Calcutta High Court
Indian Tea Packeting Industries And ... vs Union Of India (Uoi) And Ors. on 28 March, 1988
Equivalent citations: 1988(18)ECC180
JUDGMENT M.N. Roy, J.
1. Since common questions of law and fact arose in the appeal being F.M.A. No. 4198 of 1985 and other appeals being F.M.A. No, 95 and F.M.A. No. 96 of 1986 and all the appeals excepting the one in F.M.A.T. No. 2338 of 1983 which was against the determination of D.K. Sen, were directed against the determinations made by Suhas Chandra Sen, J. in the respective civil rules on diverse dates, they were heard together by consent of parties. The other assigned appeal being F.M.A.T. No. 2338 of 1983, which arose out of the judgment and order dated 14th July, 1983, passed in C.O. No. 15368(W) of 1982, was also heard immediately after the first group of appeals and along with them, as similar questions of fact and law, were involved for determination.
2. Admittedly, the Central Excises And Salt Act, 1944 (hereinafter referred to as the said Act) had undergone an amendment in or about March 1986 which and thereby "packaging" has been included within the excisibility of goods including "tea" which is involved in these proceedings. It is also an admitted fact that prior to such incorporation by way of amendment excise duty was leviable under package tea and there was no separate duties leviable for manufactured tea and package tea. Section 3 of the said Act was and still is the charging section and deals with duties specified in the First Schedule which is to be levied and under Sub-section (1) thereunder.
The said section postulates that there shall be levied and collected in such manner as may be prescribed duties of excise excisable on all goods other than salt which are produced or manufactured in India, and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act, 1985 provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured,--
(i) in a free trade zone and brought to any other place in India, or
(ii) by a hundred per cent export-oriented undertaking and allowed to be sold in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, 1962 (52 of 1962), on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value, the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975).
Explanation 1. _______________________________ Explanation 2. ______________________________ (1A) ___________________________________ (2) _________________________________ (3) Different tariff values may be fixed--
(a) for different classes or descriptions of the same excisable goods; or
(b) for excisable goods of the same class or description--
(i) produced or manufactured by different classes of producers or manufacturers; or
(ii) sold to different classes of buyers:
Provided that in fixing different tariff values in respect of excisable goods falling under Sub-clause (i) or Sub-clause (ii), regard shall be had to the sale prices charged by the different classes of producers or manufacturers or, as the case may be, the normal practice of the wholesale trade in such goods. From the statements as incorporated hereinafter, it would appear that the case of the petitioners was that they bought duty-paid tea and packed them. Since tax has been sought to be levied on such packaging, Mr. Gupta, appearing in support of the appeals, claimed that such levy or tax was improper as packaging of tea as in these cases, would not come within the purview or definition of manufacture or manufacturing process. Prior to the incorporation of the amendment in March 1986, the other material particulars which would be indicated hereafter, "manufacture" under Section 2(f) of the said Act included any process (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the section or chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account and after the amendment as substituted with effect from 28th February, 1986 the same includes any process incidental or ancillary to the completion of a manufactured product; and (i) in relation to tobacco, includes the preparation of cigarette, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff; and (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 of efflorescence; (iia) in relation to goods comprised in item No. 3A of the First Schedule, includes the lebelling or relabelling 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; (iii) in relation to patent 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 labealling or re-labelling of containers intended for consumers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer; (iv) in relation to goods comprised in item No. 18A of the First Schedule, including sizing, beaming, warping, wrapping, winding or reeling or any one more of these processes, or the conversion of any form of the said goods into another from of such goods.
3. Item 3 of the First Schedule under the said Act included and the same defined "tea" as including all varieties of the product known commercially as tea, and also includes green tea.
(1) "Tea" all varieties except Not exceeding sixtysix paise per package tea falling within sub-item kilogram as the Central Gover-
(2) of this item. ment may, by notification in the Official Gazette fix.
(2) Package tea, that is to say, 46 paise per kilogram plus the tea packed in any kind of container duty for the time being leviable containing not more than 27 kilo- under sub-item (1) of this item, grams net of tea. if not already paid.
4. It was the case of the petitioners that they carry on business inter alia of packaging tea at warehouses and tea industries situate in the District of Jalpaiguri and the tea as received by the petitioner-company had already undergone process of manufacture such as withering, rolling, fermentation and firing. The petitioner No. 2 was stated to be a partner of the petitioner No. 1. Petitioner No. 1, would hereafter be referred to as the said firm. It was their case that prior to 1984 business was carried on by the said firm of blending and packaging duty-paid tea at Siliguri and although blending and packeting of different varieties of tea was not manufactured. Item No. 3(2) of the First Schedule of the said Act, as mentioned hereinbefore, provided for different rates of duty for such blending and packaging.
4A. It has been stated that an application was made to this Court under Article 226 of the Constitution of India challenging the validity of the said Item 3(2) of the First Schedule to the said Act on 24th December, 1982 and on such application a rule was issued with a further direction that the parties concerned would be entitled to impose levy but upon furnishing bond by the said firm for Rs. 25,000 initially to the satisfaction of the Superintendent, Central Excise, Siliguri, Range-III, they would be entitled to release of all the goods. It was further directed that if the security amount was not considered to be adequate by the Collector of Central Excise & Customs or the Superintendent of the said department, who were given liberty to ask the said firm to furnish another security bond not exceeding Rs. 25,000 subject to further orders of this Court. The said petitioner has stated that interim order as mentioned above, was directed to continue initially for a period of two weeks after the "X-Mas" vacation of that year with liberty to ask for extension of the same with notice to the respondents.
5. From the statements as made, it would appear that the matter as mentioned above, came up for hearing on 24th February, 1983, when the learned Judge dealing with the same was pleased to direct that the interim order already granted will continue till the disposal of the rule and there was a further direction that if the amount due from the said firm would exceed Rs. 50,000, then they should furnish a bond in favour of the Collector of Central Excise and Customs, West Bengal for the amount upon being called upon to do so. It has been stated that in terms of the said order, the Superintendent of Central Excise, Siliguri, Range-IV asked the said firm to execute a security bond covering the outstanding dues of Rs. 3,77,601.21P with a further direction to execute security bond covering the duty amount as involved in each and every clearance. It was the case of the said firm that it was difficult to execute a security bond against each clearance, they agreed to execute a security bond for a lump sum amount of Rs. 5,00,000 and in the draft bond as sent, the said firm was required to deposit 25% of the security amount in cash. It has been stated that in terms of that order, the said firm has executed the security bond for Rs. 5,00,000 and have deposited a sum of Rs. 1,25,000.00 and thereafter, from time to time they have executed bonds and deposited 25% of the duty as involved in respect of the clearance of package tea by cash, and the bonds as executed by them, are still continuing.
6. It has been stated by the said firm that due to business exigencies, they had to change their place of business from Sevak Road and as the respondent-authorities did not allow packaging tea in that place, they under compulsion, had to make an application for licence under the said Act, which was granted on 14th May, 1984. Thereafter, by a letter of 16th May, 1984, the said firm informed the respondents concerned that they would start packing loose tea from and about 28th May, 1984 and as soon as sufficient stock would be accumulated, removal thereof from the factory would be made. It was further stated by them that they would remove package tea without payment of duty as both Siliguri and Jalpaiguri Divisions were under the jurisdiction of this Court and the Collector of Central Excise & Customs having jurisdiction over both the Divisions were respondents in the connected rule as mentioned above. By that letter the said firm also requested the respondents to intimate the amount of B16 bond and the amount of security which might be required to be furnished for removal of the concerned package tea. They have stated that by that letter dated 29th May, 1984, the Assistant Collector, Central Excise, Jalpaiguri Division, informed them that the factory falls under Jalpaiguri II Range under the jurisdiction of Central Excise Division and it was further contended in that letter that the factory of the said firm at Jalpaiguri would not come under the interim order as made by this Court and the said interim order was not applicable to the case. The said firm was further directed to pay central excise duty on loose tea and package tea according to Central Excise Rules, 1944 (hereinafter referred to as the said Rules) and thereafter by another letter of 31st May, 1984, addressed to the Deputy Collector of Central Excise, North Bengal, the said firm intimated that they had simply shifted their factory and requested, to allow clearance of goods from the premises without payment of duty, but on execution of B16 bond in pursuance of the order as passed by this Court. It has been alleged that the said firm have not received any reply to that letter. It was their further case that they received duty-paid tea from their customers and packed the said duty-paid tea in 25 grams to 1 kg. packages and it was specifically stated that their business was to receive duty-paid tea as mentioned above and to pack them into packages and to deliver them to their customers. The said firm has also stated that since they were not allowed to carry on the said business of packaging tea without central excise licence, under compulsion and duress of the respondents, they had to obtain a licence. They have of course, disputed that holding of such licence would be a pre-requisite for their business. According to them the packaging of tea in packages would not involve any process of manufacture or production and by packaging tea in packages no commercially new distinct commodity would come into being. The said firm has also stated that both package and loose tea are known in the trade as " tea " and no distinction can be made between tea cleared from a garden and the tea packed in packages. They have further stated that no process of manufacture or production is involved in packeting tea in different varieties of packages. It has further been pointed out that package tea has been defined in sub-item (2) of tariff item No. 3 and on the basis of the terms of the tariff item as quoted, they according to the said firm would mean " tea packed, in any kind of container containing not more than 27 kg. net of tea, but excluded instant tea." Sub-item (2) according to the said firm would be different from sub-item (1) only to the extent that tea falling under sub-item (2) packed in container containing not more than 27 kg. while that falling under sub-item (1) may be any unpacked condition and apart from the above, there would be no distinction between said two sub-items.
7. The main submissions of the said firm, on the basis of the pleadings as above, have been indicated hereinbefore and they also claimed that tariff item No. 3(2) of the First Schedule of the said Act to be illegal and ultra vires the Constitution of India and further required the respondents not to collect any duty under the said tariff, apart from claiming that the respondents concerned should not apply the said tariff item in any manner whatsoever, against the said firm. It should also be noted that by an application for amendment dated 13th September, 1984, the said firm further alleged that in view of their challenge towards the vires of item 3(2) as mentioned above, the respondent excise authorities had no authority or competence to decide the issues involved and consequently the order dated 13th July, 1984, which was said to be a purported one, should be deemed to be wrongful and illegal, the more so when, the said order dated 13th July, 1984, was passed by the Assistant Collector concerned pursuant to the directions given by the Court.
8. The affidavit-in-opposition in this case was filed by Rajendra Kumar Talajia and the same was dated 9th September, 1985. That affidavit was filed on behalf of the respondents and the same claimed that the excise duty on loose tea was levied for the first time on and from 1st March, 1944, manufactured at the garden under tariff item No. 3 of the concerned Schedule of the said Act and sometime in 1953, Parliament amemded the Schedule to the said Act by including sub-item (2) of tariff item No. 3 and under the said sub-item, package tea was one of the items, on which excise duty became payable. It has also been stated that on account of the amendment as mentioned above, the said firm became liable to pay excise mentioned above, the said firm became liable to pay excise duty on package tea. It was also stated that the said firm, since 1953, were submitting returns to the respondents-authorities, of their manufacture and/or production of package tea through a mechanical method and was observing excise formalities, including taking out licence for manufacture of excisable product, viz., package tea, falling under tariff item No. 3(2). According to the deponent, the said firm were manufacturing package tea after holding L-4 licence since 1982 and were paying proper central excise duties on their production upto 24th February, 1983. It has been stated that package tea as manufactured or produced by the said firm and various other persons, were and are well known as such product in the market and also in the commercial and trade parlance and such products are known and treated as distinct and different from loose tea, with different prices and marketability. It was claimed by the deponent that the fact as mentioned above, was and is well known to the said firm and with that knowledge they had been voluntarily paying excise duty on such package tea. The writ petition was claimed to be wholly misconceived, speculative and not maintainable.
9. The deponent has further pointed out that the said firm shifted their factory from Siliguri to Jalpaiguri and submitted their application in proper form for issue of new central excise licence to the Superintendent, Central Excise, Jalpaiguri, Range-II for their new factory there and obtained central excise licence for their factory on 14th May, 1984 from the said Superintendent of Central Excise. It has been stated that they have been manufacturing package tea in the factory as mentioned above and had disputed the levy of central excise duty on package tea falling under tariff item No. 3(2) of the said Schedule. The filing of the other writ petition, the particulars whereof have been mentioned hereinbefore, have been accepted. The deponent has further pointed out that in a similar case M/s. Brooke Bond India Ltd. moved a seperate application under Article 226 of the Constitution of India, alleging the excise duty would not be payable on package tea primarily on the ground that there is no manufacture involved in packaging tea and contended further that the duties on loose tea had already been paid and no duty as claimed, was payable as mixing of tea or blending of loose tea was only taken, while packeting them. It was also claimed that such blending or packeting, would not amount to manufacture as observed in that Brooke Bond's case. The respondent-authorities contended that in view of Section 3 of the said Act read with item 3(2) of the First Schedule, the goods should be deemed to be manufactured goods and it was also contended that once a goods manufactured in the First Schedule to the said Act, further enquiry whether the goods are manufactured or not or how they are known in the trade parlance would not be relevant and material. It is an admitted fact that by his judgment and order dated 13th July, 1983, D.K. Sen, J., in the Brooke Bond's case has held and observed that the package tea as involved in that case, would be liable to excise duty and was pleased to dismiss the application of M/s. Brook Bond India Ltd. holding inter alia amongst others, that goods were manufactured and/or deemed to have been manufactured in the facts of that case and particularly, when such goods are specifically mentioned in tariff item No. 3(2) of the First.
10. The deponent has also denied categorically the allegations of the said firm that they had to make the necessary application for licence under compulsion or duress and has stated that such application was filed by the said firm on their own account or that too after their factory was shifted. It has been stated that the said firm was directed to pay duty on tea and package tea in terms of tariff item No. 3(1) and 3(2) under the said Act and the said firm, according to the deponent, had really applied for licence on their own account. It has been stated that blending of tea and/or packaging of the same is a process incidental or ancillary to the completion of manufactured product and thus such operations would constitute manufacture, within the meaning of Section 2(f) of the said Act. It has also been stated that the First Schedule to the said Act is a part of the same and sub-item (2) of item 3 deals with package tea. It has also been pointed out that by providing a separate sub-item for package tea, the Legislature levied central excise duty on packaging of tea in any container containing 27 kgs. of tea and thus packaging of tea would be manufactured within the meaning of Section 2(f) of the said Act. It was also the case of the deponent that package tea is a product, which is known in the trade parlance and is bought and sold in the market and hence the same would be goods having a distinct name, character and use. Such being the position, the deponent has stated that the duty is duly leviable and has been appropriately levied on such a distinct and identifiable product which has been brought into existence by manufacture. Package tea, according to the deponent, is a product having distinct name, character and use and the same is known as such in the trade parlance. The deponent has further stated that the duty on package tea has been levied by the Parliament and since it has been incorporated in the said Act itself, the levy of the same cannot be subject to any challenge. It was also the case of the said deponent that above being the position, package tea would be a manufacture within the meaning of Section 2(f) of the said Act and thus would be liable to excise duty. The deponent has stated that package tea falls within the provisions of Section 2(f) of the said Act and the same is distinctly different from tea as per tariff item No. 3(1) of the said Act.
