Excise duty on manufacture: rerolling cold rolled strips was not a new product, so differential duty demand failed.

Excise duty is attracted on manufacture, not on mere processing, and rerolling cold rolled strips into strips of different length and gauge did not create a new article. The Calcutta High Court note further states that the burden was wrongly shifted to the purchaser to prove that market goods were duty paid, since goods are ordinarily presumed to leave a factory on payment of duty. The exemption for iron or steel products made from duty-paid materials supported that approach, and the same product could not be subjected to excise twice. On that reasoning, the differential duty demand was not sustainable, and the related certificate proceedings and distress warrant were unjustified.

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Issues: Whether the rerolling and reprocessing of cold rolled strips amounted to manufacture so as to attract excise duty, and whether the differential duty demand could be sustained on the footing that the inputs were not proved to be duty paid.

Analysis: The dispute turned on the nature of the activity undertaken by the assessee and the scope of excise levy under the Central Excises & Salt Act, 1944. Excise duty is attracted on manufacture, not merely on sale or processing of goods, and the rerolling of cold rolled strips into strips of different length and gauge did not bring into existence a new article. The Court also held that the onus was wrongly placed on the purchaser to prove that market goods were duty paid. In ordinary course, goods cannot be removed from the factory without payment of duty as required by the Central Excise Rules, 1944, and the presumption that the apparent state of affairs is real applied in favour of treating the purchased goods as duty paid. The exemption notification concerning iron or steel products made from duty-paid materials supported the same approach, and excise could not be levied twice on the same product.

Conclusion: The rerolling and reprocessing activity did not amount to manufacture, and the demand for differential duty was not sustainable. The demand, certificate proceedings and distress warrant were therefore unjustified.

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