TMI Blog1981 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... is the Collector of Central Excise, Baroda Collectorate. The third respondent is the Deputy Collector of Central Excise, Ahmedabad. The fourth respondent is Superintendent of Central Excise and the fifth respondent is also the Superintendent of Central Excise. The brief facts of the petitioners' case are that the five concerns of the petitioners which are all located in the vicinity of each other are situated at Vatva. According to them, the petitioners concerned are not using power for the purpose of manufacturing detergent powder. The petitioners' case is that they have been manufacturing detergent powder at the present place of manufacture at Vatva since Junem 1980. Under Notification No. 101/66, detergent powder which falls within the description of `organic surface active agent' is totally exempt from the whole of the excise duty leviable thereon if in or in relation to the manufacture and packing of such surface active agent no process is ordinarily carried on with the aid of power or of steam for heating. The petitioners submit that their method of manufacturing detergent powder is as follows :- The raw materials used in the manufacture of detergent powder are mainly Alky ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctric pumps are fitted near the storage tanks. The function of these electric pumps is merely to facilitate transfer of the liquid from the tanker to the storage tank and according to the petitioners, in all industries where delivery of liquid is obtained from tankers to the storage tank, it is done with the aid of compressors fitted to the tanker or with the aid of electric pumps fitted and kept at the factory taking the delivery, near the storage tank. According to the petitioners, use of electric pumps is only for the purpose of obtaining and storing sulphuric acid or alkyd benzene which are brought in huge quantities by the tankers day in and day out. 2. The petitioners' further case is that the storing of sulphuric acid and alkyd benzene in storage tanks, though within the precincts of factory premises is outside the factory and has no bearing or connection with the manufacturing process. 3. The further case of the petitioners is that alkyd benzene and sulphuric acid are taken by means of pipes from the storage tanks to the measurement tanks of different sizes through pipe-lines and the liquid flows on account of natural gravitation from the storage tank to the measurement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gone to their factory and inspected the factory. Thereafter on 19th December, 1980 a party of officers from the Excise Department came and seized the goods of the petitioners and some of the books and other materials from the factory premises on the ground that these goods were liable to confiscation as excise duty was not paid in respect of these excisable articles. The case of the Department is that these goods see liable to excise duty and since excise duty had not been paid all along, these goods were liable to confiscation and as a step preliminary to confiscation, the goods were seized. 5. Under these circumstances, the petitioners have come to this Court praying for the relief of a writ of mandamus or in the nature of mandamus or a writ in the nature of certiorari or any other appropriate order or direction or writ directing the respondents to treat the manufacture of detergent powder by the petitioners as having been done without the aid of power and for a further writ, direction etc. on the respondents, their servants, agents, etc. to treat the manufacture of detergent powder by the petitioners eligible as for exemption under Notification No. 101/66 and they have asked f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it-in-reply and the only contention was that it was a question of fact whether the manufacturing process was being carried on without the aid of power and it was contended that power was used for storing and lifting at high level the raw materials in question with a view to acquiring gravitational force for the liquid to subsequently flow through pipelines to the re-action vessels in the course of manufacturing processes stated above and it was contended that since the goods were not eligible for exemption under Notification No. 101/66, Notification No. 111/78 exempting the units where goods wholly free from excise duty are being manufactured, from licence control under the excise Rule s, was also not applicable to the case of the petitioners. The contention of Mahida in the affidavit of April 27, 1981 was that as soon as it came to the notice of the Department that electric power was used in or in relation to manufacturing of goods in question at the stage of lifting of raw materials, the departmental authorities have initiated the action in question. 7. It was not the case of the petitioners that by storing the materials at high level and special gravitational force was acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utting forward the contention of the process of manufacture being accelerated by gravitational force. It was contended that gravitational force was given to raw materials by keeping the storage tank at some elevation and inasmuch as power was used for transferring liquid alkyd benzene and liquid sulfuric acid from the tankers to this storage tank and power was in fact used for imparting gravitational force to the raw materials, namely, alkyd benzene and sulfuric acid. 9. As regards the first contention that there are disputed questions of fact and therefore, the matter should not be decided by the High Court, it may be pointed out that the broad facts regarding what happens in the factories of the petitioners from the stage when raw materials are received in tankers up to the stage of the packed goods, namely, detergent powder in plastic bags leaving the factory in plastic bags fully packed, are not in dispute. It must be borne in mind that according to the process described by the petitioners, from the storage tanks the two liquids alkyd benzene and sulfuric