1996 (8) TMI 133 - HC - Central Excise

Issues Involved:
1. Applicability of Notification No. 119/75-C.E., dated April 30, 1975.
2. Liability of the writ petitioner to pay excise duty on the total value of goods or only on job work charges.
3. Validity of show cause notices issued by the Central Excise authorities.
4. Limitation under Section 11A of the Central Excises and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 119/75-C.E., dated April 30, 1975:
The core issue was whether the writ petitioner, a job worker, was entitled to the benefits of Notification No. 119/75-C.E., which exempts goods manufactured on a job work basis from excise duty, except for the charges on the job work. The notification defines job work as a process where an article supplied by the customer undergoes manufacturing and is returned to the customer after the intended process, with the job worker charging only for the job work done. The writ petitioner argued that they met all conditions of the notification, as they received rails from the Railway Board, processed them into points and crossings, and returned them, charging only for the job work.

2. Liability of the writ petitioner to pay excise duty on the total value of goods or only on job work charges:
The petitioner contended that the points and crossings were essentially the same rails supplied by the Railway Board, subjected to minor processing. They argued that no new article emerged from the process, and thus, excise duty should be levied only on the job work charges. The Central Excise authorities, however, argued that the processed rails acquired a new identity and commercial name, thus excise duty should be calculated on the total value, including the value of the rails.

3. Validity of show cause notices issued by the Central Excise authorities:
The writ petitioner challenged the show cause notices issued by the Central Excise authorities as illegal, void, and without jurisdiction. They argued that the notices were based on incorrect facts and that the authorities failed to provide necessary information or grounds for the demand. The petitioner also pointed out that the authorities had previously accepted the applicability of the notification and assessed duty based on job work charges.

4. Limitation under Section 11A of the Central Excises and Salt Act, 1944:
The petitioner argued that the show cause notices were time-barred under Section 11A, which allows for a limitation period of six months for demanding duty, unless there was fraud, collusion, or wilful misstatement. The petitioner contended that there was no such fraudulent intent or suppression of facts on their part, and thus, the demands for periods beyond six months were invalid.

Judgment Analysis:

The High Court held that the writ petitioner was entitled to the benefits of Notification No. 119/75-C.E. The court found that the rails supplied by the Railway Board did not undergo a significant transformation to be considered a new article. The points and crossings were essentially the same rails with minor modifications, used for changing railway tracks. Therefore, the petitioner was liable to pay excise duty only on the job work charges.

The court also ruled that the show cause notices were invalid as they were based on incorrect facts and failed to provide necessary grounds for the demand. The court noted that the Central Excise authorities had previously accepted the applicability of the notification and assessed duty based on job work charges.

Regarding the limitation issue, the court held that the demands were time-barred under Section 11A, as there was no evidence of fraud, collusion, or wilful misstatement by the petitioner. The court quashed the show cause notices and the demands raised by the Central Excise authorities.

In conclusion, the High Court dismissed the appeal, upheld the writ petitioner's entitlement to the benefits of Notification No. 119/75-C.E., and quashed the show cause notices and demands raised by the Central Excise authorities.

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