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Secretary, Ministry of Finance, Government of India, New Delhi and ors. Vs. W.S. Insulators of India, Madras - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberW.A. 32 of 1978
Judge
Reported in1983(14)ELT2184(Mad)
ActsCentral Excise Rules, 1944 - Rules 7, 9(1), 9A, 47, 49, 50, 52, 52A, 53, 54 and 55; Central Excise Act, 1944 - Sections 2, 3, 3(2), 4 and 37; Finance Act, 1979
AppellantSecretary, Ministry of Finance, Government of India, New Delhi and ors.
RespondentW.S. Insulators of India, Madras
Appellant AdvocateK.N. Balasubramaniam, Central Government Standing Counsel
Respondent AdvocateK.P. Jagadeesan, Adv.
Cases Referred and Devi Dayal Enterprises and Wires Ltd. v. Union of India
Excerpt:
excise - liability - central excise rules, 1944 and section 3 of central excise act, 1944 - appellant challenged validity of order which held that no excise duty leviable on porcelain shells used in manufacture of lightning arresters by respondents - as per section 3 goods ordinarily bought and sold in market as such to commercial community attract excise duty - precedent of supreme court makes clear that no duty leviable on intermediate products - appellants were threatening to levy excise duty only on porcelain shells - porcelain shell manufactured by respondents for being used as components of lighting arresters will not be liable to excise duty - appellants had no case that respondents manufactured any porcelain-ware apart from shells - appeal dismissed. - - to quote from the.....orderpadmanabhan, j.1. the question that arises for consideration in this writ appeal is whether the porcelain shells which are used in the manufacture of lightning arresters by the respondents, messrs w. s. insulators of india ltd., are liable to excise duty under tariff item 23-b of the first schedule to the central excises and salt act. 2. the respondents manufacture, among others, lightning arresters with the technical collaboration of messrs westing house electric international company, u.s.a. for the purpose of manufacturing the lightning arrester the respondents also manufacture what is called a shell made of porcelain; shells are manufactured according to a particular design for use in the manufacture of lightning arresters. the appellants sought to levy excise duty on these.....
Judgment:
ORDER

Padmanabhan, J.

1. The question that arises for consideration in this writ appeal is whether the porcelain shells which are used in the manufacture of lightning arresters by the respondents, Messrs W. S. Insulators of India Ltd., are liable to excise duty under tariff item 23-B of the First Schedule to the Central Excises and Salt Act.

2. The respondents manufacture, among others, lightning arresters with the technical collaboration of Messrs Westing House Electric International Company, U.S.A. For the purpose of manufacturing the lightning arrester the respondents also manufacture what is called a shell made of porcelain; shells are manufactured according to a particular design for use in the manufacture of lightning arresters. The appellants sought to levy excise duty on these porcelain shells on the basis that they constituted porcelainware within the meaning of tariff item 23-B of the First Schedule of the Central Excises and Salt Act. It may be stated in this context that the respondents have a licence under the Act for the manufacture of chinaware and porcelainware which are excisable under tariff item 23-B, of the First schedule of the Act. The respondents opposed the levy of excise duty on the porcelain shells. The stand of the respondents was that the porcelain shells do not constitute goods within the meaning of the Act on the manufacture of which excise duty was leviable, These porcelain shells are not known in common parlance as porcelainware and as such cannot fall within the meaning of porcelainware in tariff item 23 of the First Schedule to the Act. The porcelain shells are used only in the manufacture of lightning arresters. The lightning arrester is an integrated unit from which the porcelain shell cannot be separated and treated as porcelainware. The respondents also contended that in any event the entire stock of porcelain goods are cleared only for captive consumption and consequently no excise duty would be leviable, even assuming that these porcelain shells fell within the meaning of porcelainware of tariff item 23-B of the First Schedule to the Act. Since the appellants did not accept the contention of the respondents and held that excise duty was leviable on the porcelain shells used in the manufacture of lightning arresters, the respondents filed W.P. 3163 of 1973 to call for the records in No. 115 of 1973, dated 27-1-1973, 5-2-1973 on the file of the Ministry of Finance, Government of India, New Delhi, in A. No. 661/70 dated 12-1-1972, on the file of the Deputy Collector of Central Excise, Madras, and in Order No. 3/70 dated 12-9-1970 on the file of the Superintendent of Central Excise, Guindy mixed Range, Madras-32, and quash the order passed on 27-1-1973/5-2-1973 by the Ministry of Finance, Government of India, New Delhi, in their order No. 115 of 1973 confirming the orders in A. No. 661/70 passed on 12-1-1972 by the Deputy Collector of Central Excise, Madras and in Order No. 3 of 1970 dated 12-9-1970 passed by the Superintendent of Central Excise, Guindy mixed Range, Madras-32. Ramanujam J. held that no excise duty could be levied on the porcelain content of the lightning arresters manufactured by the respondents. In this view, the learned Judge allowed the writ petition. This writ appeal has been filed against the judgment of Ramanujam J.

