1993 (1) TMI 100 - SC - Central Excise

Whether the company is liable to pay duty under Tariff Item No. 27(c) in respect of process of backing of duty paid aluminium foils? Held that - Such a question can be decided on evidence as to how the article is known and recognised by those in the trade, industry or commerce dealing with the article. The finding of the court must be based on such evidence and not on its own perceptions of the matter. In this case, evidence on the point is conspicuous by its absence. Indeed, in a sense, there was nothing to traverse. Appellant, so far as the proceedings in judicial review are concerned could well have remained content with a demurrer. The Court cannot reach a conclusion on its own perception and appreciation of the matter. After hearing the learned counsel on both sides, we are of the view that on the material placed before the High Court, the conclusion reached by it is not sustainable. Set aside the judgment of the High Court and remit the writ petition to the High Court for a fresh disposal.

Summary

Issues:
- Whether the process of backing duty paid aluminum foil with paper amounts to the manufacture of a new and commercially distinct article.
- Whether the High Court's decision on the levy of duty on "paper-backed aluminum-foil" was sustainable.
- Whether the absence of a counter-affidavit affects the determination of whether the process amounts to manufacture under the Central Excises and Salt Act, 1944.
- Whether a commercially different article emerging from a process can be exigible to duty under the same tariff item.

Analysis:

The Supreme Court heard an appeal by the Union of India against a High Court order upholding that the process of backing duty paid aluminum foil with paper did not amount to manufacturing a new and distinct article. The High Court's decision was based on two grounds. Firstly, the Revenue did not file a counter-affidavit to rebut the respondent's claim that "paper-backed aluminum foil" was not a new commercial article. Secondly, the High Court found that the process did not result in a commercially distinct article from aluminum foil. The absence of a counter-affidavit was not conclusive, and the determination of whether the process constitutes manufacture depends on whether a new and commercially distinct article emerges. The court emphasized the importance of evidence in establishing the transformation of goods into a different article known in the market. The court highlighted that its decision should be based on evidence, not its own perceptions. The Supreme Court concluded that the High Court's decision was not sustainable based on the material before it.

The appellant argued that even if a commercially distinct article emerged, it should not be subject to duty under the same tariff item as the original aluminum foil. The appellant cited a previous case but the court disagreed, stating that the High Court's finding that the process did not amount to manufacture was crucial. The Supreme Court allowed the appeal, set aside the High Court's judgment, and remitted the case for fresh disposal. Both parties were directed to present all relevant material, and each party was ordered to bear its own costs for the proceedings.

This judgment clarifies the legal principles surrounding the determination of whether a process amounts to manufacturing a new and distinct article under the Central Excises and Salt Act, 1944. It underscores the importance of evidence in establishing the commercial distinctiveness of the resulting article and highlights that a court's decision should be based on such evidence rather than personal perceptions.