1987 (10) TMI 62 - HC - Central Excise

Summary

Issues:
- Whether the process of preparing package tea is exigible to excise duty under a specific tariff item.
- Whether the packing process alone can be considered as a manufacturing process for the purpose of levying excise duty.

Analysis:
1. The petitioner filed a writ petition seeking a refund of excise duty collected by the Central Excise authorities, challenging the legality of the duty imposed on package tea under Tariff Item 3(2) of the Central Excises and Salt Act, 1944.

2. The petitioner, a tea packer, argued that packing tea does not amount to manufacturing under the Act. They contended that packing loose tea into containers does not create a new product beyond what is specified in the Tariff.

3. The Collector of Central Excise countered, stating that packing loose tea into packets results in a new product, package tea, which is distinct from loose tea and recognized in the market as such.

4. The petitioner clarified that they do not manufacture tea but are paid service charges for packing tea received from a supplier. They emphasized that repacking tea does not constitute manufacturing.

5. The respondent asserted that the petitioner's activities, including receiving blended tea, packing it into various sizes, and labeling it, amount to manufacturing package tea, which carries a higher duty rate than loose tea.

6. The petitioner argued that as they are only involved in packing tea supplied by another company, they should not be subject to excise duty. In contrast, the Central Government's counsel contended that packing is an integral part of the manufacturing process, making the petitioner liable for excise duty.

7. The court examined the relevant provisions of the Central Excise and Salt Act, particularly the definitions of excisable goods and manufacture, along with the applicable tariff rates for tea.

8. The court analyzed the distinction between loose tea and package tea under the Tariff, focusing on the rates of duty applicable to each category based on their marketability and nature.

9. The court determined that the petitioner's role in packing tea did not qualify as manufacturing under the Act. It emphasized that the packing process, aimed at enhancing marketability, did not constitute a manufacturing activity as defined in the law.

10. The court referred to precedents such as E.I.D. Parry Ltd. and Empire Industries Ltd. to distinguish between packing processes and manufacturing activities. It concluded that the petitioner was not liable to pay excise duty for package tea.

11. The court distinguished the cited cases from the current scenario, emphasizing the specific circumstances and the extended concept of manufacture considered in those judgments.

12. Consequently, the court ruled in favor of the petitioner, declaring that they were not liable to pay excise duty on package tea.

13. The writ petition was allowed, and no costs were imposed on either party.