3. Mr. K. N. Balasubramaniam the learned Central Government Standing Counsel, urged the following contentions. The respondents held a licence under the Act to manufacture porcelain. The shell being made of porcelain will be porcelainware within the meaning of tariff item 23-B of the First Schedule to the Act. Consequently, excise duty is leviable on the porcelain shell which is used in the manufacture of lightning arresters. The learned Standing Counsel laid emphasis on the fact that the appellants are levying excise duty only on the porcelain component of the lightning arresters and not on the lightning arresters as an integrated unit. The fact that the porcelain shells as such are not marketable cannot deprive the appellants of their power to levy excise duty on the porcelain shells because excise duty is levied on production. In the circumstances, the marketability of the goods and manufacture of goods that are being manufactured cannot enter into the question of the propriety or otherwise of the levy of excise duty, Further, according to the learned Standing Counsel these porcelain shells are not intermediary goods but they are goods separately manufactured by the respondents and used as components of lightning arresters. Even assuming without admitting that the porcelain shells are intermediate product they still would be liable to excise duty. Further, the fact that the entire stock of porcelain shells are cleared for captive consumption by the respondents cannot make the shells any the less goods on which excise duty is leviable.

4. We directed the respondents to produce before us for inspection the porcelain shell. The appellants also made available to us the literature of the respondents regarding the lightning arresters. We find from the literature that the lightning arrester consists of a wet process porcelain housing, gap assembly, autovalve block, 18 inch line and ground leads, and a bracket for direct pole or wall mounting. What is called by the appellants as porcelain shell is described by the respondents in their literature as porcelain housing. To quote from the literature : 'A strong wet process porcelain body houses the arrester internal parts. This porcelain, which is manufactured by ourselves, is subject to rigorous quality control tests.' On an inspection of the porcelain shell or to use the terminology of the respondents, the porcelain housing is particularly designed to house the arrester's internal parts. As already stated, it is also not disputed that this porcelain housing is manufactured according to the westing house specifications to be used in the manufacture of the lightning arresters. It is also necessary to state that it is not the case of the appellants that these porcelain shells are marketed by the respondents as porcelain shells. No attempt was made by the appellant to contend that these porcelain shells could be used for any purpose other than in the manufacture of lightning arresters and constitute merchandise by themselves, as understood in the ordinary parlance.

