Civil Appeal No 1695 of 1968
Appeal by Special Leave from the Judgment and Order dated 45 9 67 of the Mysore High Court in WP No 141665
VP Raman Addl
 SK Mehta and Girish Chandra for the Appellant
HR Datar and N Nettar for the Respondent
The Judgment of the Court was delivered by SHINGHAL J
This appeal by special leave is directed against the judgment of the High Court of Mysore dated September 45 1967
The High Court was moved by the State of Mysore under article 226 of the Constitution for quashing the demand notice dated July 21 843 1962 issued by the Inspector of Central Excise for the payment of Rs 246591 as excise duty on the products despatched by the State s Implements Factory
The demand was made with reference to the newly inserted item 26AA in the First Schedule to the  hereinafter referred to as the Act
That item was added to the Schedule by the Finance Act of 1962 and it was claimed by the Central Excise Department that on the date of the amendment the State Government was in possession of some stock of iron and steel products namely flats squares and rods in its factory which had been obtained from their manufacturers when they were not excisable arti cles
The precise claim of the Excise authorities was that the duty became payable on those articles by virtue of the newly inserted item 26AA because the aforesaid stock of iron and steel products was used for the manufacture of agricul tural implements like mamties pickaxes sledge hammers shovels and ploughs
The Assistant Collector of Central Excise explained in his letter dated June 19 1962 that the agricultural implements which were manufactured in the State s Implements Factory fell within the purview of item 26AA as they were forged or extruded during the process of manufacturing the agricultural implements
It was con tended that the demand was justified because the aforesaid iron and steel products out of which the agricultural implements were manufactured had not borne any excise duty at all
An appeal was preferred to the Collector of Central Excise against the demand but without success
A revision was taken to the Central Government under the provisions of the Act but it was also dismissed
That was why the State Government applied to the High Court for quashing the demand and for setting aside the appellate order of the Collector and the revisional order of the Central Government
The Central Government traversed the claim of the State Government on the ground that as the rods and bars which were held in stock by the State s Implements Factory were pre excise stock and as they were put to further process by forging them into shovels spades and other agricultural implements they became liable to duty 
until the pre excise stock held by the factory on April 24 1962 was utilised and converted into forged implements and was cleared from the factory
It was also urged that the peti tion was not maintainable in the High Court as it raised a dispute between the Government of India and the State Gov ernment within the meaning of article 131 of the Constitu tion
The High Court rejected both the contentions of the Central Government and quashed the impugned demand notice and the appellate and the revisional orders
That is why the Union of India has preferred the present appeal
It is not in controversy that the claim for the levy of excise duty was based on sub sections 1 and 1A of sec tion 3 of the Act which read as follows 31 There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced 4 1338SCI76 844 or manufactured in India and a duty on salt manufactured in or imported by land into any part of India as and at the rates set forth in the First Schedule
1A The provisions of sub section i shall apply in respect of all excisable goods other than salt which are produced or manufactured in India by or on behalf of Government as they apply in respect of good s which are not produced or manufactured by Government
 It is therefore quite clear and is not in dispute before us that the claim for the levy of excise duty in question could be justified only if it could be shown that excisa ble goods other than salt were produced or manufactured in the Implements Factory of the State Government
It was however admitted in the counter affidavit of the Senior Superintendent of Central Excise as follows In the case of the petitioner since the rods and bars held in stock by the Imple ments
Factory were pre excise stock and since those rods and bars were put to further proc ess by forging the same into shovels spades and other agriCultural implements etc
 they became liable to duty and therefore duty was demanded on such forged articles during the period that is till such quantities of the bars and rods as were in stock with the facto ry on 24 4 62 were utilised and converted into forged implements and cleared from the facto ry
 This makes it quite clear that the rods and bars in question were not produced or manufactured in the State Govern ment s implements Factory
They could not therefore be subjected to the levy of excise duty
It is true that the rods and bars were utilised for the manufacture of agricul tural implements like shovels and spades but those agricul tural implements were not of the description specified in item 26AA of the First Schedule with reference to section 3 of the Act
It is admitted by Mr Raman that agricultural implements were not included in the First Schedule to the Act and were not excisable articles
This appears to be so because they are the basic tools of trade by which a vast majority of the citizens of the country earn their livelihood
There could therefore be no question of levying any excise duty on shovels and spades or other agricultural instruments manu factured by the Implements Factory of the State Government and as has been shown the rods and bars which formed the pre excise stock of the factory had not been manufactured by the Implements Factory
Section 3 of the Act could not therefore be invoked to levy excise duty merely on the ground that the pre excise stock of rods and bars was utilised for the purpose of manufacturing agricultural instruments
There is therefore nothing wrong with the view which has prevailed with the High Court in this respect
845 Mr Raman tried to argue that the High Court erred in not applying article 131 of the Constitution to the contro versy even though the writ petition was barred thereunder as it fell exclusively within the jurisdiction of this Court under article 131 of the Constitution as a dispute between the Government of India and the State of Mysore
The argu ment is however futile because there is nothing on the record to show that there was any such dispute between the Central and the State Governments
As the High Court has pointed out the Union of India was made a party to the writ petition merely because it had dismissed the revision appli cation of the State Government
There is thus no merit in this appeal anti it is dismissed with costs
MR Appeal dis missed


Summary:
The respondent State of Mysore runs an implements Factory
The first schedule to the  was amended whereby item No 26AA was inserted by Finance Act 1962
On the date when the said amendment came into force the respondent had in his stock certain iron rods and bars
After the amendment however the rods and bars were put through a further manufacturing process and were converted into shovels spades and other agricultural implements which were not covered by schedule 1
The Central Excise Inspector issued a demand notice in respect of the said rods and the bars on the ground that they were excisable
The respondent contended that no excise duty was payable on the said articles because when the amendment came into force they were already in the stock of the respondent and that they were not manufactured after the amendment came into force
The contention of the respondent was negatived by the authorities under the Act
The Writ Petition filed by the respondent under Article 226 was allowed
Dismissing the appeal by Special Leave HELD 1
Under Section 3 of the Act the excise duty is payable on articles produced or manufactured
It was admit ted in the counter affidavit of the appellant that the rods and bars were not produced or manufactured in the implements factory of the respondent
The goods which were made out of the rods and bars were admittedly not excisable goods
The appeal was dismissed as the goods were not liable to excise duty
844 E H 2
The contention that the High Court could not have decided the matter in view of the provisions of Article 131 of the Constitution was negatived on the ground that there was nothing on regard to show that there was any dispute between the Central and the State Governments
The Union of India was made a party merely because it had dismissed the revision application of the State Government
845 A B