KIRLOSKAR OIL ENGINES LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) PETITIONER No. 1 is an existing company within the meaning of Section 3 of the Companies act, 1956 and are engaged in the manufacture of various types of bimetal bearings at their factory at Khadki. Pune District. The company holds L-4 licence issued by the Central Excise authorities under Rule 174 of the Central Excise Rules for the manufacture of bimetal bearings in the factory. The bearing are manufactured in a composite plant from the raw material stage upto the stage of final product. The process of manufacturing bimetal bearings is first to purchase aluminium ingots from canalising agencies. The aluminium foils are purchases from the open market. The alloy billets are then faces, rolled and annealed in the plant. During annealing, excess tin and other impurities appear on the surface of the rolled billet in the form of bubbles. The bubbles are removed by process known as tin bleeding. The alloy billets are then flattened and degreases and brushed. The aluminium foil is also brushed. The flattened alloy billets and the aluminium foil are thereafter bonded together by cold rolling to form aluminium alloy strip with the foil together. The aluminium alloy strips are then cut lengthwise and widthwise. The question involved in this petition is whether the manufacture of aluminium alloy strips are liable to payment of excise duty under Tariff Item 27 (b) of the First Schedule to the Central Excises and salt Act. Aluminium alloy strips in the process of manufacture of bimetal bearings are degreased and brushed. Steel strips are then degreased and finished. Steel strips and aluminium alloy strips are then bonded together in a rolling mill to form a bimetal strip. The bimetal strip is tested by means of deburring and chiseling. The bimetal strip so prepared is thereafter machined for formation into a bearing, which are commonly known as bimetal bearings.

(2.) THE Company in accordance with the directions of Central Excise authorities filed classification list under protest in respect of aluminium alloy strips on April 28, 1980. The classification list was approved by the Assistant Collector of Central Excises Poone on May 15, 1980. Tariff Item No. 27 of the First Schedule was amended on June 18, 1980 by addition of explanation II. The Company thereafter filed revised classification list under protest on June 19, 1980 and that list was approved by the Assistant Collector on July 27, 1980. The Company was insisting before the Assistant Collector that manufacture of aluminium alloy strips is not liable to payment of excise duty. The order passed by the Assistant Collector approving the classification list was challenged by the Company by filing appeal before the Collector of Central Excise (Appeals), Poone and the appeal was dismissed on December 31, 1981. The Appellate Authority held that the product is liable to excise duty if (a) it is a result of manufacturing activity; (b) it is goods and (c) it is specified in the First Schedule to the Central Excise and Salt Act. The appellate authority held that aluminium alloy strips are goods as the same are movable, have exchange ability and economic value, and therefore the Company is liable to pay duty on manufacture of alloy strips under Tariff Item 27 (b ). The order of the Appellate Authority confirming the classification list, filed under protest, by the Assistant Collector is under challenge in this petition filed under Article 226 of the Constitution of India.

(3.) SHRI Hidayatulla, learned Counsel appearing on behalf of the petitioners, submitted that though several questions are raised in the petition it is not necessary to deal with those questions as the principal question urged by the learned counsel goes to the root of the matter. The principal question urged is that the manufacture of aluminium alloy strips is not liable to payment of excise duty as these aluminium strips are not marketed and are not available in the market. The learned counsel urged that the aluminium strips manufactured by the petitioners are not available in the market and therefore even though the strips come into existence as a result of manufacturing activity and even though the strips are goods and are specified in the First schedule to the Central Excise Act, are not liable to payment of excise duty. Tariff Item 27 (b)gives the description as follows.