1987 (7) TMI 270 - AT - Central Excise

Issues Involved:
1. Whether zinc calots used in the manufacture of dry battery cells are dutiable.
2. Application and interpretation of Rule 9 and Rule 49 of the Central Excise Rules.
3. The requirement of a specified place for the collection of excise duty.
4. The effect of paying duty under protest.
5. The concept of intermediate goods in Central Excise law.
6. The necessity of a licence for manufacturing excisable goods.
7. The implications of manufacturing without a licence and the consequences of such actions.

Issue-wise Detailed Analysis:

1. Whether zinc calots used in the manufacture of dry battery cells are dutiable:
The appellants argued that zinc calots, which are intermediate products in the continuous process of manufacturing dry battery cells, should not be subject to excise duty. They contended that since these calots are used internally within their factory and not removed as per Rule 9 and Rule 49 of the Central Excise Rules, they should not be dutiable. However, the judgment clarified that zinc calots are specifically listed under Central Excise Tariff Item 26B(2a) and are thus excisable. The court held that the moment zinc calots are taken for further use in the manufacturing process, they are considered removed and become liable to duty immediately before such use.

2. Application and interpretation of Rule 9 and Rule 49 of the Central Excise Rules:
The appellants argued that Rule 9 requires a specified place for the removal of goods for duty to be levied. They claimed that no such specification was made by the Collector, hence duty should not be applicable. The judgment refuted this by stating that the appellants had paid duty under protest, which implies that the necessary licensing and specification procedures were followed. Rule 9 and Rule 49 were interpreted to mean that excisable goods are deemed removed immediately before they are consumed or utilized within the specified premises.

3. The requirement of a specified place for the collection of excise duty:
The court emphasized that the issuance of a licence for manufacturing excisable goods inherently involves the specification of a place. The appellants' argument that no place was specified was dismissed as unreasonable, given that they had received a licence and had been paying duty, albeit under protest. The court held that the appellants were bound by the terms and conditions of the licence, which included the specification of the place of manufacture.

4. The effect of paying duty under protest:
The court noted that the appellants' action of paying duty under protest nullified their argument that there was no removal from the specified place. The payment of duty indicated compliance with the licensing and specification requirements, and thus, the duty was rightly levied.

5. The concept of intermediate goods in Central Excise law:
The judgment clarified that there is no distinction between intermediate goods and final products in Central Excise law. All excisable goods are subject to duty unless specifically exempted. The court rejected the appellants' argument that intermediate goods used within the same factory should not be dutiable, stating that excisable goods retain their duty liability until it is lawfully discharged.

6. The necessity of a licence for manufacturing excisable goods:
The court highlighted that manufacturing excisable goods without a proper licence is a serious breach of the law. The appellants' failure to obtain a licence for the production of zinc calots and other excisable goods like zinc bars and zinc sheets was a significant violation. The judgment stressed that no one may profit from their lawbreaking, and the absence of a licence does not exempt the goods from duty.

7. The implications of manufacturing without a licence and the consequences of such actions:
The court condemned the appellants' actions of manufacturing excisable goods without a licence and not paying the required duty. It was pointed out that such conduct amounts to fraud on the revenue. The judgment stated that the appellants' failure to report their production and pay duty laid them open to severe penalties. The court affirmed that the duty on zinc calots must be paid as ordered by the lower authorities, and the appeal was rejected.

Conclusion:
The appeal was rejected, and the court upheld the duty liability on zinc calots used in the manufacture of dry battery cells. The judgment reinforced the importance of compliance with Central Excise Rules, the necessity of obtaining proper licences, and the non-exempt status of intermediate goods in excise law.

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