S.35L Central Excise Act | Only Supreme Court Can Decide Appeals On Question Of Excisability; Not High Courts: SC

The Supreme Court has held that disputes relating to the excisability of goods fall within its exclusive appellate jurisdiction and cannot be decided by High Courts under Section 35G of the Central Excise Act, 1944.“An appeal from an order passed by the Appellate Tribunal relating to the determination of any question having a relation to the rate of excise duty or to the value of goods for the purpose of assessment lies before this Court and not before the High Court. However, such exclusion is not attracted by every question touching the rate of duty or the value of goods. The question must have a direct and proximate relationship with assessment. The question of excisability of goods is connected with the rate of duty for the purpose of assessment. A decision on excisability of goods would be a precursor to the determination of any question having a relation to the rate of duty or to the value of goods”, the Court held.The Court also ruled that the cutting, grooving and routing of Aluminium Composite Panels (ACPs) to suit building specifications does not amount to “manufacture” under Section 2(f) of the Act because no distinct commercial product emerges from the process.A bench of Justice JB Pardiwala and Justice R Mahadevan set aside a Karnataka High Court judgment which had held that the activity amounted to manufacture and attracted excise duty. The Court restored the position taken by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had ruled in favour of the assessee, a construction contractor.The case arose from a dispute over ACPs imported by the company and used for exterior cladding of buildings. After import, at the assessee's premises, the ACPs were cut into required sizes, grooves were made on their reverse side. The panels were then fixed onto frames erected at project sites. The Revenue issued a show cause notice in September 2004 alleging that the process of cutting, grooving and assembling ACPs amounted to manufacture and demanded excise duty of Rs. 21,46,437 for the period April 2002 to December 2003 along with interest and penalties.CESTAT held that no new product came into existence and that the Revenue had failed to establish marketability of the alleged manufactured goods. The Karnataka High Court later restored the Revenue's case, prompting the present appeal before the Supreme Court.The Revenue had challenged the CESTAT order before the Karnataka High Court under Section 35G of the Central Excise Act. The assessee argued that the dispute concerned excisability of goods and therefore only the Supreme Court could hear the appeal under Section 35L.Section 35G provides for appeals from CESTAT to High Courts on substantial questions of law but excludes disputes relating to the rate of excise duty or valuation of goods for assessment. Such matters are appealable directly to the Supreme Court under Section 35L.The Supreme Court analysed Sections 35G and 35L and held that questions concerning excisability are directly connected with the rate of duty and assessment. Therefore, such disputes fall within the category of matters that can be appealed only to the Supreme Court.The Court observed that the expression “determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment” under 35L has a broad scope. It observed that a decision on whether goods are excisable is a precursor to deciding the applicable rate of duty and therefore has a direct and proximate relationship with assessment.Section 35L(2), inserted in 2014, states that determination of taxability or excisability of goods is included within the expression “determination of any question having a relation to the rate of duty” under Section 35L(1)(b). The Court held that this provision is merely clarificatory, and the amendment only made explicit what was already implicit in the statutory scheme. Thus, it operates retrospectively, the Court held.On the substantive issue of manufacture, the Court noted that excisability requires satisfaction of a two-fold test. First, the process must result in the emergence of distinct goods with a new name, character, identity or use. Second, the transformed goods must be marketable or capable of being marketed as distinct goods.Applying that test, the Court found that the ACPs remained ACPs even after being cut, grooved and bent. It observed that the essential character of the product remained unchanged and the process merely adapted the panels for installation according to customer requirements. The activity only altered dimensions and shape and did not create a commercially distinct product, the Court noted.The Court observed that changing the form of goods to facilitate their use does not amount to manufacture when the fundamental properties of the goods remain intact. It stated that the erection of frames, fixing of panels and sealing of gaps are installation activities that do not create new goods.“The...

S.35L Central Excise Act | Only Supreme Court Can Decide Appeals On Question Of Excisability; Not High Courts: SC

Amisha Shrivastava

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

S.35L Central Excise Act | Only Supreme Court Can Decide Appeals On Question Of Excisability; Not High Courts: SC

Amisha Shrivastava

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

This is a premium content
Available exclusively to
Our subscribers