referred to by the respondents amounted to processing or manufacturing. The term "process" in relation to the Octroi Rules means subjecting a product to improve its quality without transforming it into a new commodity. The trial Judge found that the Company's activity of reducing the thickness of wire bars and wire rods did not result in a change in the chemical composition or significant loss of weight, thus not constituting manufacturing. The Corporation argued that heating the wire bars in a furnace and rolling them to smaller sizes should be considered manufacturing. However, the court held that heating alone does not make an activity manufacturing. The trial Judge's conclusion that the activities amounted to processing and not manufacturing was upheld.

3. Finality of the Municipal Commissioner's decision regarding the exemption:

The Corporation argued that the Municipal Commissioner's decision on whether to grant the exemption was final and could not be challenged. However, the court noted that the decision communicated to the Company was by the Deputy Assessor and Collector, not the Commissioner, and lacked reasons for denial. The court also observed that the list of processes approved by the Commissioner did not include the Company's activity, but sub-rule (4) of Rule 7 and sub-rule 6(b)(2) allowed the Commissioner to include other processes. The court held that the Commissioner's decision is final for the Corporation but does not bind the court exercising powers under Article 226 of the Constitution of India. The trial Judge's decision to grant the exemption was affirmed, and the appeal was dismissed with costs.

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