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TMI Blog1997 (3) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) manufacture includes any process (d) incidental or ancillary to the Completion of a manufactured product; and (i) In relation to tobacco, includes the preparation of cigarettes, cigars, cheroots, bidis, 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 packing 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 purification of salt obtained in the manufacture of saltpetre, the separation of salt from earth or other substance so as to produce elementary salt, and the excavation or removal of natural saline deposits or efflorescence; (iii) In relation to patient or proprietary medicines, as defined in Item No. 14E of the First Schedule and in relation to cosmetics and toilet preparations as defined in Item No. 14F of that schedule, includes the conversion of powder into tablets or capsules, the labelling or relabelling of containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government may fix, is leviable on tea of all varieties except package tea and instant tea. Under sub-item (2), the rate of excise duty on package tea has been fixed at ₹ 1.25 per kilogram in addition to the duty leviable under sub-item (1). Excise duty on instant tea under sub-item (3), is levied at 10 per cent ad valorem in addition to excise duty leviable under sub-item (1). 5. The petitioner s case is that no excise duty is payable because it has already been paid by the Principals at Calcutta and the petitioner was only doing packaging at Ambala and, therefore, it did not fall within the meaning of manufacture . It is argued by Shri J.K. Sibal, learned Senior Advocate for the petitioner, that packaging was not manufacturing as defined in clause (f) of section 2, of the Act. The word manufacture means the bringing of a change in a material by some processing. Every change in a material is, however, not manufacture . There must be a transformation and thereby a new and different article should emerge with a distinct name, character and use. Mere process of packaging of tea from bulk containers into small containers, without making any alteration in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (April 1982 to February 1983) 5,70,194 Total :- 11,13,756/- 7. The petitioner has sought the refund of the amount of excise duty paid in the earlier 4 years as mentioned above. It is also prayed that sub-item (2) of Item 3 of the First Schedule to the Act be declared as ultra vires and the respondents be prohibited from recovering excess duty from the petitioner on the packaging of tea. 8. The respondents have contested the claim of the petitioner with the plea that the petitioner, after receiving tea in bulk from M/s. Duncans Tea Sales Limited, did two acts, namely, (i) blending and (ii) packaging. This has been admitted by the petitioner in its letter dated 16-12-1982 sent to the respondents. It is contended by Shri Arun Nehra, Senior Standing Counsel for the Central Government, that blending was an activity incidental and ancillary to the completion of manufacture and so was packaging. Since the petitioner was doing not only packaging but blending also, there was no force in the petitioner s plea that the package tea was not liable to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nehra has further argued on behalf of the respondents that blending was a fine art and was, therefore, a necessary process and part of manufacture . Different blends are obtained by proper mixing of different varieties of tea. Manufacture is complete after blending and packaging only. 12. Packing was held to be not a process of manufacture by the Calcutta High Court in Orissa Industries Limited v. Union of India and others - 1979 (4) E.L.T (J 457). That was a case where chinaware, porcelain-ware, glass as well as glass-ware were delivered to customers in packed condition. It was held that packing by itself did not constitute a process which may be treated as incidental or ancillary to the completion of such goods because they can be delivered to the customers even in wholesale without packing. 13. In another case, Calcutta High Court in Seth Chemical Works (P) Ltd. v. Union of India - 1993 (66) E.L.T. 76, examined the question of duty on the ultra-marine blue manufactured in bulk and sold in bulk as well as in small packets. It was held that packing in small packets, not being manufactured, was not liable for duty. 14. The Mysore High Court had also an occasion to exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 3 of the First Schedule is said to be without jurisdiction and outside the scope of the Act. Liability to pay excise duty would arise only where, on certain processing, a different article emerged. Blending was only the mixing of loose tea with different flavors and colours. Since it was an act of mixing alone, that could hardly be treated to be an act of manufacturing. 17. Shri Arun Nehra has placed reliance on a decision of the Supreme Court in Aditya Mills Ltd. v. Union of India - 1988 (37) E.L.T. 471 (S.C.) = AIR 1988 SC 2237. That was a case where two plies of Polyester Spun Yarn (PP) and one ply of Rayon Filament Yarn (RF), which are doubled together and the resultant yarn is referred to as PPRF Yarn. That resultant Yaran is a separate and distinct item and is taxable under Tariff Item 68 no withstanding that duties already paid on Polyester Spun Yarn and Rayon Filament Yarn. It was observed that excise duty is a duty on the manufacture of goods and not on sale. Manufacture is complete as soon as, by the application of one or more processes, the raw material undergoes some change. If a new substance is brought into existence or if a new or a different article, having a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner has neither chosen to challenge the levy in any of the earlier years by way of any appeal or revision under the Act nor has shown that excise duty was not charged from the buyers. In Indian Oil Corporation v. Municipal Corporation, Jullundur and others - AIR 1993 Supreme Court 844, the question of refund was examined in paragraph 23 of the judgment. That was a case where octroi duty had already been deposited by the Corporation-company. It was held that the question of refund did not arise because the corporation-company had collected octroi duty from the dealers and agents who had, in turn, passed the burden of the consumers. Following the ratio of the said decision in the case of the petitioner also, there is found no equity to allow the refund of excise duty for any of the earlier four years. The petitioner has not shown that excise duty was not collected from the buyers. Therefore, the plea of refund is liable to be rejected. 21. In the result, the writ petition partly succeeds and is allowed accordingly. The levy of excise duty on the packaging of tea is held to be outside the scope of the Act inasmuch as it is not part of manufacture. The respondents are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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