1988 (3) TMI 453 - HC - Central Excise

Summary

Issues Involved:

1. Whether packaging of tea amounts to "manufacture" under the Central Excises and Salt Act, 1944.
2. Whether the levy of excise duty on packaged tea is valid.
3. Whether there is any inconsistency between Section 3 of the Central Excises and Salt Act, 1944, and the First Schedule of the Central Excise Tariff Act, 1985.
4. Whether the levy of excise duty on packaged tea amounts to double taxation.
5. Whether the definition of "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944, includes the packaging of tea.
6. Whether the inclusion of packaged tea in the First Schedule to the Central Excises and Salt Act, 1944, is valid and constitutional.

Detailed Analysis:

1. Whether packaging of tea amounts to "manufacture" under the Central Excises and Salt Act, 1944:

The court examined whether the process of packaging tea from bulk into smaller packets constitutes "manufacture" as defined under Section 2(f) of the Central Excises and Salt Act, 1944. The definition of "manufacture" includes any process incidental or ancillary to the completion of a manufactured product. The court noted that the packaging of tea involves specific treatment and handling, which requires labor, capital, power, and machinery. Therefore, the packaging process was deemed to be incidental or ancillary to the completion of the manufactured product, thus falling within the definition of "manufacture."

2. Whether the levy of excise duty on packaged tea is valid:

The court upheld the validity of the levy of excise duty on packaged tea. It was observed that the inclusion of packaged tea in the First Schedule to the Central Excises and Salt Act, 1944, indicates legislative intent to treat packaged tea as a distinct excisable item. The court found that the legislative intent must be honored, and the levy of excise duty on packaged tea is consistent with the statutory provisions.

3. Whether there is any inconsistency between Section 3 of the Central Excises and Salt Act, 1944, and the First Schedule of the Central Excise Tariff Act, 1985:

The court addressed the argument that there is an inconsistency between Section 3 of the Central Excises and Salt Act, 1944, which is the charging section, and the First Schedule of the Central Excise Tariff Act, 1985. It was held that the First Schedule and the items therein are part of the Act and have statutory force. The court emphasized that every effort should be made to harmonize the provisions and avoid any repugnancy. Consequently, the inclusion of packaged tea in the First Schedule is valid and consistent with Section 3 of the Act.

4. Whether the levy of excise duty on packaged tea amounts to double taxation:

The appellants argued that the levy of excise duty on packaged tea constitutes double taxation, as duty had already been paid on the bulk tea. The court rejected this argument, stating that there is no inherent illegality in the legislature's decision to impose duty on both bulk tea and packaged tea. It was noted that Article 265 of the Constitution does not prohibit double taxation, and the legislative intent to levy duty on packaged tea must be given effect.

5. Whether the definition of "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944, includes the packaging of tea:

The court examined the definition of "manufacture" under Section 2(f) of the Act, which includes any process incidental or ancillary to the completion of a manufactured product. The court found that the packaging of tea from bulk into smaller packets is a process incidental or ancillary to the completion of the manufactured product. Therefore, the packaging of tea falls within the definition of "manufacture" under the Act.

6. Whether the inclusion of packaged tea in the First Schedule to the Central Excises and Salt Act, 1944, is valid and constitutional:

The court upheld the inclusion of packaged tea in the First Schedule to the Central Excises and Salt Act, 1944, as valid and constitutional. It was observed that the legislative intent to treat packaged tea as a distinct excisable item is clear from its inclusion in the Schedule. The court emphasized that the Schedule is an integral part of the Act and must be read harmoniously with the statutory provisions.

Conclusion:

The court dismissed the appeals, upholding the levy of excise duty on packaged tea as valid and consistent with the statutory provisions. The packaging of tea was deemed to constitute "manufacture" under the Central Excises and Salt Act, 1944, and the inclusion of packaged tea in the First Schedule was found to be valid and constitutional. The court also rejected the argument of double taxation and emphasized the need to honor the legislative intent.