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TMI Blog1982 (9) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... g them and preparing coffee powder out of those seeds by mechanical process involving consumption of power. The petitioners also purchase chicory-roots and then they are subjected to roasting and grinding by mechanical process involving consumption of power. The powders thus obtained from coffee and chicory are then blended by mechanical process involving consumption of power and the product thus obtained is bottled and marketed as Coffee-Chicory Blend , what is known as French Coffee in the business market. The proportion in which the coffee and chicory powders are mixed is equal. The sample bottles in which the French Coffee is sold have been shown to us and they describe with the mixture consisting of 50% coffee and 50% chicory. The petitioners paid duty on coffee-chicory blend under Item No. 68 of the First Schedule of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act ) without any demur since 1-3-1975. But for the first time in their letter dated 10-1-1978, they raised an objection to the said levy and claimed exemption from duty under Notification No. 55/75-C.E., dated 1-3-1975 issued by the Central Government claiming that the mixture of Coffee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and any process for rendering an unmanufactured product fit for marketing or manufacture; (d) `excisable goods means goods specified in the First Schedule as being subject to a duty of excise and includes salt; (e) `factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on; (f) `manufacture includes any process incidental or ancillary to the completing of a manufactured product; and (i) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff; (i-a) in relation to manufactured tobacco, includes the labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer; (ii) in relation to salt, includes collection, removal, preparation, steeping, evaporation, boiling or any one or more of these processes, the separation or purific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) shall apply in respect of all excisable goods other than a salt which are produced or manufactured in India by, or on behalf of Government, as they apply in respect of goods which are not produced or manufactured by Government. (2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force. (3) Different tariff values may be fixed for different classes or description of the same article. 6. Section 37 of the Act reads thus : 37. Power of Central Government to make rules : The Central Government may make rules to carry into effect the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may.....mpt any goods from the whole or any part of the duty imposed by this Act. 7. Section 4 of the Act deals with the valuation of excisable goods for the purpose of charging of duty of Excise. The Act levies a duty called Excise Duty on g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Writings slates and slate pencils; 5. Drawing and mathematical instruments; 6. Sports goods; 7. Omitted; 8. Handicrafts; 9. Animal feed including compound livestock feed; 10. Omitted; 11. Agricultural implements and parts thereof but excluding (i) power operated agricultural implements and parts thereof, and (ii) implements designed for use as attachments with tractors or power tillers and parts thereof; 12. Contraceptives; 13. All products of the printing industry including newspapers and printed periodicals; 14. Scented Chunnam (lime); 15. Katha (Catechu); 16. Artificial limbs and rehabilitation aids for the handicapped; 17. Vibuthi (Thiruneeru); 18. Insecticides, pesticides, weedicides and fungicides; 19. All drugs, medicines, pharmaceuticals and drug; intermediate not elsewhere specified; 20. Agricultural discs; 21. Engraved copper rollers or cylinders for use in textile industry; 22. Guar splits: Provided that food products and food preparations specified in the Schedule, shall not include boiled sweets, toffees, caramels, candies, nuts (including almonds) and fruit kernels coated with sweetening agent. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The words used in the inclusive definition denote extension and cannot be treated as restricted in any sense. While dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation. (State of Bombay v. Hospital Mazdoor Sabha) (A.I.R. 1960 Supreme Court Page 610). 12. While the definition manufacture enumerates the processes incidental or ancillary to the completion of a manufactured product in relation to unmanufactured tobacco, in relation to manufactured tobacco, in relation to salt, in relation to patent or proprietary medicines as defined in Item No. 14E of the First Schedule, and in relation to goods comprised in Item No. 18, it is silent in relation to unmanufactured coffee or any other item not specified in the First Schedule which is likely to fall under Item No. 68. The First Schedule contains 67 designated commodities, 68th being a residuary item, out of which all goods but two tobacco and coffee are manufacture goods, the taxable event occurs, in theory, at the moment when the process of manufacture is completed. The definition of `manufacture which includes any incidental or ancillary process requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid definition of the word `manufacture was inserted in the Act. It was so inserted by U.P. Act No. 38 of 1975 with effect from 13th October, 1972. Anyhow, grinding of wheat into flour has not been held to be manufacture, vide U.P. Atta Chakki Vyavasai Sangh, Varanasi v. Krishi Utpadan Mandi Samiti, Varanasi (1976 U.P.T.C. 322). Similarly, in the case of a dealer, who purchased til oil and, after adding scent to it, sold it as hair oil, it was held that the mixing of scents in ordinary til oil does not amount to manufacture of perfumed oil, vide Commissioner of Sales Tax v. Bechu Ram Kishori Lal (1976) 38 S.T.C. 236. 