1994 (5) TMI 32 - HC - Central Excise

Delhi High Court: Manufacturer wins excise duty case on unprocessed brown sugar

The High Court of Delhi ruled in favor of the petitioner, a manufacturer of Vacuum Pan Sugar, in a case concerning the levy of excise duty on unprocessed ... Sugar - Removal - Intermediate product Issues:1. Levy of excise duty on unprocessed brown sugar under Rule 49 of the Central Excise Rules.2. Interpretation of Rule 49 and Rule 9 in the context of excisable goods.3. Classification of brown sugar as excisable goods.Analysis:The High Court of Delhi, comprising M. Jagannadha Rao and K. Shivashankar Bhat, JJ., addressed the issue of excise duty levy on unprocessed brown sugar under Rule 49 of the Central Excise Rules. The petitioner, a manufacturer of Vacuum Pan Sugar, had quantities of brown sugar stored without further processing between 1981-82 and 1987-88 due to becoming a sick unit with old machinery. The respondents issued a show cause notice proposing duty levy on the unprocessed brown sugar under Rule 49. The petitioner's explanations and appeals were rejected, leading to a revision application to the Government of India, which also failed to succeed.The respondents primarily relied on Rule 49, which states that duty is chargeable only upon removal of goods from the factory premises or an approved storage place. The court noted that the petitioner failed to prove that the non-conversion of brown sugar into sugar was beyond their control, emphasizing the proviso to Rule 49(1) highlighted by the respondent's counsel.Additionally, the show cause notice referenced Rule 9, which treats intermediate products as excisable goods in certain circumstances. The respondents argued that duty could have been levied on the ultimate sugar or the brown sugar itself, which has an independent market. However, the court disagreed with extending Rule 9 as requested by the respondents, stating that the deeming provision applies only when the intermediate product is converted into an end-product, which did not occur in this case.Furthermore, the court examined the classification of brown sugar as excisable goods. The term 'excisable goods' is defined under the Act, and it was contended that brown sugar falls under the concept of 'sugar,' which is excisable. However, the petitioner argued that brown sugar is not considered sugar, citing a decision of the Appellate Tribunal and Supreme Court dismissals, which held that brown sugar is not classified as sugar. Therefore, the assumption by the respondents that brown sugar is excisable goods for the proviso to Rule 49 was deemed incorrect.In conclusion, the High Court allowed the writ petition, setting aside the impugned orders of the respondents, and made the rule absolute in favor of the petitioner.