1996 (2) TMI 156 - HC - Central Excise

Summary

Issues Involved:
1. Whether the conversion of Castor Oil (Commercial) into Castor Oil (BP) constitutes a manufacturing process.
2. Whether the petitioners are entitled to a refund of octroi duty under the Bombay Municipal Corporation's Refund of Octroi Rules, 1965.
3. Whether the petitioners' claim for refund is barred by limitation.

Issue-wise Detailed Analysis:

1. Whether the conversion of Castor Oil (Commercial) into Castor Oil (BP) constitutes a manufacturing process:

The primary issue is whether the filtration process that converts Castor Oil (Commercial) into Castor Oil (BP) constitutes a manufacturing process. The petitioners argued that the filtration process merely removes impurities and does not change the chemical composition of the oil. According to an Expert Certificate, filtration does not alter the characteristics of the oil, and the process cannot be termed as manufacturing. The Corporation, however, contended that the filtration process results in a new and distinct commercial product, thus constituting a manufacturing process. The Court found merit in the petitioners' argument, stating that the process of filtration does not involve mechanical activity or change the basic substance of the oil. The Court concluded that the process is not a manufacturing activity and, therefore, does not attract octroi duty under Section 192 of the B.M.C. Act.

2. Whether the petitioners are entitled to a refund of octroi duty under the Bombay Municipal Corporation's Refund of Octroi Rules, 1965:

The petitioners sought a refund of octroi duty paid on Castor Oil (Commercial) imported and later exported as Castor Oil (BP). Under Rule 3A of the Refund of Octroi Rules, 1965, a refund is admissible if the articles exported have not changed their original form, condition, or state of appearance by any process of manufacture. The Court noted that the filtration process does not amount to manufacturing and, therefore, the petitioners are entitled to a refund. The Court emphasized that mere change in quality or grade due to filtration does not constitute a manufacturing process. Consequently, the Corporation's refusal to grant a refund was found to be unjustified.

3. Whether the petitioners' claim for refund is barred by limitation:

The Corporation argued that the petitioners' claim for a refund was time-barred. The petitioners, however, contended that they had applied for a refund within the stipulated period and that the Corporation had delayed the decision on their claims. The Court found that the petitioners had lodged their claims for refund in a timely manner and that the delay was on the part of the Corporation. The Court held that the petitioners' claim was not barred by limitation and directed the Corporation to process the refund claim as per the particulars given in Exhibit-Q.

Conclusion:

The Court allowed the writ petition, directing the Corporation to refund the amount claimed by the petitioners on or before 15th April 1996. If the Corporation fails to refund the amount by the specified date, it is directed to pay interest at the rate of 12% per annum until payment. The Court emphasized that the filtration process does not constitute a manufacturing activity, and thus, the petitioners are entitled to a refund of the octroi duty paid. The petitioners' claim was found to be within the stipulated period, and the Corporation's refusal to grant a refund was deemed unjustified.