1995 (9) TMI 72 - HC - Central Excise

Summary

Issues Involved:
1. Maintainability of the writ petitions in light of the doctrine of EXHAUSTION.
2. Jurisdiction and authority of Central Excise authorities to search and seize 'Pan Masala' and other similar products.
3. Whether 'Pan Masala' and similar products were considered 'manufactured' under Section 2(f) of the Central Excises and Salt Act, 1944, before 1985.
4. Applicability of exemptions from excise duty under Notifications dated 1-3-1970 and 1-3-1975.

Summary:

1. Maintainability of the Writ Petitions:
At the outset, the Union of India raised a preliminary objection regarding the maintainability of the writ petitions, arguing that the petitioners had not exhausted the alternative remedy u/s 35 of the Central Excises and Salt Act, 1944. However, the court decided to hear the petitions on merits, citing the ratio laid down by the Supreme Court in L. Hriday Narain v. Income Tax Officer (A.I.R. 1971 SC 33), given that the petitions had been pending for about 15 years.

2. Jurisdiction and Authority of Central Excise Authorities:
The petitioners challenged the jurisdiction and authority of the Central Excise authorities to search and seize 'Pan Masala' and other similar products, arguing that these were not excisable goods. The court found that the Central Excise authorities had the jurisdiction to conduct the search and seizure operations.

3. Definition of 'Manufacture' u/s 2(f) of the Act:
The pivotal question was whether 'Pan Masala' and similar products were considered 'manufactured' within the meaning of Section 2(f) of the Act before 1985. The court held that the process of preparing 'Pan Masala' and similar products involved a transformation that resulted in a new and distinct article with a different name and character. Thus, these products were considered 'manufactured' and were excisable under the Act even before 1985.

4. Applicability of Exemptions:
The court examined whether 'Pan Masala' and similar products were exempt from excise duty under Notifications dated 1-3-1970 and 1-3-1975. It was determined that 'Pan Masala' and similar products were neither 'food products' nor 'food preparations' and thus were not eligible for exemption under these notifications. The court also clarified that 'Pan Masala' and similar products were classifiable under Tariff Item 68 and not Item 1B of the First Schedule to the Act, making the exemptions inapplicable.

Conclusion:
The court concluded that the process of preparing 'Pan Masala' and similar products amounted to 'manufacture' within the meaning of Section 2(f) of the Act as it stood before 1985. These products were not exempt from payment of excise duty under the relevant notifications. Consequently, the impugned proceedings, including search and seizure conducted by the excise authorities, were not contrary to the provisions of the Act, without jurisdiction, or illegal. All the writ petitions were dismissed with costs, being devoid of merits.