Aluminium cans in post-extrusion state not excisable under Entry 27(e); manufacture not liable and duties must be refunded

SC allowed the appeal, holding that the aluminium cans manufactured were not excisable goods under Entry 27(e) of the First Schedule to the Central Excises and Salt Act, 1944. The Court found the cans in their post-extrusion state were not marketable and became a distinct, usable component only after further finishing; evidence offered by respondents of marketability was unsatisfactory. Consequently manufacture was not liable to excise duty and the duty levied and collected from the appellant in the relevant period must be refunded.

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Issues:
Whether the manufacture of aluminium cans or torch bodies is liable to excise duty under Entry 27(e) of the Central Excises and Salt Act, 1944.

Analysis:
The appellant, a public limited company, manufactured flashlights, dry cell batteries, chemicals, and plastics. The issue arose when the excise authorities levied excise duty on aluminium cans produced by the appellant. The appellant argued that aluminium cans were not marketable goods and were solely used in the production of flashlights. The High Court initially allowed the writ petition, but on appeal, it was reversed. The High Court held that the manufacture of aluminium cans fell under Entry 27(e) of the Act, which includes extruded shapes and sections. The appellant contended that the aluminium cans were not goods as they were not marketable.

The Supreme Court analyzed the definition of "goods" for excise duty purposes, emphasizing that excise duty applies to articles capable of being sold to consumers. The Court referred to previous judgments highlighting that goods must be marketable to attract excise duty. The crucial question was whether the aluminium cans produced were capable of sale to a consumer. The Court noted that the appellant used the cans internally for flashlight production and did not sell them in the market. The cans, in their initial form, were not suitable for use in flashlights and required further processing to become a finished product. The Court found no evidence of marketability for the aluminium cans.

The Court dismissed the appeal, setting aside the High Court's decision. It held that the aluminium cans produced by the appellant did not qualify as excisable goods under the Act. The Court emphasized that the past treatment of the cans as excisable goods by the appellant was due to a mistaken belief and did not prove marketability. Consequently, the appellant was not liable to pay excise duty on the aluminium cans. The Court awarded costs to the appellant for the appeal.

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