1985 (11) TMI 58 - HC - Central Excise

Summary

Issues Involved:
1. Whether nascent timber and sawn timber are different commercial commodities.
2. Whether any 'manufacture' is involved in converting the nascent timber into cut sizes, planks, etc.
3. Whether the goods in question are 'excisable goods' under the Central Excises Act.

Summary:

Issue 1: Different Commercial Commodities
The petitioners, owners of saw mills, contended that sawn timber is not a different commodity from nascent timber. They argued that timber continues to be understood as timber even after it is converted into smaller sizes, and no new commodity comes into existence. The court referred to several Supreme Court decisions, including *Union of India v. Delhi Cloth and General Mills Co. Ltd.* and *State of Orissa v. The Titaghur Paper Mills Co. Ltd.*, which emphasized that for a process to be considered 'manufacture', it must bring into existence a new substance known to the market. The court concluded that sawn timber, planks, and cut sizes are not different commercial commodities from nascent timber.

Issue 2: Involvement of 'Manufacture'
The petitioners argued that their activity of cutting timber logs into smaller sizes does not involve 'manufacture' as defined u/s 2(f) of the Central Excises and Salt Act, 1944. They cited Supreme Court rulings which state that 'manufacture' implies a transformation resulting in a new and different article. The court agreed with the petitioners, noting that the process of sawing timber does not result in a new commodity but merely changes the form of the existing timber.

Issue 3: Excisable Goods
The court examined whether sawn timber and related products are 'excisable goods' u/s 2(d) of the Central Excises Act. The Department argued that these products are excisable under Tariff Item No. 68, supported by Trade Notice No. 145/76. However, the court, relying on the Supreme Court's interpretation in *Titaghur Paper Mills* and other cases, held that since sawn timber is not a new commodity, it does not qualify as 'manufactured goods' and thus is not subject to excise duty.

Conclusion:
The court concluded that the sawing of timber logs into smaller sizes does not amount to 'manufacture' and that sawn timber is not a different commercial commodity from nascent timber. Consequently, the goods in question are not 'excisable goods' under the Central Excises Act. The impugned show cause notices issued to the petitioners were quashed, and the rule in each case was made absolute.