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TMI Blog1973 (11) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... uty to the extent of Rs. 47,747.02 ps. levied on 15,109.6. kgs. but rejected the petitioners claim for refund of the balance of excise duty of Rs. 90,803.78. Against the said order rejecting their claim the petitioners filed an appeal, being Civil Appeal No. 1218 of 1967, to the Supreme Court after obtaining a certificate under Article 133(1)(a) and (b). By its judgment and order dated December 8, 1972, the Supreme Court remanded the matter to rehear and dispose of the same after enabling both the parties to produce evidence on disputed questions. 3. The facts leading to the filing of the petition are fully set out in the judgment of the Division Bench. The petitioners are manufacturers of dyes derived from coal tar and coal tar derivatives and have their factory at Shahad, near Kalyan, Thana District since 1956. Prior to 1st March, 1961 the dyes so manufactured were not subject to central excise duty. By the Finance Bill of 1961 such dyes were inserted in First Schedule to the Central Excises and Salt Act as Item 14-D and the Provisional Collection of Taxes Act, 1931, was made applicable with the result that the said dyes manufactured after the midnight of 28th February, 1961 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant Collector, Central Excise, Nasik rejected petitioners claim and their appeal to the Collector of Central Excise, Poona, also met with the same fate on October, 16, 1961. Petitioners Revision Application to the Central Government was also rejected on August, 22, 1963. The petitioners, therefore, filed on November 11, 1963 the present petition for quashing the said orders and for refund of the said sum of Rs. 1,31,000/-. The Division Bench referred to the relevant provisions of the Central Excises and Salt Act, 1944 and the case law and held that the completion of the Chemical Process in respect of 31,952.9 kgs. did not by itself result in the production of a new substance as known to the mercantile community and the consumers and that the statement made by the petitioners themselves namely, (to the effect that) the entire lot of 31,958.9 kgs. was blended and pulverised and sold after standardisation amounted to an admission by petitioners that blending is resorted to in order to obtain standardised commercial products of uniform purity while pulverising is done in order to obtain the product in the form in which it is known to the trade and the consumers. The Division Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The affidavits filed by the petitioners stated that they have sold dyes derived from coal tar and coal tar derivatives in lumps and without pulverising or blending the same and relied on 15 invoices (being Exhibit A collectively) in support of their contention. These 15 invoices relate to the following two varieties of dyes (i) Fast Carnet GBC BASE (Crystals), (ii) Fast Scarlet RC Base (Crystals). Further the petitioners relied upon 5 specimen invoices in respect of subsequent sales by them in 1962 and 1963 of the following varieties of dyes; (i) Fast Red R. Base (ii) Malachite Green (Crystals) and (iii) Brilliant green (Crystals). The petitioners have stated that all the said dyes were stored in the same conditions in which they were produced and were known in the market as dyes and no further process of manufacture was required in relation thereto. The affidavits of Desai and Parekh also indicate that if for the purpose of standardisation pulverising and/or blending is required to be done it is done only for uniform physical appearance and partly of the products. The affidavit evidence of the three dealers also support the petitioners contention that the petitioners have sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three dealers has relied on any single transaction of sale or pucharse in respect of any of the said 4 varieties of products. Petitioners on the other hand contend that the respondents have raised this point for the first time in their argument before us and that their case even as set out in the affidavits in reply filed on their behalf after remand has been that dyes generally are sold in the market after blending and pulverising and not that the specific varieties in question are sold in the market only after they are pulverised and blended. 9. The petitioners next contend that as the excise duty is levied on manufacture and not on sale the mere fact that the petitioners themselves did not sell the products in question but blended and pulverised them for standardisation does not render them less identifiable as products known in the market or to the users thereof even if their said products were sub-standard and relied on South Bihar Sugar Mills Ltd. and Another etc. v. Union of India and Another etc. 1978 (2) E.L.T. (J 336) (S.C.) = AIR 1968 SC 922. Lastly the petitioners argue that assuming that their above evidence that the dyes in lumps and/or crystals is known in the mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the excise duty, the question was whether petitioners products were fully manufactured and ready for delivery as dyes envisaged by the Trade Notice dated 6/15-3-1961 and at no stage was the question raised whether any specific variety of their products as distinguished from products - dyes generally was to be considered as fully manufactured or ready for delivery as dye. Next it may be noticed that even in his affidavit dated 9th August, 1973 Maharana Pratap has stated - I say the fact that the petitioners or any other dye-house has been able to sell products without any