1964 (10) TMI 4 - HC - Central Excise

Summary

Issues:
1. Interpretation of rules regarding excise duty on package tea manufacturing.
2. Allegations of evasion of excise duty by not bringing all loose tea purchases into licensed premises.
3. Legal obligation of a licensee to bring all purchases of loose tea into licensed premises.
4. Authority of the Assistant Collector of Central Excise to impose duty and penalty based on speculation.
5. Compliance with Central Excise Rules regarding manufacturing and removal of package tea.

Analysis:
1. The judgment addresses the interpretation of rules concerning excise duty on package tea manufacturing. The petitioner, a holder of an L-4 license for manufacturing package tea, was required to bring all loose tea purchases into the licensed premises for packaging, subject to excise duty upon removal. The process of packaging is considered manufacturing under the Act, attracting excise duty upon removal from the premises.

2. The issue of alleged evasion of excise duty arose as the petitioner also dealt in loose tea outside the licensed premises. The Assistant Collector of Central Excise suspected that the petitioner may have converted loose tea into package tea without paying the required duty. A show cause notice was issued based on this suspicion, leading to the imposition of duty and penalty by the Assistant Collector.

3. The legal obligation of the licensee to bring all loose tea purchases into the licensed premises was contested. The rules cited by the Department's counsel did not explicitly mandate such an obligation. While the rules aimed to prevent duty evasion, there was no provision restricting a licensee from dealing in loose tea outside the licensed premises.

4. The judgment questioned the Assistant Collector's authority to impose duty and penalty solely based on speculation, without concrete evidence of the petitioner dealing with the tea as package tea. The absence of material showing such dealings rendered the imposition of duty and penalty illegal.

5. Ultimately, the court ruled in favor of the petitioner, quashing the Assistant Collector's order and making the rule absolute with no costs. The judgment emphasized that as per the existing rules, a licensed manufacturer was not prohibited from dealing in loose tea outside the licensed premises, provided there was no evidence of converting it into package tea to evade excise duty.