5. Before we deal with the contentions advanced by the learned counsel for both sides, it will be useful to refer to some of the provisions of the Act and the Central Excise Rules, 1944 (for short the Rules). S. 3 is the charging section. It states that excise duty shall be levied on all excisable goods other than salt which are produced or manufactured in India in the prescribed manner and at the rate specified in the First Schedule. Sub-section (2) of S. 3 empowers the Central Government to fix the tariff values of any articles enumerated in the First Schedule and also alter tariff values for the time being in force. S. 2(f) defines 'manufacture'. It is an inclusive definition. 'Manufacture' is said to include any process incidental to or ancillary to the completion of a manufactured product. The definition of 'manufacture' in Section 2(f) particularly refers to manufacture of certain specified goods. The word 'goods' is not defined in S. 2. S. 4 deals with the determination of the value of excisable goods for the purpose of levy of excise duty. The Central Excise Rules have been promulgated pursuant to the power conferred on the Central Government under S. 37 of the Act. Rule 7 provides that every person who produces, cures or manufactures any excisable or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such persons as may be designated. Rule 9(1) provides that no excisable goods shall be removed from any place where they are produced, cured or manufactured until excise duty leviable thereon has been paid at such place and in such manner as is prescribed in the rules and except on presentation of an application in the proper form and obtaining the permission of the proper officer on the form. Under Rule 9-A the date of actual removal of goods from the factory or warehouse shall be the date of determination of duty and tariff valuation. Chapter V of the Rules contains detailed provisions for the levy of excise duty. Rule 47 states that a manufacturer shall provide a store-room or other place of storage at his premises for depositing goods made on the same premises without payment of duty. No duty paid goods and no goods other than excisable goods made in the factory shall be deposited in such store-room of place. However where the manufacturer undertakes to pay duty on all such goods and clears them immediately on completion of manufacture the Collector may exempt him from providing such store-room or other place of storage. Under sub-rule (4), the manufacture is obliged to maintain a book in the proper form showing the date goods are despatched in or removed from such store-room or other place of storage and other details regarding the date of deposit or removal, the quantity etc. Rule 49 states that duty shall be chargeable only on the removal of the goods from the factory premises of when the goods are about to be removed from the store-room or other place of storage approved by the Collector under Rule 47. Under rule 50 even non-excisable goods can be removed only with the permission of the Collector. Rule 52 lays down the procedure for payment of duty. Under Rule 52-A gate passes are required for removal of the goods. Rule 53 requires the manufacturer to maintain a stock account while Rules 54 and 55 oblige him to submit monthly and quarterly returns.

From the above it is seen that the levy of excise duty is a levy on the manufacture or production of goods in India. In other words, the taxable event in the manufacture or production of goods are contrasted with the levy of sales-tax in which case the taxable event is on the sale of goods. In Messrs Chhotabhai v. Union of India, : AIR1962SC1006 the Supreme Court extracted the following observations of Lord Simonds in Governor General in Council v. Province of Madras, AIR 1947 P.C. 98 : 1978 ELT 280.

'Consistently with this decision (C.P. Petrol case) 1939 FCR 18, their Lordships are of opinion that 'a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on the sales or the proceeds of sale of goods.....' The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law, there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration; it is not of the essence of the duty of excise, which is attracted by the manufacture itself.'

The Supreme Court then observed as follows :

'The view of this clear exposition of the content of the term 'duty of excise' in the India setting we think, no assistance can be derived for the meaning ascribed and the characteristics attributed to it in the decisions construing the relative taxing powers of the Dominion and the Provinces under the British North America Act, 1867.'

Again in Union of India v. Delhi Cloth and General Mills, : 1973ECR56(SC) , the Supreme Court observed thus -

'Excise duty is on the manufacture of goods and not on the sale.'

6. The next question to be considered is whether the porcelain shells produced by the respondents are goods within the meaning of Section 3 of the Act. The Act does not define goods. The term excisable goods is defined as meaning goods specified in the First Schedule as being subject to a duty of excise and includes salt. The meaning of the word 'goods' have been given in the various dictionaries as follows :-

'In Words and Phrases, Permanent edition Vol. 18, it is found as follows : The first exposition I have found of the word 'goods' is in Bailey's Large Dictionary of 1732 which defines it simply 'merchandise'; and by Johnson, who followed as the next lexicographer, it is defined to be movables in a house, personal or immovable estates, wares; freight; merchandise.

Webster defines the word 'goods' thus : 'Goods' noun plural (1) movables, household furnitures; (2) Personal or movable estate, as horses, cattle, utensils, etc.; (3) Wares, merchandise, commodities bought and sold by merchants and traders.'