standardisation that is without blending and pulverising does not imply that dyes generally used in dyeing processes are not pulverised and/or blended to obtain standardisation...... From the above passage it would appear that it is the contention of the revenue that the process of blending and pulverising are necessary to obtain standardisation and that dyes are generally pulverised and/or blended to obtain standardisation and that in the absence of such standardisation, satisfactory dyeing process cannot be undertaken. It is to be observed that the deponent has been dealing with the dyes generally and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that the dyes sold in the market in the form of lumps or crystals are sub-standard and may not, therefore, yield satisfactory result in dyeing but that is quite different from saying that such dyes in lump or crystal form is not known in the market, and therefore, are not manufactured as contemplated by Section 2(f) of the Central Excises and Salt Act, 1944 (see Supreme Court Case of South Bihar Sugar Mills Ltd. and Another v. Union of India (supra). In that case it was argued that the proportion of carbon dioxide in the coal gases varied from 25 to 33% averaging about 30 per cent whereas carbon dioxide is sold in cylinder as per standardised form would have very much higher percentage. The Supreme Court dealing with this aspect observed as follows :- The fact that gas was so generated as carbon dioxide below 99% and does not conform to the specifications of the Indian Standard Institution also would not matter for the gas may be sub-standard, provided what is produced is carbon dioxide. 13. Next in support of his contention that the products are not known to the market the learned counsel for respondents relied upon certain statements made by the petitioners in their cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmission as contended for by the Revenues. Moreover, the petitioners have relied upon instances of sales including those of the said two Items Nos. 7 and 8 by them of their products in lump and/or crystals, which are not disputed by the respondents. In our opinion, therefore, no weight can be attached to the alleged admissions. 14. It is also significant to notice that in their affidavit evidence, no difference in any characteristic trade or market condition is pointed out by the respondents to distinguish the four varieties of 31,958.9 kgs. from that of other varieties of dyes sold in lump or crystals by the petitioners in the market. 15. It is also urged by the respondents that the quantity of dyes in respect of which the petitioners have produced invoices is small and, therefore, in considering the question whether the said products in lump or crystals are known to the market no importance could be attached to these transactions. It is not possible to accept this contention. The instances do show that sales of dyes in lump or crystals are spread over different parts of countries though the quantities involved are small. However, once the dyes in lump or crystals are known to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the knowledge of the petitioners and the same was available to them and the absence of any evidence, whatsoever, of such sale combined with the admission of the petitioners as aforesaid and the affidavit evidence of Chemist Maharana Pratap go to establish that the said 4 categories of dyestuffs are known and understood in the market as dyes only after the same undergoes the process of pulverisation, blending and standardisation. We have already dealt with the weight to be attached to the petitioners alleged admissions and the evidence of the chemist or the expert opinion of the Fundamental Processes of Dye Chemistry. It is true that so far as the petitioners are concerned they have not produced evidence of any transaction of dyes or any one of the said four varieties in lump or crystal form but that would not mean that the evidence regarding the said categories of dyes being known to the market would be within their special knowledge and available only to them. So far as their own products are concerned, no doubt, the petitioners can be said to be especially in the knowledge thereof but so far as transactions in respect of the said four categories in the market are concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority... In our opinion, the argument is sound and, therefore, the burden is on the respondents to establish that the said four varieties were liable to pay excise duty as the same were manufactured after mid-night of 28th February 1961 inasmuch as the process of completing manufacture took place only after blending and pulverisation of the said products for the purpose of standardisation. Now in the present case, there is no dispute that the four varieties on which excise duty was levied were in existence prior to the mid-night of February 1961 and, therefore, the only question whether the said product can be said to be manufactured thereafter as contemplated by Section 2(f) of the said Act. For this purpose it was incumbent on the respondents to show that the processes of pulverisation and/or blending are necessary to complete the manufacture of such varieties of products. It is, however, argued for the Revenue that the burden to prove that the manufacture of the said products was complete before the mid-night of 28th Feb., 1961 was on the petitioners and in support of its contention, reliance is placed on a decision of the Supreme Court in M/s. Moosa S. Madha Azam S. M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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