1997 (3) TMI 640 - HC - Central Excise

Summary

Issues Involved:
1. Whether packaging of loose tea into smaller packets constitutes "manufacture" under the Central Excises and Salt Act, 1944.
2. Whether the levy of excise duty on the packaging of tea is within the powers of Parliament.
3. Whether the petitioner is entitled to a refund of excise duty paid in previous years.

Issue-wise Analysis:

1. Whether packaging of loose tea into smaller packets constitutes "manufacture" under the Central Excises and Salt Act, 1944:

The petitioner argued that the mere process of packaging tea from bulk containers into small containers does not amount to "manufacture" as defined in clause (f) of section 2 of the Central Excises and Salt Act, 1944. The definition of "manufacture" includes processes incidental or ancillary to the completion of a manufactured product. However, the petitioner contended that packaging does not alter the ingredients of tea and thus should not be considered manufacturing. The court referred to various judgments, including those from the Calcutta, Mysore, Bombay, and Madhya Pradesh High Courts, which held that packing alone does not constitute a process of manufacture. The judgment concluded that blending and packaging conducted by the petitioner were part of the marketing process and not manufacturing, as there was no transformation or change in the character of the tea.

2. Whether the levy of excise duty on the packaging of tea is within the powers of Parliament:

The petitioner claimed that the levy of excise duty on packaging was outside the powers of Parliament since packaging was not an act of manufacturing. The respondents argued that blending and packaging were incidental and ancillary to the completion of the manufactured product known as package tea, and thus, the levy was within the scope of the Act. However, the court found that the activities performed by the petitioner at Ambala, which involved blending and packaging of loose tea already subjected to excise duty, were part of the marketing process and not manufacturing. Consequently, the levy of excise duty on mere packaging was deemed unjustified and outside the scope of the Act.

3. Whether the petitioner is entitled to a refund of excise duty paid in previous years:

The petitioner sought a refund of the excise duty paid over the past four years, arguing that the payments were made under a mistaken belief. However, the court noted that the petitioner had not challenged the levy in any of the earlier years through appeal or revision under the Act. Additionally, there was no evidence to show that the excise duty was not charged to the buyers. Referring to the Supreme Court's decision in Indian Oil Corporation v. Municipal Corporation, Jullundur, the court held that the burden of excise duty had likely been passed on to consumers, and thus, there was no equity in allowing the refund. Therefore, the petitioner's claim for a refund was rejected.

Conclusion:

The writ petition was partly allowed. The court held that the levy of excise duty on the packaging of tea was outside the scope of the Act, as it did not constitute manufacturing. However, the petitioner's claim for a refund of excise duty paid in the previous four years was rejected. No order as to costs was made.