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TMI Blog1979 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... levied on the basis of value, or on the weight or number, as the case may be. The rates of excise duty are those mentioned in the Tariff Schedule appended to the Act. Sixty-eight items are mentioned in the Schedule. Items 1 to 1-F, 2 and 3 are mentioned under the general heading "Food and Beverages". Item 2 is "Coffee". It would be appropriate to set out all the entries under Item 2:- Coffee — (1) Coffee, cured One hundred rupees per quintal. (2) Coffee commercially known as "Instant Coffee". Twenty per cent ad valorem plus the duty of the time being leviable under sub-item (1) of the Item on Coffee, cured, used in the manufacture of such "instant coffee" if not already paid. Explanation I. — For the purposes of sub-item (1) "Coffee" means the seed of the coffee tree (Coffea), whether with or without husk, whether cured or uncured, but does not include the seed while still attached to the tree. Explanation II. — For the purposes of sub-item (2) "Instant Coffee" includes instant coffee containing any ingredient in addition to coffee'. With effect from 1-3-1975, a residuary entry, being Entry 68, was introduced in the Schedule, which Entry reads as follows :- 68. All othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore falls under the said Item, even then it is exempted from duty under the exemption notification dated 1-3-1975, aforesaid, it being a 'food' within the meaning of the notification. 7. In the counter-affidavit filed on behalf on the department, it is submitted that the Writ Petition should not be entertained without the petitioner exhausting the remedies provided by the Act, more so because certain disputed questions of fact also arise for consideration herein. It is submitted that the process employed by the petitioner in preparing the coffee-chicory blend is a manufacturing process and that, therefore, Item 68 is attracted. It is further submitted that the blend is not a "food product" within the meaning of the exemption notification and, therefore, not entitled to exemption. 8. Mr. Upendralal Waghray, the learned Additional Standing Counsel for the Central Government, submitted that only the food products and food-preparations of the nature specified in the exemption notification alone are exempted from duty and that, the coffee-chicory blend is neither a 'food product' nor a 'food preparation'. According to him, it is a beverage manufactured in a factory and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coffee and chicory. 11. Now I shall take up the first question for consideration, viz., whether the coffee-chicory blend can be said to have been 'manufactured in a factory'. That the petitioner has a factory at Ghatkesar where it prepares the said blend, is not denied. The only question is, whether a manufacturing process is involved in preparation of the blend. The expression 'manufacture' is defined by clause (f) in Section 2. It reads as follows :- "(f) 'manufacture' includes any process incidental or ancillary to the completion 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 purification of salt obtained in the manufacture of saltpetre, the separation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character, or use...........' 14. The Supreme Court referred to the meaning of the word `goods' to become 'good' an article must be something which can ordinarily come to the market to be bought and sold and, then proceeded to observe : "this consideration of the meaning of the word 'goods' provides strong support for the view that 'manufacture' which is liable to excise duty under the Central Excises and Salt Act, 1944, must be the 'bringing into existence of a new substance known to the market'...' After referring to the definition of the word 'manufacture' in the Act, the court observed : "We are unable to agree with the learned Counsel that by inserting this definition of the word 'manufacture' in section 2(f) the Legislature intended to equate 'processing' to 'manufacture' and intended to make mere 'processing' as distinct from 'manufacture' in the sense of bringing into existence of a new substance known to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India - 1978 E.L.T. (J 336) = AIR 1968 Supreme Court 1922. The appellant therein was a Sugar Mill. It was producing 'kiln gas' by lime-kiln, which was used in manufacturing sugar and soda-ash. It was sought to be taxed as carbondioxide under Item 14-H of the Tariff Schedule. The Supreme Court, found that the kiln-gas produced by the appellant therein was not 'carbondioxide' as understood in the market, though carbon dioxide was one of its constituents. It was observed that kiln-gas cannot be called 'compressed carbondioxide' as is generally understood by 'carbondioxide' in the market and cannot, therefore, be taxed under the said Item. It was observed that kiln-gas is not 'carbondioxide' in a commercial sense, nor can it be used as such. 18. The next decision on this aspect, which is strongly relied upon by the Counsel for the department, is Shaw Wallace & Company v. State of Tamil Nadu AIR 1976 Supreme Court, 1437. The case arose under the Tamil Nadu General Sales Tax Act. Sub-Items (1) to (15) of Item 21 of Schedule I to the Act, mentioned several chemical fertilisers, which were subjected to only single-point levy. In other words, the second sale of those commodities w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sorting, drying or storing of potatoes by cold process taken together or separately, does not amount to "manufacturing process". 20. In the second case, it was held that mere dehusking of paddy and getting rice from it does not amount to 'manufacture'. That was a case arising under the Karnataka Sales-tax Act. 21. In the third case, it was held that preparation of pine-apple slices in tin-containers for marketing, from out of the pine-apples purchased from the dealers therein does not amount to 'manufacturing process'. 