15. The word `manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. Mere labour bestowed on an article, even if the labour is applied through machinery, will not make it a manufacture, unless it has progressed so far that a transformation ensues, and the article becomes a commercially known as another and different article from that with which it begins its existence. It must not be a commodity, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cises and Salt Act, 1944, which furnishes no special definition of the word `manufacture . The question canvassed there was whether carbon dioxide one of the constituents of kiln gas, produced as one of the processes necessary for refining sugar, could be said to have been manufactured, quite apart from the manufacture of sugar itself. It was held that what was produced was kiln gas, a compound of different gases and not carbon dioxide, though it was one of the different gases, which made up kiln gas, and, therefore, did not attract Item 14H in the Schedule to the Act. Since the excise duty was leviable under the Act on `manufacture of goods, the Court explained the connotation of the word `manufacture . In so doing, the court said that the word `manufacture implied a change, but that a mere change in the material was not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character, use. This was also the meaning given to the word `manufacture in Union of India v. Delhi Cloth and General Mills (AIR 1963 S.C. 791 = 1977 E.L.T. (J 177)]. A notification issued by the Government of U.P. under Section 3A of the U.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption of pineapple fruit in the manufacture of those goods so as to be liable to purchase tax under Section 5A of the Kerala General Sales Tax Act, 1963, and it was held as under : ........... Commonly, manufacture is the end-result of one or more processes, through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can not longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity. 21. The Supreme Court, in that connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial identity, it can be said that manufacturing has been taken place. Accordingly, where the Tribunal found as a matter of fact that the constituent articles composing the two varieties of pan-masala sold by the assessee retained their original form and that the substantial identity of those articles continued. The Court held that : (i) it could not be said that there was a transformation of the different constituent elements in the sense of a new or different article emerging therefrom, (ii) the mixture of supari, variyali, dhanadal, sweet flavoured powder etc. as effected by the assessees and sold under the popular name of pan-masala did not amount to `manufacture within the meaning of that expression as defined in Section 2(16) of the Act and accordingly the assessee was entitled to deduct the sales thereof as resales of goods purchased from registered dealers in terms of Section 7(ii) of the Act, (iii) the assessee s sales of pan-masala containing the mixture of supari, chuna and tobacco were sales of a `form of tobacco within the meaning of Item 4 of the First Schedule to the Central Excises and Salt Act, 1944 and, therefore, they were sales of tobacco within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read, or fish or meat or vegetables, when they eat these articles of food; we speak of people consuming tea or coffee or water or wine, when they drink these articles; we speak of people consuming cigars or cigarettes or bidis, when they smoke these. The production of wealth, as economists put it, consists in the creation of `utilities . Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the `utilisation thereof. For some commodities, there may be even more than one kind of final consumption......... But the act that there is for each commodity what may be considered ordinarily to be the final act of consumption, should not make us forget that in reaching the stage at which this final act of consumption takes place the commodity may pass through different stages of production and, for such different stages, there would exist one or more intermediate acts of conversion. (10) ....... This conversion of a commodity into a different commercial commodity by subjecting it to some processing is consumption within the meaning of the Explanation to Article 286 no less than the final act of user when no distinct commodity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that both rice and paddy are identical goods and that when paddy was dehusked there is no change in the identity of the goods. Reliance was placed by the appellants in support of their contention on the previous decisions of the Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer (1961) (12 S.T.C. p. 286) (S.C.) wherein the