1980 (5) TMI 37 - HC - Central Excise

Manufacture and produce - Asbestos fibre - Legislature s interpretation - Significance - Refund - Central Excise - Collection of duty from the consignee - Validity - Appeal to Supreme Court

Summary

Issues Involved:
1. Constitutionality of the imposition of excise duty on asbestos fibre introduced by the Finance Act of 1976.
2. Liability of the petitioners to pay additional duty of customs equal to the excise duty on asbestos fibre as per Section 3 of the Customs Tariff Act, 1975.
3. Whether the process of obtaining asbestos fibre amounts to 'manufacture' under Section 2(f) of the Excise Act.
4. Consideration of refund claims for excise duty and additional customs duty paid by the petitioners.

Detailed Analysis:

1. Constitutionality of the Imposition of Excise Duty:
The petitioners challenged the imposition of excise duty on asbestos fibre introduced by the Finance Act of 1976, arguing that the process of obtaining asbestos fibre is part of mining operations and not manufacturing, thus not subject to excise duty. The court examined the definitions and processes involved in obtaining asbestos fibre and concluded that the extensive processing, including crushing, screening, and separating the fibres from the rock, constituted a manufacturing process. The court held that the imposition of excise duty on asbestos fibre was constitutionally valid as it involved the transformation of asbestos rock into a marketable commodity known as asbestos fibre.

2. Liability to Pay Additional Duty of Customs:
The petitioners contended that if excise duty on asbestos fibre was not applicable, then additional duty of customs under the Customs Tariff Act should also not be levied. The court found that since the excise duty on asbestos fibre was validly imposed, the petitioners were liable to pay the additional duty of customs as per Section 3 of the Customs Tariff Act, 1975. The court noted that the additional duty is an independent provision and would be applicable as long as excise duty is validly imposed on a like article produced or manufactured in India.

3. Process of Obtaining Asbestos Fibre as 'Manufacture':
The court analyzed whether the process of obtaining asbestos fibre amounted to 'manufacture' under Section 2(f) of the Excise Act. It referred to various definitions and precedents, including the Supreme Court's interpretation that 'manufacture' implies a change resulting in a new and different article with a distinctive name, character, or use. The court concluded that the process of obtaining asbestos fibre from asbestos rock involved significant transformation and resulted in a new marketable commodity, thereby constituting manufacture. The inclusion of asbestos fibre in Tariff Item 22F of the Excise Act further supported this conclusion, indicating legislative recognition of asbestos fibre as a manufactured product.

4. Consideration of Refund Claims:
The petitioners sought a refund of the excise duty and additional customs duty paid. The court dismissed this claim, stating that the duties were validly imposed. Additionally, the court noted that even if the levies were found invalid, the petitioners would not be entitled to a refund as the duties are typically passed on to consumers. The court emphasized that any refund should benefit the consumers who ultimately bore the cost, not the petitioners.

Conclusion:
The court dismissed the writ petitions, upholding the constitutionality of the excise duty on asbestos fibre and the liability to pay additional customs duty. The court rejected the argument that the process of obtaining asbestos fibre was merely a mining operation and not manufacturing. The petitioners' claims for refunds were also dismissed, and the stay on duty recovery was vacated. The court refused to grant a certificate for leave to appeal to the Supreme Court, but allowed the petitioners time to seek appropriate orders from the Supreme Court before encashing the bank guarantees.