1967 (2) TMI 32 - HC - Central Excise

Summary

Issues: Interpretation of entry 6 of the First Schedule under the Central Excises and Salt Act, 1944 regarding the liability of excise duty on absolute alcohol denatured with special denaturants.

Analysis:
1. The petitioner, a distillery company, challenged the demand for excise duty on absolute alcohol denatured with special denaturants, claiming it was not power alcohol as defined by the Indian Power Alcohol Act, 1948. The company argued that the denaturants used were not prescribed by the Central Government, thus not making the product power alcohol. However, the court clarified that the denaturing process was to render power alcohol unfit for human consumption, not to determine its classification as power alcohol. The alcohol manufactured by the petitioner met the criteria of power alcohol under the Act.

2. Even if the petitioner's product did not align with the definition under the Indian Power Alcohol Act, the court held that entry 6 of the First Schedule defined power alcohol broadly as ethyl alcohol of any grade. The phrase 'that is to say' indicated an equivalent meaning, encompassing ethyl alcohol of a specific grade as power alcohol subject to excise duty.

3. The petitioner contended that power alcohol must not only be ethyl alcohol of any grade but also suitable for use as fuel for internal combustion engines. The company claimed that its denatured power alcohol was not fit for such use. The court noted the lack of evidence to counter the petitioner's assertion and rejected the need for additional expert affidavits based on the interpretation of entry 6.

4. The court emphasized that the liability for excise duty arises when the petitioner manufactures ethyl alcohol of 99.5% grade, regardless of further processing into industrial alcohol. Citing a Supreme Court precedent, the court affirmed that excise duty is on the manufacture of goods, not on their sale, thus reinforcing the liability of the manufactured ethyl alcohol to duty.

5. The appellate authority's failure to explicitly address the suitability of denatured alcohol for use as mentioned in entry 6 was not deemed a significant omission, as the petitioner had not disputed the suitability of the ethyl alcohol produced. The court dismissed the petition, upholding the liability of the petitioner to pay excise duty on the manufactured ethyl alcohol.

This judgment clarifies the interpretation of entry 6 of the First Schedule under the Central Excises and Salt Act, 1944, establishing the liability of distillery companies for excise duty on manufactured ethyl alcohol, irrespective of denaturation processes or further product applications.