1981 (9) TMI 106 - SC - Central Excise

Supreme Court: Appellant entitled to excise duty exemption

The Supreme Court allowed the appeal, overturning previous decisions, and declared the appellant entitled to exemption from excise duty. The Court held ... Whether those transactions of purchase effected by the appellant from the Industrial General Products Private Limited can be regarded as purchases 'from the open market' ? Held that:- In the present case, it was open to every person desirous of purchasing the surface active agents to place orders with the manufacturing Company, namely, M/s. Industrial General Products Private Limited, and obtain the supply on payment of the price at the prevailing rate. The sales by the said Company were not to a limited class only. Hence, the purchases of the surface active agents effected by the appellant from M/s. Industrial General Products Private Limited have to be treated as purchases made 'from the open market'. The denial to the appellant of the benefit of the exemption provided for by the Notification was, therefore, clearly illegal. Appeal allowed. Issues:Interpretation of a Notification for exemption from excise duty based on purchase of raw materials from the open market.Analysis:The judgment pertains to an appeal against an order passed by the Government of India under the Central Excises and Salt Act, rejecting a Revision Petition and confirming the view that the appellant is not entitled to the exemption from duty of excise. The appellant, a company manufacturing process chemicals, purchased organic surface active agents from a supplier exempt from excise duty. The dispute arose regarding the eligibility for exemption under a Notification dated January 20, 1968. The Notification exempted emulsifiers/wetting out agents from duty subject to certain conditions. The primary issue was whether the purchase of raw materials from a duty-exempt manufacturer qualifies as a purchase from the open market, as required for the exemption.The Notification specified two conditions for exemption: payment of excise duty on raw materials or purchase from the open market after January 20, 1968. The appellant argued that since they purchased the raw materials post the specified date, they fulfilled the second condition. The authorities, however, contended that the exemption required duty payment on raw materials, which was not the case here. The Appellate Collector upheld this view, stating that purchases from a duty-exempt manufacturer do not constitute purchases from the open market. The Government of India also rejected the Revision Petition on the same grounds.The Supreme Court analyzed the language of the Notification and concluded that the crucial factor for exemption was whether the raw materials were purchased from the open market post the specified date. The Court emphasized that the duty payment on raw materials was irrelevant for this condition. They interpreted 'open market' to include purchases made from manufacturing units where any interested buyer could place orders and obtain supplies. Relying on legal precedent, the Court clarified that the open market does not necessarily mean a public marketplace but includes transactions enabling any potential buyer to acquire goods.In light of this interpretation, the Court allowed the appeal, overturning the previous orders and declaring the appellant entitled to the exemption under the Notification. The Court held that the purchases from the duty-exempt manufacturer qualified as purchases from the open market, making the denial of exemption illegal. The respondent was directed to pay costs to the appellant.