1986 (2) TMI 60 - HC - Central Excise

Summary

Issues:
Challenge to show cause notices, validity of order by Assistant Collector, validity of Rule 10A of Central Excise Rules.

Analysis:
The case involved a petitioner, a partnership firm engaged in manufacturing components for telephones on a job work basis for Indian Telephone Industries Ltd. The petitioner excluded raw materials supplied by ITI in the payment of excise duty under the Central Excises and Salt Act, 1944. The Superintendent proposed to levy excise duty on these raw materials, leading to show cause notices and an order by the Assistant Collector confirming the duty. The petitioner challenged these actions under Article 226 of the Constitution.

The petitioner contended that as per Exemption Notification No. 119/75, raw materials supplied on job work basis and returned to ITI after manufacturing should be excluded from excise duty. The petitioner relied on legal rulings and High Court judgments to support this argument. The respondents sought to justify the Assistant Collector's order, stating that duty on the goods was chargeable under the Act.

The Central Government had issued exemption Notification No. 119/75, exempting goods produced on job work basis from excess excise duty. The notification defined 'job work' as a process where an article supplied for manufacturing is returned to the supplier after processing, charging only for the job work done. The purpose of the exemption was to encourage ancillary industries and protect property rights.

The court accepted the petitioner's claim that raw materials supplied by ITI for job work and returned after manufacturing were exempt from excise duty under the notification. The court referred to previous judgments supporting this interpretation. As a result, the Assistant Collector's order was deemed illegal and quashed. The court did not delve into the validity of Rule 10A of the Central Excise Rules, leaving it open for future examination.

In conclusion, the court held that the Assistant Collector's order was to be quashed, and the rule issued was made absolute. Each party was directed to bear their own costs in the case.