Manufacture by assembly under Central Excise law upheld, with duty recomputation allowed for duty already paid on components.

Assembling purchased components into finished air-conditioners was treated as "manufacture" under Central Excise law, and the factual finding that the goods were produced without the required licence was upheld because it was supported by record and not shown to be perverse. Duty on the end product, however, had to be recomputed after accounting for excise duty already paid on the compressors used in the air-conditioners. Penalty and confiscatory consequences under Rule 173Q were also sustained, as the authorities' finding on intention to evade duty was treated as a factual one and no basis for writ interference was established.

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Issues: (i) Whether the petitioners had manufactured air-conditioners without a licence and were liable to confiscation, duty and penalty under the Central Excise law; (ii) whether the excise duty determined on the air-conditioners required reconsideration while accounting for duty already paid on the compressors; (iii) whether penalty and fine under Rule 173Q could be sustained in the absence of mens rea.

Issue (i): Whether the petitioners had manufactured air-conditioners without a licence and were liable to confiscation, duty and penalty under the Central Excise law.

Analysis: The expression "manufacture" in Section 2(f) is of wide amplitude and includes assembling purchased components into a finished product. Section 3 is the charging provision, and Section 6 requires a licence for manufacture of specified goods. On the facts, the petitioners had assembled 23 air-conditioners over a period of years, removed 18 from the factory, and at least one was sold. The findings recorded by the excise authorities were based on material on record and were not shown to be perverse or unsupported by evidence. In writ jurisdiction, interference with such findings was unwarranted.

Conclusion: The finding that the petitioners had manufactured air-conditioners without the requisite licence and had contravened the excise law was upheld and was against the petitioners.

Issue (ii): Whether the excise duty determined on the air-conditioners required reconsideration while accounting for duty already paid on the compressors.

Analysis: The petitioners had paid excise duty on the compressors used in the air-conditioners. The duty on the end product had been separately determined by the excise authorities. In the circumstances, the authorities were required to determine the exact amount actually payable after taking all relevant aspects into account, including the duty element already borne by the compressors.

Conclusion: The duty computation was directed to be re-determined, which was in favour of the petitioners.

Issue (iii): Whether penalty and fine under Rule 173Q could be sustained in the absence of mens rea.

Analysis: The question of intention to evade duty was treated as one of fact. Rule 173Q(1) clauses (a), (b) and (c) did not expressly require intent to evade payment of duty in the manner contemplated by clause (d). On the facts found by the excise authorities, no ground was made out for writ interference with the imposition of penalty and fine.

Conclusion: The penalty and confiscatory consequences were sustained and were against the petitioners.

Final Conclusion: The petition succeeded only to the limited extent of requiring recomputation of excise duty, while the findings on unauthorised manufacture and the imposition of penalty and fine were left undisturbed.

Ratio Decidendi: In writ jurisdiction, findings of fact by excise authorities will not be interfered with unless they are perverse or unsupported by evidence, and duty may be re-determined where the assessment does not properly account for duty already paid on constituent goods.

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