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TMI Blog1982 (6) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the excise duty paid on stock amounting to 2,01,809.36 square metres. The third respondent, Asst. Collector of Central Excise, Kozhikode passed Ext. Pl order rejecting the claim of the petitioner. According to him the edges of hardboard in question were trimmed subsequent to the crucial time, that it was a process incidental to the completion of the manufacture of the product namely, hardboard, that this quantity of hardboard was not fully manufactured as contemplated under Sec. 2(f) of the Act before the crucial time and therefore it was excisable. The order also mentions that the R.G. 1 register entries are made only after trimming is done and the product is not considered as hardboard the moment it comes out of the press. An appeal filed before the second respondent, Appellate Collector of Customs and Central Excise, Madras, was rejected under Ext. P2 order. In Ext. P2 order, the second respondent stated that it is well known that hardboard when it comes out of the mills is bound to have uneven edges from both sides, that it is considered as semi-manufactured, that the first process to make it marketable is to make the edges even by trimming, that the accounting of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment Standing Counsel submitted as follows: Trimming is a process required for the completion of the manufacture of hardboard. Hardboard known to the trade or market is only the trimmed hardboard and not the untrimmed variety. There is no evidence to show that untrimmed hardboard is known to the market. As hardboard is despatched only after trimming, the end product is trimmed hardboard. In R.G. 1 as per Rule 53 the petitioner has accounted only for trimmed hardboard. The petitioner has no case that the particular stock in question was sold untrimmed. It was sold after trimming. At least in so far as that stock is concerned, manufacture was complete only when it was trimmed. Trimming is a process which is part of the manufacturing process. When goods reach the factory gate, then alone excise duty is payable. Thus the untrimmed hardboard which the petitioner had at the crucial time became excisable when it was trimmed subsequently. 5. Before dealing with the contentions, it is necessary to refer to some of the provisions of the Act and Central Excise Rules (for short 'the Rules'). Sec. 3 is the levying section. The relevant portion of the section states that excise duty shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified in Rule 9 or about to be removed from a store-room approved by the Collector under rule 47. The provisos are not relevant for our purpose. Rule 53 requires the manufacturer to maintain stock account in the prescribed form. The form prescribed is R.G. 1. Rule 54 requires maintenance of monthly returns and Rule 55 deals with quarterly returns. The columns in form R.G. I relate to date, description of goods, opening balance, quantity manufactured, total, quantity deposited in the store-room, quantity cleared from the factory on payment of duty or without payment of duty, the rate and amount of duty and the closing balance. 7. Under the Act the levy is on goods produced or manufactured, of course, in India. The taxable event in the case of excise duty is the manufacture or production of goods and the duty is not directly on the goods but on the manufacture thereof. This is unlike in the case of sales tax where also tax is imposed with reference to goods but the taxable event is the sale and not the act of manufacture. The taxable event in regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother v. Union of India others (A.I.R. 1981 S.C. 1014). 9. The question next arises whether for goods to be excisable as falling in a particular item in Schedule I of the Act, it is necessary that the goods must be actually put in the market. This question is of importance in deciding whether an intermediate product which comes into existence in the course of manufacture of another product is also excisable. As already pointed out the taxable event is the manufacture of goods and not the sale, despatch or disposal of goods. Therefore whenever goods which satisfy the description in any one of the items in Schedule I of the Act, come into existence in the course of manufacture, such goods would become excisable. However, care must be taken to verify whether the intermediate product so coming into existence is known to the market, the consumers or the commercial community. If the intermediate product is not known to the market or the commercial community, it cannot be regarded as goods. The various items in Schedule I of the Act describe various products. In interpreting the items in the Schedule one cannot go by the scientific or technical meaning of the expressions involved; one m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are manufactured they become leviable for excise duty, though the actual collection may be postponed to a future event such as storage or removal. The Supreme Court had to consider this aspect also in the two decisions referred to above. In the Delhi Cloth and General Mills' case it has been observed as follows: "Excise duty is on the manufacture of goods and not on the sale. Mr. Pathak is therefore right in his contention that the substance produced by them at an intermediate stage is not put in the market would not make any difference." In the South Bihar Sugar Mills Limited's case, it has been observed as follows: "At the same time the duty being on manufacture and not on sale the mere fact that kiln gas generated by these concerns is not actually sold would not make any difference, if what they generate and use in their manufacturing processes is carbon dioxide." 11. This discussion has become necessary in view of the stand taken by the department that the petitioner has to establish that the goods in question were actually sold in untrimmed condition. That is wholly unnecessary. The question is not whether the particular stock of goods, was sold in an untrimmed conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of any manufactured product. It appears to me, the argument involves a fallacy. The question is what is the manufactured product ? Is it i.e., a manufactured product of the description contained in item 16BB of Schedule I of the Act is known to the commercial community. There can be no doubt that hardboard is hardboard whether it is trimmed or untrimmed. In either form, it can be used for various purposes for which hardboard is generally used. But if there be evidence to show that it is only trimmed hardboard which is accepted by the commercial community as hardboard, then this submission on behalf of the department has to succeed. If, on the other hand, there is material to show that untrimmed hardboard is regarded and accepted in the market as hardboard, then the trimming which involves cutting the edges of the hardboard pieces cannot be regarded as any process incidental or ancillary to the completion of the manufactured product. That is because a manufactured product is known to the market is already complete without trimming. It is therefore unnecessary for me to go into the elaborate arguments advanced on both sides on the question whether trimming is process, at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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