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TMI Blog1983 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... r human consumption, is brought into existence. 5. The petitioner No. 1 does not own any tea garden and purchases tea of different varieties from the auction centres all over India upon payment of appropriate Central Excise Duty leviable under Tariff Item No. 3(1) of the Central Excises and Salt Act, 1944, (hereinafter referred to as the said Act) as a manufactured product. 6. The tea purchased as aforesaid are brought to the blending or packing centres of the petitioner No. 1 at Calcutta in West Bengal, Tundla in Uttar Pradesh, Jamnagar in Gujarat, Kannan in Maharashtra, Ghaskesar in Andhra Pradesh and Coimbatore in Tamil Nadu, where they are packed in small packets after blending or mixture of different grades and are labeled with the brand names used by the petitioner No. 1. 7. Item 3 of the current Central Excise Tariff reads as follows :- "Tea" includes all varieties of the product known commercially as tea and also includes green tea and "instant tea". (1) Tea, all varieties except package tea and "instant tea" falling within sub-items (2) and (3), respectively, of this Item. (2) Package tea, that is to say, tea packed in any kind of container containing not more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew article through a process resulting in the emergence of a new article having a distinctive name, character or use different from that of the article or articles on which the process has been applied. 12. Package tea which is being subjected to duty under Clause (2) of Item 3 of the Tariff, it is contended, has no other distinctive features from that of the manufactured tea subjected to duty under Clause (1) except that it is packed in smaller packages, and duty has already been levied on it. 13. The process of packing, it is contended, may be ancillary or incidental to manufacture of tea in the processing centres and at that stage tea packed in small packets may be subjected to a different rate of duty. But packing, after clearance of the manufactured from the gardens on payment of excise duty, it is contended, does not by itself amount to manufacture of a new article and Clause (2) of Item 3 cannot be applied on tea at that stage. 14. It is contended that Clause (2) of Item 3 must be construed in the light of Section 3 of the said Act. It is contended that Schedule I of the said Act is a part of the Act and Clause (2) of Item 3 of the Tariff confers power to levy duty on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. The petitioner also prays for issue of appropriate writs commanding the respondents to forbear from levying excise or collecting duty on package tea and for setting aside or quashing the orders of settlement made under Clause (2) of Item 3 of the Central Excise Tariff. 20. The petitioners also pray for an order or direction on the respondents to refund all money so far collected without authority of law on package tea from the petitioner No. 1. 21. At the instance of the parties this application was heard on merits without any Rule Nisi being issued. 22. Amal Kanti Das, the Assistant Collector of Central Excise, Calcutta V Division, one of the respondents has affirmed an affidavit on the 4th August, 1982 which has been filed on behalf of all the respondents in opposition to the petition. It is, alleged in this affidavit, inter alia, that excise duty was levied for the first time on loose tea manufactured in tea gardens on and from the 1st March, 1944. The Schedule to the said Act was amended some time in 1953 and in the Tariff list under Item 3(2) package tea was included as one of the items on which excise duty would be levied. It is alleged that the petitioner No. 1 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and the process of blending, also does not amount to manufacture as no new article is brought into existence by mere blending. 29. It is alleged that both before and after blending and packing by the petitioner No. 1 the article viz. manufactured tea remains the same continues to be known as dealt with as tea. 30. It is alleged that the process of blending whether carried out manually or mechanically remains the same except that blending can be done in a large scale mechanically. 31. At the hearing, learned counsel for the petitioners did not press the challenge to the constitutionality of the relevant items of the Central Excise Tariff and confined his submissions to the other points raised. 32. He submitted that the item "package tea" as specified in Clause (2) of Item 3 in the Central Excise Tariff did not contemplate tea which was repacked by the petitioner No. 1 in its packing centres. This could not be a part of the manufacturing process which was completed in the tea garden. If at the time of manufacture at the garden, tea was packed in small packets then such packaging might be a process incidental to the completion of manufacture as tea was always produced in lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue that in the process of manufacture of Vanaspati with the aid of power, at one stage the assessee brought into existence a product known in the market as refined oil' which come under the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power" in a separate item of tariff and this product was also liable to excise duty. Levy of excise duty on the intermediate product was successfully impugned by the assessee under Article 226 of the Constitution. On appeal the Supreme Court found that at no stage during the process of manufacture refined oil, known to the consumers as a commodity, came into existence and therefore, the product could not be subjected to levy of excise duty on the ground that it was a vegetable non-essential oil manufactured with the aid of power as no new or different article having a distinctive name, character and use came into existence. Mere change by subjecting and article to a process would not result in manufacture. (d) South Bihar Sugar Mills Ltd. v. Union of India, reported in [1978 E.L.T. (J 336)] = AIR 1968 SC 922. In this case a producer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case." Supreme Court