BRAKES INDIA LIMITED MADRAS Vs. SUPERINTENDENT OF CENTRAL EXCISE MADRAS

JUDGEMENT

(1.) THIS writ appeal is directed against the order of padhmanabhah J. in W. P. 3700 of 1977. The petitioners in that writ petition are the appellants; and the respondents therein are the respondents herein. It will be convenient for us if we choose to refer to the parties as per their array in the writ petition. The petitioners are the manufacturers of brake equipments, apart from other motor vehicle parts. We are more concerned with the brake linings over which a controversy has arisen as to whether it will attract the provisions of the Central Excises and Salt Act 1944 (Act 1 of 1944), hereinafter referred to as the Act. The point involved is certainly argumentative but at the same time it requires a decision only with reference to the interpretation to be put on the expression'manufacture'as defined in s. 2 (f) of the Act. Certain facts need delineation. The petitioners purchase brake lining blanks from Messrs. Rane Brake Linings Ltd. , Madras and other brake lining manufacturers. An exception was taken, in the course of the arguments, on behalf of the petitioners, to the learned single Judge calling the items purchased by the petitioners as'brake lining blanks'and it was contended before us that what the petitioners purchase is only brake lining as such, after the process of its manufacture is completed. In our view, this contention appears to be a puerile and a feighed one to get over the implications, factual and legal, of what the petitioners themselves expressed before the Authorities with regard to the nature of the articles purchased by them from Messrs. Rane brake Linings Ltd. , and other brake lining manufacturers and subsequently marketed by them after putting the articles to specified processes. According to the petitioner, the brake linings which they purchase from the aforesaid concerns have to go through the processes of drilling, trimming and chamferring for the purpose of making them to suit the requirements of the users of the various vehicles and they are put in a carton and sold under the caption'b. I. Girling Kit Linings'and nothing more happens and hence such processes can never come within the ambit of'manufacture'as defined by S. 2 (f) of the Act. The view of the respondents on this question is different. According to them, the articles purchased from Messrs. Rane Brake Linings Ltd. , Madras, and other brake lining manufacturers by the petitioners though after payment of excise duty at 20 per cent are subjected to the further processes of drilling, trimming and chamferring to suit the needs of the concerned customers depending upon the vehicles, for which brake linings are required and then only marketed by the petitioners and the said process will certainly fall within the ambit of s. 2 (f) of the Act, and what is demanded is only the difference in duty between what is leviable on the products as they are marketed by the petitioners and the duty already collected at the time of clearance of the articles from messrs. Rane Brake Linings Ltd. , Madras and other brake lining manufacturers.

(2.) THE second respondent by his order dated 14-2-1977 directed that the petitioners should immediately take out a licence under Rule 174 of the Central Excise Rules 1944, read with S. 6 of the Act, and the second respondent further ordered under Rule 9 (2) of the Central Excise Rules, 1944, that the petitioners should pay the appropriate duty on the past clearance of brake linings effected from their factory taking into account duty, if any, that was paid on the goods previously by M/s. Rane Brake Linings Ltd. , Madras. THE second respondent also imposed a penalty of Rs. 200 under Rule 173-Q of the central Excise Rules, 1944. THE petitioner, aggrieved by this order of the second respondent, preferred an appeal to the third respondent. THE third respondent, by order dated 19-7-1977, did not opine differently, with regard to the petitioner's obligations to possess a licence for manufacture of brake linings. With regard to the demand, the third respondent passed orders in the following terms :- "in so far as the demand issued by the lower authority is concerned, it is obvious that the assessments earlier made on the values declared by M/s. Rane Brake Linings Ltd. , for the blanks will not be valid in the new circumstances. Since the appellant firm is considered as 'manufacturers'they should file a separate price list for approval, on the basis of which, the assessments should be completed. In so far as the past clearances are concerned, the assessment should be finalised on the basis of the price lists to be filed by the appellant firm. On approval of the price list by the proper officer, differential duty, if any, should be collected. " * As a result, he disposed of the appeal in the above terms.

(3.) INSOUTH Bihar Sugar Mills Ltd. v. Union of India and another 1968 AIR (SC) 922, 1989 (25) ECR 447, 1968 (3) SCR 21, 1978 (2) ELT 336, 1968 (2) SCJ 433 = 1978e. L. T. (J 336) (S. C.), there was a manufacture of sugar by carbonisation and further manufacture of soda ash by solvay ammonia soda process. For producing these products certain dioxide was required. The manufacturer set up a lime kiln, which also generated kiln gas. The question arose as to whether the kiln gas produced by lime kiln could be subject to excise duty under item 14. H. The answer given by the Supreme Court was in the negative. The following passage in the pronouncement requires advertence to : "the Act charges duty on manufacture of goods. The word'manufacture'there must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the Legislature must be taken to have used that word in its ordinary dictionary meaning. The dictionary meaning is that to become goods, it must be something which can ordinarily come to the market to be bought and sold and is known to the market. " *