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TMI Blog2002 (12) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... quantity of cigarettes removed, which was liable to excise duty. Out of the aforesaid show cause notices, first show cause notice was issued by the Collector of Central Excise, Patna on 25th July, 1990 and the appellant-company was required to pay excise duty to the tune of Rs. 65,45,630.32 besides penalty in relation to the period from March, 1973 to April 1990 under the provisions of Central Excise Act, 1944 (hereinafter referred to as 'the Act') and the rules framed thereunder which was issued in case No. 6-MP of 1991. Other three notices were issued in the months of January and February, 1991 by the Additional Collector of Central Excise, Patna, in relation to period between May and December, 1990 in case Nos. E-522, E-523 and E-524 of 1992 and total amount of excise duty leviable upon the appellant-company was Rs. 6,14,278.48 besides penalty. 3.The appellant-company contested the demand on grounds, inter alia, that no duty was leviable on samples of cigarettes drawn for test purposes in the quality control laboratory within the factory since the process of manufacture of cigarettes is not completed until the same are packed as packing is a process incidental or ancillary to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ukul Rohtagi, learned Additional Solicitor General, appearing on behalf of the respondent, on the other hand, submitted that manufacture of cigarette within the meaning of Section 2(f) of the Act is completed no sooner they are converted into sticks of cigarettes and the process of packing into separate packets and wrapping the same is neither incidental nor ancillary to the completion of manufacture of cigarette, but the same may, at the highest, be incidental or ancillary to its sale. Learned Additional Solicitor General further submitted that it is not known as to whether any quantity of cigarette was at all destroyed during the process of testing and if at all there was any destruction, what was its quantum as no account in this regard was either maintained or produced either before the assessing authority or the Tribunal. 8.In view of the submissions made on behalf of the parties, questions that fall for consideration of this Court are : - 1. Whether cigarettes removed for the purposes of tests in the quality control laboratory situated within the factory premises could be treated to be excisable goods manufactured and conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the Central Board of Excise and Customs, by general or special order, each such packet, or the manufacturer's label affixed thereto, shall bear in clearly discernible characters, the following particulars - (i) the name of the factory or a distinguishing mark which may take the form of a special design whereby the origin of the products can be traced; (ii) the number of his licence in Form L4; and (iii) the trade brand of the product, Specimens of all such wrappers, outer covering or labels shall be submitted to the Collector for his approval before they are brought into use. (c) An application for clearance in the proper form shall be delivered to the officer-in-charge of the factory at least 12 hours (or such other period as the Collector may in any particular case require or allow before it is intended to remove the goods : Provided that where removals from a factory are frequent and the manufacturer maintains a sufficient credit balance in his account-current maintained under rule 9 for payment of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be necessary to refer to the relevant decisions hereinafter. 13.In the case of Union of India v. Delhi Cloth & General Mills, [1963 Supp. (1) SCR 586], the respondent-Mills were engaged in the manufacture of vegetable product known as 'Vanaspati'. Vanaspati was subject to duty. It was the common case of both the parties that for the purpose of manufacturing vanaspati, the respondent-Mills purchased groundnut and 'til' oil from the market and subjected them to different processes before applying hydrogenation to produce vanaspati. The stand of the Union of India was that in the course of manufacture of vanaspati, the respondent-Mills produced at an intermediate stage what is known as 'refined oil' in the market and although the respondent may not sell it as such, still it being a marketable product, it was liable to excise duty under Tariff Item 23 of the Schedule which levied duty on "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". This stand was negatived by this Court holding that there could be no refined oil as known to the market without deodorisation. In other words, non-deod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omponents in flashlights. The cans had sharp uneven edges and before they could be used as a component in making the flashlight, these cans had to undergo various processes such as trimming, threading and redrawing. After trimming, threading and redrawing, they were reeded, beaded and anodised or painted. It is at that point that they became distinct and complete components capable of being used as flashlight cans for housing battery cells and for having a bulb fitted thereto. On the said facts, it was held by this Court that the aluminium cans in their aforesaid elementary and unfinished form were not capable of sale to a consumer and hence not marketable - nor were they ever marketed. This Court accepted the affidavit filed by the appellant that the aluminium cans in that State are not known to the market because the Revenue could not produce any material to the contrary. The ratio of this decision is that the aluminium cans which were sought to be taxed were, in that State not marketable. They were not capable of being sold to a consumer nor were they ever sold in that State. 15.In the case of Bhor Industries Ltd. v. CCE, [(1989) 1 SCC 602], the question that fell for considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the same may result into evasion of excise duty as before packing the cigarettes the same may be regularly supplied to each and every employee for his consumption without payment of excise duty thereon. The definition of 'manufacture' under Section 2(f) very clearly includes process which is incidental or ancillary to the completion of manufactured product. Manufacture of cigarette is completed when the same emerges in the form of sticks of cigarettes which are sent to the laboratory for quality control test. Sticks of cigarettes can be consumed and manufacture of the end-product, i.e., cigarette, which is commercially known in the market as such, is completed before its removal for test and after testing only packing of the same, which is the requirement of Rule 93 of the Rules, is done. Thus, we hold that sticks of cigarette which are removed for the purpose of test in the quality control laboratory located within the factory premises of the appellant-Company are liable to excise duty. 18.Coming now to the second question, it may be stated that learned counsel appearing on behalf of the Revenue could not dispute the proposition that the quantity of cigarette sticks that is de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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