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TMI Blog1991 (9) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ent product of the tea and there is no difference between package tea and tea of all varieties. For having package tea no manufacturing process as defined under Section 2(f) of the Act is involved. (ii) As per charging Section 3, the excise duty can be levied on the goods which are manufactured in India but it cannot be levied only on the basis of packing because packing or blending of tea does not involve a manufacturing process. (iii) Duty of excise on process not amounting to manufacture is beyond the legislative competence of the Parliament and recourse cannot be taken to Entry 97 of List 1 of the Seventh Schedule to the Constitution of India to justify such a levy. (iv) In any set of circumstances, as there is no difference between the package tea and tea falling within the Tariff Item 3(1) the levy of higher rate of duty of excise on package tea is discriminatory and is violative of Article 14 of the Constitution of India. 3. As against this, in affidavit in reply, it has been pointed out and contended by the respondents as under: (i) The process of conversion of original tea into package tea is a manufacturing process within the meaning of Section 2(f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity of tea. Keeping in view the demand of the trade the packing upto 27 kgs. is considered as Package Tea. The petitioners themselves are enjoying facility of duty free removal of tea packed in container containing more than 27 kgs. of tea. (iv) Lastly, it has been stated that for a long period of 30 years, that is, since 1953, the duty has been paid by the petitioners on the basis of Tariff Item 3(2) which indicates that Package Tea is known as different variety of tea in the market. For a long period of 30 years the petitioners have not raised the contention that Package Tea cannot be considered as different product of tea which indicates that it is known to the petitioners and in the market as different product of tea. 4. For considering the aforesaid contentions it is necessary to consider Tariff Entry 3, which defines the word 'tea' and prescribes different rates of duty for three different varieties of tea. Tariff Item 3 reads as under: Item No. 3 - Tea Rate of duty Item number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tea plant an ever green shrub or small tree (Camellia Sinensis) of the family Theaceae. Its manufacturing process is as under :- Teas may be divided into three clauses : (1) fermented black tea; (2) unfermented or green tea; and (3) semi-fermented or oolong tea. These classes result from different processes applied to the same kind of leaf, or even to leaves from the same plant, though various regions generally specialize in one type. Most stages of processing are generally common to the three types of tea. First, the fresh leaves are withered by exposure to the sun or by heating in trays until pliable (usually 18-24 hours). Next the leaves are rolled by hand or machine in order to break the leaf cells and liberate the juices and enzymes. This rolling process may last upto three hours. Finally, the leaves are completely dried either by further exposure to the sun, over fires, or in a current of hot air, usually for 30- 40 minutes. In making black tea, the leaves, after being rolled are fermented in baskets or on glass shelves or cement floors under damp clothes, usually for 1 to 4 hours, followed by the usual drying process until the leaves are black and crisp. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack and green teas. But it is contended that the said process of mixing, or blending, removal of impurities, and of packing it into small packets does not involve any manufacturing process so as to make package tea as different product of tea. 5. Considering the aforesaid averments in the petition, affidavit-in-rejoinder and meaning of tea as per Encyclopedia Britannica, there cannot be any doubt that package tea can be classified as a different variety of tea from instant tea or remaining varieties of tea. On different varieties of the same product the duty of excise at different rates can be levied. Tariff Item 3 provides for it. The different rate of duty of excise is fixed for instant tea, package tea and remaining tea of all varieties including green tea. Different rates of duty of excise are fixed on the basis that they are of different varieties of tea and not on the basis that they are different products. Therefore, the main contention of the petitioners that package tea is not a different product than other tea and that no manufacturing process as defined under Section 2(f) of the Act is required for having package tea and, therefore, Tariff Item 3(2) is illegal is misc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply to tea as defined therein which is lying in stock on the 15th day of April, 1953, in any premises where tea is produced or manufactured or in any premises appurtenant thereto as it applies to tea produced or manufactured on or after the said date. 7. From the object of introducing the concept of the Package Tea, it is apparent that it has been introduced with a specific purpose of giving relief to the tea growers and consumers of unpacked tea. At the initial stage for package tea containing more than 60 lbs. (equivalent to 27 kgs.) net of tea, the rate of duty of excise was four annas per lb. The rate of duty of excise on other tea was one anna per lb. If before being packed excise duty of one anna per lb. is paid, then the excise duty on package tea was reduced to that extent. Therefore, on a package tea containing not more than 60 lbs. of tea, higher excise duty was levied and on loose tea or on other tea, lower excise duty was levied. Therefore, the main contention of the petitioners that the Parliament is not competent to levy a different rate of duty of excise on package tea because the petitioners are not manufacturing or producing the package tea and, therefore, Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ederal Court in the case of Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, AIR 1939 PC 1 , in the case of Province of Madras v. Boddu Paidanna and Sons, AIR 1942 FC 33 and of the Privy Council in the case of Governor General in Council v. Province of Madras, AIR 1945 PC 98, and held as under: With great respect, we accept the principles laid down by the said three decisions in the matter of levy of an excise duty and the machinery for collection thereof. Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. Whether in a particular case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinct character, use and name and commercially known as such because transformation of package tea from loose tea purchased in bulk would be a question of degree. The Division Bench of this Court in the case of Prabhat Cotton Silk Mills Co. Ltd., Swat v. Union of India Ors., 1982 (10) E.L.T. 203 (Guj.) = XXIII (1) G.L.R. 557 dealt with similar aspect and the relevant observations of the Division Bench (Coram: M.P. Thakkar, CJ. and V.V. Bedarkar, J.) which are important are as under : All the same the circumstance that all concerned have adjusted their affairs on the basis that the payment of duty on the aforesaid basis was in accordance with law, is a circumstance which cannot be brushed aside in a cavalier fashion. The following factors must be flashed on the mental screen in this context: (1) The annual budget of the Central Government has been moulded on the assumption that this duty can be lawfully levied for more than 30 years, not to speak of the formulation of the budget by the appropriate Government prior to the enforcement of the Constitution of India upon the attainment of Independence. (2) Income tax must have been collected from tens of thousands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach need not therefore be outlawed in favour of unduly sophisticated, unduly refined, disingenuous approach, if two views are possible and what is reasonable, as also accords with reason, prevails over what is unreasonable, but may also accord with reason. 'Just and reasons' may well prevail instead of 'just and unreasonable' when both sides are equally able to call into aid good reasons in support of their respective pleas. Therefore, it can reasonably be said that if the Parliament and the dealers in tea have considered package tea as a different product for a period of 30 years and subsequently the Parliament by deeming provision provided that package tea is a different product then it would be just and proper to hold that package tea was considered to be a different product by all growers who were and are concerned in the tea market. Still, however, as we have arrived at the conclusion that the Parliament has levied higher duty of excise on package tea on the basis that it is of different variety and not a different product, therefore, as stated earlier, it is not necessary for us to deal further with this aspect. 11. Lastly, we would deal with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lligible and real as taste of the consumers who purchase the same is different. Presuming that tea is of the same variety, if it is packed in packages having different brand names, would have bearing with the purchasers. Blending tea also would have its own effect on the purchase of tea as it depends upon different tastes of the consumers. 13. In any set of circumstances, scope of classification permitted in taxation is greater and unless classification made can be termed to be palpably arbitrary, it is left to the legislature's wisdom to choose a yardstick for classification in the background of fiscal policy of the State. This is established by numerous decisions of the Supreme Court. The mere fact that duty of excise is more some category of package tea is not by itself a ground to render the law invalid. While dealing with the similar contention in the case of Dunlop (I) Limited v. Union of India, AIR 1977 Supreme Court 597 , the Supreme Court observed as under: 36. We are, however, unable to accept the submission. It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible and reasonable ways. If two or more methods of adjustments of an economic measure are available, the legislative preference in favour of one of them cannot be questioned on the ground of lack of legislative wisdom or that the method adopted is not the best or that there were better ways of adjusting the competing interests and claims. The legislature possesses the greatest freedom in such areas. 'The legislature has to reckon with practical difficulties of adjustments of conflicting interests. It has to bring to bear a pragmatic approach to the resolution of these conflicts and evolve a fiscal policy it thinks is best suited to the felt needs. The complexity of economic matters and the pragmatic solutions to be found for them defy and go beyond conceptual mental modes. Social and economic problems of a policy do not accord with preconceived stereotypes so as to be amenable to predetermined solutions...' 'The lack of perfection in a legislative measure does not necessarily imply its un-constitutionality. It is rightly said that no economic measure has yet been devised which is free from all discriminatory impact and that in such a complex arena in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced, one must look beyond the classification and to the purpose of the law. (Emphasis supplied) From the aforesaid decision it can be stated that with regard to taxation the State enjoys widest latitude as the taxation measure is taken for fiscal and economic regulations in a complex economic situation depending upon the policy of the Government; it is also an accepted position that no taxation measure can be devised which would be free from discriminatory impact; the mere fact that tax falls more heavily on some category, say of package tea which is packed in a container containing less than 27 kgs. by itself would not be a ground to render it invalid; further, the classification between package tea and loose tea seems to be based on difference in value and its notional superiority to the persons who consume it. Therefore, it cannot be said that Tariff Item 3(2) is violative of Article 14 of the Constitution of India. As stated above, classification between loose tea and package tea is reasonable and with the specific object of affording relief to the tea growers and to the consumers of loose tea. Package tea has its own market and is considered by all concerned to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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