AHURA CHEMICAL PRODUCTS PVT. LTD. versus UNION OF INDIA

Citation: [1982] 1 S.C.R. 621 · Decided: 03-09-1981 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

621 
A 
AHURA CHEMICAL PRODUCTS PVT. LTD. 
v. 
UNION OF INDIA 
B 
September, 3, 1981 
(P.N. BHAGWATI AND V. BALAKRISHNA BRAD!, JJ.] 
Central Excise and Salt Act 1944, Notification-Word cropen market"-
Meaning of, 
C 
The appellant company manufactured various process chemicals required 
for the Textile Industry. The process chemicals so manufactured by them are 
substances known as emulsifiers and wetting out agents and they fall within the 
scope of tariff item 1 SAA of the first schedule to the Central Excise and Salt 
Act 1944. The appellant purchased 164500 kgs. of organic surface active ag~nts 
from the "Industrial General Products Pvt. Ltd.". The organic surface active 
D 
agents sold to the appellant by the Industrial General Products Pvt. Ltd. had not 
been subjected to the levy of excise duty in as much as the said supplier company 
was eligible for exemption from payment of Excise Duty on account of the fact 
that the goods were manufactured by it without the aid of power. 
Emulsifiers/wetting out agents etc. intended for use in any industrial pro-
cess were exempted from the levy of duty under entry 15AA, by a notification 
E 
dated 20.1.1968 issued by the Government of India, subject to the condition that 
if in respect of surface active agents used in the manufacture of such emulsifiers, 
wetting out agents, softners and other 1ike preparations the appropriate amount 
of the duty of excise or the additional duty under section 2A of the Indian 
Tariff Act 1934 (32 of 1934), has already been paid or where such surface active 
agents are purchased from the open market on or after the 20th day of January. 
1968. 
F 
' 
It is common ground that the organic surface active agents used by the 
appelJant as raw-material for the manufacture of emulsifiers/wetting out agents 
were purchased by it subsequent to the 20th day of January, 1968. The Central 
Excise authorities originally treated the manufactured product, namely the emul-
sifiers etc. as exempt from levy of duty by virtue of the Notification dated 
January 20, 1968. But, subsequently by a notice dt. Augu•t 6, 1974 issued by the 
G 
superintendent of Central Excise, the appellant was directed to show cause why 
an amount of Rs. 1, 21,709.57 should not be recovered from the appellant by 
way of excise duty in respect of the period August 1973 to February 1974 on the 
ground that the said amount 1epresented escaped duty in respect of the emulsi-
fiers/wetting out agents manufactured by the appellant during the aforesaid 
period. The appellant in reply contended that it was entitled to the benefit of 
8 
exemption from levy of duty in respect of the manufactured products under the 
notification dated 20.1.1968. This contention was rejected by the Assistant 
622 
SUPREME COURT REPORTS 
[1982] l s.c.F:, 
A 
Collector and his order was confirn1ed by the appellate collector of centniJ 
excise. 
8 
c 
D 
E 
F 
G 
H 
A revision petition filed by the appellant before the respondents (union of 
India) was rejected by order dated August 3, 1978 wherein the Central Govern-
ment took the view that "purcha~es made from a particular manufacturer, the 
production from whose factory is exempt from payment of duty, being manufac-
tured without the aid of power, cannot be treated at par with purchases made 
from the open market". In the appeal filed by special leave, it was contended 
that the condition that the surface active agents should have been purchased frorn 
the 'open market' on or after the 20th day of January 1968 was fully satisfied in 
the present case, and hence the appellant was entitled to the benefit of the exemp-
tion granted by the Notification. 
Allowing the appeal, 
HELD : I. The appellant Company is entitled to the benefit of the exemp-
tion granted by the Notification dated January 20, 1968 in respect of the emulsi-
fiers, wetting out agents, softners etc. manufactured by the Company for us,e 
during the relevant period (August 1973 to February 1974). [628 G] 
2. In determining the eligibility of a person for the benefit of the exemptio11 
conferred by the Notification on the basis of the fulfilment of the second of tbe 
aforementioned conditions, it is wholly irrelevant to enquire whether duty of 
excise had already been paid in respect of the surface active agents purchased and 
utilised as raw material for the manufacture of the emulsifiers/wetting out 
agents. [627 A·B] 
3. 
Having due regard to the context in which the expression '•open market" 
h

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