in C.A. Abraham v. I.T.O., Kottayam, AIR 1961 SC 609 : "In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there may be any; the Court must interpret the statute as it stands and in case of doubt in a manner favourable to the taxpayer." (f) Patel India (Private) Ltd. v. Union of India, reported in [1983 E.L.T. 1495) = AIR 1973 SC 1300. In this case involving refund of import duty levied by the Customs Authorities wrongly, the Supreme Court laid down that where excess duty had been assessed and recovered without the authority of law there was a legal obligation on the part of the Government to refund the excess collected and a legal right in the tax-payer to its recovery. (g) Union of India v. Tata Iron Steel Co. Ltd., Jamshedpur, reported in [1977 E.L.T. (J 61)] = AIR 1976 SC 599. In this case duty paid pig iron consisting of rejected ingot molds and bottom stools along with the non-duty paid material were used to produce stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of the Andhra Pradesh High Court held that the cost of secondary packing of goods was not a part of manufacturing costs and could not be included in the value of the goods for the purpose of assessment excise duty. (j) P.C. Cheriyan v. Mst. Barfi Devi, reported in AIR 1980 SC 86 = [1979 (4) E.L.T. (J 593) (S.C.)]. In this case the Supreme Court held that the lease of a premises for carrying on the business of retreading of tyres was not a lease for manufacturing purposes within the meaning of S. 106 of the Transfer of Property Act. The Supreme Court observed as follows (at p. 89) : - "The retreading of old tyres does not bring into being commercially distinct or different entity. The old tyre retains its original character, or identity as a tyre. Retreading does not completely transform it into another commercial article, although it improves its performance and serviceability as a tyre. Retreading of old tyres is just like resoling of old shoes. Just as resoling of old shoes does not produce a commercially different entity having a different identity, so from retreading no new or distinct article emerges. The old tyre retains its basic structure and identity." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) Chowgule Co. Pvt. Ltd. v. Union of India, reported in AIR 1981 SC 1014. In this case a private limited company mined and exported iron ore. The ore, after extraction, was washed, ressed and screened and also blended to produce the required specification. The question arose whether the company could be said to be manufacturing or processing so that other goods purchased by the company to be used in the said operations would attract a lower rate of tax under the Central Sales Tax Act, 1956. The Supreme Court held that the operation of blending amounted to processing within the meaning of the said Act but blending of different qualities of ores was not manufacture. The Supreme Court observed as follows : - "..... 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 manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together." (m) Commissioner of Sales Tax v. Musarafalli Kutubuddin, reported in (1975) 35 STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the usual course. But once an article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we then see no difficulty for statutory classification under a particular entry." (b) Indo-International Industries v. Commissioner of Sales Tax, U.P., reported in 1981 E.L.T. 325. This decision was cited for the following observations of the Supreme Court (at p.2964 of Tax LR) : "It is well settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Act, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured in India. Such excisable goods or articles are enumerated either specifically or under the general heading in the First Schedule of the said Act and such goods or articles become chargeable with excisable duty to be fixed by the Central Government by notification in the Official Gazette. It is open to the Central Government to prescribe different tariffs for excisable goods of the same class or description which are produced or manufactured by different classes of producers or manufacturers or sold to different classes of buyers. 41. In Item 3 of the First Schedule, tea has been enumerated as an excisable goods or article under a general heading. The clauses of Item 3 specifically enumerate two different articles or goods one being tea, as such, and the other being package tea that is tea packed in containers containing up to 27 Kgs. of tea. Different rates of duty have been imposed on these two specified articles. 42. The First Schedule and the items thereunder are part of the said Act having statutory force. The legislature must be held to have considered the position and imposed levy of excise duty at different rates on the two articles separately enumerated. The legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being produced or manufactured. The Supreme Court observed as follows (Paras 7 and 8) : "In Item 26A itself, the legislature has laid down that excise duty rate and on manufactures of circles, as a higher rate. This provision itself makes it clear that the legislature was aware that billets were converted into circles, and it was decided that excise duty should be leviable at both stages. When the legislature used the word "manufacture" in connection with circles, after having taken account of the fact that billets were already subjected to excise duty, it is obvious that the process by which the billets were converted into circles, was held by the legislature to amount a manufacture. The word "manufacture" is defined in process incidental or ancillary to the completion of a manufactured product. The rolling of a billet into a circle is certainly a process in the course of completion of the manufactured product, viz., circles. In the present case, as we have already indicated earlier, the product, that is sought to be subjected to duty, is a circle within the meaning of that word used in Item 26A." "In this process of manufacture of circles, there are two stages. At the first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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