1979 (10) TMI 80 - HC - Central Excise

Issues Involved:
1. Whether the coffee-chicory blend is manufactured in a factory as contemplated by Item 68 of the First Schedule to the Central Excises and Salt Act, 1944.
2. Whether the coffee-chicory blend is exempted from duty under the notification dated 1-3-1975, which exempts "all kinds of food products and food preparations".

Detailed Analysis:

Issue 1: Manufacturing in a Factory
The petitioner, Brooke Bond India Ltd., argued that the coffee-chicory blend marketed by it cannot be said to have been 'manufactured in a factory' within the meaning of Item 68 of the First Schedule to the Central Excises and Salt Act, 1944. The petitioner contended that the process employed in preparing the blend does not constitute a manufacturing process. The department, however, countered that the process employed by the petitioner in preparing the coffee-chicory blend is indeed a manufacturing process, thereby attracting Item 68.

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 referred to the Supreme Court's interpretation in Union of India v. Delhi Cloth & General Mills, which held that 'manufacture' implies bringing into existence a new substance with a distinctive name, character, or use. The court also considered other relevant cases, such as S.B. Sugar Mills v. Union of India and State of Maharashtra v. C.P. Manganese Ore Company Ltd., to determine the scope of 'manufacture'.

The court found that chicory roots, after being roasted and ground into powder, are mixed with coffee powder to create a blend known as "French Coffee". This blend is a new and different article with a distinctive name, character, and use, different from chicory roots. The court concluded that the process of roasting, powdering, and mixing chicory with coffee powder constitutes a manufacturing process, thereby falling under Item 68 of the Tariff Schedule.

Issue 2: Exemption from Duty
The petitioner alternatively argued that even if the coffee-chicory blend is considered to be manufactured in a factory, it should be exempted from duty under the exemption notification dated 1-3-1975, which exempts "all kinds of food products and food preparations". The department contended that the blend is neither a 'food product' nor a 'food preparation' and is instead a beverage manufactured in a factory, thus rightly subjected to duty.

The court examined the general heading under which coffee is mentioned in the Tariff Schedule. The official publication showed that Items 1 to 3 are under the general heading "Food and Beverages". The court held that since coffee is classified as a beverage, the coffee-chicory blend should also be classified as a beverage and not as food. The court noted that in common parlance and commercial usage in India, coffee is understood as a beverage, not as food.

The court also considered references from Halsbury's Laws of England and Corpus Juris Secundum, which indicated that the term 'food' could include beverages in certain contexts, such as food adulteration laws. However, the court emphasized that the Central Excises and Salt Act makes a distinction between foods and beverages, and the exemption notification should be interpreted accordingly.

The court further examined decisions under the Prevention of Food Adulteration Act and other statutes but found them not directly applicable. The court concluded that the coffee-chicory blend is a beverage and does not fall under the exemption for "all kinds of food products and food preparations".

Conclusion
The court dismissed the writ petition, holding that the coffee-chicory blend is manufactured in a factory and is not exempt from duty under the exemption notification dated 1-3-1975. The petitioner's arguments were rejected, and the court ruled in favor of the department, imposing costs on the petitioner.

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