Excisability of pre-existing decorated glassware and valuation under "value charged" upheld for the assessee.

Decorated glassware lying in stock before Chapter Note 6 to Chapter 70 was not liable to excise duty because the note created excisability for decoration of glassware only from its insertion, and pre-existing non-excisable goods could not be brought to tax merely by later levy. The assessee also satisfied the exemption conditions by not taking Modvat credit on input duty paid glassware, and the notification's use of the expression "value charged" required valuation by reference to the cost of printing, decoration or ornamenting plus notional profit rather than a different notional base. The assessee's exemption and valuation claim was sustained.

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Issues: (i) Whether decorated glassware lying in stock before the insertion of Chapter Note 6 to Chapter 70 could be subjected to excise duty. (ii) Whether the decorated glassware was entitled to exemption and valuation under the notification on the basis of the expression "value charged".

Issue (i): Whether decorated glassware lying in stock before the insertion of Chapter Note 6 to Chapter 70 could be subjected to excise duty.

Analysis: The insertion of Chapter Note 6 created a new levy by treating decoration of glassware as manufacture for the first time. Before that insertion, the activity was outside the ambit of excise. Goods that were not excisable when manufactured cannot be charged merely because they were lying in stock when the new levy came into force.

Conclusion: The duty demand on decorated glassware already in stock before the levy came into existence was not sustainable and the finding was in favour of the assessee.

Issue (ii): Whether the decorated glassware was entitled to exemption and valuation under the notification on the basis of the expression "value charged".

Analysis: The assessee had not taken Modvat credit on the input duty paid glassware and therefore satisfied the exemption condition. The notification used the expression "value charged" rather than "value added", which justified valuation by reference to the cost of printing, decoration or ornamenting plus notional profit, instead of the Department's proposed basis.

Conclusion: The assessee was entitled to the exemption and the valuation method adopted against the Department's challenge was upheld, resulting in a decision in favour of the assessee.

Final Conclusion: The Department's challenge failed on both the levy and valuation questions, and the assessee's position was sustained in full.

Ratio Decidendi: A process made excisable for the first time by a later statutory insertion cannot render pre-existing stock liable to duty, and where an exemption notification employs the expression "value charged", valuation must follow that formulation rather than a different notional base not used by the notification.

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