1997 (9) TMI 105 - SC - Central Excise

Whether the goods were not entitled to exemption from excise duty under the said notification No. 167/86, dated March 1, 1986? Held that - In view of the order of the Collector (Appeals) dated August 29, 1991, it cannot be said that in respect of goods which were detained on the basis of order dated September 2, 1987 exemption was not available under Notification No. 167/86, dated March 1, 1986. The appeal is, therefore, allowed, the impugned judgment of the Tribunal is set aside and the demand raised by the Assistant Collector of Central Excise on the basis of the show cause notice dated February 16, 1988 is quashed.

Issues:
1. Exemption from excise duty under Notification No. 167/86 for fireworks manufactured by Kuil Fireworks Industries.
2. Detention of goods by excise authorities on September 2, 1987, and subsequent demand for excise duty.
3. Applicability of exemption under Notification No. 167/86 after withdrawal by Notification No. 222/87.
4. Legal principles governing duty liability in cases of detention and clearance of goods.
5. Interpretation of whether power was used in the manufacture of fireworks by Kuil Fireworks Industries.
6. Relevance of the decision in Priyanka Overseas Pvt. Ltd. & Anr. v. Union of India in the present case.

Analysis:
1. The appeal challenged the demand for excise duty on fireworks manufactured by Kuil Fireworks Industries under Heading 3604.10 of the Central Excise Tariff, claiming exemption under Notification No. 167/86. The appellant argued that no process involving power was used in manufacturing the goods, thus qualifying for the exemption.
2. The excise authorities detained the goods on September 2, 1987, demanding excise duty. The appellant contended that the goods were detained illegally and were later cleared based on an interim order from the High Court, leading to a show cause notice for duty payment issued on February 16, 1988.
3. The withdrawal of exemption under Notification No. 167/86 by Notification No. 222/87 raised questions regarding the duty liability for goods cleared post-withdrawal. The appellant maintained that they should not be held liable for duty due to the illegal detention of goods by authorities.
4. Legal principles from previous cases, including Wallace Flour Mills Co. Ltd. v. Collector of Central Excise, were cited to determine duty liability based on the date of clearance of goods. The Tribunal rejected the appellant's reliance on a Calcutta High Court decision, emphasizing the date of clearance for duty calculation.
5. The issue of whether power was used in the manufacture of fireworks by Kuil Fireworks Industries was contested. The Assistant Collector initially held that power was used, but the Collector (Appeals) overturned this decision due to lack of evidence, concluding that the appellant was eligible for the exemption.
6. The applicability of the decision in Priyanka Overseas Pvt. Ltd. & Anr. v. Union of India was debated, with the appellant arguing that they should not be penalized for the illegal detention of goods. The Additional Solicitor General acknowledged this stance but contended that duty exemption was not valid due to power usage in manufacturing.
7. Ultimately, the appeal was allowed, setting aside the Tribunal's judgment and quashing the excise duty demand. The appellant was entitled to a refund of the deposited amount, and the bank guarantee was discharged. No costs were awarded in the case.

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