7. In Union of India v. Delhi Cloth and General Mills, : 1973ECR56(SC) the question as to what constitutes goods within the meaning of S. 3 of the Act came up for consideration. The Central Excise authorities levied excise duty on the manufacture of refined oil from raw oil against three different companies manufacturing vegetable products known as vanaspati. The companies challenged the legality of the levy of excise duty on refined oil. They contended that for the purpose of manufacturing vanaspati, they purchased groundnut and til oil from the open market or directly from the manufactures of such oil, The oils so purchased were subjected to different processes in order to turn them into vanaspati. It was their case that the only finished product they manufactured from the raw materials thus purchased is vanaspati which are liable to excise duty as a vegetable product. They further contended that at no stage did they product and new product which could come within the limits described in the schedule as 'vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. It was said that the demand for excise duty on the ground that they produced from the raw oil purchased a product which was liable to duty under item 23 of the Schedule (now item 12) was illegal. As against this, the Union of India contended that in the course of the manufacture of vanaspati, the companies brought into existence at one stage, after carrying out some processes with the aid of power, what was known to the market was refined oil. The said refined oil fell within the description of vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process was ordinarily carried on with the aid of power and so was liable to excise duty. It was in this connection, the Supreme Court had to consider the meaning of the word 'goods'. The Supreme Court observed as follows :-

'It is helpful to consider also in this connection the ordinary meaning of the word 'goods'. For, by the very words of the Central Excises and Salt Act, 1944, excise duty is leviable on goods. The Act itself does not define goods but defines excisable goods as meaning goods specified in the First Schedule as being subject to a duty of excise and includes sale.'

Then after referring to the meaning given to the word 'goods' in Words and Phrases, Permanent edition, Vol. 18 and Webster dictionary of English language already referred to, the Supreme Court observed as follows :-

'These definitions make it clear that to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold. This consideration of the meaning of the word 'goods' provides strong support for the view that manufacture which is liable to excise duty under the Central Excises and Salt Act. 1944, must be the 'bringing into existence' of a new substance known to the market.'

8. On the facts of the case the Supreme Court observed as follows :-

'Excise duty is on the manufacture of goods and not on the sale. Mr. Pathak is therefore right in his contention that the fact that the substance produced by them at an intermediate stage is not put in the market would not make any difference. If the raw material has been brought into existence a new substance by the application of processes one or more of which are with the aid of power and that substance is the same as refined oil as known to the market as excise duty may be leviable under item 23 (the present item 12). But has it been shown that the substance produced by the petitioners is at any intermediate stage before vanaspati comes into existence 'refined oil' as known to the market ?'

9. The Supreme Court then took note of the fact that the process of deodorisation was applied in the company's factories after hydrogenation was complete. The Supreme Court had therefore to consider the question whether the substance in the hands of the Company was refined oil as known in the market before deodorisation had taken place. The Supreme Court finally concluded that the raw oil purchased by the companies for the purposes of manufacture of vanaspati did not become at any stage refined oil as is known to the consumer and the commercial community. Finally, the Supreme Court observed as follows :-

'But as the duty is on the manufacture of goods, that is, on the bringing into existence a new substance known to the market the raw oil or the refined oil must be some substance known to the market before it can be subjected to duty.'

The Supreme Court has followed the decision in Union of India v. Delhi Cloth and General Mills, : 1973ECR56(SC) , in S. B. Sugar Mills v. Union of India, : 1973ECR9(SC) , Shelat J. speaking for the court observed as follows :-

'The Act charges duty on manufacture of goods. The word 'manufacture' implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the Legislature must be taken to have used that the word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. That it would be such an article which would attract the Act was brought out in Union of India v. Delhi Cloth and General Mills Ltd. : 1973ECR56(SC) .'