11. The answering respondent also filed an affidavit-in-opposition to the amendment application as mentioned above and claimed that the said application for amendment was unwarranted and was filed with the intent to bring on records certain alleged facts which were not correct. That application was further claimed to be an attempt to divert the Court from the main writ petition and the same was claimed to be misconceived as no amendment was necessary in the facts and circumstances of the case. It was also contended that amendment of a petition or plaint must relate back to the presentation of the plaint or petition before the Court and therefore, the writ petition should not be allowed to contain the fact posterier to the date of presentation of the same. On such facts amongst others, it was claimed that the amendment application should to be dismissed. In their reply, the said firm, apart from repeating and reiterating their statements as made in the writ petition, stated that the points as sought to be raised in the affidavit-in-opposition had no basis and in any event, the determinations as made in Brooke Bond's case, cannot be allowed to be agitated at this stage, since an appeal taken therefrom, is still pending and as a result whereof, the determinations as made by D.K. Sen, J., cannot be held and considered to be a final determination. It was also stated by the answering respondents that Section 2(f) and 3 of the said Act being legislation duly incorporated, no challenges as were thrown in this proceeding, would be maintainable and available to the said firm and they further claimed that manufacture of package tea falls within the provisions of Section 2(f) of the said Act, apart from claiming that package tea is distnictly different from tea as per tariff No. 3(1) of tariff as mentioned hereinbefore. According to the answering respondents package tea has a distinct name, character and use and the same is marketed as such. Such being the position, the answering respondents further claimed that the levy of central excise duty on package tea was violative of Articles 14, 19, 300 and 301 read with Article 304 of the Constitution of India as alleged and it was their specific case and the claim of excise duty on such tea would not be unconstitutional or without the authority of law and that being the position, the authorities concerned, according to the answering respondents acted legally and with jurisdiction in the matter of levy of excise duty as involved.
12. The said firm, in their reply, apart from repeating and reiterating their stand as taken initially denied the contentions of the answering respondents, that blending of tea or packaging thereof, is a process incidental or anciallary to the completion of manufactured product or that blending or packaging is manufacture within the meaning of Section 2(f) of the said Act. They further denied and disputed the authority of the legislature to levy central excise duty on package tea by providing a separate sub-item and further denied that package tea is manufactured within the meaning of Section 2(f) of the said Act or that such tea has a distinct name or character or use or that the same is a product brought into existence by manufacture or that duty is leviable on such package tea. They further denied and disputed their liability to pay excise duty on package tea due to the concerned amendment and it was their specific case that the said firm was blending and packaging tea prior to May, 1984 and they do not blend different varieties of tea since that time. It was also the categorical case of the said firm that they only pack duty-paid tea in packages. It has also been stated that package tea is not manufactured or produced by the said firm or various other persons or that such tea are well known in the commercial or trade parlance as distinct and different from loose tea with different prices or marketability. It has further been stated that since May, 1984, the said firm only packed duty-paid tea in 25 gms. to 1 kg. packages and their only business is to receive duty-paid tea and to pack them into packages and to deliver the same to their customers. The payment of excise duty on such package tea or the taking of central excise licence for such package, was stated to be under compulsion and not a voluntary action of the said firm. The said firm has also stated that they have no factory for packaging duty paid tea.
13. The said firm has stated that the levy of duty on package tea can be subject to challenge in view of the intricate questions and points of law as raised in the petition and so long the appeal in Brooke Bond's case is not finally disposed of. It has also been reiterated that package tea is not distintly different from tea or that such package tea has distinct name or character or use and is marketed as such alleged.
14. The amendment application, the particulars whereof, have been indicated hereinbefore, has also been claimed by the appearing respondents in addition to their statements as quoted hereinbefore, to be not maintainable inter alia amongst others:
(a) this application for amendment of writ petition is unwarranted and has been filed with the intent to bring on records certain alleged facts which are not correct. There has been an attempt to divert the Court from the main writ petition, (b) the application for amendment is misconceived as no amendment is necessary to incorporate in the writ petition those facts which are consequential to an interlocutory order of the Court which is in seisin of the main matters, (c) moreover, amendment of a petition or plaint must relate back to the date of presentation of petition or plaint before the Court. Therefore, the writ petition cannot contain the fact posterior to the date or presentation of the writ petition. At the most, the fact posterior or subsequent to the date of presentation of the writ petition, if considered necessary to be brought on record, can be brought to the notice of the Court by filing a supplementary affidavit with the leave of the Court and not by filing a petition for amendment of the writ petition, (d) such application for amendment is, therefore, untenable, misconceived and liable for dismissal with costs and the said application is intended to delay the disposal of the writ petition.
15. On the pleadings as above, before the learned Trial Judge it was submitted that the said firm was not liable to pay excise duty as the same do not come within the mischief of Section 3 of the said Act which is the charging section of the said Act and it was argued that the said Section 3 levies duties on all excisable goods (which are produced or manufactured in India), at the rate set out in the First Schedule to the said Act. It was contended before the learned Trial Judge by the said firm that the tea which was sold by them was or is neither produced nor manufactured and packaging does not bring into existence any marketable product which was not in existence before such packaging. Apart from the above, it was contended on behalf of the said firm that packaging normally cannot come within the definition of "manufacture" as in Section 2(f) of the said Act which includes "any processes incidental or ancillary to the completion of a manufactured product". It was also argued before the learned Trial Judge that because the word "manufacture" will not normally include packaging all manufactured goods, there are some sub-sections of Section 2(f) of the said Act, wherein packaging has been specifically mentioned so as to bring the same within the definition of "manufacture".
16. The learned Trial Judge has pointed out that the controversy which was raised before him was also in issue in the case of Brooke Bond India Limited v. Union of India 1984 Tax LR 2593 wherein D.K. Sen, J., repelled those arguments on the ground that the process by which tea is packed after manufacture and comes into the category of package tea will be deemed to have been considered by the Legislature to amount to, by itself, a production or manufacture, which brought the article within the ambit of the said Act. Before the learned Trial Judge on a reference to the determinations in the case of Union of India v. Godfrey Philips India Limited and Ors. , the determinations as made in Brooke Bond's case (supra) was not in fact upheld. The learned Trial Judge has pointed out that the Supreme Court in the case as mentioned above, has not in clear terms overruled the judgment in Brooke Bond's case (supra) and as such, he made no interference in the proceedings as he felt that there was no reason to differ from the views as expressed by D.K. Sen, J., in that Brooke Bond's case (supra).
17. Since reference has been made to the Brooke Bond's case (supra) and before us that determination was also placed by Mr. Bhaskar Gupta, we think we should refer, not only to the salient facts and the points as involved in that case but also to the decision on the basis whereof, the said determination was arrived at. It should be noted that the decisions as cited in Brooke Bond's case (supra) and which would be indicated hereinafter, were also cited before us by Mr. Gupta.
18. It should also be noted that the defence of the respondents in that Brooke Bond's case (supra) was more or less in the same line as in this case and the petitioners in that case contended amongst others that the concerned blending of tea as was made by them could not have been levied to tax, as by such process there was no manufacture of tea or a new product was brought into existence. It was also contended that the item "package tea" as defined in para. 2 item 3 of the concerned central excise tariff would not contemplate the levy of tea which was re-packed in the packing centres of the petitioners and such operation of the petitioners could not be a part of the manufacturing process which was completed in the tea garden. It was also contended the definition of the expression "manufacture" in Section 2(f) of the said Act, made it clear that more re-packing in a smaller container from a larger, would not amount to manufacture of a new article and manufacture envisaged a process, by which the original commodity would lose or change its identity and a new product having a distinct name, character or use would come into existence. The levy as made, was also claimed by the petitioners in that case to be bad on the ground of double taxation. Thus, on a reading of the determinations in the Brooke Bond's case (supra) it would appear that the main contention and grievance of the petitioners was that, that since on re-packing the character of tea retains tea and there was no manufacture of a new product, the action as taken, was void and violative of the provisions of the said Act and Rules made thereunder.
19. The first case to which reference was made in the Brooke Bond's case (supra) in support of the contentions as above, was that of Mc.Nicol and Anr. v. Pinch, (1906) 2 KB 352, where excise duty was levied on the concerned goods for manufacture of saccharin under the English Finance Act of 1901 and on challenges thrown to such levy it was held by the majority judgment of the Court of Appeal, that the duty in question, could not be levied unless there is a transformation of a new produce and such view, as it appears from the case of Union of India v. Delhi Cloth & General Mills Co. Ltd. , had been supported from the determination of the Supreme Court where it has been indicated that mere change by subjecting an article to a process would not result in manufacture. The above view also gets support from the case of South Bihar Sugar Mills Ltd. v. Union of India , where the Supreme Court has observed that the gas as generated was not carbon dioxide as known to the trade and such would not fall within the mischief of the item of tariff. Similar view has also been expressed or gets support from the determination in the case of J.K. Steel Ltd. v. Union of India , as cited, and where the Supreme Court quoted with approval the observations of Lord Cairns in Partington v. Attorney General (1869) LR 411 to the effect that as I understand the principle of all fiscal legislation it is this; if the person sought to be taxed comes within the letter of the law he must be taxed however great the hardship may appear to the judicial mind to be. On the other hand, if the crown, seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.
While on the point, next case which was referred and was of relevant consideration was that of State of Maharashtra v. Central Provinces Manganese Ore Co. Ltd. , where the question arose as to whether, the mixture of the materials/goods, amounted to manufacture of a new product and on facts the Supreme Court has observed that there was no manufacture of any new product and has also indicated that the mere giving of a new name by the seller is not the "manufacture" of a new product.
There is, it appears to us, no new process of the manufacture of goods at all by the assessee before us this is a case in which the term "Oriental Mixture" was nothing more than a name given by the appellant-company itself to the goods which were in the State of Madhya Pradesh at the relevant time and sent from there specially in order to satisfy the specifications given in the contracts. The goods get mixed up in the process of unloading. The mere fact that the specifications in the contracts are satisfied when they get mixed up is not good and enough ground for holding that a new product has been manufactured. The mere fitting up of parts or a mixture of goods, without employing any mechanical or chemical process of manufacture could not, we think, result in a new commodity. In Indo National Limited, Nellore v. Union of India, 1979 ELT (J) 334 which was also referred in that Brooke Bond's case (supra), was a Division Bench of the Andhra Pradesh High Court and which has indicated that the cost of secondary packing of goods was not a part of manufacturing cost and thus, could not be included in the value of the goods for the purpose of assessment of excise duty. While on the question if transformation is necessary for having the goods in question levied to tax, further reference was made to P.C. Cheriyan v. Mst. Barfi Devi , where the Supreme Court has held that the lease of a premises for carrying on business of retreading of tyres was not a lease for manufacturing purposes within the meaning of Section 106 of the Transfer of Property Act and has also observed to the effect that 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 proves its performance and serviceability as a tyre. Retreading of old tyres is just like resoling 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 retain its basic structure and identity. We may sound a note of caution that the definitions of "manufacture" given in other enactments such as, in the Factories Act or Excise Act should not be blindly applied while interpreting the expression "manufacturing purposes" in Section 106 of the Transfer of Property Act. In some enactments for instance in the Excise Act, the term "manufacture" has been given as extended meaning by including in it "repairs, also.
Similarly view has been expressed in the case of Deputy Commissioner, Sales Tax (Law) Board of Revenue & (Taxes) Emakulam v. Pio Food Packers , where the assessee produced pineapple slices. The production involved purchase of the fruit, cleaning and removal of its inedible portions, slicing and packing in cans with sugar added as a preservative. The cans were then sealed after sterilisation. Section 5A of the Kerala General Sales Tax Act, 1963 imposed levy of a tax on a dealer who in course of his business purchased goods and consumed the same in manufacturing of other goods for sale. The respondent was sought to be taxed under this section. On such facts the Supreme Court held that the process did not involve consumption of the fruit for the purpose of manufacture. The Supreme Court observed as follows:--
Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the Revenue that pineapple slices have a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it. It is not as if the higher price is claimed because it is commercially a different commodity. It is said that pineapple slices appeal to a different sector of the trade and that when a customer asks for a can of pineapple slices he has in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the identity of the two, but is derived from the mere form in which the fruit is desired.
Apart from the above, reference was made to the case of Chowgule & Co. Private Ltd. v. Union of India and Ors. , where a private limited company exported iron ore. The ore, after extraction, was washed, dressed and screened and also blended to produce the required specification and on such 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 operation of blending amounted to processing 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.
In the case of Commissioner of Sales Tax v. Musarafalli Kutubuddin [1975] 35 STC 503, where the sale of old and second-hand furniture after polishing and colouring was involved, it has been held not to be a manufacture under Section 2(17) of the Bombay Sales Tax Act which indicated that manufacture with all its grammatical variations and cognate expressions means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adopting any goods. It has also been observed that an operation, did not bring into existence a new or a different commercial identity. Such view has also been expressed in the case of Piramal Spinning and Weaving Mills Ltd. v. Union of India, 1982 ELT 145 where following the case of Chowgule & Co. Pvt. Ltd. (supra), the Bombay High Court has also observed that by blending or twisting of cotton and nylon yarns no new product came into existence, within the meaning of Section 2(f) of the central excise tariff, though the process led to a twinkling effect and the blended product had a different name in the market. The High Court observed that mere blending or some process at some stage would not necessarily lead to a conclusion that a commercially distinct and different commodity come into existence.
20. The learned Judge in the Brooke Bond's case (supra) on consideration of the effect of Section 3 of the said Act and item 3 of the First Schedule thereunder, has observed that the said First Schedule and the items thereunder, are part of the said Act having statutory force. It has been observed by him that the legislature must be held to have considered the position and imposed excise duty at different rates on the two articles separately enumerated. He was also of the view that such enumeration having specifically been made, package tea should be deemed and considered as a different item and for that the other fact that was taken into account, was that package tea is produced out of tea already manufactured in the garden. The learned Judge has also observed that the process by which tea is packed after manufacture and come into the category of package tea, should thus be deemed to have been considered by the legislature to amount to by itself a production or manufacture which make the article excisable to the duty. It has also been observed that criterion of such differentiation is not unintelligible and he further held that from the facts on record in the case before him, that package tea is not necessarily produced or manufactured by the undertakings which manufacture tea in bulk and package tea is sold to a class of buyers different from the class which produced tea in bulk and can be treated as a different commercial item. On such view, the learned Judge in the Brooke Bond's case (supra) has further observed that the excise duty levied under the goods manufactured or produced by the petitioner, viz., package tea is valid and lawful and according to him package tea is a separate specific excisable items and as such, the authorities were entitled to treat the same as such.
21. Mr. Gupta submitted that observations as made by the learned Judge in the Brooke Bond's case (supra) on leviability of package tea on the basis of his determination on the effect of the section of the said Act and the Schedule, were improper and according to him if there was or has been any inconsistency between the Schedule and the section, which according to him was the case in this proceeding, the section should have precedents over the Schedule and in not holding so, the learned Judge in the Brooke Bond's case (supra) had acted irregularly.