22. In Lt. Governor, Delhi v. G.F. Mills - [1973, Tax, L.R., 1923 (S.C.)], the Supreme Court held that the mere fact that the tin-sheets or tin-plates are subjected to the process of cutting and moulding into tin-containers for storing vegetable oil, will not by itself take them out of the category of tin-sheets and tin-plates. It was held that cutting and moulding only facilitates the actual user for packing, and does not alter the nature of the material intended for being used for packing of goods for sale. I must observe that there is no discussion in this decision about the meaning of the expression 'manufacture'. The decision turned entirely upon the langua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover and Assessment) Rules, 1939. The process of hydrogenation brought about a chemical change, and the liquid oil became hardened and assumed a solid form. In fact, it was found that the change in that case was both additive and intermolecular; and yet it was held that the refined ground-nut oil was not 'groundnut oil'. It was observed that there is no use to which the hydrogenated oil could not be put to, to which the groundnut oil could be put, and vice versa. It was observed that the process of hydrogenation was merely for the purpose of improving its keeping qualities and to make it more acceptable to customers, and for easy packing and transportation. Then again it is a case, it should be noted even at this stage, where the question was whether the hydrogenated oil remained and continued to be 'groundnut oil' for the purpose of the Madras Rules, aforesaid. 25. Now, keeping in view the above decisions, and in particular the decision of the Supreme Court in Union of India v. Delhi Cloth and General Mills - 1977 E.L.T. (J 199) = AIR 1963 Supreme Court, 7971 which defines the expressions 'manufacture' and 'goods', let me consider whether the process involved in this case (set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e roots suitable for forcing. In such regions seed should be sown in June. The roots may be forced under greenhouse benches, in Cellars or out of doors. (See also Endive)........" It is also called "Endive", which is mentioned at page 378 of Vol. VIII. 29. From the above statement it is clear that chicory is a plant, the roots whereof are used for obtaining the chicory powder. Though the test-books do not say so, it appears that this plant is now being raised in certain parts of India, particularly in Uttar Pradesh, because of its commercial use. May be that on the European continent its leaves are also used as salads, but the plant as such appears to be grown as a fodder or herbage crop for cattle, though in Great Britain it is for mixing with coffee. These roots are available at a far cheaper cost, than the coffee-seeds. As stated in paragraph 14 of the counter-affidavit, these roots, after they are properly pruned and cleaned, are roasted to the proper colour and then ground into powder, with the aid of mechanical process, involving consumption of powder. It is thereafter that it is mixed with coffee-powder in varying percentages. In other words, what is a mere root with no ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f food products and food preparations'. 31. The first submission of Mr. K. Srinivasa Murthy on this question was that coffee itself is mentioned in the Tariff Schedule under the general heading 'Coffee', and if coffee is 'food', coffee-chicory blend equally is: It was, however, found that the general heading for Items 1 to 3 in the Tariff Schedule was differently printed in different publications. Hence, I sent for the official publication, viz. the Central Excise Manual, Volume I, containing the Acts and Rules (10th Edition), published in 1976 by the Board of Excise and Customs, New Delhi. This shows that Items 1 to 3 are mentioned under the general heading "Food and Beverages". In the publication Mr. Srinivasa Murthy was relying upon, while Items 1 to 3 are mentioned under the head 'food', tobacco (item 4) was mentioned under the head 'beverages', which is plainly impossible. I have no reason to doubt that the heads as printed in the official publication are the correct ones. That knocks the bottom out of the petitioner's contention aforesaid. May be that in some cases the dividingline between 'food' and 'beverage' is very thin but, the aforesaid general heading displaces the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported into the present case, more particularly when the Act with which we are concerned, does make a distinction between foods and beverages and used both the expressions in the Tariff Schedule. Further, the passage from Corpus Juris Secundum itself shows that the word 'food' has no definition of universal application and that, it varies from statute to statute. As I have said earlier, in some cases, the dividing line between 'beverages' and 'food' may be thin - they may, in some cases, overlap - but so far as coffee or coffee-chicory blend is concerned, there can be little doubt that it is a beverage than a food. 33. Learned Counsel then relied upon certain decisions rendered under the Prevention of Food Adulteration Act. But, in my opinion, they are not of much help, for the reason that those decisions are rendered with reference to the particular definition of the expression `food' in that Act, which is very widely worded. The definition reads: "Food" means any article used as food or drink for human consumption other than drugs and water and includes......... (a) any article which ordinarily enters into or is used in the composition of preparation of human food, (b) any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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