1990 (12) TMI 81 - HC - Central Excise

Court grants refund of excise duty on processed film, ruling in favor of petitioners

GARWARE PLASTICS & POLYESTER LTD. Versus UNION OF INDIA

GARWARE PLASTICS & POLYESTER LTD. Versus UNION OF INDIA - 1991 (52) E.L.T. 506 (Bom.) Issues Involved:1. Classification of lacquered and metallised polyester film under the Central Excise Tariff.2. Definition and scope of 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944.3. Applicability of excise duty on lacquered/metallised polyester film.4. Validity of tariff advice and its impact on quasi-judicial functions.5. Availability of alternative remedy and jurisdiction of the High Court to entertain the writ petition.Detailed Analysis:1. Classification of Lacquered and Metallised Polyester Film:The petitioners challenged the classification of lacquered and metallised polyester film under Tariff Item 15A(2) or Tariff Item 15BB. The respondents sought to levy excise duty on these films, arguing that they fell under the specified tariff items. The petitioners contended that they had already paid excise duty on the polyester film manufactured at Aurangabad and that further processing at Nasik did not warrant additional duty.2. Definition and Scope of 'Manufacture':The petitioners argued that lacquering/metallising of polyester film does not constitute 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944. The court examined the definition of 'manufacture,' which includes any process incidental or ancillary to the completion of a manufactured product. The Supreme Court's interpretation in Union of India v. Delhi Cloth and General Mills Co. Ltd. was cited, emphasizing that 'manufacture' implies a transformation resulting in a new and different article with a distinctive name, character, or use.3. Applicability of Excise Duty:The court noted that prior to March 1981, the Central Board of Excise and Customs had clarified that metallised/lacquered polyester films were not liable to duty again if produced from duty-paid polyester film. This position was reiterated even after the introduction of Tariff Item 15BB in March 1981. However, from 1-3-1982, Tariff Item 15BB was omitted, and Tariff Item 15A was amended to include lacquered or metallised films. Despite this, the court found no material evidence indicating that the process of lacquering/metallising resulted in a new commercial commodity with a distinct identity or use. Therefore, the court held that the processing at Nasik did not amount to 'manufacture,' and no additional excise duty was warranted.4. Validity of Tariff Advice:The petitioners argued that the respondents' decision to levy excise duty was influenced by tariff advice dated 15-7-1982. The court acknowledged that respondents must perform a quasi-judicial function in classifying goods and levying excise duty, which should not be fettered by tariff advice. However, the court found no indication in the impugned orders that the decision was based solely on the tariff advice.5. Availability of Alternative Remedy:The respondents contended that the impugned orders were appealable, and the petitioners should have pursued alternative remedies. The court, however, noted that the writ petition had been admitted in October 1982, and interim orders had been passed. Given the lapse of eight years, the court decided to adjudicate the petition on its merits rather than dismissing it on procedural grounds.Judgment:The court ruled in favor of the petitioners, making the rule absolute in terms of prayers (a) and (b). This included the refund of excise duty paid under protest from 28-2-1982 on lacquered/metallised polyester film at the petitioners' factory at Nasik. The refund was to be made within ten weeks, failing which the amount would carry interest at 12% per annum. The court did not award additional interest due to the nature of the contentions raised. No order as to costs was made.