After referring to the facts of the case in Delhi Cloth and General Mills case, the learned Judge further observed as follows :-

'This court held that if a new substance was brought into existence from raw materials and that substance was the same as 'refined oil' as known to the market it would be subject to duty. The question, therefore, was the substance sought to be charged 'refined oil' known to the market The affidavits showed that deodorisation was necessary before the product could be called 'refined oil'. It was not in dispute that process was employed after hydrogenation and not at the stage when what was called 'refined oil' came into existence at an intermediate stage. No evidence was produced by the Union of India that refined oil was being brought to the market for without deodorisation. It was held that the raw oil purchased by the respondents for the purpose of manufacturing Vanaspati did not become that any stage 'refined oil, as known to the consumers and the commercial community.'

The learned Judge again observed thus -

'In our view, the gas generated by these concerns is kiln gas and not carbon dioxide as known to the trade i.e., to those who deal in it or who use it. The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract item 14-H in the First Schedule.'

From the above decision of the Supreme Court it is clear that in order to attract excise duty under Section 3 of the Act the goods that are manufactured must be goods which are ordinarily bought and sold in the market and are known as such to the commercial community. However, when once such goods are manufactured the fact that the goods are not actually sold in the market would not make any difference since as we have already stated that excise duty is leviable on the manufacture of goods and not on their sale.

10. Item 23-B of the First Schedule to the Act reads as follows :-

'23-B. Chinaware and porcelainware all sorts -

(1) Tableware

(2) Sanitaryware

(3) Glazed tiles

(4) Not otherwise specified

Explanation. - Chinaware includes all glazed clayware but does not include terracotta.'

The question is whether the porcelain shells manufactured by the respondents fall within the meaning of porcelainware. The meaning of ware as given in the various dictionaries are as follows :-

In Funk and Wagnalls Standard dictionary of the English language, International Edition, volume 2, page 1418, it is stated -

'Ware - Articles of the same class; especially, manufactured articles; used collectively, often in composition tableware, glassware, Articles of commerce, goods; merchandise products. Pottery; ceramic articles; earthenware.'

In the Random House dictionary of the English language, College Edition, page 1483, it is stated -

'Ware - Articles of merchandise or manufacture; goods, Anything that a person tries to sell or exploit esp. talents or personal accomplishments A specified kind or class of merchandise or of manufactured article; silverware, glassware. Pottery or a particular kind of pottery.'

11. A similar situation arose for consideration before a Bench of this court in English Electric Co. v. Supdt. of Central Excise, : 1979(4)ELT36(Mad) . The English Electric Company of India, the petitioner herein was manufacturing an equipment useful in the distribution of electricity at its works at Pallavaram near Madras. One of the items of manufacture was high rupturing capacity cartridge fuselinks. The question that arose for consideration was whether the said item would attract excise duty under entry 23-B of the First Schedule to the Act. The chemical examiner's report showed that the fuselinks were composed of compounds of aluminium, calcium, magnesium, iron and sillicon. The water absorption was found to be 0.37% and therefore the fuselinks could be considered as porcelainware. It was contended before this court by the English Electric Company that fuselinks were not porcelainware within the meaning of tariff entry 23-B of the First Schedule to the Act. After referring to the decision of the Supreme Court in Union of India v. Delhi Cloth and General Mills, : 1973ECR56(SC) and tariff entry 23-B in the First Schedule to the Act, Veeraswami, C.J. observed as follows :-

'But then when one looks into the itemisation of articles in the Entry, doubt arises whether an article like high rupturing capacity fuselinks will be within the ambit of the Entry. The enumeration of the articles consists of tableware, sanitaryware and glazed tiles. Fuselink of the type we have here have no possible analogy at all to any of the things mentioned there. It is no doubt true that the fourth item of entry 23-B is 'not otherwise specified' and this phraseology 'read with all sorts' may perhaps justify a contention that porcelain of all sorts, although not tableware, sanitaryware and glazed tiles, will fall within the scope of entry 23-B. But the pointed argument of Mr. Uthama Reddi before us is that high rupturing capacity fuselink as such is not and cannot be described as porcelainware. We have already noted the meaning of the word 'ware' and this word ware occurs as part of tableware, sanitaryware and glazed tiles. To our minds, it is difficult to regard high rupturing capacity fuselink as porcelainware merely because one of its components is made of porcelain. The whole thing, namely high rupturing capacity fuselink is a manufactured article and one of its components is porcelain. But merely because that component forms part of the finished article, we cannot take it that by itself will come within Entry 23B, for it must be a porcelainware as such. Hardly high rupturing capacity fuselink can be described as a porcelainware as we commonly understand the phrase.'

