1997 (4) TMI 95 - HC - Central Excise

Summary

Issues Involved:

1. Whether the Tribunal was right in holding that the petitioner was not entitled to permission under Rule 56B of the Central Excise Rules, 1944 for the movement of bare copper wire without payment of duty to another factory for insulation and then being brought back to the factory of the petitioner for further processes.

Issue-wise Detailed Analysis:

1. Entitlement to Permission under Rule 56B:

The primary issue revolves around the interpretation and application of Rule 9 and Rule 56B of the Central Excise Rules, 1944. The petitioner, a manufacturer of insulated wires and cables, sought permission under Rule 56B to move bare copper wire without payment of duty to another factory for insulation and then bring it back for further processing. The Collector of Central Excise denied this permission, citing Rule 9, which mandates that no excisable goods can be removed without payment of duty.

Analysis of Rule 9:

Rule 9 stipulates that no excisable goods shall be removed from any place where they are produced, cured, or manufactured without payment of excise duty. The rule aims to ensure that excisable goods are not taken out from the premises without paying the excise duty, thus putting a general embargo on the removal of such goods.

Analysis of Rule 56B:

Rule 56B, on the other hand, provides a special procedure allowing the removal of finished excisable goods or semi-finished goods for certain purposes, such as further manufacturing processes or tests, without payment of duty. This rule empowers the Collector to permit such removal by special order and subject to specified conditions.

Harmonious Interpretation of Rule 9 and Rule 56B:

The court emphasized the need to read Rule 9 and Rule 56B harmoniously. Rule 56B serves as an exception to the general rule laid down in Rule 9, enabling the Collector to permit the removal of semi-finished goods for further processing without payment of duty. The court noted that if Rule 9 were interpreted as a complete bar, it would render Rule 56B redundant, which is not the intention of the framers of the rules.

Collector's Discretion Under Rule 56B:

The court clarified that the Collector has the discretion to permit the removal of goods under Rule 56B if he is satisfied that the goods are semi-finished and require further processing. The Collector's decision should not be solely based on the classification of the goods as excisable under Chapter 74 of the Central Excise Tariff.

Rejection of the Tribunal's View:

The court rejected the Tribunal's view that the petitioner was not entitled to permission under Rule 56B. It held that the Collector's interpretation of Rule 9 as a total bar was incorrect. The court also distinguished the present case from the Allahabad High Court's decision in Lohia Machines Limited v. Union of India, where the product in question was not considered a semi-finished product.

Conclusion:

The court concluded that Rule 9 and Rule 56B should be read harmoniously, allowing the Collector to grant permission for the removal of semi-finished goods for further processing under Rule 56B. The view taken by the Collector and upheld by the Tribunal was found to be incorrect. The question of law was answered in favor of the petitioner, affirming their entitlement to permission under Rule 56B.