acid go to measurement tank and from the measurement tank after the liquids are measured properly, they are taken to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n alternative remedy is no bar to the maintainability of the petition. It is only as an exercise of self restraint or self denial that High Courts have been asking parties to follow alternative remedy if alternative remedies are available. In this connection, there is the decision of the Supreme Court in Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras, A.I.R. 1971 S.C. 870 where it has been pointed out by the Supreme Court that where the action is taken under an ultra vires statute or where, although the statute is intra vires the action is without jurisdiction or the principles of natural justice are violated, a right to move the Supreme Court under article 32 for enforcement of fundamental right exists. Errors of law or fact committed in the exercise of jurisdiction founded on a vital law do not entitle a person to have them corrected by way of petitions under article 32. The proper way to correct them is to proceed under the provisions for appeals etc. or by way of proceedings under article 226 before the High Court. Therefore, so far as a petition under article 226 is concerned, it is one of the proper ways to correct errors of law or fact committed in the exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In Rama Krishna Wire Works, Surat v. P.T. Phowala, Assistant Collector of Central Excise, Surat, 1978 (2) E.L.T. (J 64), a Division Bench of this High Court consisting of J.B. Mehta and B.K. Mehta, JJ. held following the decision in Coffee Board's case (supra) that the existence of alternative remedy would hardly be material in a case where the demand is ultra vires the act. The threat to property by such ultra vires demand would clearly justify approaching the High Court and availing the extraordinary remedy at public law. In view of the decisions and in view of the observations of the Supreme Court, it is clear that existence of an alternative remedy is no bar to the maintainability or entertainability of this petition by the High Court and further, when the goods of the petitioners were seized on the ground that the petitioners were not entitled to the benefit of Notification No. 101/66 and since broad facts of the case are not in dispute, it is neither wise nor advisable to send the petitioners away from this court in limine. Moreover, since the Board has already expressed its opinion in a matter of this kind, it is no use asking the petitioners to go through the gamut. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s with intent to evade payment of duty, then all such goods shall be liable to confiscation......." And since these goods would be liable to confiscation under Rule 173(a) they would also be liable to seizure under Section 110 of the Customs Act read with Section 12 of the Central Excises Act, if the contention of the Excise authorities is correct. It may be pointed out that under Rule 8 of the Central Excises Rules, power has been conferred on the Central Government to exempt by notification from time to time in the Official Gazette subject to such conditions as may be specified, any excisable goods from the whole or any part of duty leviable on such goods. It was in exercise of these powers under Rule 8 that the notification which is under consideration in the present case was issued by the Central Government. A copy of that notification is at annexure `A' to the petition and it says :- "In exercise of the powers conferred by sub-Rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the excisable goods specified in column (2) of the Table hereto annexed and falling under Item No. 15AA of the First Schedule to the Central Excises and Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the inserting this definition of the word `manufacture' in S. 2(f) the legislature intended to equate `processing' to `manufacture' and intended to make mere `processing' as distinct from `manufacture' in the sense of bringing into existence of a new substance known to the market, liable to duty. The sole purpose of inserting this definition is to make it clear that at certain places in the Act the word `manufacture' has been used to mean a process incidental to the manufacture of the article. Thus in the very item under which the excise duty is claimed in these cases, we find the words `in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power'. The definition `manufacture' in S. 2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the clause will be applicable : and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion, inserted this definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps for bringing about the change in the raw material from one stage to another, are all process, that is, intermediate steps taken for the conversion of raw materials into the manufactured article. It is the manufacture or production of the final article known to a trade as such which is liable to excise duty but until that article emerges, there are intermediate processes and those intermediate processes no doubt bring about some change and must bring about some change before it can amount to process and until the change starts, there may not even be the beginning of the process as one of the stages in manufacture. That position seems to be clear from these two passages from the decision of the Supreme Court. That, process means an operation which brings about some change in the raw materials, becomes clear from the subsequent decision of the Supreme Court in Chowgule Co. Pvt. Ltd. v. Union of India, Civil Appeal No. 1032 of 1973 decided by the Supreme Court on November 25, 1980. There, C.J. Bhagwati, speaking for the Supreme Court in the context of sales tax law was dealing with the word `process' and what is meant by the word `processing' and quoting from the Deputy Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, vehicles, barges and other items of goods purchased by the assessee for using at the mining site, conveying the ore from the