22. We have referred to and indicated hereinbefore the definition of "manufacture" as in the said Act and for the purpose of having an idea as to what manufacture is or what should be the meaning of the said term, Mr. Gupta referred to the case of Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. , which was the case where the question of excise duty and chargeability thereof, under Schedule I and items 12 and 13 of the said Act was under consideration and it has been observed that excise duty is on the manufacture of goods and not on the sale. The fact, therefore, that the substance produced by the manufacturer at an intermediate stage is not put in the market would not make any difference to the chargeability of the substance to excise duty if it is covered by an item in Schedule I of the Act, and therefore, if the manufacture of hydrogenated oils known as vanaspati from the raw materials, new substance has been brought into existence by the application of processes one or more of which are with the aid of power and that substance is the same as "refined oil" as known to the market, an excise duty may be leviable under item 23 (the present item 12). In this respect the view of the Indian Standard Institution as regards what is refined oil as known to the trade in India must be preferred. As the raw oil though purified in the process of manufacturing vanaspati is not deodorised before its hydrogenation. It does not become at any stage "refined oil" as is known to the consumers and the commercial community and no excise duty is leviable on it under item 12 (old item 23) of Schedule I as "refined oil", apart from holding further that the producers of vanaspati cannot be held to manufacture some kind of non-essential vegetable oil within item 12 by applying to the new material purchased by them, the process of neutralisation by alkali and bleaching by activated earth and or carbon. To say that "manufacture" is complete as soon as by the application of one or more processes, the raw material undergoes some change is to equate processing to "manufacture" and for this there is no warrant in law. The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance" however minor in consequence the change may be and the definitions of "goods" make it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold. The "manufacture" which is liable to excise duty under the Central Excises and Salt Act, 1944 must therefore be the "bringing into existence of a new substance known to the market." The definition of "manufacture" in Section 2(1) does not equate "manufacturing processing" to "manufacture". The processed raw oil is not, therefore, covered by the expression "vegetable non-essential oil" or by "all sorts" as no new substance known to the market has been brought into existence at that stage. There is therefore no legal basis for the demand of excise duty thereon under item 12 (old item 23) of Schedule I. Mr. Gupta then referred to the case of South Bihar Sugar Mills Ltd. and Anr. V. Union of India and Anr. , where while dealing with Schedule I and item 14H under the said Act in the case of the appellants who produced gas by lime kilns and used in manufacturing sugar and soda ash on the tests for excisability it has been observed that though in the process of manufacture of sugar by carbonisation process and of soda ash by solvay ammonia soda process, the manufacturer does not require carbon dioxide for the purpose of producing the two articles and sets up lime kiln for that purpose, the gas generated by the kilns is kiln gas and not carbon dioxide as known to the trade, i.e., to those who deal in it or who use it. The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract item 14H in the First Schedule, apart from holding that at the same time, the duty being on manufacture and not on sale the mere fact that kiln gas generated by these concerns is not actually sold would not make any difference if what they generate and use in their manufacturing process is carbon dioxide. The fact that the gas so generated has carbon dioxide below 99 per cent and does not conform to the specification of the Indian Standard Institution also would not matter for the gas may be substandard provided what is produced is carbon dioxide. It has further been observed by the Supreme Court that the said Act charges duty on manufacture of goods. The word "manufacture" implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use and as the Act does not define goods, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. In fact, the above determination was made on the basis of the determinations in the case of Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. (supra). Then Mr. Gupta also made a reference to the case of Empire Industries Limited and Ors. v. Union of India and Ors. . The petitioner-company in that case is a processing unit carrying on job activities of dyeing, printing and finishing of cotton fabrics and man-made fabrics. These fabrics in unprocessed condition called grey fabrics are received by the appellant's factory from various customers for processing. The fabrics are then boiled in water mixed with various chemicals, washed and dyed. The next stage is printing process, i.e., putting the required designs on the said fabrics by way of screen printing on hot tables. The final stage is the finishing process, that is to give a final touch for better appearance. According to the petitioners they do not carry on any spinning or weaving of the fabrics, nor do they sell the processed fabrics but they merely collect from their customers charges only for the job work of processing done by them and it was their case that apart from the excise duty the cotton fabrics and man-made fabrics were also subjected to the additional duties of excise as a result of the amendments of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. By Section 4 of the Amending Act, items 19-I and 22(2) of the First Schedule to the Excise Act were also similarly amended by making an identical substitution of items 19-I and 22(1) in the First Schedule to the Additional Duties Act. The effect of various amendments inserted in the Excise Act by the Amendment Act was to include the processes of bleaching, dyeing and printing, insofar as the present petitions are concerned within the definition of the word "manufacture". The petitioners challenged the validity of the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980. The question for determination were: (1) Whether processes conducted and carried on by the petitioner in respect of cotton fabrics and woollen fabrics/man-made fabrics as mentioned under item 19 or 22 of the Schedule to the Central Excises and Salt Act amount to "manufacture" as the Act stood prior to the impugned Act of 1980 so as to attract levy of duty under Section 4 of that Act? (2) Whether and in any event after the impugned Amendment Act under which these processes carried on by the petitioner are covered by the expression "manufacture" the levy is valid? Whether the impugned Act is intra vires entry 84 of List 1 of the Seventh Schedule to the Constitution and if not, whether the said impugned Act can be said to be valid in any event under Entry 97 of List 1 of the Seventh Schedule to the Constitution? While making their determinations the Supreme Court, by majority has observed that the process of bleaching, mercerising, dyeing, printing, waterproofing, etc., carried out by the petitioner-company amounted to "manufacture" under the Central Excises and Salt Act as it stood prior to the impugned Amendment Act. Etymologioally also such process means manufacturing process and whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of "manufacture". The test to determine whether a particular activity amounts to "manufacture" or not is: Does new and different goods emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes "manufacture" takes place and liability to duty is attracted. Etymologically the word "manufacture" properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view is a question depending upon the facts and circumstances of the case.
23. It has also been observed in that case that levy as made under the Act in question, was valid and the Act being intra vires entry 84 of List 1 of the Seventh Schedule to the Constitution. The words "manufactured or produced" in entry 84 are used in connection with duty of excise. It is not required by that entry that the goods must be manufactured in the sense that raw material should be first transformed into something altogether different. It would still require that these should be produced in the sense that some human activity and energy should be spent on them and these should be subjected to some processes in order that these might be brought to the state in which they might become fit for consumption. So further transformation of the transformed material by the human labour and skill making it fit for human consumption so as to attract the duty is covered by the entry, apart from holding that in any event the impugned Act would be covered by entry 97 of List 1 of the Seventh Schedule if it is not covered by Entry 84. It is difficult to appreciate the argument that the levy would fail as there will be no appropriate charging section or machinery for effectuating the levy on the activity like the method of processing even if such an activity can be justified under Entry 97 of List 1 of Seventh Schedule. The charging section is Section 3 of the Central Excises and Salt Act, which stipulates the levy and charge of duty of excise on all excisable goods produced or manufactured. "Manufactured" under the Act after the amendment would be the "manufacture" as amended in Section 2(f) and tariff items 19-I and 22 and the charge would be on that basis and the challenge to the validity of the impugned Act on the ground that giving retrospective effect unreasonable restrictions had been imposed on the petitioners' rights under Articles 14 and 19(1)(g) cannot be sustained. Tax may be imposed retrospectively and that by itself would not be an unreasonable restriction on the right. Having regard to the object of the Act, there is no particular feature of this legislation which can be said to create any unreasonable restriction upon the petitioners. It has also been observed that in the view taken of the expression "manufacture", the concept of process being embodied in certain situation in the idea of manufacture, the impugned legislation is only making "small repairs" and that is permissible mode of legislation and the impugned legislation does not act harshly nor there is any scope for arbitrariness. Apart from holding that the contention of the petitioner that they are carrying on only the processing activity and the wholesale cash price is not theirs on the entire product is also unwarranted and, where for the purpose of calculating assessable profits, a notional and conventional sum is laid down by the Legislature to be arrived at on a certain basis, it is not permissible for the Courts to engraft into it any other deduction or allowance or addition or read it down on the score that the said deduction or allowance or addition was authorised elsewhere in the Act or in the Rules. A conventional charge should be measured by its own computation and not by facts relating to other method of computation. The circumstances that thereby the benefit of any exemption granted by the Legislature may be lost and that in some cases hardship might result are not matters which would influence courts on the construction of the statute. Taxation under the Act is the rule and benefit and exemption, the exception.
24. In fact, it was contended by the appellant before us that the definition of "manufacture" under the said Act is an inclusive one and according to them, the Court should find out on the basis of the tests as indicated as to whether if the facts of this case or in the process as involved, a new commodity comes into being or not. In support of their submissions that the process as involved in the present case, would not bring about a new commidity, reference was made by Mr. Gupta to the case of M/s. Sterling Foods, a Partnership Firm represented by its Partner Shri Ramesh Dalpatram v. State of Karnataka and Anr. 1986 (26) Excise Law Times 3 which is also , , where it has been observed by the Supreme Court that in order to attract Sub-section (3) of Section 5 of the Central Sales Tax Act it is necessary that the goods which are purchased by an assessee for the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The words "those goods" in this sub-section are clearly referable to "any goods" mentioned in the preceding part of the sub-section and the test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. It is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct commodity that it can be said that a new commodity, distinct from the original, has come into being. It has also been observed that the question as involved, for the purpose of the Central Sales Tax Act, has to be determined on the basis of what is commonly known or recognised in commercial parlance and it has also been indicated that in commercial parlance and according to what is understood in the trade by the dealer and the consumer, processed or frozen shrimps, prawns and lobsters retain their original character and indentity as shrimps, prawns and lobsters and do not become a new distinct commodity and are as much "shrimps, prawns and lobsters", as raw shrimps, prawns and lobsters. Therefore, Section 5(3) of the Central Sales Tax Act would be attracted. Since with a view to fulfilling the existing contracts for export, the assessee purchased raw shrimps, prawns and lobsters and processed and freezed them, such purchase of raw shimps, prawns and lobsters would be deemed to be in course of export so as to be exempt from liability to State Sales Tax.
25. In the case of Commissioner of Sales-Tax v. Bombay Traders, [1976] 38 STC 286, to which reference was made by Mr. Gupta, the traders used to purchase plain cashew nuts in tins and used to sell in plastic bags after frying and applying spices. A point arose in that case whether such activity amounted to manufacture and a Division Bench of the Bombay High Court has observed that the expression "sealed container" means a container, which is so closed that access to the contents is impossible without breaking the fastening, and the assessee, registered as a dealer under the Bombay Sales Tax Act, 1959, bought plain cashew-nuts in tins and after frying and applying spices to the cashew-nuts to make them tasty, packed them in plastic bags and sold them locally. The Tribunal found that the fried and salted cashew-nuts sold by the assessees could not be said to be a different commercial commodity from the plain cashew-nuts and that the sample container which was produced before them and in which the cashew-nuts were packed could be opened and closed again. The Tribunal accordingly held that the activity of frying and spicing of the cashew-nuts could not be said to be "manufacture" within the meaning of that term in Section 2(17) of the Act and that the cashew-nuts were not sold in sealed containers. It would appear that on a reference it was held (i) that the question to be considered was whether the fried and salted cashew-nuts prepared by the assessees could be said- to be a different commercial commodity from plain cashew-nuts and this was primarily a question of fact to be determined on the evidence before the sales tax authorities. As the Tribunal had found that even after the plain cashew-nuts were fried and salted by the assessees they still continued to be the same commercial commodity, viz., cashew-nuts, the process or activity applied on the cashew-nuts could not be said to be "manufacture" within the meaning of the term in Section 2(17) of the Act; (ii) that there was also ample material before the Tribunal on which it could come to the conclusion that the fried and salted cashew-nuts sold by the assessees could not said to be a new or different commercial commodity from the plain cashew-nuts which had been purchased by the assessees; (iii) that the cashew-nuts were not sold by the assessee in sealed container and the Tribunal was justified in holding that the sales were covered by entry 5 of the Part I of Schedule 'D' to the Act. Apart from the above, further reference was made by Mr. Gupta to another Bombay High Court decision in the case of Commissioner of Sales-Tax, etc. v. Paper Process etc. and Ors. [1986] 62 STC 317. In fact, in that case it has been observe that, on a reference in a case where the assessee, a registered dealer, purchased paper in larger reels or rolls and these rolls were cut by the assessee into smaller paper reels by a slitting process. On an application made by the assessee under Section 52 of the Bombay Sales Tax Act, 1959, the Deputy Commissioner took the view that the said activity amounted to manufacture under Section 2(17) of the Act and so the sales effected by the assessee were liable to sales tax. On appeal the Tribunal took the view that the activity carried on by the assessee did not amount to manufacture as that activity did not result in the production of a new commercial commodity, that before an activity could amount to manufacture it must result in a commodity commercially different from the commodity to which the activity was applied. There was no material on record to show that in the paper market larger reels of paper were treated as a different commercial commodity from smaller reels. Therefore the process of slitting paper did not amount to manufacture under Section 2(17) of the Bombay Sales Act, 1959, and consequently no tax was payable on the sales of smaller reels of paper. The Tribunal was right in its conclusion that smaller reels of paper prepared by the assessee were not a different commercial commodity from the larger reels of paper from which they were cut.
26. For the meaning of the word "processing", reference was made by Mr. Gupta to the case of Chowgule & Co. Pvt. Ltd. and Anr.
v. Union of India and Ors. . In that case the company used to blend ore of different qualities for obtaining ore of requisite specification and a question arose as to whether such blending would come within the purview of the term "processing" and the Supreme Court has observed that though 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, the operation of blending would amount to "processing" of ore within the meaning of Section 8(3)(b) and Rule 13. Consequently, where the blending was done through the Mechanical Ore Handling Plant, the plant fell within the description of "machinery, plant, equipment" used in the processing of ore for sale and it follows as a necessary corollary that if any items of goods were purchased by the assessee as being intended for use as "machinery, plant, equipment, tools, spare parts, stores, fuel or lubricants" for the mechanical ore handling plant, they would be eligible for inclusion in the certificate of registration of the assessee. On the basis of the said determinations and on consideration of the definition of manufacture under Section 2(f) of the said Act, it was Mr. Gupta's firm contention that unless because of the process involved, there has been a change of the product, there could not be any case of manufacture and such being the position, since tea packed in packages from out of the bulk tea purchased by the appellants remain tea and do not have a change of the character of the same, the levy as made, was improper, irregular, void and unauthorised.
27. Mr. Gupta specifically contended that if there is inconsistency between the section and the Schedule, the Schedule must give way to the section and such being the position, even if package tea has been included in the Schedule, such tea could not be subjected to tax as the concerned incidence of tax on the basis as indicated hereinbefore, would be contrary to the section itself. In support of his submissions, reference was made by Mr. Gupta to the case of Commissioner of Income Tax, Gujarat v. Vadilal Lallubhai . The assessee in that case had transferred the shares in certain controlled companies and the companies went into voluntary liquidation and distributed their assets, the assets so distributed, which were deemed to be dividends within the meaning of Section 2(6a)(c) of the Income-tax Act, 1982, were not "income" for the purposes of Section 44F of that Act and were also not capable of being deemed to accrue from day to day, therefore, no portion of the assets so distributed and received by the transferees could be assessed in the hands of the assessee under Section 44F. It has also been indicated that the scheme of Section 2(6a)(c) is not compatible with the scheme of Section 44F and the two provisions are intended to meet totally different situation. On such facts it has also been observed that the scheme of Section 2(6a)(c) cannot be dovetailed into the latter, i.e., Section 44F in that case. It has further been observed that subject is not to be taxed unless the charging section clearly imposes the obligation and in interpreting a taxing provisions one has merely to look into the words of the provision. It has also been observed that it is not permissible to consider any provision of a statute, much less a taxing provision, by reading into it more words than it contains. Apart from the above, it has also been indicated that if a section of a statute is considered as ambiguous it would not be inappropriate to find out the reasons that persuaded the Select Committee to recommend the inclusion of that section.
28. While on the point as indicated above, further reference was made by Mr. Gupta to the case of Rahim Manji and Anr. v. Sheikh Ekbar AIR 1914 Calcutta 581, where it has been specifically observed in the case of a conflict between the Civil Procedure Code and its Schedule, the Code must prevail. In the case of Muneshwara Nand v. State , to which reference was also made by Mr. Gupta, it has been indicated that Schedules form a part of the statute and must be read together with it for all purposes of construction. But expression in the Schedule cannot control, or prevail against the express enactment. If there is any appearance of inconsistency between the Schedule and the enactment the enactment shall prevail, and if the enacting part and the Schedule cannot be made to correspond, the latter must yield to the former and on that basis Mr. Gupta wanted to supplement his arguments that section in the instant case should prevail over the Schedule. Similar view as above, has also been indicated in the case of Commissioner of Income-Tax, Madras v. Ajax Products Limited where it has also been specifically indicated that if the words of a statute are precise and unambigious it must be accepted as declaring the express intention of the Legislature and a proviso must be considered harmoniously with the main enactment, apart from holding that fictions should not be stretched beyond the purposes for which they were enacted. The said case has also observed that subject is not to be taxed unless the charging provisions clearly imposes the obligation.
