Jost''s Engineering Co. Ltd. vs Union of India

The petitioners have sought : (i) A declaration that the activity of packing carried on at their godown at Bhivandi does not amount to manufacture within the meaning of Section 2(f)(iii) of the Central Excise Act, 1944; (ii) A writ of Mandamus directing the respondents to withdraw the detention memo dated 2 March, 2013; and (iii) A direction to the respondents to forbear from taking any action and implementation thereof.

The petitioners claim to be engaged in the manufacture and trading of material handling equipment falling under Chapter Heading 8427 and 8709 of the Central Excise Tariff Act, 1985 and connected activities in the nature of trading and after sales service/support relating to spares, components and equipment. On 27 February, 2013 a search was carried out at the factory of the petitioners during the course of which it has been revealed that the petitioners had a godown at Bhivandi. The godown does not have a Central Excise registration and according to the Revenue, the petitioners were clearing spare parts of automobiles/vehicles from the godown without the payment of duty.

In the affidavit-in-reply filed by the Deputy Director of DGCEI, of the Mumbai Zonal Unit it has been stated that the petitioners manufacture automobiles/vehicles at their factory at Thane and that they are engaged in an activity of packing and labelling of automobile/vehicle parts from the factory at Thane for which a registration has been obtained under the Central Excise Act upon which goods are cleared against the payment of Central Excise duty. However, according to the Revenue, no Central Excise duty has been paid while effecting clearances from the godown at Bhivandi for which registration under the Central Excise Act, 1944 has not been obtained, in respect of the same activity of packing and labelling.

The case of the petitioners is that the activity which has been carried out does not amount to ''manufacture'' within the meaning of Section 2(f)(iii) of the Act.

Section 2(f)(iii) defines the expression "manufacture" to including any process which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.

In the affidavit-in-reply it has been submitted that the activity of packing and labelling is mainly undertaken by the petitioners in order to make the goods marketable and the goods which were stored at the godown at Bhivandi are in fact parts of automobiles/vehicles manufactured by the petitioners at the factory. These goods, it has been submitted, which were stored at Bhivandi are all parts of automobiles/vehicles and fall under serial No. 100 of the Third Schedule to the Central Excise Tariff Act, 1985. According to the department, during the previous three years, there has been an evasion of duty in the amount of Rs. 1.93 crores and that the department has seized goods of a value of approximately Rs. 1.23 crores. Investigation is being conducted, it has been stated in the reply, in regard to the process carried out by the petitioners in the godown at Bhivandi and a notice to show cause would be issued upon the completion of the investigation.

At this stage we are not inclined to entertain a petition under Article 226 of the Constitution. The issue as to whether the petitioners are engaging in the manufacture of excisable goods within the meaning of Section 2(f)(iii) would have to be determined on the basis of facts and after an adjudication in pursuance of a notice to show cause. This is not a matter which can be decided on the basis of affidavits, in a petition under Article 226.

Learned counsel for the Revenue has stated before the Court that a notice to show cause shall be issued to the petitioners within a period of three weeks from today and that the adjudication shall be completed and orders would be passed after allowing an opportunity of being heard to the petitioners within a period of three months thereafter.

We clarify that we have kept open all the rights and contentions of the parties and the observations contained in this order shall not come in the way of the adjudication in pursuance of a notice to show cause.

In the event that the petitioners make an application, in the meantime, for the clearance of the goods which have been detained against payment of Central Excise duty, such a request shall be considered expeditiously in accordance with law.

In the circumstances, no further directions are necessary. The petition is accordingly disposed of.