1980 (12) TMI 60 - HC - Central Excise

Summary

Issues:
1. Liability to pay central excise duty on whole milk powder under Tariff Item 1B.
2. Whether the regenerated fluid milk is taxable.
3. Distinction between whole milk powder, skimmed milk powder, and butter for excise duty purposes.

Analysis:
1. The petitioner, a milk producers' union, challenged the demand for excise duty on whole milk powder under Tariff Item 1B. The court noted that the powder is intended for sale, satisfying the terms of the tariff item. Even though the petitioner also pays duty on skimmed milk powder and butter produced later, separate duties are applicable as two distinct manufacturing events occur at different times, creating different products subject to excise duty.

2. The argument that the regenerated fluid milk, an intermediate stage in producing skimmed milk powder and butter, is not taxable was dismissed. The court clarified that if the fluid milk is an intermediate product, it is not taxable. However, if it is a final product, it falls under Tariff Item 1B, unless exempted. The court highlighted that the regenerated fluid milk is not taxable due to being an intermediate product or being covered by an exemption notification, while whole milk powder, skimmed milk powder, and butter are all taxable under relevant tariff items.

3. The court emphasized the distinction between whole milk powder, skimmed milk powder, and butter. It outlined the mechanical processes involved in producing each product, highlighting that whole milk powder undergoes one process, while skimmed milk powder and butter undergo four processes, making them distinct commercial commodities. Referring to a previous case, the court affirmed that excise duty liability arises due to further mechanical processes applied to the regenerated fluid milk to produce skimmed milk powder and butter at different times.

In conclusion, the court dismissed the petition, upholding the liability to pay excise duty on whole milk powder under Tariff Item 1B and clarifying the taxability of regenerated fluid milk and the distinction between the different milk products for excise duty purposes.