29. The cases as cited by Mr. Gupta in support of his submissions on the tests required to find out whether a new commodity is brought into existence by the process as involved in this case, in order to bring the same within the purview of the definition of "manufacture" further reference was made to the decision of Customs, Excise and Gold (Control) Appellant Tribunal, New Delhi's in the case of Collector of Central Excise v. Fine Marbles and Minerals Pvt. Ltd., Mackainara 1984 ECR 1493. The respondents in that case produced marble slabs from marble blocks by the process of sawing and contended that mere sawing of the slabs from blocks did not amount to manufacture. They also pointed out that since the Appellate Collector had set aside the adjudication order, the burden of proving the liability to duty would be on the department. The appellant contended that marble slab was brought into existence by the process of sawing marble blocks with sophisticated machineries and were a commercially identifiable product with the distinct name, character and use, at the different identity from the raw materials, i.e., marble block. It has been observed that marble slabs sawn from marble blocks are not manufactured goods, there being no transformation by processing into a commercially distinct commodity, as the end product continues to be known as marble. On application of the ratio of the Supreme Court judgment to the effect that the marble slabs that are merely sawn from the marble blocks cannot be called a distinct commodity. The end product which would come into existence after the activity is completed, would still be called marble.
It has thus been indicated that the original identity continues despite the several processes undergone. In the trade circle, marble slabs or marble tiles that are manufactured after cutting edges, trimming, polishing and other processes continued to be known as marble, unless it is proved that by virtue of sawing process, a different or distinct commodity comes into existence, the process cannot be equated to manufacture. It has further been indicated that marble slabs are not marketable and therefore manufacture of marble is only complete when processes as machining and polishing result in a distinctly different commodity. This determination, on appeal, has been upheld in the case Collector of Central Excise v. Fine Marble etc. (1986) 9 Excise and Customs Reporter 504.
30. Mr. Bhattacharjee appearing for the authorities concerned and opposing the appeals claimed and contended that package tea is itself a concept and the same forms a different class from tea as purchased in bulk by the appellants and have a distinct character, use and recognition to the consumers and it was specifically claimed by him that such concept, viz., package tea is a different class by itself was evidenced since after the last Second World War and as the authorities concerned felt and realised that package tea grew or was growing as a different concept by itself, so in 1953, the Legislature wanted to have such tea levied to tax. In fact, he wanted to establish such intention, on a reference to the provisions of Central Excise and Salt (Amendment) Act, 1953, according to which "tea" includes all varieties of the product known commercially as tea, and also includes green tea.
1) package tea, that is to say, tea packed in any kind of container containing not more than 60 lbs. net of tea--
i) if before being so packed, duty has Three annas per lb. net.
been paid thereon under sub-item (2) of this Item.
ii) if, before being so packed, duty Four annas per lb net.
has not been paid thereon under sub-item (2) of this item
2) Tea not otherwise specified. one anna per lb. net.
2) The amendment made by Sub-section (1) shall apply 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. It was further claimed by him that package tea was inserted in the concerned Tariff/ Rules on and from 15th April, 1983 and if not earlier, at least from that date, such tea has, as mentioned hereinbefore, grown as a concept by itself, having, specific connotation in commercial parlance and is treated by all as a separate item or of merchandise. Such being the position, Mr. Bhattacharjee has also claimed that package tea having been entered into the First Schedule, became excisable and such excisability, which was and is the real object of the charging section, viz., Section 3, has been satisfied in the instant case and thus, the levy of duty as made or imposition of any tax, cannot be considered or contended to be contrary to the intention of the said charging section and the Legislature. He further pointed out that since definite and specific treatment with the help of labour and other machineries by a manufacturer of package tea is required, so there would be no other way but to hold that package tea as mentioned in item 3(2) of the First Schedule, would be entitled to be taxed under the said Act. For the purpose of having taxes imposed or levied in respect of other items, viz., cotton fabrics, iron in any crude form, silk fabrics, woollen fabrics, rayons, artificial silk fabrics, copper and copper alloys containing not less than 50% by weight of copper and aluminium, Mr. Bhattacharjee referred to the different items of the First Schedule under the said Act and claimed that if tax can be imposed or levied on these items as they have been incorporated in the First Schedule so there would not be any reason why tax cannot be imposed or levied in respect of package tea.
31. On a reference to item 3 of the First Schedule, according to which "tea" includes all varieties of the products known commercially as tea, and also includes green tea, (1) (2) package tea, that is to say, tea packed in any kind of container containing not more than 27 kilograms net of tea, Mr. Bhattacharjee contended that such inclusive definition would also justify the imposition or levy of tax on package tea as made in the instant case. For the purpose of establishing what is meant by the word "includes" within the meaning of "tea" as in item 3 of the First Schedule, Mr. Bhattacharjee referred firstly, to the case of Khan Bahadur C.K. Mammad Koyi v. Assistant Collector, Estate Duty-cum-Income-tax Circle, Coimbatore (Estate Duty Cases). In that case, the words "including in particular" or the meaning thereof, in Moplah Marumakkattayam Act, 1939 were considered and the Division Bench of the Madras High Court has observed that where the expression used in a section is merely "including" it does not have a restrictive operation and confine the scope of the section only to those things specified in the words following. Specially in a taxation measure, which is intended to be quite general in its operation, it enlarges the meaning of the words or phrases occurring in the section. It has also observed in that case that the particular phraseology employed in Section 7(1) which including in particular compels the adoption of the interpretation which enlarges the meaning to be attached thereto in particularizing the coparcenary interest. It has also been observed that the legislature intended only to remove any ambiguity and which might otherwise be supposed to exist in the area of operation of the provisions. Above view which was also sought to be supported by Mr. Bhattacharjee on a further reference to the case of Commissioner of Income-tax, Madras v. I.G. Mackintosh and Anr. [1975] 99 ITR 419, where the definition of salary under the Income-tax Act is exhaustive or not come up for consideration and the Division Bench of the Madras High Court has observed that normally the word "include" is employed by Parliament and legislature in defining words for the purpose of enlarging the meaning of the ordinary words or clearing any doubt that might arise in understanding the same. Therefore, the Courts generally interpret it as enlarging the meaning of the word and do not restrict the meaning to the particular words that follow in the inclusive part of the definition unless the context otherwise merits, apart from holding that the purpose of defining the word "salary" in Rule 3 of the Income-tax Rules, 1962, separately appears to be to exclude certain items which would otherwise be comprehended within it rather than to restrict its meaning itself. It is doubtful whether the rule-making authority could have given in the Rules any meaning different from that given in the Act itself. Hence, the definition of the word "salary" in Rule 3 is not exhaustive and the word "salary", in its natural import, would comprehend within it taxes paid by the employer on behalf of the employee and hence such taxes paid by the employer would be included in the word "pay" in Rule 3. It may also amount to a cash allowance and come within Rule 3. Hence, in any view of the matter, the income-tax paid by the employer has to be treated as salary for the purpose of valuing the rent-free residential accommodation under Rule 3 of the Income-tax Rules, 1962, and Rule 24A of the Indian Income-tax Rules, 1922. For the purpose of supplementing his submissions, on the above point, Mr. Bhattacharjee made a further reference to the case of The Commissioner of Income-tax, Andhra Pradesh v. Raj Mahal Hotel, Secunderabad AIR 1972 SC 162, where the expression "plant" as in Section 10(2) (vi-b) and (5) of the Income-tax Act, 1922 and the meaning thereof, was considered and while considering the effect and meaning of the word "includes" it has been observed by the Supreme Court that the very fact that even books have been included in the definition of the word "plant" in Section 10(5) shows that the meaning intended to be given to "plant" is wide. The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statutes. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include, apart from observing that to have sanitary fittings, etc., in a bath room is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. It is therefore incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier. He can reasonably expect to get more customers and earn larger profit by charging higher rates for the use of rooms if the bath rooms have sanitary fittings and similar amenities. Therefore the sanitary fittings in the bath rooms in a hotel will be "plant" within Section 10(vi-b) read with Section 10(5). It has also been observed by the Supreme Court in that case that where the definition of a word has not been given, it must be construed in its popular sense of it is a word of every day use. Popular sense means "that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it." On the basis of the above determinations, Mr. Bhattacharjee contended that if the intention of the section or the provisions of the statute which according to him was in issue in the instant case, the Schedule/tariff should be preserved and no endeavour should be made to create any repugnancy. In support of such submissions he referred to the case of Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota and Ors., [1981] 48 STC 466 in which case the assessee a company engaged in the manufacture and sale of cement, sold the cement partly in Rajasthan, where its factory was situated, and partly outside that State. For the period between August 1, 1973, and July 31, 1974, it submitted returns for its turnover under the Rajasthan Sales Tax Act, 1954, as well as the Central Sales Tax Act, 1956, accompanied by chalans for the payment of tax which which was in accordance with the returns. In its returns, the assessee did not include freight charges in the taxable turnover, in the bona fide belief that the freight charges were not liable to be included in the taxable turnover, in view of certain decisions, especially the decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh . Subsequently, the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan held that freight was a part of the sale price of cement. Thereafter the assessee filed revised returns including the freight charges in the taxable turnover and also deposited along with the revised returns the balance of the sales tax payable under the State and Central Acts. In the order of assessment passed under the State Act, the assessing authority levied penalty under Section 7AA of the Rajasthan Sales Tax Act and interest under Section 11B of the Act for the delay in depositing the freight charges. Similarly in the assessment orders passed under the Central Act penalty under Section 7AA and interest under Section 11B of the State Act read with Section 9(2) of the Central Act were levied. The assessee obtained special leave of the Supreme Court under Article 136 of the Constitution of India to appeal against these orders and on such facts it has been observed by the majority that the explanation of the assessee for not including the freight charges in the taxable turnover that there was a doubt about its liability to pay sales tax thereon as the very same question was pending adjudication before the Supreme Court and that within two months after the judgment of the Supreme Court in Hindustan Sugar Mill's case , the assessee had filed the revised returns including the freight charges in the taxable turnover and paid the sales tax payable in respect of them even before the assessing authority had passed the orders of assessment had to be accepted. Therefore, the levy of penalties (under the State as well as the Central Acts) for not including the freight charges in the taxable turnover in the original returns and for not paying the tax in respect of such freight charges at the time of filing the original returns was unsustainable. It has also been observed in that case that it was not disputed that freight charges had to be included in the taxable turnover of the assessee mentioned in the returns that were filed within the prescribed time under Section 7(1) of the Act and that the tax payable in respect of freight charges should have been paid as required by Section 7(2) before the returns were filed. The fact that the question relating to the liability of the assessee to pay sales tax in respect of the freight charges was decided by the Supreme Court subsequently did not in any way affect the question which arose for consideration in the case. The decision of the Supreme Court did not create any new liability. It only declared that such a liability was existing at the relevant point of time. Since it was clear that the amount of tax due in respect of the freight charges which was payable under Section 7(2) was not paid within the period allowed, Section 11B was clearly attracted and the liability to pay interest as required by it arose and the statutory liability to pay interest under Section 11B(a) of the Rajasthan Sales Tax Act, 1954, arises wherever there is default in payment of tax within the period allowed by law irrespective of any doubt which an assessee may be entertaining about the liability to pay the tax. Either by delaying the filing of the return or not filing the return at all or by filing a return wrongly claiming that a certain part of the turnover is not taxable or by not disclosing a part of the taxable turnover in the return an assessee cannot escape the liability to pay interest under Section HB(a) on the amount of tax withheld as a consequence of his own action or inaction from the last date on which it has to be paid as per Section 7(2) or (2A), as the case may be, read with the Rajasthan Sales Tax Rules, 1955. The amount of interest has no doubt to be calculated after the actual amount of tax payable is assessed and necessary adjustments are made, apart from holding that Section 7 of the Act which deals with the submission of returns is not a charging section but a machinery section. It is settled law that a distinction has to be made by Courts while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The Courts are expected to construe the machinery sections in such a manner that a charge to tax is not defeated. It is the duty of the Court while interpreting the machinery provisions of a taxing statute to give effect to its manifest purpose having a full view of it. Wherever the intention to impose liability is clear the courts ought to have no hesitation in giving a common sense interpretation to the machinery sections so that the charge does not fail and a fair reading of Section 11B of the Act suggests that the Act expects that all assessees who are liable to pay sales tax should file a true return within the period prescribed under Section 7(1) and should produce a treasury receipt or a recipt of any bank authorised to receive money on behalf of the State Government showing that the full amount of the tax due from them has been paid. If the words "on the basis of return" occurring in Sub-section (2) of Section 7 of the Act are construed as "on the basis of a true and proper return which ought to have been filed under Sub-section (1) of Section 7" then all the three classes of persons, viz., (1) those who have not filed any return at all and who are later on found to be liable to be assessed, (2) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (3) those who have filed a return making a wrong claim that either the whole or any part of the turnover is not taxable and who are subsequently found to have made a wrong claim, would all be liable to pay interest on the amount of tax which they are liable to pay but have not paid as required by Section 7(2) of the Act. This view is in conformity with the legislative intention in enacting Section 11B of the Act. It has also been indicated that Section HB(a) which provides for levying interest on failure to pay tax, states that if the amount of any tax payable under Sub-sections (2) and (2A) of Section 7 is not paid within the period allowed, the dealer shall be liable to pay interest at the prescribed rate during the time he continues to make default in the payments. Section 11B(a) does not refer to any tax due and Rule 25 of the Rajasthan Sales Tax Rules, 1955, which is framed under the Act should be read as a part of the Act itself in view of the express provision contained in Section 26(5) of the Act, which declares that all rules made under Section 26 shall on publication in the official Gazette have effect as if enacted in the Act and also to indicate that it is well-settled rule of interpretation that a statute must be so construed as not to create any repugnance between its different provisions, for it is a basic assumption underlying every interpretation exercise that the legislature must be supposed not to have intended to contradict itself.
