1975 (10) TMI 23 - SC - Central Excise

Whether condensed skimmed milk fell within the Exemption Notification No. G.S.R. 339, dated the 1st March, 1970 and not within the excluded Item 13 of that notification? Held that - In Item 13 of the notification when the Government added the words whether sweetened or not it did mean to classify the condensed milk of sweetened or unsweetened variety but did not intended to include in Item 13 condensed skimmed milk whether sweetened or unsweetened. Even assuming that the petitioner had a manufacturing licence under Section 6 of the Act only for manufacture of condensed milk that by itself will not take condensed skimmed milk out of the Exemption Notification and include it in the excluded Item 13. For the purpose of levy of excise duty, therefore, condensed skimmed milk remains included in the Exemption Notification. Appeal allowed - direct the respondents not to enforce their demand of excise duty

Summary

Issues:
Interpretation of the Central Excises and Salt Act, 1944 regarding the levy of excise duty on milk products, specifically condensed milk and condensed skimmed milk.

Detailed Analysis:

1. The case involved a registered partnership firm engaged in manufacturing milk products, including condensed milk and condensed skimmed milk. The Central Government, through a notification, exempted certain prepared or preserved foods from excise duty, including condensed milk. However, the authorities levied excise duty on condensed skimmed milk, treating it as falling under the excluded Item 13 of the Exemption Notification. The High Court upheld this decision, leading to the appeal before the Supreme Court.

2. The Supreme Court emphasized that the common understanding of goods should be considered for excise duty purposes. It was established that condensed milk and condensed skimmed milk are distinct milk preparations. Skimmed milk is milk from which fat has been extracted, making it different from full cream milk. The Court referred to the Central Excise Rules and highlighted the distinction between milk powder and condensed milk, indicating that the Exemption Notification intended to exclude only condensed milk from full cream milk, not condensed skimmed milk.

3. The Court also referenced Rule 42 of the Prevention of Food Adulteration Rules, which classified condensed milk into different types, including condensed skimmed milk. The notification adding the phrase "whether sweetened or not" to Item 13 was interpreted as distinguishing between sweetened and unsweetened condensed milk but not including condensed skimmed milk.

4. The respondents argued that since the firm was licensed only for manufacturing condensed milk, both products should be treated similarly for excise duty purposes. However, the Court clarified that a separate license would be required for manufacturing condensed skimmed milk, as it falls under the category of milk preparations subject to excise duty exemption. Even if the firm did not have a specific license for condensed skimmed milk, it would not alter its inclusion in the Exemption Notification.

5. The Court dismissed the argument based on the firm's price list, which differentiated between "Condensed milk (full cream)" and "Condensed milk (skimmed)." The differentiation in pricing did not impact the excise duty liability, as skimmed milk would remain exempt unless specifically included in the Exemption Notification.

6. Consequently, the Supreme Court allowed the appeal, overturning the High Court's decision and directing the authorities not to enforce the excise duty demands on condensed skimmed milk. No costs were awarded in this matter.