Court was called upon to consider whether betel leaves could be considered as vegetables. Further reliance was placed on another earlier decision of the Supreme Court in Commissioner of Sales Tax v. Jaswant Singh Charan Singh (1967) (19 S.T.C. 469) (S.C.), wherein the Supreme Court held that the word coal included charcoal on the ground that in ordinary parlance `coal includes `charcoal . The appellant therein also relied upon the earlier decision of the Supreme Court in State of Madhya Bharat v. Hiralal (1966) (17 S.T.C. 313) (S.C.) wherein the Court was called upon to consider whether when a dealer purchased scrap iron locally and imported iron plates from outside and after converting them into bars, flats and plates in his mills, sold them in the market, they continued to be iron and steel . The Supreme Court ruled that in spite o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as sellers of rice that we should hold that the levy in question is impermissible because paddy and rice are liable to be taxed at a single point. Their Lordships observed thus : No provision is shown to us which bars such a taxation when the commodities are different. In fact, in this case, there is no double taxation on the same commodity . A similar contention was rejected by this Court in the case of Baburam Jagdish Kumar Co. v. State of Punjab (44 S.T.C. 159) (S.C.) thus : We may at this stage refer to one other subsidiary argument urged on behalf of the appellants. It is urged that because paddy and rice are not different kinds of goods, but one and the same, the inclusion of both paddy and rice in Schedule C to the Act would amount to imposition of double taxation under the Act. There is no merit in this contention also because the assumption that paddy and rice are one and the same is erroneous. In Ganesh Trading Co. v. State of Haryana (1973) (32 S.T.C. 623) (S.C.) arising under the Act, this Court has held that although rice is produced out of paddy, it is not true to say that paddy continued to be paddy even after dehusking; that rice and paddy are two different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, it could not be said that it was not consumed in the manufacture of other goods. Ingots would be `other goods as scrap and ingots are not the same. Anyone going into the market and asking for scrap will not be given ingot and vice versa. Further the process employed by the assessee by putting the steel scrap into fire and making ingots out of them is a process of manufacture and therefore, there is consumption of steel scrap and manufacture of the same into goods . 35. In Ghennakesavulu v. Board of Revenue (1981) (47 S.T.C. 403) the assessee purchased old silver jewellery or silverware from customers, and after melting them manufactured new silver jewellery of silverware and sold them. It was contended on behalf of the dealer before the Madras High Court that whether they are old jewellery or new jewellery or whether they are different kinds of jewellery, still the jewellery continued to be silver jewellery. The Court held that the old silver jewellery of silverware purchased, melted subsequently and made into new silver jewellery of silverware ought to be treated as separate distinct goods or commodities. 36. In Jammula Srirangam Brothers v. Sales Tax Officer (1966) (17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re two distinct commercial goods observed thus : On behalf of the appellants the argument was stressed that ginning process was a manufacturing process, and ginned cotton and cotton seeds were different commercial commodities and the respondent was not entitled to the exemption under Section 5(2)(a)(vi) of the Act. It was said that unginned cotton was transformed into two distinct commercial commodities and there was no substantial identity between unginned cotton and ginned cotton or cotton seeds. It was argued that the ginning process required complicated machinery of manufacture. Reference was made in this connection to the mechanical aspect of the ginning process described in Encyclopeadia Britannica, Vol. 6 : Hand separation of lint and seed was replaced rapidly by use of saw-type gins in the United States after the inventions of Eli Whitney in 1794 and of Hogden Holmes in 1796. Whitney s gin was improved upon by Holmes who substituted toothed saws for the hooked cylinder and flat metal ribs for the slotted bar used by Whitney. The saws, metal ribs and doffing brush in these early models persist in modern gins, with no basic change in ginning principle having been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in Item 21 and brings about a new product by mixing one or more of the said articles with one or more of any organic manure, that product cannot be said to be the same chemical manure or fertiliser which he had purchased and which had already been subjected to tax. The produce got by the petitioner by mixing one or more of chemical manure with one or more of the organic manure will have different properties of its own and it cannot be said it retains the same characteristics or properties of any one of the chemical manures or organic manures which went to make up the resultant mixture. For getting an exemption on the ground that the sale of an article is a second or subsequent sale, it must by established that there has been a sale of the same goods at an anterior point of time. If there is no identity between the product purchased with the product sold it is not possible to treat the sales of the products manufactured and sold by the petitioner as second sales . This decision was followed by the High Court of Madras in its later decision reported in State of Tamil Nadu v. Rallis India Limited (1974) (34 S.T.C. p. 532) and in State of Tamil Nadu v. Pyare Lal Malhotra (1976) (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but the scrap is made into a better marketable commodity. Before the High Court this contention was not pressed. That apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses its identity and becomes a new marketable commodity. The process is certainly one of manufacture . 