Central Excises - Supreme Court judgment in the case of M/s. Standard Fire Works Industries, Sivakasi - Whether conflict with Board's letter F. No. 13/50/84-CX.1, dated 19-11-1985 regarding - Central Excise - 4/87

Central Excises - Supreme Court judgment in the case of M/s. Standard Fire Works Industries, Sivakasi - Whether conflict with Board's letter F. No. 13/50/84-CX.1, dated 19-11-1985 regarding Circular No. 4/87 Dated 19-6-1987 [From F. No. 13/1/87-CX.1] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Central Excises - Supreme Court judgment in the case of M/s. Standard Fire Works Industries, Sivakasi - Whether conflict with Board's letter F. No. 13/50/84-CX.1, dated 19-11-1985 regarding. A reference is invited to Supreme Court judgment dated 17th February, 1987 in C.A. No. 2670-71 of 1985 in the case of M/s. Standard Fire Works Industries, Sivakasi v. Collector of Central Excise, Madurai decided in favour of the Department in a matter relating to the interpretation of Notification No. 179/77-C.E., dated 18th June, 1977. In the context of this judgment, question has been raised as to whether the instructions contained in Circular No. 10/85-CX.1, dated 19-11-1985, also relating to the interpretation of Notification No. 179/77-C.E., dated 18-6-1977, goods consistent with the aforesaid decision given by the Supreme Court. 2. In terms of Notification No. 179/77-C.E., dated 18-6-1977 goods falling under Item 68 of the earlier tariff, in or in relation to the manufacture of which, no process was ordinarily carried on with the aid of power, were completely exempted from excise duty. A doubt has been raised as to whether the exemption was available in respect of Attar, which was made from Sandal Wood Oil, without using power even though during the earlier stage of the manufacture of Sandal Wood Oil, power had been used. The matter was examined in consultation with the Law Ministry, and Circular No. 10/85-CX.1, dated 19-11-1985 was issued by which it was advised that exemption from payment of excise duty on a finished product could be availed of even if power had been used in the process of manufacture of the raw material/components, provided that such raw material/components were by themselves excisable, irrespective of the premises in which these parts/components were manufactured. 3. In the case covered by the aforesaid Supreme Court judgment, manufacturers of fire works claimed exemption in terms of Notification No. 179/77-CE in respect of fire works manufactured by them. The raw materials consisted of paper, chemicals, iron filings, coal, gums, steel wires etc. The steel wires were sent by the manufacturer to different persons, to be cut to size the similarly, paper was made over to outsiders by the manufacturer to different persons, to be cut to size the similarly, paper was made over to outsiders for being shredded into small strips and given special treatment - all these processes were done with the aid of power. It was not in doubt, however, that within the factory of manufacture of fire works, no power was used. The Supreme Court decided that since there was no dispute regarding the cutting of steel wires or the treatment of paper having been carried on with the aid of power, albeit, outside the manufacturer's factory, the requirement under the notification was not satisified. On this basis the appeallant's claim for exemption was disallowed. 4. The question whether the instructions issued in Circular No. 10/85-CX.1, dated 19-11-1985 would require modification in the context of the aforesaid Supreme Court judgment has been examined in the Board. In the case before the Supreme Court, the two raw materials viz. steel wire and paper were finished excisable goods by themselves and in these cases power was used in the final stage of manufacture of fire works from the raw materials. The fact that the processes were carried out by outsiders, did not make any difference in so far as the applicability of the exemption notification was concerned. The processing of paper and cutting of steel wires were a part of fresh processes in the manufacture of fire works in which power had been used. Board's instructions dated 19-11-1985 had, however, considered the exemption to be admissible only in the cases where power had been used at the earlier stage of the manufacture of raw materials/component parts, and not in respect of the processes performed during the stage of the conversion of raw materials/component parts into the finished manufactured product. 5. In view of the aforesaid, Board is of the view that no modification is necessary in regard to the guidelines given in Board's Circular No. 10/85-CX.1, dated 19-11-1985.