1987 (7) TMI 115 - HC - Central Excise

Court Rules Amendments to Tax Acts Unconstitutional; Orders Refund

The court held that the amendments introduced by the Finance (No. 2) Act, 1980, and the Central Excise Tariff Act, 1985, were ultra vires Entry No. 84 of ... Manufacture - Central Excise - Dutiability - Constitutional validity of - Charging section for levy Issues Involved:1. Whether the process of printing and lacquering of extruded aluminium tubes constitutes 'manufacture' under the Central Excises and Salt Act, 1944.2. The validity of the amendment introduced by the Finance (No. 2) Act, 1980, and its compliance with Entry No. 84 of List I of Schedule VII to the Constitution of India.3. The legislative competency of the Parliament to amend the definition of 'manufacture' to include printing and lacquering.4. The applicability of Entry No. 97 of List I of Schedule VII to the Constitution of India.5. The validity of the Central Excise Tariff Act, 1985, in relation to the definition of 'manufacture.'Detailed Analysis:1. Whether the process of printing and lacquering of extruded aluminium tubes constitutes 'manufacture' under the Central Excises and Salt Act, 1944:The court referenced the Division Bench decision in Extrusion Process Pvt. Ltd. v. N.R. Jadhav, which concluded that 'printing and lacquering do not involve the process of forming a tube from a metal slug or dump which extrusion means.' It was determined that since printing and lacquering do not require further extrusion, they cannot be considered under sub-item (c) of Item 27. The court emphasized that 'printing and lacquering are not even remotely connected with the completion of the manufacture of aluminium tubes.' This view was supported by the judgment in Metal Box Company of India Ltd. v. The Union of India, which held that such processes are 'clearly a post manufactured operational process.'2. The validity of the amendment introduced by the Finance (No. 2) Act, 1980, and its compliance with Entry No. 84 of List I of Schedule VII to the Constitution of India:The amendment sought to include printing and lacquering within the definition of 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944, and in Tariff Item 27(f). The court noted that the earlier judgments had expressly answered in the negative regarding whether these processes could be considered as 'manufacture.' The court stated, 'The amendment must at-least indicate as to how a process which was not a process of manufacture as authoritatively held by two High Courts, becomes a process of manufacture.'3. The legislative competency of the Parliament to amend the definition of 'manufacture' to include printing and lacquering:The court referred to the Supreme Court's interpretation in Union of India v. Delhi Cloth and General Mills, which defined 'manufacture' as 'bringing into existence a new substance' and not merely producing some change in a substance. The court reiterated that 'any process of manufacture must bring into existence a new substance, commercially known.' The court concluded that if a process is a 'post-manufactured operational process,' it does not fall within the definition of 'manufacture.'4. The applicability of Entry No. 97 of List I of Schedule VII to the Constitution of India:Mr. Shah for the respondents argued that if the item does not fall within Entry No. 84, it could fall under the Residuary Entry No. 97. The court rejected this contention, stating there was no discussion or finding by the Supreme Court that the item would fall under Entry No. 97. The court emphasized, 'Therefore, I am not prepared to accept this contention of Mr. Shah.'5. The validity of the Central Excise Tariff Act, 1985, in relation to the definition of 'manufacture':The court noted that the new Tariff Item 8312.11 of the Central Excise Tariff Act, 1985, was virtually identical to the previous Tariff Item 27(f) as amended by the Finance (No. 2) Act, 1980. The court held that for the same reasons, this provision also had to be struck down. The court concluded, 'It is not that because Government says a particular process is a process of manufacture, such a process automatically becomes a process of manufacture.'Conclusion:The court held that the amendments introduced by the Finance (No. 2) Act, 1980, and the Central Excise Tariff Act, 1985, were ultra vires Entry No. 84 of List I of Schedule VII to the Constitution of India. The processes of printing and lacquering were not considered as 'manufacture' or incidental to the completion of a manufactured product. Consequently, the amendments were struck down for want of legislative competency on the part of the Parliament. The court ordered the refund of the amount to the petitioners within three months and rejected the respondents' application for a stay of the judgment.