32. To establish that the definition of "manufacture" as in Section 2(f) of the said Act, would be inclusive and the clauses appended to the said definition are merely illustrative and not exhaustive, Mr. Bhattacharjee referred to the determinations in the case of Ramnugar Cane and Sugar Co. Ltd., Jaipur and Ors. v. Union of India and Ors. 1983 Excise Law Times (Vol. 12) 6, where, apart from holding in the matter as indicated by Mr. Bhattacharjee, the Division Bench of the Rajasthan High Court has also observed, while dealing with a case of vegetable product and if packing of the same is a process of manufacture that since under tariff item 13 of the central excise tariff, the vegetable product which is made subject to duty of excise should be fit for human consumption, therefore, canning of such a vegetable product in containers of metal or polythene is a process incidental and ancillary to the completion of manufacture of the vegetable products, apart from holding that the very fact that the petitioners are marketing their products under their own brand name lends added assurance to the conclusion that the process of canning of vanaspati in metal or polythene containers inscribed with brand name of the petitioner, is incidental or ancillary to the completion of the manufacture of vegetable product to make it fit for human consumption and since canning of vegetable products in metal or polythene containers is a process incidental and ancillary to the completion of vegetable product, therefore, the cost of such canning is includible in the value of vegetable products for assessing the duty of excise. It makes no difference whether such containers are manufactured by the petitioners themselves or are purchased from the market. In that case it has also been observed that if the process of canning (packing) is incidental or ancillary to the completion of manufacture of a particular product, then the cost incurred in purchasing the containers is a cost which is an essential component of the manufacturing cost of excisable goods which are to be contained in such containers. While on the point, a further reference was made by Mr. Bhattacharjee to the case of Brakes India Ltd., Madras v. Superintendent of Central Excise, Madras and Ors., , where the question of the liability of a manufacturer of brake linings was considered. It was an admitted fact that in that case the petitioners purchased brake lining blanks manufactured to their specifications from M/s. Rane Brake Linings Ltd., and other manufacturers and those brake linings blanks cannot be used by the customers in their vehicles without drilling and trimming or charnferring them. The process of drilling, trimming or chamferring has been observed to be a process which has essentially to be applied in order to render the brake lining blanks fit to be straightaway used in vehicles and thus it has been observed that so the process of drilling and trimming or chamferring of brake lining blanks is a process essential, incidental or ancillary to the completion of the brake linings as a manufactured product as without drilling and trimming or chamferring the product could not be used in vehicles. Such being the position it has been held that the process of drilling, trimming or charmferring which is applied to the brake lining blanks purchased by the petitioners is incidental or ancillary to manufacture and therefore, the petitioners must be deemed to be " manufacturers " manufacturing brake linings for motor vehicles liable to take out a central excise licence as required by the provisions of Section 6 of the Central Excise Act read with Rule 174 of the Central Excise Rules, 1944 and also liable to pay excise duty thereon under the Act. In that determination the Court has further observed that " manufacture " implies a change though every change is not manufacture. If by a process a change is effected in a product which was not there previously and which change facilitates the utility of the product for which it is meant, then the process is not a simple one but a process incidental or ancillary to the completion of a manufactured product. Commonly, " manufacture " is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may very from one product to another and there could be several stages of processing and different kinds of processing depending upon the utility for which the end product is meant. Any process if it is incidental and ancillary to the completion of manufactured product, it will certainly amount to " manufacture " within the meaning of Section 2(f) of the Central Excise Act, apart from indicating that the question as to when the manufacture of an excisable goods can be stated to be complete is certainly a mixed question of law and fact. In order to dispel any ambiguity which may arise as to the precise stage when the manufacture of an excisable goods could be stated to have been completed the definition clause in Section 2(f) stands enacted, first generally setting out that it will include any process incidental or ancillary to the completion of a manufactured product, further expatiating the relevant processes with regard to the specified goods. The stage of completion of manufacture of an excisable goods cannot be stated to have been reached until the processes incidental or ancillary have also been completed. Ultimately, it will to a great extent depend upon as to what is known to the consumer and commercial community as the product which they want to utilise and consume for the specified purpose and in case of the interpretation of fiscal statute imports nothing of reason and justice but depends entirely upon the language of the legislature. It is true that in case of doubt, they are to be construed most strongly against the Revenue and in favour of the citizen, but statutes imposing pecuniary burdens are subject to the rule of strict interpretation. One has to look merely at what is clearly said. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.
33. Mr. Bhattacharjee referred to the earlier and the present definition of "manufacture" under the said Act and contended that the subsequent amendment of the said term is only clarificatory and for the meaning of the word "include" he referred to the case of Commissioner of Sales Tax, M.P. v. Esso Standard Refining Co. of India Ltd. [1980] 46 STC 216. The point of determination amongst others was whether petroleum products, motor spirits and Esso Solvents Nos. 1425, 3040 and 2445 were taxable as "petroleum products" under Sales Tax Act or as "motor spirit" under Motor Spirits Act and what should be the meaning of the word "Includes" in the definition of "motor spirit". The real point for determination really was " whether Esso Solvent Nos. 1425, 3040 and 2445 are exigible to tax under entry No. 39 of Part II of Schedule II or under the provisions of the M. P. Sales of Motor Spirits Taxation Act, 1957?" and it has been indicated following the observations of the Supreme Court in the case of Income Tax Commissioner, A.P. v. Taj Mahal Hotel , that the word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occuring in the body of the statute, and when it is so used the words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. He also contended that the present definition of "manufacture" is all inclusive and has been brought into the statute by way of ex abundanti cautela. In support of such submissions, he referred to the observations in Craies on Statute Law (Seventh Edition) and more particularly to the observations that sometimes a term is defined in an interpretation clause merely ex abundanti cautela--that is to say, to present the possibility of some common law incident relating to that term escaping notice. While on the question and submissions of double taxation, reference was made by him to Maxwell on The Interpretation of Statutes (Twelfth Edition) and more particularly to the chapter [which] deals on the question of "construction most agreeable to justice and reason" and pointed out that in determining either the general object of the Legislature, or the meaning of its language in any particular passage, it is obvious that the intention which appears to be most in accord with convenience, reason, justice and legal principles should, in all cases of doubtful significance, be presumed to be the true one. It was pointed out in terms of the determinations in the case of Aremion v. Procopion, (1966) 1 QB 878 that an intention to produce an unreasonable result is not to be imputed to a statute if there is some other construction available and in terms of the observations in the case of Luke v. J.R.C. (1963) AC 557, that where to apply words literally would " defeat the obvious intention of the legislation and produce a wholly unreasonable result" some violence to the words may be made to achieve that obvious intention and produce a rational construction. The question of inconvenience of unreasonableness as indicated in Attorney General v. Prince Ernest Angustu of Hanover, (1957) AC 436 must be looked at in the light of the state of affairs at the date of the passing of the statute and not in the light of subsequent events, apart from contending, that unreasonable and inconvenient results should be avoided. In view of the above, it was Mr. Bhattacharjee's specific submission, that arguments on double taxation in this case will be of no use, help and assistance to the appellants. Tariff item No. 22 deals with "man-made fabrics".
34. It was Mr. Bhattacharjee's submission that when the said Tariff was included, like the present item ''tea" as in tariff item No. 3, long before the incorporation of the present definition of "manufacture", so there was or has been no fetter on the part of the authorities concerned to levy and impose tax on package tea as involved in this case. In support of his submission, Mr. Bhattacharjee referred to the case of Union of India and Ors. v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. (Calico Mills), Ahmedabad, . The goods manufactured, in that case, which were called "Calikut Special", contained more than 60 per cent of artificial silk at the final stage and it has been observed that the same will be liable to excise duty under item No. 22 of the Schedule notwithstanding the fact that during processs at some intermediate stage it contained less than 60 per cent of rayon or artificial silk and was thus liable to heavier excise duty under item No. 19 of the Schedule and having regard to the process involved in the manufacture of the same, the Supreme Court has indicated that it is not possible to hold that the character of the goods at the intermediate stage of production could be taken into consideration for determining the liability under the Act. The process involved in the case after the intermediate stage formed an integral part of the manufacture of the product in question and the classification of the manufactured product for purposes of excise duty would depend upon its nature and character at its final stage of production unless a contrary intention appears from the statute. It is seen from Clause (vii) of Section 2(f) of the Act which is no doubt introduced subsequently that bleaching, heat setting, etc., are incidental and ancillary processes necessary for the completion of the manufactured product falling under item No. 22. This amendment has only attempted to explain the obvious and to put the question beyond dispute. Therefore even though the product in question might have fallen under item No. 19 in the First Schedule to the Act at the intermediate stage of production, at the final stage, when the duty became exigible, it became taxable under item No. 22 only. In fact, Mr. Bhattacharjee, on the basis of the incorporation of the product "package tea" since 1953 by the Amendment Act as mentioned hereinbefore, claimed that since package tea has been included in the Schedule/Tariff, the imposition or levy as made, was due and proper, since that was the intention of the legislature and according to him, this Court would not be justified in interferring with such intention of the legislature or taking or expressing a contrary view therefrom.
35. On the question as to how a statue has to be construed and what are the cautions that are to be followed, a reference was made by Mr. Bhattacharjee to the case of Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota and Ors. (supra), the particular findings whereof, have been indicated hereinbefore. He also indicated that the intention of the legislature in the case of the present nature should have preference and such intention is to be culled out from the nearest proximity of the provisions in the statute. In support of such submissions, reference was made by Mr. Bhattacharjee to the case of Commercial Tax Officer, Radha Bazar Charge v. Bengal Potteries Ltd. [1986] 61 STC 219, where it has been observed by a Division Bench of this Court, while determining on the question if State Government is competent to prescribe conditions for issue of declaration forms and the meaning "condition" and "restriction" as used in Bengal Finance Sales Tax Act (6 of 1941) and so also on the question of difference in language on the basis of the use of these words that the difference in language used, i.e. , the use of the word "condition" and not restriction in Section 13(4)(e) of the Central Sales Tax Act unlike the proviso to Section 5(2) of the Bengal Finance (Sales Tax) Act, 1941, is no material for deciding the question that whether the State Government can enact Rule 4(2) of the Central (West Bengal) Rules for application of Rule 27AA of the Bengal Rules. Then a reference was made by Mr. Bhattacharjee to the case of Godavari Plywoods Ltd. v. Union of India, and Ors. , for the purpose of establishing that the will of the legislature in a case of the present nature should prevail. In fact, in the facts of that case, it has been observed that the will of the legislature is the supreme law, apart from holding that the legislature is competent to alter the law declared by Courts by legislative fiat giving new meaning by suitable structural alteration in the statute. There is liberal presumption of its validity and change in 1he legal rights. The legislature is competent to create rights, prescribe procedure and limitation for enforcement. The will of the legislature is the supreme law and it must always prevail. It is to be given effect to without scanning its wisdom or policy and without adding, omitting or implying anything inconsistent with the statute. If the statute intends to embody a particular branch of law, it is to be given effect to without whittling down its efficacy lest it will be frustrated. While on the point, a further reference was made by Mr. Bhattacharjee to the case of Annapurna Carbon Industries Co. v. State of Andhra Pradesh , where the question for determination in the appeals by special leave, was whether sales of arc carbons, known as "cinema arc carbons", manufactured by the appellant-company, were rightly subjected to sale-tax for two assessment years 1965-66 and 1966-67, on the ground that they fall under entry No. 4 of the First Schedule of the Andhra Pradesh Sales Tax Act, 1957, which indicated that "cinematographic equipment, including cameras, projectors, and sound recording and re-producing equipment, lenses, films and parts and accessories required for use therewith." While deliberating on the issue, the Supreme Court has observed that no useful purpose would be served by multiplying cases relating to entries which are so very different and could have only a very remote bearing, if any, upon any reasoning which could be adopted to support the submissions that the arc carbons, under consideration here, fall within the relevant entry 4 of Schedule 1 of the Act, apart from indicating that the meaning to this entry can only be satisfactorily determined in the light of the language of the entry itself considered in the context in which it occurs and has further observed that the deciding factor is the predominant or ordinary purpose or use. It is not enough to show that the article can be put to other uses also. It is its general or predominant user which determines the category in which an article will fall and the Court has to find the intention of the framers of the schedule in making the entry in each case. The best guide to their intention is the language actually employed by them, apart from holding, that the term "accessories" is used in the schedule to describe goods which may have been manufactured for use as an aid or addition. "Accessories" are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument. The main use of the arc carbons was duly proved to be that of production of powerful light used in projectors in cinema. The fact, they can also be used for search lights, signalling, stage lighting, or where powerful lighting for photography or other purposes may be required, could not detract from the classification to which the carbon arcs belong. That is determined by their ordinary or commonly known purpose or user. This is evident from the fact that they are known as "cinema arc carbons" in the market.
36. Dealing with the question of the intention of the legislature, which according to Mr. Bhattacharjee should be the paramount consideration in the matter of interpretation of a statute and also on the question whether a schedule should be deemed or treated to be a part of the statute, further reference was made by Mr. Bhattacherjee to the case of Indira Bai and Anr. v. The Gift Tax Officer, City Circle-II, Madras , where, while deciding a case under Gift Tax Act, 1958 it has been observed that an Act has to be read as a whole and the schedule to the Act is as much part of the Act as any provisions thereof. If an enactment in a schedule, other than one merely of form, contradicts an earlier clause, it is the schedule that would prevail. Here in this case, Mr. Bhattacharjee's specific contention was that since there has been conflict between the schedule and the provisions of the said Act, so the schedule of the same cannot be disregarded and should be taken into consideration while making the determination. The above submission of Mr. Bhattacharjee and more particularly as to what should be the effect, if there is any conflict between the provisions of the Act and the schedule, reference was also made by him to the case of State of Kerala v. M. K. Mrishnea Nair and Ors. , which has indicated that where two constructions are possible, that one which leads to unconstitutionality must be avoided and the other, which tends to make provisions constitutional should be adopted, even if straining of language is necessary. Such determination was made in a case where the constitutionality of bifurcation of State Judicial Service into two wings, that is civil and criminal, on the basis of separate rules governing recruitment and conditions of service was under consideration, apart from whether such bifurcation and rules would be violative of Articles 14 and 16, and it has been observed by the Supreme Court, that even assuming that there was a complete integrated judicial service prior to the bifurcation, since the Rules did not themselves provide for the option, they were free from any blemish of discrimination so also in respect of Government orders, the complaint of hostile treatment was devoid of any substance and therefore they do not violate Articles 14 and 16.
37. Mr. Bhattacharjee's specific and categorical submission that even if there has been double taxation in the instant case, viz., by levy of tax on the original product of tea and the subsequent levy of tax on package tea, would be permissible and possible. Such submissions were sought to be supported and supplemented by Mr. Bhattacharjee on a reference to the case of Avindar Singh, etc. v. State of Punjab and Anr. , which has laid down that there is nothing in Article 265 from which one can spell out the constitutional vice called double taxation. If on the same subject matter the legislature chooses to levy tax twice over, there is no inherent invalidity in the fiscal adventure in case other prohibitions exist. This was a case whereby the provisions of Punjab Municipal Corporation Act, 1976, levy of tax was made on Indian made foreign liquor at flat rate of rupee one per bottle and on the basis of the observations as above, it has been observed that such levy was not discriminatory. Apart from the cases as cited above, a further reference was made by Mr. Bhattacharjee to the case of Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. (1980) ELT 735. In that case, it has been observed by the Delhi High Court, while dealing with the question of imposition of excise duty on asbestos fibre from asbestos rock that asbestos rocks are not saleable as such and it is only when the detailed process of manufacture has to be gone through when asbestos fibre is obtained which is different and distinct from asbestos rock on which the Legislature imposed the duty of excise. Therefore, it can be said that imposition of duty on asbestos fibre or insertion of tariff item 22F in the First Schedule to the Central Excises Act was not ultra vires and invalid and it is now settled law that before excise duty can be levied, the goods brought into existence must be the goods which can be bought and sold in the market. In other words, by the process of treatment, labour, and manipulation, the raw material must be converted into a different article having a distinctive name, character or use on which duty is leviable, apart from observing that the term "manufacture" or "produce" are synonymous and that "manufacture" means creation or production of a product from raw material or by combining two or more products to form a different one. It has also been held interchangeable or synonymous with "fabricate", make and "process" and it is not open to doubt that asbestos fibre is a marketable commodity and is known to the market and is saleable as such, while asbestos rock is not saleable, but great and intensive process is required before the asbestos rock can be converted, transformed and put into market as asbestos fibre. Therefore, it cannot be said that the detailed process of converting the asbestos rock to asbestos fibre, i.e., breaking boulders into smaller pieces and further putting them into crushers, air cleaner, hurricane mills, separating fibres from the rock is only a process and is not manufacture. It has further been observed that if the Parliament has specifically included a particular product in the First Schedule to the Central Excise Act, its validity cannot be questioned on the ground that it did not involve any process amounting to manufacture and if the Legislature has treated a process of an article to be a "manufacture" it is not open to contend that the process is not manufacture, in addition to the observations that if there are two constructions which a tariff entry could reasonably bear and one of them which was in favour of revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favourable to the subject was better one.
