1980 (4) TMI 106 - HC - Central Excise

Court rules wooden base assembly of record changers not 'manufacture' under tax law. Petitioner entitled to refund.

The Court held that placing imported record changer decks on a wooden base with a cover did not amount to 'manufacture' under Section 2(f) of the Central ... Garrard Auto changer - Liability to duty - Manufacture - Appeal - Raising of new points not admissible Issues Involved:1. Whether placing imported record changer decks on a wooden base with a cover constitutes 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944.2. The applicability of excise duty on the Bush Auto Changers.3. The validity of the orders passed by the Assistant Collector, Appellate Collector, and Joint Secretary rejecting the petitioner's claims.4. The entitlement of the petitioner to a refund of excise duty paid.Detailed Analysis:Issue 1: Definition of 'Manufacture' under Section 2(f) of the ActThe primary question was whether the act of placing imported Garrard record changer decks on a wooden base with a cover amounted to the manufacture of a new and different article within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. The Court observed that the imported record changer decks were mechanically, electrically, and functionally complete and could be used in their imported condition without needing a wooden base or cover. It was emphasized that the word 'manufacture' implies the creation of a new substance known to the market, and not merely a change in the substance. Citing the Supreme Court's rulings in Union of India v. Delhi Cloth and General Mills Co. Ltd. and S.B. Sugar Mills v. Union of India, the Court concluded that no new article with a distinctive name, character, or use emerged from merely placing the decks on a wooden base. Therefore, this process did not constitute 'manufacture.'Issue 2: Applicability of Excise DutyThe Court examined whether excise duty was applicable to the Bush Auto Changers. The petitioner argued that since the imported decks were already complete articles, no new product was manufactured by placing them on a wooden base. The respondents, however, claimed that the decks were not functionally complete and required the base to be sold to customers. The Court rejected this argument, noting that the decks were capable of functioning without the base and that the process did not result in a new product. Consequently, the Court held that excise duty was not applicable to the Bush Auto Changers.Issue 3: Validity of the OrdersThe petitioner challenged the orders dated 7th July 1971, 26th February 1973, and 10th October 1975, passed by the Assistant Collector, Appellate Collector, and Joint Secretary, respectively. The Court found that these orders failed to consider the Supreme Court's decisions in the Delhi Cloth Mills and S.B. Sugar Mills cases, which were directly relevant to the issue at hand. The reasoning provided in these orders was deemed unintelligible and not in accordance with the established legal principles. Therefore, the Court set aside these impugned orders.Issue 4: Entitlement to RefundThe petitioner sought a refund of Rs. 3,40,222.24, representing the difference between the excise duty paid and the countervailing duty credited. The Court noted that since the process did not constitute manufacture, the excise duty collected from the petitioner was erroneous. The respondents were thus liable to refund the amount paid by the petitioner between July 1971 and October 1975. The Court ordered the respondents to refund the amount within three months and also awarded costs to the petitioner.ConclusionThe Court ruled that placing imported record changer decks on a wooden base with a cover did not constitute 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944. Consequently, no excise duty was payable on the Bush Auto Changers. The orders passed by the Assistant Collector, Appellate Collector, and Joint Secretary were set aside, and the respondents were directed to refund Rs. 3,40,222.24 to the petitioner within three months, along with costs.