Tested in the light of the above decision, we are of the opinion that the porcelain shells or the porcelain housing is neither porcelainware within the meaning of tariff item 23-B of the First Schedule to the Act or excisable goods. The porcelain shells or the porcelain housing manufactured by the respondents do not constitute ware or constitute goods within the meaning of the item 23-B of the First Schedule to the Act or Section 3 of the Act. The said porcelain shells ordinarily come to the market to be bought and sold which is the necessary ingredient which should be present in the particular type of goods to attract the levy of excise duty under Section 3. The appellants have not been able to establish that these porcelain shells are bought and sold in the market or are known as porcelainware to the consumers and commercial community. In fact, it has not been disputed by the appellants that these porcelain shells are manufactured according to westing house specification and are used only as a component in the manufacture of the integrated unit of lightning arrester. In other words, it has not been established or attempted to be established before us that these porcelain shells could be used for any purpose known to the consumers and the commercial community other than as a component in the manufacture of lightning arresters.

12. Mr. K. N. Balasubramaniam, the learned Standing Counsel cited the decision of the Calcutta High Court in Union Carbide Co. Ltd. v. Asst. Collector of Central Excise, 1978 ELT J 180 for the proposition that an excise is a tax on the production or manufacture of goods and it is not necessary to attract excise duty that the goods should be sold or saleable. No exception could be taken to this proposition of law advanced by the learned counsel relying on the decision of the Calcutta High Court. But the decision does not in any manner help the learned Standing Counsel. The question before the Calcutta High Court was whether raught-rolled zinc was liable to excise duty. The learned Judge has observed as follows in paragraph 19 of the judgment -

'If there are separate and different processes of manufacture, and each process results in such transformation that a new and distinct article known in the market as such comes into being then each process would be subject to duty.'

This proposition is consistent with the decision of the Supreme Court in Union of India v. Delhi Cloth and General Mills Ltd., : 1973ECR56(SC) . This fact is confirmed further by the observation of the learned Judge in paragraph 11 of the following effect, which are made after referring to the said decision of the Supreme Court -

'Counsel is right in saying that in order to be exigible to duty sale is not relevant but production or manufacture is the only relevant factor. But in order to be particular goods as mentioned in the item of the Schedule unless that item is defined under the Act or in the Schedule the goods produced must be known as such in the market. The concept of being known to the market is important not from the point of view whether the goods are sold as such but from the point of view whether the goods are manufactured. On this aspect I do not see any conflict between the Supreme Court's earlier view and the later view as expressed in the case of Union of India v. Delhi Cloth Mills Ltd.'

13. Similarly, the decision of the Gujarat High Court in Maneklal Harilal Spg. and Mfg. Ltd. v. Union of India, 1978 ELT 618 , does not help the learned Standing Counsel. The ratio of the said decision as is found from the first headnote is as follows -

'An intermediary product which is by itself and excisable article, is liable to excise duty even though it is not removed from the factory.'

The learned Judges have applied the principles laid down in Union of India v. Delhi Cloth and General Mills Ltd., : 1973ECR56(SC) and S. B. Sugar Mills v. Union of India, : 1973ECR9(SC) .

14. The learned Standing Counsel cited the decision in Caltex Oil Refining (India) Ltd., v. Union of India 1979 E.L.T. 581. All that a Bench of the Delhi High Court held in that case was that it was apparent that the legislative intent for levy and collection of excise duty under the Central Excise Act and the rules was that no duty was leviable on intermediate products if they were not end products by themselves provided the end product was obtained by one continuous uninterrupted integrated process as opposed to distinct or independent processes. The learned Judges further held that an intermediary product used for obtaining an end product is a single uninterrupted process would not attract duty. But, it would be dutiable if it was obtained by one process and was used for being converted into another product by a separate distinct process. On the facts of that case, the learned Judges held that furnace oil would attract excise duty.