38. While on his submissions with regard to the effect of a provision being in the schedule of a statute, Mr. Bhattacharjee made further reference to the case of Dunlop India Ltd. v. Union of India and Ors. AIR 1977 SC 597, where the Supreme Court has observed that meanings given to an article in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in usual course. But once an article is classified and put under a distinct entry, the basis of classification is not in 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 then there is no difficulty for statutory classification under a particular entry. Apart from the above, while on its scope and power under Article 136 of the Constitution of India and whether corrections of classification of an article under particular item and the reason given by the authorities for such classification can be probed, it has been observed that it is not for the Supreme Court to determine for itself under Article 136 of the Constitution under which item a particular article falls. It is best left to the authorities entrusted with the subject. But where the very basis of the reason for including the article under a residuary head in order to charge higher duty is foreign to a proper determination of this kind, the Court would be loath to say that it will not interfere. The appellant in that case, who manufactured automotive tyres, imported V.P. latex and successfully contended before the appellate Collector of Customs that it was classifiable as rubber raw under item 39 of the Tariff Act. The Central Government revised the findings of the appellate authorities and held that the said V.P. latex was an "aqueous dispersion of synthetic resin" up to 1st March, 1970 and thereafter under new item 82 of the Tariff Act. It has further held that the said goods were liable to countervailing duty under Central Excises and Salt Act. The reason for such a finding as appeared from the order, was that, the authority was principally influenced to come to its decision on a sole basis of the ultimate use of the imported article in the trade and in the concerned appeal, it has been held that in the state of evidence before the revisional authority, no reasonable person could come to the conclusion that V.P. latex would not come under rubber raw. The basis of the reason with regard to the end use of the article was absolutely irrelevant in the context of the entry, where there was no reference to the use or adaptation of the article. On the basis of above determinations, it was also a specific submission of Mr. Bhattacharjee that the basis of classification, which has been made in the instant case of "tea" and "package tea", would not be open to challenge and consideration by this Court. While on the question of power of the authorities concerned to make further classification of "tea" for the purpose of levy of duty as in this case, a reference was made by Mr. Battacharjee to the Division Bench Judgment of this Court in the case of Long View Tea Co. Ltd. v. Collector of Central Excise, West Bengal and Ors. 1977 Tax LR (NOC) 16. In that case, the zonal classification for levy of duty on tea as made by the authorities concerned, was under challenge and it has been observed, that in view of the provisions of Section 3 read with item 3 of the First Schedule, the Central Government has power to sub-classify tea for the purpose of levy of duty and therefore, the power of classification of tea gardens into different zones would not amount to levying duty on goods which are not set forth in the First Schedule.
39. It has also been indicated that the expression "as set forth in the First Schedule" does not indicate only the varieties mentioned in item 3 of the First Schedule. Duty is on the excisable goods, viz., "tea". What is "tea" has been made clear under item 3 of the First Schedule, that is to say, it includes all varieties of the product commercially known as tea and therefore by rules made under the Act, if different varieties of tea are indicated as being subject to different rates of duties, the same would amount to prescription of the manner of the levy and collection of duty on an excisable goods which have been already [taxed] could not be made unit of taxation is based upon misapprehension. The levy of excise duty under Section 3 is not on any variety as such but is levy on the manufacture of a product commercially known as tea and power is there to indicate what are the different varieties and in what manner these would be leviable to duty under the provisions of the Act, apart from indicating that "tea" as produced in different areas have different markets and different classes of buyers. It cannot be said that teas which are known as Darjeeling Tea is commercially the same commodity of tea which is commercially known as common tea. Therefore, by virtue of Section 3, different types of teas which are produced or manufactured by the different areas, attract differential rates of duty as different commercial sub-clauses of the item of the excisable goods, namely, tea. In the case under consideration it has been indicated that in the context of the provision of the Act, "all varieties" in item 3 of the First Schedule would mean all such different types of tea which are commercially known to be of different types. Such difference in types of variety would be reflected in the different preferences of the buyers or in different types of buyers for the excisable item and the same would sometime be also reflected in the prices which the teas of the different varieties would fetch at the market reflecting varying demands for the different varieties. The moment there are demands for different types or varieties of tea reflecting in the different demands for the different varities there would be demand of tea commercially known as such. It cannot, therefore, be said that there would not be sub-classification of the varieties under item 3. The categories of varieties, commercially known as different varieties are not closed. It is indisputable that Black Tea, Green Tea and Brick Tea are different varieties or categories of tea known for their differences but commercially there may be other qualitative differences in the teas produced by the different tea gardens which would be reflected as commercial varieties of tea, apart from the above, has been held that where the tea gardens were classified into different zones and different rates of excise duties were imposed on the tea produced by the gardens in the different zones, the presumption of equality among the tax payers cannot be said to be violated.
40. The principle that the like should be treated alike, has been stated to be fundamental in our Constitution. The fact that, the enforcement of the rights under Article 14 of the Constitution are temporarily suspended, does not absolve the Courts from the obligation of avoiding the construction of a statutory provision which would be violative of the concept of equality. But the power to levy differential duties within the maximum set out by the legislature for the different varieties is not violative of that concept of equal treatment. These different gardens producing different qualities of tea, known commercially as such, can be subject to differential rates of duty depending upon the capacity of the commodities to bear those charges. The principle against discrimination does not prohibit classification. Moreover power of classification under a fiscal law is larger than in case of [other] laws. Bare equality of treatment regardless of inequality of realities is not required. The power to levy differential rates of duty for different varieties of tea has a nexus to the legislative end of taxation and the power to indicate or classify different varieties for the purpose of levy of duty is subject to the main condition that such different varieties should be on different commercial identity of the product known as tea. That legislative intent has been made manifest in item 3 of the First Schedule. Secondly, such different varieties can only be fixed by proper rules. Such rule-making power has been preserved by Section 37 of the Act to carry into effect the purpose of the Act. Therefore in the purpose of the Act and specially in the scheme of the Act there is sufficient indication on what basis the different varieties should be fixed for the purpose of classification under item 3(1) of the First Schedule. Secondly, such power or the principles on which such different varieties are to be fixed would be by rules and such rules by virtue of Section 38 of the Act are enjoined to be placed before the Parliament. In that case it has been indicated that the manner of levy and collection must be by rules prescribed and such rule is Rule 96F, which has authorized the Central Government for the purpose. Therefore, both the authority to frame rules as well as to make groups of different varieties and to fix different rates have been given to the Central Government. Secondly, in the scheme of the Act and in the legislative history there is no abandonment of essential legislative function by the legislature. Thirdly, the maximum rate has been indicated. In view of this, the power to classify different varieties for the purpose of levy of differential duty cannot be said to be bad on account of excessive delegation of legislative function. The said judgment, in short, has held that the zonal classification as made for the purpose of levy of duty on tea, was not improper and the authorities concerned had power to levy differential rates of duty for different varieties and different rates of duty as charged for different zones, was not violative of the concept of equality and such power of imposing differential rates of duty for different varieties of tea do not suffer from excessive delegation of legislative function. Since tea which was involved in that case, and is involved in the present one, Mr. Bhattacharjee, on reference to the judgment in that case, specifically contended that the levy of different duties on "tea" and "package tea" as made, was not improper or ultra vires the said Act and the schedule as framed thereunder. In the case of A. Hajee Abdul Shukoor & Co. v. State of Madras, AIR 1964 SC 1729, which was one where the provisions of Madras General Sales Tax Act, 1939 and the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 were being considered and while dealing with the validity of the taxation on raw hides and dressed hides and skins and if they constitute different commodities for the purpose of tax, the Supreme Court has observed that raw hides and skins and dressed hides and skins constitute different commodities of merchandies and they can, therefore, be treated as different goods for the purpose of taxation under the Act. On a reference to that determination, Mr. Bhattacharjee wanted to contend that "tea" and "package tea" being constituting different commodities of merchandise, can thus be treated as different goods for the purpose of taxation under the said Act. In fact, in the case under consideration, the real question was whether the provisions treat raw hides and skins and dressed or tanned hides and skins as one class of goods for the purpose of taxation or as two different classes of goods. If they treat them as one class of goods, the contention for the petitioner loses force as taxing of hides and skins at the time of their sale in a raw condition meets the requirements of law, as hides and skins could be taxed only at a single point. If the dressed or tanned hides and skins are not taxed at the time of their sale, that does not offend against the statutory provisions. No question of discrimination arises as a sale of raw hides and skins of whatever origin, i.e., whether produced in the State or imported into the State would be equally liable to the levy of tax and it has been observed that if the statute treats both these kinds of hides and skins as different commodities, the provision of Sub-rule (1) of Rule 16 providing for the levy of tax on raw hides and skins at a certain point even in the absence of any provision for the taxation of dressed hides and skins cannot be said to be discriminatory and invalid. The articles to be taxed were not the same and the legislature could provide differently about their taxation.
41. Mr. Bhattacharjee contended that harshness on the incidence of taxation, if there be any, cannot be sustained in this case and in support of such submissions, he referred to the case of Jagannath and Ors. v. Union of India , where the tariff entry in dispute under the taxing statute was entry 4 in the First Schedule, which deals with tobacco. Under that entry "tobacco" means any form of tobacco, whether cured or uncured and whether manufactured or not and includes the leaf, stalks and stems of the tobacco plant but does not include any part of a tobacco plant while still attached to the earth. Clause 1 in entry 4 deals with unmanufactured tobacco and prescribed tariff per kilogram in respect of the several items specified therein. Item (1) under the said clause deals with five categories. Item (2) deals with tobacco which is flue cured and used for the manufacture of smoking mixtures for pipes and cigarettes. Item (3) provides for flue cured tobacco which is not otherwise specified and item (4) is concerned with tobacco other than flue cured and used for the manufacture of (a) cigarettes or (b) smoking mixtures for pipes and cigarettes. The tariff varies from Rs. 16.15 nP. per kilogram to Rs. 1.65 nP. per kilogram. Item (5) deals with tobacco other than flue cured and not actually used for the manufacture of (a) cigarettes or (b) smoking mixtures for pipes and cigarettes or (c) biris. The fourth clause under the said item is tobacco cured in whole leaf form and packed or tied in bundles, hanks or bunches or in the form of twists or coils. For tobacco falling under the clauses under item (5) the tariff is Rs. 1.10 nP. per kilogram. Clause (6) in the said item, with which the case under consideration was concerned, deals with tobacco other than flue cured and not otherwise specified. For this residuary clause, the tariff prescribed is Rs. 2.20 nP. per kilogram and the said tariff is double the tariff prescribed for the clauses in the preceeding items.
42. The grievance was that the tobacco with which the petitioners dealt, cannot be distinguished on any rational from the tobacco covered by item (5), Clause (4) and so, the imposition of a double tariff on" such tobacco was invalid inasmuch as the same was based on unconstitutional discrimination. Such argument proceeded on the assumption that the tariff was prescribed by reference to the use to which tobacco is put and it was argued that the tobacco with which the petitioners were concerned, was not actually used either for cigarettes or smoking mixtures or biris and the fact that it was broken and not whole leaf, would not afford any rational basis for classification. In that background it has been observed that by the test of physical form, the two articles of tobacco mentioned in Clauses (5) and (6) of item 4(1) of Schedule I are different. By the test of capability of user they are different and in a sense according to the Tobacco Expert Committee's recommendations they partake of the character of different commodities. The problem which the Committee had to face was to classify tobacco other than flue cured which would be used for the manufacture of biris, and with that object Clause (5) and Clause (6) have been devised. Therefore, the distinction between tobacco falling under Clause (5) and Clause (6) according to the report of the Committee, is clear and unambiguous and its relation to the object intended by the imposition of tariff is clearly reasonable and the attack against the validity of Clause (6) on the ground of unconstitutional discrimination cannot be upheld; this is so even assuming that if discrimination in respect of commodities taxed is proved it ultimately amounts to a discrimination against the persons taxed and therefore Article 14 can be invoked in such a case.
43. Another case on the levy of duty on tobacco, which was referred to and relied on by Mr. Bhattacharjee was that of East India Tobacco Co., etc. v. State of Andhra Pradesh and Anr. AIR 1962 SC 733. In that case, the validity of Andhra Act 14 of 1955, which amended Section 5 of Madras General Sales Tax Act was under consideration. In appeals which were taken against the judgment of the High Court of Andhra Pradesh, as made in proceedings under Article 226 of the Constitution of India questioning the validity of the Andhra Act concerned insofar as the same imposed a tax on the sale of Virginia tobacco, was considered. The appellants in that case were firms doing business in the export of tobacco. The usual course of that business was stated to be that, they first enter into contracts with their customers abroad for the sale of tobacco, that thereafter they purchase the requisite quantities of goods locally and then export them to the foreign purchasers in performance of their contracts. Prior to October 1, 1958, the area wherein the appellants carried on business formed part of the State of Madras and on that date the State of Andhra was constituted, and the area in question fell within that State. The law relating to Sales-tax in force in that area was the Madras General Sales Tax Act IX of 1939. Section 5 of that Act provided for exemption of tax on sales of goods specified therein and Section 6 conferred on the State Government power to exempt the tax payable on the sale of any specified class of goods or by any specified class of persons. In exercise of power conferred by Section 6, the Government of Madras issued on March 31, 1953, a notification exempting the sales of unmanufactured tobacco from sales tax. After the Andhra Pradesh came into existence, the Legislature of that State enacted Act XIV of 1955, whereby it amended Section 5 of the Madras General Sales Tax Act by adding as item (viii) to the following effect:--
(viii) raw tobacco (except country variety thereof) whether cured or un-curred, shall be liable to tax under Section 3, Sub-section (1) only at the point of the first purchase effected in the State of Andhra by a dealer who is not exempt from taxation under Section 3, Sub-section (3) but at the rate of seven and half pies for every rupee on his turnover.
Explanation:--For the purpose of this item, country variety of tobacco means variety of tobacco other than Virginia and other similar varieties of tobacco.