42. The Supreme Court further observed thus : It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the sales tax law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of sales tax is also concerned with goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object appears to us to be tax sales of goods of each variety and not the sale of the substance out of which they are made...... As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax........ The law of sales tax is also concerned with `goods of various descriptions. It, therefore, becomes necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description. 45. In State of Gujarat v. Oil Natural Gas Commission [(1982) 49 S.T.C. p. 310)], a Division Bench of the Gujarat High Court considered the question whether the operation of mining mineral from the earth or for that matter extracting oil from the oil well can be considered to be a process which can be included in the term `manufacture as defined under the provisions of the Bombay Sales Tax Act, 1959, as applicable to the State of Gujarat. Their Lordships of the Gujarat High Court, relying upon the principles laid down by the Supreme Court in Chowgule Co. Pvt. Ltd. v. Union of India [(1981) 47 S.T.C. p. 124 (S.C.)] held that on the plain reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (1959) 10 S.T.C. 500 where the Bombay High Court had held that manual mixing of different kinds of tea would not bring into any product of a different characteristic, name or use and, therefore, mixing cannot be said to be any process of manufacturing. The Supreme Court held that the said decision did not lay down the correct law because the means employed for the purpose of carrying out the operation would not be relevant for purposes of determining whether any process is applied or not, but it is the effect of the operation on the commodity that is material for purposes of determining whether the operation constituted `processing or not. In that view of the matter, therefore, the Supreme Court held that in the course of loading the blending of ore taken from different stock piles would amount to processing and, therefore, would be an activity of manufacturing . 46. In Metro Ready Wear Company v. Collector of Customs (1978 II Excise Law Times, p. J 520) the appellants were the manufacturers of brassieres. After the brassieres were stitched, the finished brassieres were ironed with electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition contained in Section 2(f) the learned Judges held that any process that is incidental or ancillary to the completion of a manufactured product, however unessential it may be, will fall within the compass of the expression `manufacture . But, in order that any process can be regarded as incidental or ancillary to the completion of a manufactured product it must have some relation to the manufacture of finished product. On the facts of that case the learned Judges came to the conclusion that the printing or lacquering could not be said to be incidental or ancillary to the completion of the process of manufacture referred to in Item 27(e) of the First Schedule since the said item takes in only a manufacture of tubes by application of the process of extrusion. This decision is, in our opinion, of little assistance to the petitioner because the conclusion of the learned Judges that excise duty was not leviable in that case was rested wholly on the ground that Item 27(e) of the First Schedule authorises the levy of excise duty only if there is a manufacture of pipes or tubes of aluminium by the application of any process or extrusion. It was because that process of manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excises and Salt Act, 1944. The respondents claim that the product, as it appears in the form of uncut circles after rolling of billets by the rolling mills, unless these uncut circles are trimmed and after further work on them, they are converted into utensils. The contention on behalf of the respondent was that when the billets were rolled into circles no process of manufacture was carried out and consequently excise duty could not be charged under Item No. 26A, which imposes the liability only when goods like circles are manufactured. Reliance was placed by the respondent on the interpretation of the word `manufacture as defined in the Central Excises and Salt Act and interpreted in two decisions of the Supreme Court in Union of India v. Delhi Cloth General Mills (A.I.R. 1963 S.C. 791) and South Bihar Sugar Mills Ltd. v. Union of India (1968) S.C. 922). Justice Bhargava of the Supreme Court repelled the contention raised on behalf of the respondent and observed that the principles laid down in the said two decisions of the Supreme Court have no application to the present case. The Supreme Court observed thus : In our opinion, neither of these cases supports the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 26A(2). Similarly, the decision in South Bihar Sugar Mills Ltd. v. Union of India is of no help on this point, because again the gas, which was subjected to excise duty, was held by the court not to be carbondioxide, while only carbondioxide was liable to duty. It was held that the product that came into existence was a mixture of gases containing only a percentage of carbondioxide and could not, therefore, be held to be carbondioxide alone which could be subjected to excise duty under Item 14H of the First Schedule. 