mining site to the river side and carrying it by barges to the Marmagoa harbour, fell within the description of processing of ore within Section 8(3)(b) and Rule 13, it was held if any of these items of goods were purchased by the assessee as being intended for use as `machinery, plant, equipment, tools, spare parts, stores, accessories, fuel or lubricants' in carrying the mined ore from the mining site to the river side and from river side to the Marmagoa harbour, they would qualify for inclusion in the certificate of Registration. Mr. Mehta appearing for the respondents has urged before us that this portion of the judgment of the Supreme Court in Chowgule Co.'s case (supra) which deals with the question of transporting of iron ore from the mining site to the river side and from the river side to Marmagoa harbour where the goods were shipped would qualify for inclusion in the certificate of Registration, indicates that even transporting of goods, that is, iron ore, from one place to another would amount to processing to some extent because the requisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, we have not gone into the different trade notices and different processes of manufacture connected with aerated waters, Rosin and Tupentine Powder or the process of glass manufacture. 16. Mr. Nanavati also tried to argue that under Notification No. 101/66 it was provided that excisable goods would be eligible for exemption only if `no process is ordinarily carried on with the aid of power'. He emphasized the word `ordinarily' in support of his contention and urged that ordinarily, compressors, attached to the motor tankers are put in use for the purpose of transferring liquid alkyd benzene or sulphuric acid from the motor tanker to the storage tank in question. However, in our opinion, this contention must be rejected because the petitioners themselves have pointed out that some of the motor tankers have no compressors and on that account the electrically operated pump near the storage tank is used for the purpose of transferring the liquid in question from the motor tanker to the storage tank. Again, Mr. Nanavati conceded that on some occasions when the compressor attached to the motor tanker is out of use or cannot be used for some reason or the other, electrically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accelerate the process of manufacture, but in the instant case, whatever argument there might be in that connection is negatived by the fact that the measurement tank intervenes between the storage tank and the re-action vessel and until the raw materials reach the re-action vessel, there is no process of manufacture because even from the measurement tank the raw materials can be taken out and still be treated as raw materials namely, alkyd benzene and sulphuric acid, as the case may be. Under these circumstances, prior to the raw materials entering the re-action vessel, there being no process as known to law, it cannot be said that in relation to the manufacture of detergent powder any process is carried on with the aid of power. The process begins only in the re-action vessel and till the stage of reaching that re-action vessel, no change having taken place in the raw materials no process has started as known in the language of the law. There is no specific definition of the word `process' as there is of the word `manufacture' in Section 2(f) of the Act before us. Since process or processing is not defined, judicial definition or the dictionary meaning of the word has to be adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not in dispute and the facts are all before us, then the Court can examine the question whether the article is entitled to exemption or not. There is no question so far as the facts of the present case are concerned of this burden of proof which is laid down as a proposition of law in Ramkrishna Deo's case (supra). Again, the decision in H.E.H. Nizam's Religious Endowment Trust, Hyderabad v. Commissioner of Income-tax, Andhra Pradesh, Hyderabad, A.I.R. 1966 S.C. 1007 was relied upon for the purpose of showing that when exemption is claimed under any particular taxation enactment, the burden of showing that exemption applies or that the particular assessee is entitled to exemption, is on that assessee. But so far as we are concerned, as pointed out above, bearing this principle in mind the question has to be examined whether on the facts which are broadly admitted, is the exemption notification applicable or not ? 22. Mr. Mehta for the respondents tried to draw a distinction between seizure of articles as such and adjudication. He urged in the alternative to his main contention that if at all it is found that seizure was bad because from January, 1980 till December, 1980 the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this particular article. 25. We are informed that Notification No. 111/78 is replaced by Notification No. 2/81 though to the same effect. 26. The seizure made by the respondents under the Panchnamas annexed at annexure `B' to the petition is also quashed and set aside. By way of interim orders, on furnishing bank guarantee the petitioners were allowed to remove the goods and the goods were released from the seizure. Bank guarantee to be returned back to the petitioners. The respondents to pay costs, charges and expenses incurred by the petitioners in connection with the bank guarantee. 27. In view of the fact that this point has come to be decided for the first time before this court, there will be no order as to costs so far as this special civil application is concerned. 28. Mr. Mehta applies under article 133(1) for leave to appeal to the Supreme Court. Since all that we have done in this case is to apply the principles laid down by the Supreme Court and applied the interpretation of the Supreme Court to the word `process' it cannot be said that this question, though it may be a substantial question of law of general importance, is needed to be decided by the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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