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M/s Gujarat Industries & Ors. v. Commissioner of Central Excise-I, Ahmedabad

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 5784-5788 of 2007)Decided 14 Dec 2015
Civil Appeal Nos. 5784-5788 of 2007
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

The company cold-rolled hot-rolled stainless steel strips sent to it by other manufacturers, for a job-work charge, between November 1995 and March 1997. It did not take out excise registration or pay duty, believing that reducing the thickness of the strips was not "manufacture". After an intelligence-based search, the department demanded duty in 2000 and invoked the longer, extended limitation period, and the Tribunal upheld the demand by a 2-1 majority.

Decision Breakdown

The Court held that cold-rolling flat-rolled stainless steel strips hardens and tempers them, which falls within Chapter Note 4 to Chapter 72 of the Tariff, so the process is "manufacture" under Section 2(f) of the Central Excise Act. It relied on the HSN explanatory notes, technical literature, and the reasoning of the Tribunal's Third Member, which it adopted. On limitation, the Court held that the company knew or ought to have known that registration was needed, because similar units in the same trade paid duty on identical processes, and because the search and panchnama showed the company was running the mills without registration. The Court therefore upheld the extended period, rejected the claim that the demand was time-barred, and dismissed the appeals.

Lesson Learnt

Doing processing work for others does not exempt a business from excise duty if the law treats that processing as "manufacture". A genuine belief that duty is not payable is not a shield when competitors in the same trade are paying it, because the department can then look back over the longer period.

Official source (sci.gov.in)View Judgment (PDF)

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