49. As regards the contention that there was no process of manufacture in the goods, the Supreme Court further observed as follows : According to the respondents, the conversion of billets into circles did not bring any new substance into existence, nor did it bring into existence any completed product, so that there was no process of manufacture which alone could render the circles liable to excise duty. This argument again appears to be based on a misunderstanding of the law. There is, first, the circumstances that, in Item 26A itself, the legislature has laid down that excise duty shall be leviable on billets at a lower rate and on manufacture of ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = 1983 E.L.T. 1582 should be the guiding principles in determining the question whether a particular commodity has been subjected to the process of manufacture. Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. The test that is required to be applied is: does the processing of the original commodity being into existence a commercially different and distinct commodity. On an application of this test it is clear that the blending of different qualities of ore possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act provides for the levy on all excisable goods, other than salt which are produced or manufactured in India at the rates set forth in the First Schedule. The Central Government framed the Central Excise Rules, 1944 in exercise of the powers conferred on it by Sections 6, 12 and 17 of the Act. Under Rule 8 (1) the Central Government is empowered by notification in the Official Gazette to exempt, subject to such conditions as may be specified, any excisable goods from the whole or part of duty leviable on such goods. The rate of excise duty was mostly on the ad valorem basis and hence Section 4 laid down the principles to be followed in calculating the value of an article. 52. In the present case, as we have already indicated earlier, the product that is sought to be subjected to duty is the goods viz., mixture or blend of Coffee and Chicory . Chicory is neither an excisable goods nor it is an item of the First Schedule. It is only the Coffee which is an excisable goods covered by Item No. 2 of the First Schedule. Under Item No. 2(1) the levy on Coffee, cured is ₹ 100/- per quintal and whereas under sub-item (2) the levy on Instant Coffee is 20% ad valorem plus the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, relied upon various articles, journals and books written by experts and also the provisions of the Prevention of Food Adulteration Act, 1954 and the rules made thereunder to explain as to the meaning and content of Coffee of various kinds and Chicory and also Coffee-Chicory Mixture . It is not in dispute that Chicory is a perennial herb. As a cultivated crop, common Chicory is grown to some extent for its roots. Its roots roasted and ground are used as a substitute for an adulterant of or an addition to Coffee. In Great Britain it is chiefly in connection with coffee that Chicory is employed. Chicory gives the coffee additional colour, bitterness and body. The roots of Chicory, dried, ground and roasted are used by the appellants for admixture with Coffee. The flavour of Chicory is very peculiar and popular. The Prevention of Food Adulteration Rules defined the standards of quality for and fixed the limits of variability permissible in respect of Coffee and Chicory, which are as follows : A.08. COFFEE : A.08.01 (1) Coffee (green, raw or unroasted) means the seeds of Coffee Arabic, coffee liaberica, coffee excelsa or Coffee robusta freed from all but a small portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flavour. The coffee-chicory mixture shall contain caffeine not less than 0.6 per cent and the aqueous extract shall not be more than 50 per cent. Any tin or other receptacle containing a mixture of coffee and chicory shall not bear any misleading expression. The expression French Coffee may be used if followed by the words mixed with chicory or blended with chicory . 