15. Mr. K. P. Jagadeesan, the learned counsel for the respondents, cited the decisions in Oudh Sugar Mills Ltd. v. Union of India, 1980 ELT 327; Collector of Central Excise v. J. K. Synthetics Ltd., Kots, 1981 ELT 5; J. K. Cotton Spinning and Weaving Mills Co. Ltd. Union of India, 1981 ELT 887. In re : Oriental Metal Pressing Works Pvt. Ltd., Bombay 1981 ELT 962, and Devi Dayal Enterprises and Wires Ltd. v. Union of India, 1982 ELT 33. In view of the conclusions that we have reached on the basis of the Supreme Court decision, it is unnecessary to refer to these decisions cited by the learned counsel for the respondents as these decisions do not strictly deal with the real question that arises for our decision in the present case. We may also make it clear that we have not expressed any opinion on the contention raised by Mr. Jagadeesan on behalf of the respondents that even assuming, without admitting, that the porcelain shells manufactured by the respondents for use as components in the manufacture of lightning arresters fall within the meaning of porcelainware under tariff item 23-B, they are not liable to excise duty since the entire stock of porcelain shells manufactured are used for captive consumption in the manufacture of lightning arresters.

16. By the Finance Act, 1979, an Explanation was added to item 23-B which is as follows :-

'Explanation II. - This item does not include electrical insulators or electrical insulating fittings or parts of such insulators or insulating fittings.'

In view of this amendment and the introduction of Explanation 11 by the Finance Act, 1979, there is now no dispute that after the Finance Act, 1979, the porcelain shell manufactured by the respondents for being used as components of lighting arresters will not be liable to excise duty under tariff item 23-B. Some arguments were advanced on the basis of this Explanation. The arguments related to the scope of the Explanation viz. whether the Explanation clarified the position that even prior to its introduction tariff item 23-B did not include electrical insulators or electrical insulating fittings or parts of such insulators or insulating fittings or tariff item 23-B included such items and the purpose of the Explanation was only to take out of the ambit of tariff item 23-B electrical insulators or electrical insulating fittings or parts of such insulators or insulating fittings. It is unnecessary to consider this question in view of the conclusions already reached by us that the porcelainware referred to in item 23-B cannot take in the porcelain shells or porcelain housing manufactured by the respondents according to the particular westing house specification for the purpose of being used as a component in the manufacture of lightning arresters.

17. The learned Standing Counsel argued that the learned Single Judge was erroneously under the impression that the appellants were attempting to levy duty on the lightning arresters in view of the porcelain content in the lightning arresters. The learned Standing Counsel is not correct in this submission. The learned Judge has observed thus :-

'The lightning arrester manufactured by the petitioner have as one of their components, a shell made or porcelain. On the ground that the lightning arresters which are articles manufactured by the petitioner company contain shell made or porcelain as their component. The Central Excise authorities proposed to levy Central excise duty on the porcelain portion of the integral unit, namely, the lightning arresters.'

The learned Judge therefore was conscious of the fact that the appellants were threatening to levy excise duty only on the porcelain shells. The learned Judge has also taken note of the fact that the appellants had no case, that the respondents were manufacturing any porcelainware apart from the shells which were used as component parts in the manufacture of lightning arresters. We are in complete agreement with the conclusion arrived by the learned Single Judge. We do not therefore find any merit in the appeal. The writ appeal is dismissed. There will be no order as to costs.

18. [The Chief Justice]. - After judgment was delivered, an oral prayer has been made by learned counsel for the appellants for certificate for appeal to the Supreme Court under Art. 133(1) of the Constitution of India. As our judgment is based on the decision of the Supreme Court, we do not find that any substantial question of law of general importance arises in the case, which in our opinion needs to be decided by the Supreme Court. The prayer for certificate is refused.


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