Delhi High Court
Synthetics And Chemicals Limited, ... vs Government Of India on 1 January, 1800
Equivalent citations: 1980(6)ELT675(DEL)
JUDGMENT B.N. Kirpal, J.
1. In this writ petition the order of the Additional Secretary to the Government of India is being challenged. He had held that a product known as Bentol was liable to excise duty.
2. The petitioner-company, inter alia, carries on the business of manufacturing synthetic rubber from Industrial Alcohol. The raw- material required for the manufacture of synthetic rubber are Benzene and Ethyl Alcohol. The process of manufacture which is followed, briefly stated, is that Ethyl Alcohol is first converted into Ethylune, which is reacted with Benzene to form Ethyl Benzene. Ethyl Benzene is then purified and fed to styrene Reactors for conversion into styrene by the process of dehydrogenation in the presence of a catalyst. During a subsequent process of styrene purification by distillation a mixture of Benzene and Toluene gets separated from styrene in the first column. This mixture is not a separate product but is reused for the manufacture of Benzene and Toluene by the petitioner. The petitioner uses Benzene again in the cycle for manufacture of styrene and dispose of Toluene as such. This mixture of Benzene and Toluene which, according to the petitioner, has no Chemical or trade name is colloquially called 'Bentol'.
3. The petitioner had obtained certain quantity of this mixture. Due to strike in its factory it was not possible to recover Benzene and Toluene from the Bentol. On 23rd June, 1973, the petitioner-company approached the Excise Authorities for permission to allow the petitioner to burn this mixture. This mixture was thereafter burnt by the petitioner. The petitioner- company, however, applied for a license in L-6 form for permission to use Bentol/Toluene as fuel in their plant but this permission was refused.
4. On 9th November, 1973 and 14th November, 1973 the petitioner received two demand notices for a sum of Rs. 1,31,340/- on account of Central Excise Duty on 131,340 kilolitres of Bentol which had been so destroyed by the petitioner. The duty was based on the full rate of duty of Rs. 1000/- per kilolitres, applicable to Motor Spirit.
The petitioner protested against the said levy but the plea was rejected by the Assistant Collector. Thereafter an special appeal was filed to the Appellate Collector, Central Excise, Delhi but the same was also dismissed. A further revision, which was filed with the Government of India, was also rejected by the Central Government of 18th June, 1979.
5. The present writ petition has been filed challenging the aforesaid decisions of the Central Government and the Excise Authorities. The contentions have been raised on behalf of the petitioner. The first is that the product Bentol was not removed from the factory premises and no duty of excise was leviable thereon. The second contention is that the product Bentol is not Motor Spirit and in any event no excise duty can be levied on the alleged manufacture of the same.
With regard to the first contention it has been stated on behalf of the petitioner that in the application which is filed for obtaining of a license under Rule 174 of the Central Excise Rules, 1944 a plan of the factory had also been filed. A license was granted by the Collector but no place of removal, as contemplated by Rule 9, was specified. The contention is that excise duty is leviable only when the excisable goods are removed from the place in which they are produced and which place of removal has been specified by the Collector. If no such place has been specified then, the contention is, the excise duty would be leviable only if the goods are removed from the factory premises. Reliance in this behalf is also placed on Rule 49, which, inter alia, provides that duty is not required to be paid in respect of excisable goods which have been made in a factory until they are about to be issued out of the place or premises specified under Rule 9. In this behalf it will also be pertinent to take into consideration that the term "place of removal" has been defined in section 4(4)(b) of the Act as under :
"place of removal " means :-
(i) a factory or other place or premises of production or manufacture of the excisable goods; or
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed."
This clearly shows that the place of removal would be the factory or any other place or premises of production or manufacture of the excisable goods.
6. On behalf of the respondent the contention of Shri Chandrasekaran is that the excise duty is levied at the time of the manufacture of the goods. A further contention is that as with the application for the grant of a license the petitioner had furnished the plan of the factory. That plan had indicated the exact location of the plant where Bentol was being produced. According to the respondents the moment a license is granted it would tantamount to specifying the place of manufacture as contemplated by Rule 9.
7. A similar question had come up before this Court in the case of M/s. Modi Carpets Limited v. Union of India - 4980 E.L.T. 320 - (Civil Writ No. 506 of 1979), decided on 16th April, 1980 by this Bench. After referring to Rules 9 and 49, it was held as follows :
"Rule 49, it will be seen, makes it clear that payment of duty is required to be made only when the goods are removed from the place or premises specified under Rule 9 or from an approved place of storage. Rule 9, inter alia, enables the Collector to specify the place where the goods can be said to be produced, cured or manufactured from which they cannot be removed without payment of duty. The Collector may specify the place of manufacture to be not only the entire factory but a part of the factory in which the actual manufacturing process is carried out, under the said Rule 9. It is admitted between the parties that in the present case the Collector has not specified and part of the factory as the place of manufacture. In the absence of any place having been so specified the place of manufacture is necessarily to be the factory in which the manufacturing process takes place."
8. The contention on behalf of the respondents that the excise duty is leviable the moment the goods are manufactured is clearly belied by the provisions of Rule 49(1) reads as under :-
"Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under Rule 47."
It is evident that even though excisable goods have been manufactured rule 49 provides that no excise duty shall be levied "until they are about to be issued out of the place or premises specified under rule 9 ....". It is, therefore, necessary that the place from where they are to be issued has to be designated and the place of issue can be called the place of removal. The place of issue need not necessarily be the same as the place of manufacture and the action of issuing is different from the action of manufacture. The action of issuing takes place after the manufacture had been completed. Rule 49 clearly refers to the place of issuing of the manufactured goods. The specification, contemplated by rule 49, takes place under rule 9. It is under rule 9 that a specific order has to be passed by the collector specifying the place for the purpose of removal. This is evident from the following words used in the rule :-
"Which may be specified by the Collector in this behalf."
It is evident that if the argument of the respondents was correct then these words would be wholly unnecessary. It is clear that what as to be specified is the place from where the goods are to be removed for the purpose of attracting the levy of duty.
9. Shri Chandrasekaran sought to reply on rule 47 in order to contend that the said rule contemplated the levy of excise duty even when the goods are stored within the same premises. In this case no goods have been taken for storage. Duty is sought to be levied on the goods which have been destroyed without they being removed from the factory premises. All that rule 47 says is that if excise duty is leviable at the time removal the same would not be levied in case the goods are being taken for storage in the store-room or other place or storage. In case premises under rule 9 had been specified then the petitioner would not have been able to take the goods out of those premises without paying excise duty even for the purpose of storage in another premises within the same factory area, but for the concession which is granted by rule 47.
10. In view of the fact that we are accepting the first contention on behalf of the petitioner, it is not necessary for us to go into the other contentions which are raised.
11. The writ petition is accordingly allowed and the order dated 18th June, 1970 is quashed. The parties to bear their own costs.