57. From what is stated above it is clear that coffee and chicory are two separate and independent commodities or goods. Coffee is an excisable goods covered by item No. 2 of the First Schedule. Chicory does not find place in the items of the First Schedule. There is nothing on record to show that Chicory has been declared as an excisable goods, even under Item No. 68 of the First Schedule. The Central Excises and Salt Act, 1944 does not define Goods . The Legislature, therefore, must be taken to have used every word in its ordinary dictionary meaning. The Dictionary meaning of the goods is that it must be something which can ordinarily come to the market to be bought and sold and is known to the market. As already stated above, excisable goods means goods specified in the First Schedule as being s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion whether the expression Coffee as found in Section 5 (v) of the Madras General Sales Tax Act, 1959 would include a variety of stuff known as French Coffee or by any other trade name which is made by an admixture of Coffee powder and Chicory powder. It was held in that case that the term Coffee should be confined only to the forms of Coffee as explained in Madras General Sales Tax Act, 1959 and that it could not be extended to coffee Blended with chicory which, according to the usage, is different article from coffee and is often referred to as French Coffee . It was further observed that: When.........we find that there are several enactments dealinh with the Coffee which defined Coffee in a particular manner, confined only to pure coffee, there is no reason why a similar connotation to the expression Coffee in the absence of any particular definition thereof in the Madras General Sales Tax Act, should not be adopted. In our opinion the mixture or blend of two commodities Coffee and Chicory as such does not fall within the content of the expression Coffee used in item No. 2 of the First Schedule and hence it necessarily falls under item No. 68 of the First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny finding whether dispensing of medicines constituted a manufacture, but he held that dispensing resulted in a new mixture and thereby the chemist produced goods for sale. He observed (at page 160): When dispensing has taken place, but not before the chemist has the goods with which to supply his customers and which he has agreed to sell to them. The resultant mixtures, after dispensing prescriptions, are the goods sold by a dispensing chemist to his customers the process of dispensing is to produce those goods for sale, without which process sales of mixtures or compounds cannot be effected by a chemist. Even if that process is not the manufacture of goods, as articles of furniture, mechanical appliances and paints are made from raw materials, nevertheless, since it is the production of goods for the purpose of selling to customers, the chemist who dispense prescriptions thereby produces goods for sale . Das, J., however, held that the activity of dispensing constituted a manufacture. He obse-rved : To manufacture goods in common parlance means to bring goods into being . To manufacture or produce goods for sale means to bring into being or to produce something in a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to Anwarkhan Mehboob s case (11 S.T.C. 698) (S.C.) relied upon by the company and observed that it is not a direct authority on the question of what is manufacture and that it does not furnish a guide that in such cases the test should be the bringing into existence of a different commercial commodity. Again referring to the decision of Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (10 S.T.C. 500), the learned Judges observed that it is pertinent to note that in that case what was bought was tea leaves and what was sold was also tea leaves and that there was no plea that it was commercially different article, as the commodity remains in the same condition. In fact the Supreme Court in Pio Food Packers, case (46 S.T.C. p. 63) = 1980 E.L.T. 343 disapproved the view of Bombay High Court in Nilgiri Ceylon Tea Supplying Company (10 S.T.C. 500). The Supreme Court held that the said decision did not lay down the correct law because the means employed for the purpose of carrying out the operation would not be relevant for the purpose of determining whether any process is applied or not, but it has the effect of the operation of the commodity that is material for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct. In the case of the State of Gujarat v. Sukharam Jagannath (50 S.T.C. 76), it was found, as a matter of fact that the constituent articles composing the two varieties of pan-masala retained their original form and that the substantial identity of those articles continued. Thus in almost all the cases relied upon by the learned Counsel for the appellants the original commodity has not lost its original identity. In our view, on the facts, each of the above cases relied upon by Shri K. Srinivasa Murthy, the learned Counsel for the appellants, has been rightly decided and their is no conflict as such with the decisions rendered by the Supreme Court relied upon by Shri Upendralal Waghray, Counsel for the Central Government discussed hereunder. 