44. As a result of this enactment, exemption from tax was limited to sale of what is known as country tobacco (Nattu tobacco) and as far as sales of Virginia tobacco are concerned, they became liable to be taxed. Pursuant to the Amendment Act, the Andhra Government issued on November 4, 1955, a notification No. 711 cancelling the earlier notification No. 144 dated March 31, 1953 and acting under the provisions of the Amendment Act, the Additional Commercial Tax Officer, Guntur, issued notices to the appellants to produce the account books relating to their business in tobacco, for the purpose of assessing sales tax. To this, the appellants replied by filing petition under Article 226 of the Constitution in the High Court of Andhra Pradesh challenging the constitutionality of the Amendment Act on the ground inter alia that in taxing of Virginia tobacco and exempting from tax sales of other tobacco, the Act was discriminatory, and that in consequence, it was obnoxious to Article 14 of the Constitution and that further, it was in contravention of Article 286(1)(b), as it was really tax on sales in the course of export of tobacco and accordingly prayed that a mandamus might be issued directing the respondents to forbear from making any assessment on the sale of tobacco. The proceeding was dismissed holding that the impugned Act did not infringe any constitutional provisions, but granted certificate under Article 133 of the Constitution and the Supreme Court has observed, that taxation law must also pass the test of Article 14. But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of the selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of Article 14, apart from holding, that Virginia tobacco has features which distinguish it from country tobacco and can be treated as a class by itself. It will therefore be within the power of the State to impose a tax on the sales of Virginia tobacco and exempting the country tobacco. Andhra Act XIV of 1955, by which Section 5 of the Madras General Sales Tax Act (9 of 1939) has been amended by addition of item (viii) is not repugnant to Article 14. Thereafter, in support of his contentions that when the item of levy has been placed in the Schedule as in this case, the same cannot be challenged, reference was made by Mr. Bhattacharjee to the case of Kores (India) Ltd. v. Union of India Ors., 1982 ELT 253, which is a determination of a Division Bench of the Bombay High Court and in that case, where the classification of teleprinter paper was in question, it has been held that if the Parliament has specifically included a particular product in the Schedule to general excise tariff, its validity cannot be questioned on the ground that such product did not involve manufacture. In that case, it has also been observed that if the Parliament has put the teleprinting paper under special entry in item 17(2) of central Excise Tariff, it is difficult to understand how it can be classified under the general entry in Item 17(3). A question arose in that case as to whether teleprinter rolls manufactured from printing or writing paper (jumbo rolls), amounts to manufacture and it has been observed that the process of cutting rolls of paper in the specific sizes and dimension and to roll them into teleprinter rolls with the aid of power driven machine amounts to manufacture under Section 2(f) of the Central Excise Act. On the basis of the said determination, it was Mr. Bhattacharjee's specific submission that since package tea has been put in the Schedule or special entry under the Tariff and they are packed in special cartoons with the help and aid of power and labour, there would certainly be an incidence of manufacture and as such, the levy as made on "package tea" was due and proper. While on the point, further reference was made by him to the determinations of the Supreme Court in the case of Khandelwal Metal & Engineering Works and Anr., etc. v. Union of India and Ors. . There the Supreme Court has considered the scope of Section 3(1) of the Customs Tariff Act, 1975 and whether the terms "additional duty" as mentioned in the said section was in the nature of countervelling duty. It has been observed by the Supreme Court that it cannot be said that Section 3(1) of the Tariff Act is an independent, charging section or that the "additional duty" which it speaks of is not a duty of customs but is a countervailing duty and the scheme embodied in Section 12 of Customs Act, 1962 is amplified by what is provided in Section 3(1) of Customs Tariff Act. The customs duty charged under Section 12 of Customs Act, 1962 is extended by an additional duty confined to imported articles in the measure set forth in Section 3(1). Thus, the additional duty which is mentioned in Section 3(1) of the Tariff Act is not in the nature of countervailing duty. Section 3(1) cannot be treated as a charging section merely because the Statement of Objects and Reasons of Section 3 says that Section 3 "provides for the levy". The Statement of Objects and Reasons errs in being common to Sub-sections (1) and (3) of Section 3. It is more apposite to Sub-section (3) though, even there, it may not be correct to say that it is a charging provision, apart from holding that it cannot be said that Section 3(1) of the Tariff Act is not attracted in case of import of brass scrap merely because the damaged articles, which are in the nature of brass scrap, are outside the scope of that Act since, such articles are not and cannot be produced or manufactured. The duty referred to in Section 3(1) of the Tariff Act does not bear any nexus with the nature and quality of the goods imported into India. The Supreme Court has also observed that the damaged goods of brass, which are compendiously called "brass scrap", can come into existence during the process manufacturing brass articles and such brass scrap has an established market in India. The scrap is recycled for extracting metal. Since excise duty is payable on such scrap, the imported brass scrap is subjected to the additional duty in order that indigenous brass scrap may not suffer in competition with the imported brass scrap. The fact that the articles imported by the importers in this case have been reduced to scrap by reason of damage, wear and tear, would be quite irrelevant. They imported (sic) if the articles are brass scrap, the limited inquiry which has to be made is whether brass scrap can come into being during the process of manufacture. If the answer is in the affirmative, the imported brass scrap will be chargeable to additional duty in accordance with Section 3(1) of the Tariff Act, and Section 3(1) of the Tariff Act, 1975 provides a measure of the additional duty, which has to be "equal to the excise duty" leviable on a like article, if produced or manufactured in India, as defined in the Explanation to that section. The measure of tax or duty cannot determine its nature or character. The brass scrap which is imported into India by the importers of the brass scrap is liable to the levy of additional duty mentioned in Section 3(1) of the Tariff Act, 1975 because, the taxable event is the import of the goods into India and not their manufacture. The duty referred to in Section 3(1) of the Tariff Act, 1975 is, therefore, leviable even if the goods imported into India are not capable of being manufactured in India or are not in fact manufactured in India. The expression "excise duty for the time being leviable on a like article if produced or manufactured in India", which occurs in Section 3(1) of the Tariff Act, 1975 means excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, apart from holding that the brass scrap cannot possibly be a "master alloy", it is not, in the wildest imagination, an alloy of mixture of elements used for introducing desired elements into molten metals in the foundry. A master alloy is generally called a foundry alloy for the simple reason that it is an alloy used for adding elements in the foundary. Brass scrap does not square with that description and use. Brass is an alloy of copper and zinc and is a complete and finished product by itself. Brass or brass scrap is not used as a raw material in the manufacture of other alloys. Therefore, it is not a master alloy. Accordingly, the importers of the brass scrap cannot claim the benefit of notification No. 97 dated June 25, 1977 on the basis that brass scrap is a master alloy and also indicated that insofar as the terms of Heading No. 74.01/02 in Chapter 74 of Section 2 are concerned, the primary conclusion is that brass scrap is not a master alloy. It was also observed by the Supreme Court that the brass unquestionably, is most akin to copper and therefore brass scrap has to be classified as "copper waste and scrap" Clause (a) of note 3 to Section XV of First Schedule (Import Tariff) provides that an alloy of base metals is to be classified as an alloy of the metal which predominates by weight over each of the other zinc in which copper predominates by weight, brass has to be classified as an alloy of copper. Therefore, "copper waste and scrap" includes brass scrap. According to note 4, of the said section XV unless the context otherwise requires, any reference in the First Schedule to a base metal is to be taken to include a reference to alloys which, by virtue of note 3, are to be classified as alloys of that metal. Heading No. 7401/02 of the First Schedule refers to copper waste and scrap. Copper is a base metal. Reference to copper in that heading would include by reference brass since, by virture of note 3, brass has to be classified as an alloy of copper. Therefore, "copper waste and scrap" includes "brass scrap" and notification No. 156 of July 16, 1977 exempts "copper waste and scrap" from so much of the duty of customs as is in excess of 80% ad valorem. Since brass scrap is includible in the expression "copper waste and scrap" and since, brass scrap is not a "master alloy, the case of the importers of the brass scrap would fall under this Notification. Accordingly, they would be entitled to exemption from customs duty to the extent of 20% only. It has further and ultimately been observed by the Supreme Court, that Clause (b) of entry 26A of the First Schedule to the Central Excises and Salt Act, 1944 is not ultra vires Section 3(1) of the Act. The reason is that "waste and scrap" referred to in that entry is excisable to duty if it is produced or manufactured in India. Waste and scrap are by-products of the process of manufacture and are inevitably incidential to the manufacturing process. The said entry, namely, entry 26A(1b) of the First Schedule to the Act of 1944 is within the legislative competence of the Parliament because, the duty of excise is attracted under the Central Excises and Salt Act, 1944, only if the goods are produced or manufactured in India. The impugned provision falls within entry 84, List 1 of the Seventh Schedule to the Constitution. Even otherwise, Parliament would have the legislative competence to pass the law because of the combined operation of Article 248 and entry 97, List 1, of the Seventh Schedule. After the above citations, Mr. Bhattacharjee refered to the case of Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai, Rewari and Anr. . In that case, the rolling of billets of copper alloys in circles were involved and the point arose as to whether excise duty under item 25A(2) was leviable, though circles are uncut and not trimmed. The Supreme Court in that case has observed that when billets of copper alloys, namely, mansi and brass are rolled into circles in some form or the other and in different sizes, the process of manufacture of circles is complete even if the circles are uncut. Consequently, the rolled circles are liable to excise duty under item 26-A(2). It cannot be said that only trimmed circles can be treated as circles and as finished product. Even, uncut circles are circles as envisaged by the item. The rolling of a billet into a circle is a process in the course of completion of a manufactured product, viz., circles, as contemplated by Section 2(f).
45. The case of Empire Industries Limited and Ors. v. Union of India and Ors. (supra) and all the determinations therein, were referred to and relied on by the appellants and Mr. Bhattacharjee also referred to those determinations. The findings or the observations of the Supreme Court in that case have been quoted hereinbefore. On the basis of the determinations in Dunlop's case (supra), those in the case of Khandelwal (supra) and Empire Industries Limited (supra) and those in Long View's case (supra). Mr. Bhattacharjee submitted that transformation of an object into a different commercial commodity would be sufficient to hold that there has been a manufacture. According to him, when tea as purchased in bulk is packed in the manner as indicated hereinbefore, there would be a case of manufacture and a charge of identity happens.
46. It was further claimed by him that since the incentives as given or granted by the authorities concerned on manufacture of "package tea" has been accepted, the appellants cannot or should not be allowed to turn down and contend against the levy or imposition of tax in the manner as indicated in this case. It was also claimed by him that since the provisions of the said Act have not been challenged, the manufacture of the instant case should mean and include "package tea" as packed from the bulk tea as purchased. It was also pointed out by him that the tariff item, by which package tea has been brought in within the purview of the levy and imposition of tax, has not been challenged and as such also, the appellants cannot claim in the manner as sought to be done in the instant case. It was his further contention that the intention to levy or impose tax should be culled out from the different portions of the said Act and when the Legislature has intended to bring "package tea" under the umbrella of the levy of tax, the challenges as thrown will not be maintainable. It was his specific submission that tea, when packed in packets from out of bulk tea, would give rise to a case of manufacture. It was pointed out by Mr. Bhattacharjee that taxable event would be manufacture and not the ownership and such being the position, when the appellants are involved in packaging tea out of the bulk tea purchased, they would be manufacturing "package tea", which as indicated hereinbefore, would be separately assessable to levy of tax, as the same has been incorporated in the Schedule/tariff. To further establish and augment his submissions on manufacture, Mr. Bhattacharjee referred to the case of Metro Readywear Co. v. Collector of Customs 1978 ELT (J 620), where it has been observed by the Kerala High Court, while considering whether ironing of stiched brassiers is incidental or anciallary to their manufacture since the said process was intended to give a finishing touch in order to render them marketable that brassiers are undoubtedly under-garment falling within "articles of ready to wear" apparel (known commercially as "readymade garments") and as such classifiable under item 22D of the central excise tariff and ironing with electric iron amounts to a process of manufacture with the aid of power.
47. As mentioned earlier, it was Mr. Bhattacharjee's contentions that double taxation, if the same has occured in the case of tea and package tea, the same was possible and permissible and in support of that submission, he referred to the case of Avinder Singh, etc. v. State of Punjab and Anr. (supra) where it has been observed that there is nothing in Article 265 from which one can spin out the constitutional vice called double taxation. If on the same subject matter the legislature chooses to levy tax twice over, there is no inherent invalidity in the fiscal adventure save where other prohibitions exist. On the basis of the said determinations, Mr. Bhattacharjee submitted that when in the instant case, the legislature has elected to levy and impose duty on tea and package tea, even though the species of tea as claimed remain the same, such imposition cannot be claimed or contended to be improper, invalid and bad.
48. Mr. Bhattacharjee submitted that the Central Excise Tariff Act, 1985, the Bill whereof, was introduced in the Lok Sabha on 16th March, 1985, has brought in major changes in central excise which amongst others includes the change in the definition of "manufacture" as given in Section 2(f) of the said Act and on the basis of such amendment, the word "manufacture" would now include labelling, re-labelling, re-packing of pan masala as a process of manufacture. The said 1985 Act was claimed by Mr. Bhattacharjee to be an independent enactment and was also said to be a clarificatory law to provide and explain the law which was in existence. Package tea according to Mr. Bhattacharjee, is no new substance, since the same was included in the Schedule/Tariff long ago and more particularly in 1953. It was Mr. Bhattacharjee's submission that pan masala as brought into the statute is a new concept in the commercial world, but package tea is historical and traditionally known since April 1953, so the incorporation of pan masala or the treatments mentioned therefor, according to him cannot be a guiding factor for finding out the meaning of package tea or the tariff item as evolved. He further submitted that if the meaning is clear and there is no ambiguity, an artificial distinction would be improper and the more so when, such distinction would be contrary to the actual tests.
49. Dealing with the cases as cited on behalf of the appellants, Mr. Bhattacharjee firstly, stated that the case of Sterling Food v. The State of Karnataka and Anr. [1987] 11 ECC 89 (SC), wherein it has been observed that in order to attract the applicability of Section 5(3) of the Central Sales Tax Act, 1956, it is necessary that the goods which are purchased by an assessee for the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The words "those goods" in this sub-section [are clearly referable to "any goods" mentioned in the preceding part of the sub-section] and it is, therefore, obvious that the goods purchased by the assessee and the goods exported by him must be the same. If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export, and the test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded commercially and in the trade, the same as the original commodity, apart from holding that processed or frozen shrimps, prawns and lobsters are commercially regarded the same commodity as raw shrimps prawns and lobsters. When raw shrimps, prawns and lobsters are subjected to the processess of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps, prawns and lobsters and become another distinct commodity. They are in common parlance known as shrimps, prawns and lobsters. There is no essential difference between raw shrimps, prawns and lobsters and processed or frozen shrimps, prawns and lobsters. The dealer and the consumer regard both as shrimps, prawns and lobsters and the question whether raw shrimps, prawns and lobstors after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by the State Legislature for the purpose of exigibility to State Sales Tax (e.g., entry 13a of Schedule III to the Karnataka Sales Tax Act, 1957), because even where the commodity is the same in the eyes of the persons dealing in it the State Legislature may make a classification for determining liability to sales tax. This question, for the purpose of the Central Sales Tax Act, has to be determined on the basis of what is commonly known or recognised in commercial parlance would have no application in the instant case. In that case on the facts as indicated hereinbefore, it was held that the purchase of raw shrimps, prawns and lobsters by the appellant for the purpose of fulfilling existing contracts for export were exempt from purchase tax under the deeming provision of Section 5(3) of the Central Sales Tax Act, 1956, even though after making such purchase the appellant subjected them to the process of cutting heads and tails, pealing deveining, cleaning and freezing before export because they remained the same goods in commercial parlance after such processing and freezing. The case of Union of India and Anr. v. Delhi Cloth and, General Mills Limited (supra), was claimed by Mr. Bhattacharjee to be really supporting his contentions as in the instant case because of the process of packing, "package tea" which is a new substance and commercially known, as such, is brought into existence. The necessary tests according to him, while on the question of leviability would be how the commodity is known and not on the basis of the identity of the contents. Same submissions were made by Mr. Bhattacharjee while with the case of South Bihar Sugar Mills Ltd. and Anr. v. Union of India and Anr. (supra) and he reiterated that while dealing on the question the Court should see what is produced and how the subject matter of such production is known to the commercial world and the general public. The case of Commissioner of Sales Tax, etc. v. Paper Process, etc. and Ors. (supra) and the determinations as made therein, according to Mr. Bhattacharjee would have no application in this case, as the said determination was on a reference where the specific question was required to be answered. The submissions as above, were also made by Mr. Bhattacharjee while distinguishing the case of Commissioner of Sales Tax v. Bombay Traders (supra), where two questions, viz., (1) whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the activity of frying and spicing of the cashew nuts did not amount to manufacture within the meaning of Section 2(17) of the Bombay Sales Tax Act, 1959? and (2) whether, on the facts and in the circumstances of the case the Tribunal was right in holding that the fried and and salted cashew nuts sold to Air India under bill dated 31st May, 1968 in pursuance to purchase order No. CN-58633 dated 11th April, 1968 in heat-sealed transparent cellophane packs of [size 75 X 75 mm. and weighing 30 gm. each were not covered by] entry No. 6 of Schedule E but were covered by entry No. 5 of Schedule D to the Bombay Sales Tax Act, 1959? were referred for determination. Mr. Bhattacharjee indicated on the basis of such question as referred, the High Court had to answer them and to the decision as arrived at, was merely the decision on facts on the basis of available materials and as such, the determination as made therein, cannot be applied with equal efficacy in the facts and circumstances of the case. Then, Mr. Bhattacharjee submitted that the case of Commissioner of Income-tax, Gujarat v. Vadilal Lalubhai (supra) and the determination as made therein, would not apply with all efficacy in the facts of the present case and more particularly when, in this case, there is no inconsistency between the provisions of the statute and the Schedule and particularly when, the language is quite clear and explicit to attract excise duty. According to him, the terms of the charging section under the said Act is absolutely clear and on the basis thereof, the imposition and levy of duty as made, should be held to be due and proper.
