1986 (2) TMI 66 - HC - Central Excise

Issues Involved:
1. Whether the job work of twisting wires constitutes 'manufacture' under the Central Excises and Salt Act, 1944.
2. Applicability of the Limitation Act to the demand for excise duty.
3. Classification of twisted wires under Tariff Item 33-B(ii) of the First Schedule to the Central Excises and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Whether the job work of twisting wires constitutes 'manufacture' under the Central Excises and Salt Act, 1944:

The petitioners argued that they were only performing the job work of twisting wires for M/s. Bharat Wire Industries and not manufacturing excisable goods. The definition of 'manufacture' under Section 2(f) of the Act includes any process incidental or ancillary to the completion of a manufactured product. The court examined whether the twisting of wires transformed them into a new commodity with a distinct name, character, and use. The court referred to the Supreme Court's observations in Empire Industries Limited v. Union of India, emphasizing that 'manufacture' involves creating a new commodity commercially known as distinct and separate. The court concluded that the twisted wires did not constitute a new commodity, as they remained conductors and did not acquire a new character or name. Thus, the job work of twisting wires did not amount to 'manufacture' under the Act.

2. Applicability of the Limitation Act to the demand for excise duty:

The Appellate Collector initially held that the demand for Rs. 6,323.22 paise for the period from 3-11-1967 to 27-3-1968 was time-barred under the general law of limitation. However, the Joint Secretary overturned this decision, stating that the provisions of the Limitation Act do not apply to officers functioning under the Central Excises and Salt Act, 1944. The court did not delve further into this issue as it decided the case on the primary issue of whether the job work constituted 'manufacture'.

3. Classification of twisted wires under Tariff Item 33-B(ii) of the First Schedule to the Central Excises and Salt Act, 1944:

The Appellate Collector and the Joint Secretary classified the twisted wires under Tariff Item 33-B(ii), which pertains to electric wires and cables not specified elsewhere. The court examined whether the twisted wires fell within this classification. The court noted that M/s. Bharat Wire Industries manufactured insulated copper wires, which were liable to excise duty under Tariff Item 33-B. The petitioners received untwisted copper wires, twisted them, and returned them for further processing. The court held that the process of twisting did not create a new commodity distinct from the original copper wires. Therefore, the twisted wires could not be classified under Tariff Item 33-B(ii) as a new product.

Conclusion:

The court allowed the petition, setting aside the impugned order dated 2-3-1976 and the orders of the subordinate authorities assessing excise duty against the petitioners. It held that the job work of twisting wires did not constitute 'manufacture' under the Central Excises and Salt Act, 1944, and thus, the petitioners were not liable to pay excise duty. The court directed that any duty paid by the petitioners be refunded within four weeks. The rule was made absolute with costs.

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