1994 (9) TMI 100 - HC - Central Excise

Summary

Issues:
Challenge to show cause notices regarding excise duty on construction activity

Analysis:
The judgment involved multiple connected writ petitions challenging show cause notices issued by the Respondent (Additional Collector) regarding the imposition of excise duty on construction activities conducted by the petitioners. The petitioners contended that the construction of sheds using iron and steel did not amount to "manufacture" as defined under the Central Excises and Salt Act, 1944. They argued that the process of fabrication did not attract excise duty. The Respondents opposed the petitions, treating them as a response to the show cause notices.

The Counsel for the petitioners relied on various judgments to support their argument that the construction activity did not constitute "manufacture" under the law. They emphasized that the process of making trusses, beams, and other articles from raw materials like iron and steel was fabrication and not manufacturing as per the legal definition.

The Court, after considering the arguments and legal precedents, concluded that the Respondents erred in equating fabrication with manufacture for the purpose of levying excise duty. The judgment highlighted the distinction between fabrication and manufacture, emphasizing that only the latter is subject to excise duty. The Court noted that the burden of proof was on the department, which failed to establish that the construction activity amounted to manufacture.

The judgment further delved into the constitutional aspect of taxation, citing precedents that emphasized the need for every stage of the taxation process to be authorized by law. It underscored the importance of fairness and reasonableness in the exercise of discretionary powers by authorities, ensuring that legitimate rights of individuals are not unjustly infringed.

Ultimately, the Court held that the construction of sheds by the petitioners did not amount to manufacturing goods liable for excise duty. It quashed the show cause notices, ruling them as without jurisdiction and not backed by legal authority. The judgment emphasized the need for correct interpretation of tax laws to prevent undue burden on taxpayers and maintain adherence to legal principles.

In conclusion, the Court allowed all the writ petitions, quashing the show cause notices demanding duty and penalty. The parties were directed to bear their own costs, and security costs were to be refunded. The judgment was to be retained in the records of each petition for reference.