2014 (7) TMI 834 - HC - Central Excise

Court Holds Hot Dip Galvanisation Process Determination as Fact

The court held that the determination of whether the process of Hot Dip Galvanisation amounts to manufacture or galvanisation under Chapter 73 of the ... Manufacture versus process of galvanisation - question of appreciation of evidence - entitlement to exemption under notification no.214/86-CE dated 25.3.86 - efficacious alternative remedy of appeal under Section 35-B - condonation of delay in filing appeal - stay of recovery subject to depositManufacture versus process of galvanisation - question of appreciation of evidence - Processing of M.S. fabricated items by hot dip galvanisation is a factual question whether it amounts to galvanisation or to manufacture. - HELD THAT: - The court held that determining whether the hot dip galvanisation constitutes a process of galvanisation or amounts to manufacture requires appreciation of evidence and factual inquiry. Such factual determination cannot be undertaken in writ jurisdiction and must be examined by the statutory adjudicatory forum in proceedings where evidence can be led and appreciated.Not decided on merits; treated as a factual issue to be adjudicated by the appropriate authority on evidence.Entitlement to exemption under notification no.214/86-CE dated 25.3.86 - question of appreciation of evidence - Whether the petitioners are entitled to exemption under notification no.214/86-CE where their suppliers did not pay central excise duty on final products. - HELD THAT: - The court observed that entitlement to the claimed exemption depends on evidence concerning the suppliers and their tax payments, which again is a matter requiring evidence and cannot be adjudicated in writ proceedings. The controversy therefore falls to be considered and determined by the statutory authorities in proceedings where evidence is admissible.Not decided on merits; referred for determination by the appellate/ adjudicatory authority on evidence.Efficacious alternative remedy of appeal under Section 35-B - condonation of delay in filing appeal - Maintainability of the writ petition in view of the statutory remedy of appeal against the assessment order under Section 11A and the availability of appeal under Section 35-B. - HELD THAT: - The court held that the petitioners have an efficacious alternative statutory remedy by way of appeal under Section 35-B against the assessment order passed under Section 11A. Given that the three-month period for filing the appeal had expired, the court dismissed the writ petition but granted liberty to file the appeal within eight weeks. The appellate authority was directed not to go into limitation and to treat any such appeal as having been filed within time and to decide the appeal on merits after hearing the parties.Writ petition dismissed; liberty granted to file appeal under Section 35-B within eight weeks and appellate authority directed to condone delay and decide on merits.Stay of recovery subject to deposit - Status of recovery proceedings in view of deposit made pursuant to interim order. - HELD THAT: - The court noted that by its interim order the petitioners had been directed to deposit a specified sum and that the petitioners asserted compliance. In view of the assertion that the deposit was made, the court ordered that recovery of the balance amount pursuant to the assessment order shall remain stayed pending disposal of the appeal.Recovery of the balance amount stayed pending disposal of the appeal, subject to the asserted deposit.Final Conclusion: Writ petition dismissed as the disputed questions-whether the hot dip galvanisation amounts to manufacture and entitlement to exemption under notification no.214/86-CE-are factual matters requiring evidence and are to be decided in statutory appellate/ adjudicatory proceedings; petitioners granted eight weeks' liberty to file appeal under Section 35-B which the appellate authority shall treat as within time, and recovery of the balance amount is stayed pending the appeal in view of the deposit asserted to have been made. Issues:1. Whether the process of Hot Dip Galvanisation amounts to manufacture or galvanisation under Chapter 73 of the Central Excise Tariff Act, 1985.2. Eligibility of the petitioners for exemption under notification no. 214/86-CE dated 25.3.86.3. Validity of the assessment order passed under Section 11 A of the Central Excise Act 1944.4. Remedies available to the petitioners against the assessment order.Analysis:1. The petitioners were engaged in the process of galvanization of goods under Chapter 73 of the Central Excise Tariff Act 1985. They received a show cause notice contending that the process of Hot Dip Galvanisation of M.S. Fabricated items may amount to manufacture, not galvanisation, and hence excise duty was liable on the final product. The court held that whether the process amounts to galvanisation or manufacture is a question of fact and evidence that cannot be decided in a writ jurisdiction.2. The show cause notice also raised the issue of the petitioners' eligibility for exemption under notification no. 214/86-CE dated 25.3.86 due to suppliers not paying central excise duty on their final product. The court opined that this issue also requires evidence and cannot be adjudicated in a writ jurisdiction. The petitioners were advised to file an appeal under Section 35-B of the Act to address this issue.3. During the pendency of the writ petition, an assessment order was passed under Section 11 A of the Central Excise Act 1944. The petitioners sought to quash this assessment order. The court noted that the petitioners have a remedy to appeal against the assessment order under Section 35-B of the Act, which they failed to do within the prescribed time. The court dismissed the writ petition but granted the petitioners the liberty to file an appeal within eight weeks.4. The court directed the petitioners to deposit a sum of Rs. one crore, which they complied with. The recovery of the balance amount pending the disposal of the appeal was stayed. The court emphasized that if the appeal is filed within the specified period, the appellate authority should not consider the question of limitation and decide the appeal on its merits after hearing all concerned parties.