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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 ..... n clause (f) of section 2 of the Act which reads as under :- "(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 conversio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 ingredients of tea, would not amount to 'manufacture'. Shri Sibal has vehemently argued that charging of excise duty on mere packaging is in conflict with the meaning of clause (f) of section 2 of the Act. Excise duty is charged under sub-section (1) of section 3, which reads as under :- "3. Duties spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-12-1982 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 excise duty. "Package tea" has been specifically subjected to the levy of excise duty under sub-item (2) of Item 3 of the First Schedule and, therefore, the levy of duty was legal and within the ambit of the schedule. Column 3 specifying the rate of duty in respect of package tea in sub-item (2) made it explicitly clear that package tea is subjected to the levy of duty in addition to the duty leviable under sub-item (1). Shri Nehra has argued that the petitioner obtained a licence under the Act in the month of February, 1979, for package tea. The petitioner was doing the blending and packaging for and on behalf of M/s. Duncans Agro-Industries Limited, Calcutta. Printed packets were supplied to the petitioner by the Principals, M/s. Duncans Agro-Industries Limited. Package tea was a distinct variety of te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 examine 'paking' in Alembic Glass Industries Ltd. v. Union of India and others - 1979 (4) E.L.T. (J 461). There also, the company was engaged in the manufacture and sale of glassware. It was held that 'packing' was not incidental or ancillary to the process of manufacture of bottles. 15. The Bombay High Court has also, in Ogale Glass Works Ltd. v. Union of India and others - 1979 (4) E.L.T. (J 468), taken the same view. There also, it was a case of glass and glassware. It was observed that if the goods are such that without packing they do not become excisable, then 'packing' can be considered as a process incidental or ancillary to the completion of such goods. But, if the goods can be said to have completely been manufactured before they are packed, then 'packing' cannot be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable 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 distinct name, character or use, results from a particular process or processes, such process or activity would amount to 'manufacture'. The moment there is transformation into a new commodity, commercially known as a separate and distinct commodity having its own character and use, 'manufacture' takes place. 18. In the case of the present petitioner, blending of different varieties of tea is done before packaging. The respondents have treated this blending to be a necessary part of the manufacturing process. It is for that reason that the levy of duty has been said to be within the ambit of sub-item (2) of Item 3. 19. It is evident from the facts arising from the rival contentions that the petitioner is only mixing different varieties of tea with different flav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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