64. In Anwarkhan Mehboob Co. v. State of Bombay (A.I.R 1961 S.C. 213), the Supreme Court held that the conversion of raw tobacco into bidi pattis by removing stem and dust, which, in turn, was required for the manufacture of bidis, emerge into a commercially different commodity. In the case of Hajee Abdul Shukoor Co. (1964) (15 S.T.C. 719) (S.C.), the tanning of raw hides and skins was held as a manufacturing process resulting in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court held that the ironing of stitched brassieres using electric iron to be a manufacturing process involving a transformation in the commercial identity of the article. In the case of Union of India v. Ramlal Mansukharai (A.I.R. 1971 S.C. 2333), the process of melting the metals and mixing them together was held by the Supreme Court as a manufacturing process, resulting in the production of a new commercial commodity. Relying upon the ratio decided in these cases and applying the test laid down therein and on a consideration of all the facts and circumstances of the case we hold that the process adopted by the appellants of roasting and grinding coffee seeds and Chicory roots by the mechanical process involving consumption of powder and then mixing the powders thus obtained from coffee and chicory by mechanical process involving consumption of power constitute the process of manufacture as defined in Section 2(f) of the Central Excises and Salt Act, 1944 and further hold that the product thus obtained known as Coffee-Chicory Blend and otherwise known as French Coffee in the business market is a distinct commercial commodity falls under Item No. 68 of the First Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mixture of Coffee and Chicory is called French Coffee , the resultant product does not continue to be coffee and that Coffee and French Coffee are two different goods in commercial circles and that there is a change in the identity of the goods. 67. In Alladi Venkateswarlu v. Government of A.P. (41 S.T.C. 394), Beg, C.J. observed thus : It may be that an item may be taxed once as raw material and after it is manufactured and converted into separately taxable goods, taxed again as another taxable item altogether. But in such cases, the identity of the goods sold would be deemed to be different even though the raw materials may have been taxed already in a different form earlier. The question, therefore, before us is whether rice which is obtained form paddy already taxed under Item No. 8 of the Second Schedule ceased to be rice falling prima facie under Item No 66B as rice on which tax was already paid when it was in the from of paddy?...... It is clear that there is a distinction between Paddy as found in Item No. 8 of the Second Schedule and Rice , as mentioned in Item No. 66 of the First Schedule. Apparently, the removal of the husk makes this difference.The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to goods Coffee-Chicory Mixture . 69. Shri K. Srinivasa Murthy, the learned Counsel for the appellants relied upon certain passages in Corpus Juris Secundum, Vol. X 36 under the heading Food in General: which reads thus : Except as used in some statutes, the word Food includes that which is drunk, as well as that which is eaten, for nourishment, as used in statutes. It may include food for animals as well as food for human beings, although in common use the word feed is employed when referring to articles fed to animals. In the general sense of the term, food is that which is eaten or drunk for nourishment . It includes lard, milk, milk chocolate, cheese, coffee, condiments, confectionary, popcorn, and oleo oil, but not talc, tobacco, whisky, or saccharin. What constitutes food within the meaning of statutes making it an offence to mingle poisons with food is considered in the C.J.S. title poisons. In food statutes the term usually includes all articles used for food or drink by man, or by man and other animals whether sample, mixed, or compound. In construing, certain statutes, however, it has been held that the term food does not include a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff as follows : that which is taken into the system to maintain life and growth and to supply waste of tissue . In Webster s international Dictionary food is defined as- nutritive material absorbed or taken into the body of an organism which serve, for purposes of growth, work or repair and for the maintenance of the vital process. Then follows this explanation : Animals differ greatly from plants in their nutritive processes and require in addition to certain organic substances (water, salts etc.) and organic substances of unknown composition (vitamins) not ordinarily classed as foods (though absolutely indispensable of life, and contained in greater or less quantities in the substances eaten complex organic substances which fall into three principal groups, Proteins, Carbohydrates and Fats. Next is given a special definition for legal purposes namely- As used in laws prohibiting adulteration etc., food is generally held to mean any article used as food or drink by man, whether simple, mixed or compound, including adjuncts such as condiments etc., and often excluding drugs and natural water . The definition given of food stuff is : 1. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p further observed thus: Now the comparison of one Act with another is dangerous, especially when the Act used for comparison is an English Act and a war-time measure, and I have no intention of falling into that error. I am concerned herewith the Act before me and must interpret its provisions uninfluenced by expressions, however similar, used in other Acts. I have referred to the case discussed above, not for purposes of comparison but to show that the terms food and food-stuffs can be used in both a wide and a narrow sense and that the circumstances and background can alone determine which is proper in any given case . 