1997 (3) TMI 111 - HC - Central Excise

Summary

Issues Involved:

1. Legality of the Assistant Commissioner's order.
2. Whether cross arms are excisable goods.
3. Prematurity of the Original Petitions.
4. Provisions for clearing goods on execution of a bond.
5. Adjudication and payment of excise duty before removal of goods.
6. Jurisdiction of the High Court under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Legality of the Assistant Commissioner's Order:

The petitioners challenged the Assistant Commissioner's order (Ext. P3) requiring them to clear goods only after observing Central Excise formalities, arguing it was arbitrary, illegal, and violative of their fundamental rights under Article 14 of the Constitution of India. They contended that the Central Excise Department should not demand duty without adjudication and should allow clearing goods on executing a bond, as previously permitted by the Court in a similar case.

2. Whether Cross Arms are Excisable Goods:

The petitioners argued that their fabrication of cross arms did not amount to manufacture and hence should not be subject to excise duty. The respondents countered that cross arms, made from MS Angles, undergo processes like cutting, drilling, and welding, resulting in a new product with a distinct character and identity, thus making them excisable under the Central Excise Tariff Act. The Court agreed with the respondents, noting that the processes involved in making cross arms are incidental or ancillary to the completion of a manufactured product, making them dutiable.

3. Prematurity of the Original Petitions:

The respondents argued that the Original Petitions were premature and an abuse of the Court's process, as the petitioners had not exhausted the adjudication process. The Court noted that adjudication proceedings were already initiated to determine the duty liability, and the petitioners could not insist on the same procedure for future manufacture without adjudication.

4. Provisions for Clearing Goods on Execution of a Bond:

The petitioners sought to clear goods provisionally on executing a bond for the alleged duty liability. The respondents maintained that there was no provision under the Central Excise Act and Rules to permit clearing dutiable goods for domestic use without payment of duty on execution of a bond. The Court upheld this view, stating that the Central Excise Rules do not allow the removal of excisable goods without payment of duty, and the petitioners must follow the prescribed procedures.

5. Adjudication and Payment of Excise Duty Before Removal of Goods:

The Court emphasized that excise duty must be paid before removing excisable goods from the factory, as per Rule 9 of the Central Excise Rules. Various rules under the Central Excise Act and Rules provide detailed provisions for the removal of manufactured goods, and the petitioners must comply with these stringent requirements. The Court noted that the petitioners had registered under the Excise Act and were therefore obligated to pay duty before clearing goods.

6. Jurisdiction of the High Court under Article 226 of the Constitution of India:

The Court referred to the Supreme Court's rulings in cases like Collector of Central Excise, Chandigarh v. Steel Strips Ltd. and Metagraphs Pvt. Ltd. v. Collector of Central Excise, which held that issues involving the classification and scope of manufactured items should be decided by the excise authorities and contested before adjudicating authorities, not under Article 226. The Court reiterated that the petitioners should follow the statutory remedies provided under the Central Excise Act and not seek relief through a writ petition at this stage.

Conclusion:

The Court dismissed the Original Petitions, finding no sustainable grounds for the relief sought. The petitioners were directed to follow the statutory adjudication process to resolve their disputes regarding excise duty liability.