Case: Ahura Chemical Products Private Limited Vs. Union of India

is exempt from payment of duty, being manufactured without the aid of power, cannot be treated at par with purchases made from th e open market". It is against this order of the Government of India that the appellant has come up to this Court with this appeal.The language used in Columns (2) and (3) of the Table appended to the Notification dated January 20, 1968 is simple and unambiguous. It shows that the benefit of the exemption will be available in respect of the emulsifiers/wetting out agents provided that either of the following two conditions is fulfilled:(a) Excise duty (inclusive o f additional duty under section 2A) should have been already paid in respect of the surface active agents used as raw- material in the manufacture of the emulsifiers, wetting out agents, etc..(b) The surface active agents used as raw-material for the manufacture of the emulsifiers/wetting out agents should have been purchased from the open market on or after the 20th day of January, 1968.7. The first of the aforementioned conditions was obviously not satisfied in the present case since the surface active agents were purchased by the appellant-Company from a manufacturer who was exempt from payment of excise duty on account of the fact that the process of manufacture was being carried out without the aid of power. The appellant-Company contends that the second of the aforesaid conditions, namely, that the surface active agents should have been purchased from the open market on or after the 20th day of January 1968 was fully satisfied in the present case, and hence it was entitled to the benefit of the exemption granted by the Notification, That the appellant had purchased the surface active agents used in the manufacture of the emulisifiers/wetting out agents subsequent to the 20th day of January, 1968 is undisputed. The purchases of the raw-material had been made by the appellant from the Industrial General Products Private Limited. The short question to be considered is, whether those transactions of purchase effected by the appellant from the Industrial General Products Private Limited can be regarded as purchases "from the open market"?In determining the eligibility of a person for the benefit of the exemption conferred by the Notification on the basis of the fulfillment of the second of the 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. The sole question to be examined is, whether the surface active agents used in the manufacture of the emulsifiers were purchased "from the open market" on or after the 20th day of January, 1968 ?8. The Assistant Collector as well as the Appellate Revisional Authorities have taken the view that the exemption granted by the Notification will get attracted only if the surface active agents used as raw-material had been already subjected to levy of duty at the primary stage. In our opinion, the said view is based on an erroneous interpretation of the provisions contained in item 4 of the Table appended to the Notification. The condition that the duty of excise should have already been paid on the raw- material (surface active agents) has no application to cases covered by the second part of Column (3) of Sl. No. 4 of the Table, namely, cases where the surface active agents were purchased from the open market on or after the 20th day of January, 1968.9. That brings us back to the question, whether the purchases effected by the appellant from M/s. Industrial General Products Private Limited were purchases "from the open market"? Having due regard to the context in which the expression "open market has been used in the Notification, it would be wholly wrong to understand the said expression "open market" as connoting only a market-yard, bazar or a shopping complex where goods are offered for sale. Industrial chemicals (which have to he ordinarily purchased in bulk for use as raw-material in the manufacture of secondary products) are not commodities that are usually exposed for sale in bazars and shops. Such bulk purchases of chemicals etc., are effected by placing orders with the concerned manufacturing units. In our opinion, if the transactions of sale and purchases are effected under conditions enabling every person desirous of purchasing the goods in question to place orders with such manufacturing unit and obtain supplies, they will constitute purchases "from the open market". We may in this context refer with advantage to the following observations of Swinfen Eady, J. in Inland Revenue Commissioners v. Clay(l), where the Court of appeal had to consider the scope of the expression "open market" occurring in section 25 (1) of the Finance Act, 1910 (10 Edw. 7, c. 8):"The market is to be the open market, as distinguished from an offer to a limited class only, such as the members of the family. The market is not necessarily an auction sale. The section means such amount as the land might be expected to realize if offered under conditions enabling every person desirous of purchasing to come in and make an offer, and if proper steps were taken to advertise the property and let all likely purchasers know that the land is in the market for sale."We fully agree with these observations.10. In the present case, it was open to every person desirous of purchasing the sur face active agents to place orders with the manufacturing Company, namely, M/s. Industrial General Products Private Limited, and obtain the supply on payment of the price at the prevailing rate. The sales by the said Company were not to a limited class only. Hence, the purchases of the surface active agents effected by the appellant from M/s. Industrial General Products Private Limited have to be treated as purchases made "from the open market." The denial to the appellant of the benefit of the exemption provided for by the Notification was, therefore, clearly illegal.11.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The Assistant Collector as well as the Appellate Revisional Authorities have taken the view that the exemption granted by the Notification will get attracted only if the surface active agents used as raw-material had been already subjected to levy of duty at the primary stage. In our opinion, the said view is based on an erroneous interpretation of the provisions contained in item 4 of the Table appended to the Notification. The condition that the duty of excise should have already been paid on the raw- material (surface active agents) has no application to cases covered by the second part of Column (3) of Sl. No. 4 of the Table, namely, cases where the surface active agents were purchased fromthe open market on orth day ofg due regard to the context in which the expression "open market has been used in the Notification, it would be wholly wrong to understand the said expression "open market" as connoting only a market-yard, bazar or a shopping complex where goods are offered for sale. Industrial chemicals (which have to he ordinarily purchased in bulk for use as raw-material in the manufacture of secondary products) are not commodities that are usually exposed for sale in bazars and shops. Such bulk purchases of chemicals etc., are effected by placing orders with the concerned manufacturing units. In our opinion, if the transactions of sale and purchases are effected under conditions enabling every person desirous of purchasing the goods in question to place orders with such manufacturing unit and obtain supplies, they will constitute purchases "from the openthe present case, it was open to every person desirous of purchasing the sur face active agents to place orders with the manufacturing Company, namely, M/s. Industrial General Products Private Limited, and obtain the supply on payment of the price at the prevailing rate. The sales by the said Company were not to a limited class only. Hence, the purchases of the surface active agents effected by the appellant from M/s. Industrial General Products Private Limited have to be treated as purchases made "from the open market." The denial to the appellant of the benefit of the exemption provided for by the Notification was, therefore, clearly illegal.The first of the aforementioned conditions was obviously not satisfied in the present case since the surface active agents were purchased by thefrom a manufacturer who was exempt from payment of excise duty on account of the fact that the process of manufacture was being carried out without the aid of power. Thecontends that the second of the aforesaid conditions, namely, that the surface active agents should have been purchased fromthe open market on orth day ofJanuary 1968 was fully satisfied in the present case, and hence it was entitled to the benefit of the exemption granted by the Notification, That the appellant had purchased the surface active agents used in the manufacture of the emulisifiers/wetting out agents subsequent to thery, 1968is undisputed. The purchases of thehad been made by the appellant from the Industrial General Products Private Limited. The short question to be considered is,whether those transactions of purchase effected by the appellant from the Industrial General Products Private Limited can be regarded as purchases "from the openmarket"?In determining the eligibility of a person for the benefit of the exemption conferred by the Notification on the basis of the fulfillment of the second of the 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. Thesole question to be examined is, whetherthe surface active agents used in the manufacture of the emulsifiers were purchased "from the open market" on or after thery, 1968