73. The Supreme Court has laid down guidelines as to the use of Foreign Decisions and Laws, while considering the provisions of the Indian Statutes. The Supreme Court made the following observations in various cases : No assistance can be derived from decisions that deal with other laws made in other countries to deal with situations that do not necessarily arise in India . [Pratap Singh v. Shri Krishna Gupta (A.I.R. 1956 S.C. 140)] . While dealing with the problem of construing a specific statutory provision it would be unreasonable to invoke the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken to restrict the plain terms of the section. It does not also prevail, where the intention of the legislature can be gathered by reference to other sections. The heading of a chapter may be referred to in order to determine the sense of any doubtful expression in a section ranged under it. But it cannot control unambiguous expressions. It has repeatedly been said by the Supreme Court that it is not safe to pronounce on the provisions of one Act with reference to decisions dealing with other Acts, which may not be in pari materi (Hari Khemu Gawali v. Deputy Commissioner of Police, Bombay, A.I.R. 1956 S.C. 559 at p. 568). It is no sound principle of construction to interpret expressions used in one Act with reference to their use in another Act. The meaning of words and expressions used in an Act must take their colour from the context in which they appear. (Ram Narain v. State of Uttar Pradesh, A.I.R. 1957 S.C. 18 at p. 23). It is the part of judicial prudence to decide an issue arising under a specific statute by confining the focus to that statutory compass as far as possible. The diffusion into wider jurisprudential areas is fraught with unwitting conflict or confusion (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1944, which is a taxing statute. Now there is one cardinal rule of interpretation which is always to be borne in mind, while interpreting entries and expressions in a tax legislation and it is that the words used the entries must be construed not in any technical sense, not from the scientific point of view but as understood in the common parlance. We must give the words used by the legislature the popular sense meaning That sense which people conversant with the subject-matter with which the statute is dealing would attribute to it . The words Coffee , Food and Food Products and Food preparations must, therefore, be interpreted according to ordinary parlance and must be given a meaning which people conversant with these commodities would ascribe to them. 78. The question in this appeal thus revolves on the interpretation to be placed on the words and expressions Coffee , Food , Food products and Food preparations , taking into consideration the scheme of the items of the First Schedule. In Union of India v. G.W.F. Mills (A.I.R. 1977 S.C. 1548), the Supreme Court held that the well-known rule in interpreting items in statutes like the Central Excises and Salt A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried on with the aid of power, the following, namely :- (1) Biscuits, (2) Butter, whether pasteurised or not, and (3) pasteurised or processed cheese . 80. Item No. 1C is restricted only to the three kinds of mechanically manufactured food products . mentioned therein. If really the intention of the Legislature was to consider the goods Coffee or Instant Coffee or Coffee-chicory Mixture manufactured with the aid of power, as Food or Food product , then these commodities would have been under Item 1C and not as a separate item under Item No. 2 and that too in a very restricted manner and sense. Evidently the intention of the Legislature is to treat each of the goods Coffee covered by Item No 2, and food and food-products covered by Item Nos. 1B and 1C respectively as separate and distinct commercial goods. If any food product other than the articles enumerated in Item No. 1C are to be exempted by a notification in the Official Gazette by the Central Government under Rule 8(1) of the Rules, it can be possible only by issuing a notification under item No. 68. The fact that item No. 68 deals with only other excisable goods not specified in item Nos. 1 to 67, clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falling under exemption notification issued under Item No 68 of the First Schedule does not arise. The burden of proof that Coffee-chicory Mixture was food or food product or food preparation was on the appellants to be entitled for exemption of Coffee-chicory Mixture . The appellants must show that the goods Coffee-chicory Mixture was covered by the aforementioned exemption notification. The fact that the item `coffee covered by Item No. 2 of the First Schedule is distinct from the items mentioned in the exemption notification falling under Item No 68 of the First Schedule, one has to irresistibly conclude that the goods Coffee-chicory Mixture is neither food, nor food product nor food preparation, so as to enable the appellants to claim exemption from excise duty. 81. In this context it has to be borne in mind that the Central Government by another notification No. 179/77-C.E., dated 18-6-1977 exempted from the whole of the duty of excise leviable on goods falling under Item No. 68 in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power. We have already noted that in the exemption notification No. 55/75-C.E., dated 1-3- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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