1991 PLP 1923 (CLC)

Rashid Moneer for Petitioner. Syed Tariq Ali for Respondents. Dates of hearing: 14th and 15th January, 1991. SALEEM AKHTAR, J.‑‑‑The petitioner manufactured ceramic products in its factory at Landhi, Karachi. It manufactured liquid preparation of chemicals called glaze in which the moulded ceramic wares are dipped before they are fired into furnace. By this treatment the ceramic wares get smooth surface and glaze. The Central Board of Revenue by General Order No. 3/86 dated 15‑4‑1986 ruled that the chemical preparation used for coating the ceramic products before these are fired into the furnace are classifiable under item 04.03 of the First Schedule of the Central Excises and Salt Act, 1944. The staff of the Directorate of Industries visited the petitioner's factory and obtained the estimate figures of the said chemical preparation and its in house consumption from 4‑9‑1979 to 3 6‑1985. They assessed its retail price and demanded Rs.2,37,834.15 as the Central Excise Duty payable by the petitioner. The Deputy Collector (Central Excise & Land Customs) at the stage of adjudication held that the product in question was classifiable under item No.04.03 of the First Schedule to the Act and duty was leviable. The petitioner was ordered to pay the duty and also to take out manufacturing licence in respect of glaze manufacturing by it but no penalty was imposed. The petitioner filed an appeal before respondent No.2 who maintained the order of the Deputy Collector and so far the applicability of General Order No.3 of 1986 dated 15‑4‑1986 is concerned it was observed that it is applicable from the date the glaze was incorporated in the First Schedule to the Central Excises and Salt Act and the order is not a new levy so as to take effect prospectively. The Revision filed by the petitioner was dismissed by the respondent No.5. On the factual side there seems to be no dispute that glaze is covered by item No.04.03 mentioned in the First Schedule to the Act. The learned counsel, however, contended that the glaze is not manufactured separately by the petitioner. It is prepared and used immediately in the process of manufacturing ceramic wares, it cannot be even applied at a place having room temperature and since the glaze so manufactured is assimilated in the end‑product without separately manufacturing it and is no vendable duty cannot be levied. Section 3 is the charging section which provides that the Excise Duty shall be chargeable on all excisable goods produced or manufactured at the' rate set forth in the First Schedule. The word 'Excisable goods' has been defined in section 2 (d) as goods specified in the First Schedule being subject to duty of excise and include salt. The word `goods' has not been defined. Therefore, the ordinary dictionary meaning should be taken into consideration. In Orient Straw Board and Paper Mills Ltd., v. Assistant Collector of Central Excise and Land Customs P L D 1985 Kar.126 it was held that if by any process a marketable good is produced the levy of duty is attracted. Similar view was taken in Union of India v. Additional Commissioner A I R 1963 S C

791. Considering the definition of term 'excisable goods' and the charging section it is clear that duty can be levied on goods which can be sold in the market. Section 3‑C supports this conclusion as according to it, in case of goods, tariff value and rate of duty in force on the date on which the goods are cleared for home consumption is to be charged. Mr. Rashid Munir the learned counsel for the petitioner has contended that the glaze prepared by the petitioner cannot be sold in the market and it is used during the process of manufacturing ceramic wares. No such inquiry has been made by the respondent before demand of excise duty. The impugned orders are, therefore, declared to be without lawful authority and the case is remanded to respondent No.l to hold inquiry after notice to the petitioner, whether glaze used by the petitioner is a vendable good. If the finding is in the nagative no excise duty will be charged. The learned counsel then contended that as there was a practice not to charge the excise duty on glaze the General Order No.3 of 1986 should be operative from the date of its promulgation and not with retrospective effect. The General Order reads as follows:

"Subject: C.E. Classification of `Glazes' used in Ceramic Industry. The Board has considered the question of Central Excise classification of chemical preparations (glazes) used for coating of the ceramic products before these are fired into the furnace and it is ruled that such glazes are classifiable under Item No.04.03 of the First Schedule to the Central Excises and Salt Act, 1944. From this General Order it seems that the question was raised before the CBR whether the Excise Duty should be recovered on manufacturing of glaze or not. It was ruled that it should be recovered. It is not clear whether before issuance of this order respondent had been recovering duty on glaze and whether any practice had developed that no excise duty was recoverable on glaze. As the case is being remanded, this aspect of the case should also be looked into by respondent No.l whether there was any practice prior to General Order No.3 of 1986 not to charge excise duty on manufacture of glaze. This finding will be relevant only if respondent No.l comes to the conclusion that the glaze is a vendable good. The petition is allowed in the aforestated terms. AA./T‑114/K Case remanded.