Excise duty on manufactured quantity upheld; claimed transit losses rejected where excess was not proved genuine or process-used.

Excise duty on benzene was held to attach to manufacture or production, so the relevant quantity was what the manufacturer dispatched, not what the petitioner later measured as received. The court also upheld the authorities' assessment of evaporation or transit loss at 7.5%, finding the determination reasoned and not arbitrary because the alleged losses were not shown to be genuine and improved measurement reduced the discrepancy. Since the disputed balance quantity was not proved to have been used in the specified industrial process, concessional or remitted duty was unavailable and tariff duty remained recoverable.

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Issues: (i) Whether excise duty on benzene was payable on the quantity dispatched by the manufacturer or only on the quantity actually received by the petitioner. (ii) Whether the authorities acted arbitrarily in fixing evaporation or transit losses at 7.5% and in demanding tariff duty on the balance quantity not shown to have been used in the specified industrial process.

Issue (i): Whether excise duty on benzene was payable on the quantity dispatched by the manufacturer or only on the quantity actually received by the petitioner.

Analysis: Excise duty is a duty on manufacture or production, and the method of collection does not change its character. Where goods are manufactured under a concessional or remitted-duty arrangement and are required to be transported under the prescribed procedure, the duty remains referable to the quantity produced or procured from the manufacturer. The court applied the statutory scheme under the charging provision and the concessionary rules to hold that the relevant measure was the quantity dispatched by the manufacturer, not the quantity ultimately measured at the petitioner's end.

Conclusion: The issue was decided against the petitioner and in favour of the revenue.

Issue (ii): Whether the authorities acted arbitrarily in fixing evaporation or transit losses at 7.5% and in demanding tariff duty on the balance quantity not shown to have been used in the specified industrial process.

Analysis: Under the concessionary rules, relief depends on the authority's satisfaction that the goods were genuinely lost or destroyed by industrial causes or unavoidable accident, and the extent of permissible loss is a matter for administrative determination unless the decision is capricious or unsupported by reason. The findings recorded that the alleged losses were not genuine, that the flow meter had been erratic, and that losses reduced after calibrated measuring equipment was installed. On that basis, the fixation of loss at 7.5% was held to be reasoned and not arbitrary. Since the disputed quantity was not shown to have been consumed in the specified industrial process, remitted duty was unavailable on that portion and tariff duty was recoverable.

Conclusion: The issue was decided against the petitioner and in favour of the revenue.

Final Conclusion: The writ petition failed because the duty liability was correctly assessed on the manufactured quantity and the claimed excess losses were not shown to warrant concessional treatment.

Ratio Decidendi: Excise duty attaches to manufacture or production, and concessional or remitted duty is available only to the extent goods are shown to have been legitimately lost or used in the prescribed industrial process; the authority's reasoned assessment of such loss will not be interfered with in writ jurisdiction absent arbitrariness.

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