Chittatosh Mookerjee, J. - (1.) The appellant Company at the relevant time carried on business of proceeding and sale of lubricating oils and greases. The appellant Company had a factory at 109, Fore Shore Road, Howrah. According to the appellant Company it produced greases of two varieties, namely (1) asphalt base grease and (2) soap base grease for which it blended or compounded lubricating oil was used. In the present case we are concerned with the question whether or not the said soap base greases manufactured by the appellant Company were excisable goods under Item No. 11B of the 1st Schedule to the Central Excise Act. The Asstt. Collector, Calcutta, II Division by the notice dated 31st May, 1976 alleged that greases made by the appellant Company out of duty paid compounded lubricating oils fell within the Item No. 11B of the 1st Schedule of the aforesaid Act and the Company was asked to show cause why a penalty should not be imposed upon it and why the duty involved on the said greases should not be realised under Rule 9(2) of the Central Excise Rules, 1944.
(2.) The appellant filed a writ petition in this Court challenging the validity of the said proceeding in regard to the said show cause notice. Manas Nath Roy, J. discharged the Rule obtained by the appellant Company. The appellant being aggrieved, by the said decision has preferred the present appeal.
(3.) During the relevant period the appellant Company used to purchase lubricating oils and according to it the said lubricating oils purchased by it were excisable goods under Items 11 and 11B of the 1st Schedule of the Central Excises and Salt Act, 1944 and as such excise duty had already been paid in respect of these goods at their manufacturing point and before their purchase by the appellant from the open market. The appellant processed the said duty paid lubricating oils by blending or compounding soap and other ingredients. The appellant's case is that the greases produced by it could not be subjected to further excise duty. In any event, the resultant products obtained by the appellant by processing of duty paid lubricating oils were not covered by any of the tariff items specified in the 1st Schedule to the said Act. The respondents, on the other hand, contend that the petitioner Company carried on manufacturing processed by blending or compounding lubricating oils with other ingredients namely fats and chemicals to make them finished products and sold them in the market. The said finished products manufactured by the appellant Company fell under Item No. 11B of the 1st Schedule and as such they were excisable and dutiable. The respondents also contended that in case excise duty had been already paid on any of the item used in manufacturing the appellants products, it was entitled to claim credit of the duty already paid in terms of Rule 56A of the Central Excise Rules, 1944.;