1991 (3) TMI 156 - HC - Central Excise

State Electricity Board not exempt from excise duty; clarification on manufacturing status required

The Court held that the State Electricity Board, although considered a 'State' under the Constitution, is not a Department of the State Government and ... Exemption to goods produced in factories belonging to State Government Issues Involved:The issues involved in the judgment are:1. Exemption of goods manufactured by the State Electricity Board from excise duty based on a notification issued by the Central Government.2. Determination of whether fabrication and galvanizing activities conducted by the Board amount to manufacturing, thus attracting excise duty.Exemption of Goods from Excise Duty:The petitioner, U.P State Electricity Board, challenged the action of the respondents on the grounds that goods produced by its fabrication units were exempted by a notification issued by the Central Government. The notification exempted goods falling under Item No. 68 of the First Schedule to the Central Excises & Salt Act, 1944, manufactured by a factory belonging to any State Government for purposes declared by Parliament to be incidental to the ordinary functions of the government. The petitioner argued that as a part of the State Government of U.P., goods manufactured by the Board should be exempt from excise duty. However, the Court held that although the Electricity Board is considered a 'State' under the Constitution, it is not a Department of the State Government and therefore cannot claim exemption under the said notification.Manufacturing Activities and Excise Duty:The Court noted that the question of whether fabrication and galvanizing activities amount to manufacturing, thus attracting excise duty, had not been conclusively decided by the respondents. The orders for charging excise duty were made on the assumption that these activities constitute manufacturing. The Court refrained from making a determination on this issue at the initial stage due to conflicting positions taken by the parties and the need for a factual assessment. It was emphasized that unless it is established that the Board is indeed manufacturing goods, excise duty cannot be imposed. Consequently, the Court partly allowed the writ petition, quashing previous orders and directing the respondents to reconsider whether the fabrication and galvanizing activities amount to manufacturing, providing the Board with a reasonable opportunity to present its case within three months.In conclusion, the judgment addressed the exemption of goods from excise duty based on a notification, clarifying the status of the State Electricity Board in relation to government departments. Additionally, it highlighted the need for a proper determination on whether the Board's activities constitute manufacturing to impose excise duty, emphasizing the importance of factual considerations in such decisions.