1973 (11) TMI 45 - HC - Central Excise

Summary

Issues Involved:
1. Whether the dyes were manufactured before the night of 28th Feb./1st March, 1961, making them excisable under the Finance Bill of 1961.
2. Whether the process of blending and/or pulverizing was necessary to complete the manufacture of the dyes.
3. Whether the products were known in the market in their form before blending and pulverizing.
4. The burden of proof regarding the excisability of the products.

Issue-wise Detailed Analysis:

1. Whether the dyes were manufactured before the night of 28th Feb./1st March, 1961, making them excisable under the Finance Bill of 1961:
The petitioners, manufacturers of dyes, claimed that 47,068.50 kgs. of dyes were manufactured before the midnight of 28th February, 1961, and thus not subject to the excise duty imposed by the Finance Bill of 1961. The Division Bench initially allowed a partial refund, recognizing that 15,109.6 kgs. were fully manufactured before the specified date, but rejected the claim for the remaining 31,958 kgs., which were subjected to further processing post-midnight. The Supreme Court remanded the matter for further evidence on the disputed questions.

2. Whether the process of blending and/or pulverizing was necessary to complete the manufacture of the dyes:
The Division Bench held that the completion of the chemical process did not by itself result in the production of a new substance as known to the mercantile community and the consumers. The petitioners admitted that blending and pulverizing were done for standardization, implying that these processes were necessary for obtaining commercially uniform products. The Supreme Court found no material on record to support the High Court's conclusion and remanded the matter for further evidence.

3. Whether the products were known in the market in their form before blending and pulverizing:
The petitioners provided affidavits and invoices showing that dyes were sold in lump or crystal form without further processing. The respondents, however, did not produce any evidence from dealers or consumers to show that the products were not known in the market before blending and pulverizing. The High Court found that the evidence supported the petitioners' contention that the dyes in lump or crystal form were known to the market and thus were fully manufactured before the specified date.

4. The burden of proof regarding the excisability of the products:
The petitioners argued that the burden of proving that the products were liable to excise duty was on the revenue. The Supreme Court in the case of Deputy Commissioner of Agricultural Income-tax and Sales-Tax Quilon v. Travancore Rubber & Tea Co. held that the burden of proving the necessary ingredients for taxation is on the taxing authority. The High Court concluded that the respondents failed to establish that the processes of blending and/or pulverizing were necessary to complete the manufacture of the dyes and thus failed to prove that the products were excisable.

Conclusion:
The petitioners succeeded in proving that the dyes were fully manufactured before the midnight of 28th February, 1961, and thus were not liable to excise duty. The High Court set aside the order dated 22nd August, 1955, and directed the respondents to refund Rs. 90,803.78 to the petitioners. The respondents were also ordered to pay the costs of the petition and the Civil Appeal No. 1218 of 1967 to the Supreme Court.