50. Mr. Bajoria sought to distinguish the case of Rahim Manji and Anr. v. Sk. Ekbar (supra) on facts, and also claimed that the determinations in Chowgule & Co. Pvt. Ltd and Anr. v. Union of India and Ors. (supra) was one on completely different facts. It was his further submission that the observations in Commissioner of Income-Tax, Madras v. Ajax Products Ltd. (supra) would not apply in this case and the determinations in Collector of Central Excise v. Fine Marbles & Minerals Pvt. Ltd., etc. (1985) 9 Excise and Customs Reporter 504 and Collector of Central Excise v. Fine Marbles, etc. (1984) 9 Excise and Customs Report 1493 would not also apply in this case in view of the submissions as made in connection with the lobster case.
51. In his reply, Mr. Bajoria also contended that under Section 3 of the said Act the taxable event should be things produced and manufactured in India. He contended that the purpose and object of the Schedule is to determine and lay down the rates only or for cataloguing the goods and the rate of duty. It was his submission that the words "in relation to" would mean and extend to the commodities as indicated and furthermore change of container, as in this case, will not bring about separate goods liable for levy. After placing the definition of "manufacture" or what the same means Mr. Bajoria further contended that the package tea as in this case, would not be subject to the excise duty or levy as made, as here only change is in respect of the container/package. It was his submission that the determination in Empire Industries case (supra), would really help the appellants and not the Revenue in view of the observations in paragraph 20 of the determinations. It was further submitted by him that on application of the tests of manufacture as laid down in that case, the goods in this case "package tea" would not be liable to any levy of duty as tea as contained therein, remains the same since such packages are made out of bulk tea as purchased by the appellants. Even if the Schedule in the instant case as referred to in Section 3 of the said Act, the levy as made in respect of "package tea" was not permissible or possible as "tea" has not been classified like tobacco and other merchandise and more particularly when the activity of packaging has not been included in the matter of the levy or imposition of duty. Such being the position, Mr. Bajoria's contention was that the case of Khendelwal (supra), would not really help the Revenue and he further contended that in term of the determinations as made therein mere mentioning in the Schedule is not the appropriate tests while bringing a product under levy and to bring such product under levy, there should be an incidence of manufacture, which tests, according to Mr. Bajoria, has not been satisfied in case of "package tea". His short and final submission was that mere mentioning of the term "package tea" in the Schedule would not be enough to bring such product under the levy or imposition of duty as in the instant case.
52. Mr. Bajoria further submitted that the observations in Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. (supra) and more particularly when in the instant case, the appellant had purchased duty-paid tea and therefrom they merely packed them for the purpose of selling, would not be enough or sufficient to bring such package tea within the definition of "manufacture" as in Section 2(f) of the said Act. He further pointed out that asbestos rock as involved in this case under reply was not saleable and such being the position, under what context the concerned determination was made will have to be looked into. While dealing with the case of Mother India Refrigeration Industries (P) Ltd. v. Superintendent of Central Excise and Ors., 1980 ELT 600, Mr. Bajoria contended that chargeability being the basis of the levy of duty, mere placing "package tea" in the Schedule without changing the definition of manufacture would not be enough. His further contention was that manufacture only attracts excise duty and the entry of a product, if made in the Schedule, would be immaterial for imposition of levy of duty. Mr. Bajoria made a further reference to the case of State of Maharashtra v. Central Provinces Manganese Ore Co. Ltd. (supra) and submitted that in view of the tests regarding manufacture as laid down or indicated therein and so also the issue as involved, the levy or imposition of duty as was made in this case in respect of package tea, was neither proper nor legal. He further contended that the case relating to V.P. latex as , being one of sales tax, the charging event in that case was thus sale and that case merely interpreted the two items of the Schedule and will not be a decision for holding or arriving at the conclusion that once an item has put in the Schedule, the power of the Court would be taken away. Similarly, Mr. Bajoria contended that the case of A. Hajee Abdul Shukoon & Co. v. The State of Madras AIR 1964 SC 1729, which deals with hides and skins would not also apply with such efficacy as has been sought to be argued by Mr. Bhattacharjee, since these products were and are subject to some process, which would not be the factor in the present case of tea or package tea and more particularly when, no change or alternation in the product, except the packaging of the same, takes place in case of "package tea". Mr. Bajoria also contended that in view of the challenge as involved in the case of Jagannath and Ors. v. Union of India, (supra), the determinations as made therein, would not apply in our case and in this case, no tax should be levied or imposed as the charging section has been appropriately amended. It was also contended by him that the determinations as made in the case under reply or Article 14 of the Constitution of India, would not also have any application in this case. He then referred to the case of East India Tobacco v. State of Andhra Pradesh and Anr. (supra) and claimed that since in that case, Article 14 was attracted and such is not the point involved or in issue in this case, so the determinations as made therein, would not apply with the same efficacy in respect of "package tea". While on the determinations in the case of Dunlop India Ltd. v. Union of India and Ors. AIR 1977 SC 597, which was considered in the case of Empire Industries and Khandewall's case (supra), Mr. Bajoria also contended that the observations as made therein, would not also apply in this case, because in that case, the commodity in question had a change and in this case of package tea, there was in fact, no change of the product.
53. Mr. Bajoria then pointed out that the case as involved in F.M. A.T. No. 2338 of 1963 (Brooke Bonds India Ltd. and Anr. v. Union of India and Ors.), there would be some distinguising features, as Brooke Bonds were and are purchasing tea from tea gardens and then sell them after mixing. He pointed out that Brooke Bonds are blenders and his clients, viz., the appellants are not blenders, but they are selling tea as purchased, after packing them in the manner as indicated herein before.
54. We have indicated hereinbefore, the distinguishing features which Mr. Bajoria pointed out in his case and F.M.A.T. No. 2338 of 1983, which was an appeal by Brooke Bond India Ltd. (hereinafter referred to as the said Company) and another, against the determinations of D.K. Sen, J. as made on 14th July, 1983 and in support whereof, Mr. Jatin Ghosh appeared. By the said judgment and order, Civil Order No. 15368(W) of 1982, which was obtained on July 1983 and was heard at the instance of the parties on merits and without any rule nisi being issued, was dismissed and it was held amongst others that the company was not entitled to the orders as prayed for and as such, the application was disposed of. We have also indicated earlier, the material findings of the said learned Judge, on the basis whereof, it was ultimately found by him that the excise duty levied over the goods manufactured or produced by the petitioner, mainly, package tea is valid and lawful, apart from holding further that package tea is a separate specific excisable item and the authorities were entitled to treat it as such.
55. Apart from the said company, the said proceeding in CO. 15368(W) of 1982, was moved by one of their shareholders and it was their case that the said company carries on business in tea, purchased in India. The said tea has been said to be sold in India, apart from exporting abroad. According to them such production involves (a) the plucking of tea leaves from plants in the tea gardens and are subjected to successive processes known as withering, rolling, fermentating, firing and sorting of the factories or processing centres (b) then the manufactured tea is packed in chests in bulk by the manufacturers and are cleared upon payment of central excise duty for being sold in different auction centres and (c) the manufacture of tea is completed in the factory and processing centres is as aforesaid whereby a manufactured product known as tea, fit for human consumption, is brought into existence.
56. It has also been stated that the said company is not the owner of any tea garden and they purchase tea of diverse varieties from the auction centres all over India on payment of relevant central excise duty as levied or leviable under tariff item No. 3(1) of the said Act, as a manufactured product. It was also their case that the tea purchased in the manner as above, are brought to their blending and packeting centres at Calcutta in West Bengal, Tundla in Uttar Pradesh, Jamnagar in Gujarat, Kannan in Maharashtra, Ghashesar in Andhra Pradesh and Coimbatore at Tamil Nadu, where they are packed in small packets after blending or mixturing of different grades and are lavelled with the brand names as used by them.
55. After the levy of excise duty on manufactured tea under Clause (1) of item No. 3 as mentioned above, the said company was called upon to pay further excise duty on tea blended and packed by them in small packets under Clause (2) of the said item 3, which, as mentioned earlier by us, was introduced in the statute in 1953. Being aggrieved by such imposition of levy, the said company moved this Court inter alia on the grounds that the said Clause (2) of item 3 provides for a specific rate of duty on tea excluding instant tea packet in any kind of container containing not more than 27 kg. net weight and the said clause does not lay down any distinction in quality or value or any other factor which distinguishes tea packed in small packets from tea packed in bulk, i.e., 27 kg. or more. It was also contended that the process of blending or packing of tea carried out by the said company does not bring into existence any new product having a distinctive name, character and use, different from the product which is to be processed and there is no transformation and the article, i.e., manufactured product known as "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 thisitem. (2) Package tea, that is to say, tea packed in any kind of container containing not more than 28 kilograms net of tea but excluding "instant tea". (3) Instant tea, according to the said company, tea really remains the same before and after blending and continues to be known in the market and used by all as tea.
58. It has also been claimed that such process of blending and packeting as involved is not manufacture as defined or in terms of Section 2(f) of the said Act, which would involve levy and collection of excise duty which is essentially a duty on manufacture or production of excisable goods and there is no doubt or dispute that it is only those processes which bring into existence a new article having a distinct name, character and use which would amount to manufacture. It was also contended that the authorities concerned, in the instant case, had no power, jurisdiction and competence to levy or collect excise duty on any article under the said Act unless the same is manufacture of a new article though involving a process, resulting in the emergence of a new article having the character as mentioned hereinbefore or unless the use of the process bring out or produces an article, the use whereof is different from the original product, tea in this case. It was the further and definite case of the said company that package tea which has been sought to be subjected to duty now under Clause (2) of item 3 of the tariff, has no other distinctive features from that of the manufactured tea as subjected to duty under Clause (1) of the said tariff item 3, except that the same is packed in smaller package and duty has already been levied on the same.
59. The said company has further contended that such process of packing as mentioned above may be incidental or anciliary to manufacture of tea in their processing centres and at that stage, tea packet in small packets may be subjected to a different rate of duty. But such packing, after clearance of the manufactured tea from gardens on payment of excise duty would not be leviable to duty as claimed. It has been claimed that mere packing is not a process of manufacture, and the said sub item (2) read with Section 3 of the said Act clearly contemplates packaging at the time of manufacture of tea in the processing centres in the gardens and not packaging of manufactured tea at some other place after clearance of the manufacture from gardens on payment of excise duty would not be leviable to duty as claimed. It has been claimed that mere packing is not a process of manufacture, and the said sub-item (2) read with Section 3 of the said Act clearly contemplates packaging at the time of manufacture of tea in the processing centres in the gardens and not packaging of manufactured tea at some other place after clearance from the factory/processing centres on payment of duty. It was the further case of the said company that the said sub item (2) means and should mean packaging of tea at the time of carrying on manufacturing operation in the factory/processing centre and not after clearance or despatch of manufactured product at any subsequent stage. According to the said company, mere packaging of tea after clearance of the manufactured tea from the gardens does not amount to manufacture, independently of a new article and as such also, as indicated earlier, item 3(2) has no application and the said sub item should be so construed and given such a meaning in the light of Section 3 of the said Act and any other construction and meaning given to the said sub-item (2) of the Schedule, would be invalid and ultra vires entry No. 84 of List 1 of the Seventh Schedule of the Constitution. It was also pointed out that Clause (2) of item 3 should be construed in the light of section of the said Act and that Schedule I of the said Act is a part of the same and if item 3(2) of the tariff confers powers to levy duty on package tea, then the said Clause (2) is liable to be struck down as violative of Article 246 of the Constitution of India read with the Seventh Schedule thereof and entry 83 therein. It was also claimed that the Parliament, has no power or authority to make any law to amend the Schedule to the said Act and thus to incorporate as excisable article, a new manufacture and on which excise duty has already been levied and such levy would give rise to double taxation.
60. Thus, according to the said company, the duty levied and collected under item 3(2) would be bad in law and a nullity. The said Clause (2) of the concerned item was also claimed to be violative of Article 14 of the Constitution of India, as the mere weight of tea, put in a container of a packet without taking into account or consideration the quality or value of the same or other guiding and relevant factors, cannot be a reasonable classification for the purpose of levy of duty. It has also been stated that the said Company has been paying excise duty under item 3(2) of the tariff as demanded by the authorities concerned on the mistaken belief that such duty was lawfully payable and they have come to know and realise their mistake very recently, when Liptons India Ltd., which also carries on business similar to them, challenged such levy in a proceeding under Article 226 of the Constitution of India. According to the said company, all assessments, levy and collection of duty under Item 3(2) of the tariff were and are illegal and are liable to be set-aside and the levy as made and collected, should be refunded to them.
61. The affidavit-in-opposition in this case was dated 4th August 1982 and the same was filed through respondent No. 2, Shri Amal Kanti Das, Assistant Collector of Central Excise, Calcutta V Division, Calcutta for appreciation of the facts and points involved in the case, he has stated that excise duty on loose tea was levied for the first time on and from 1st March, 1944, manufactured at the gardens and sometime in 1953, the Parliament amended the Schedule to the Central Excises and Salt Act, 1944 by including therein sub-item (2) of tariff item 3 and included therein packaged tea as one of the items on which excise duty would become payable, (b) the said company since a long time has been manufacturing and/or producing package tea in their various factories situated in different parts of India in automatic method and/or process right from blending, packaging and levelling, all by mechanical means. Since 1953, on account of the said amendment as mentioned above, the petitioner became liable to pay excise duty on such packaged tea. The petitioners since 1953 have been submitting returns to the respondents of their manufacture and/or production by mechanical methods of such package tea in their factory premises and had been observing excise formalities including taking out licence for manufacture of excisable product namely package tea falling under tariff item 3(2) and has been paying excise duty in respect of the same voluntarily. He has craved leave to refer to such records including those relating to the licence, (c) they have been employing qualified and experienced persons in the trade for the purpose of manufacturing or producing such package tea. Such packaged tea as manufactured and/or produced by the said company and various other persons are a well-known product in the market and in the commercial and trade parlance, the same is well known and treated as distinct and different from loose tea with different prices and marketability, (d) the Parliament has specifically included package tea in the Schedule to the said Act and as such, the petitioner cannot challenge and question its validity on the grounds that such product did not involve manufacture, (e) the said company fully knowing the said facts had been voluntarily paying excise duty on such package tea. The present application is wholly misconceived, mala fide and speculative and (f) the said company are guilty of gross delay and laches and no proper or any explanation has been given for the same and the application should be dismissed on that ground alone.
62. The deponent has more or less agreed that the said company has been, for a long time manufacturing or producing package tea in their various factories in India and has stated that such production is carried on by machineries, which are operated automatically and he has also stated that the entire process of blending, packing and labelling are also carried on by mechanical means. It has also been stated by the said deponent that the factories of the said company in different parts of India, the manufacture as involved in this case is carried on by sophisticated and fully equipped machines, from duty paid loose tea, purchased from auctions. His further case is that tea produced/manufactured in the gardens are liable to excise duty as loose tea. It has been alleged that purposefully the said company has suppressed the said fact that package tea are manufactured and/ or produced by mechanical process in their different factories and also the fact that such package tea have a commercial market of their own, with different price, separate and distinct from the loose tea and the same is separate and distinct from ordinary loose tea.
63. The deponent has also stated that the Parliament, which is a competent authority, has specifically included package tea as an item in the Schedule to the said Act and as such, the validity or otherwise of the same cannot be questioned by the said company on the grounds as alleged or at all and the grounds as alleged and put forward have also been claimed to be speculative, misconceived and not tenable in the facts of the case and so also the law as involved.
64. It has also been asserted that the said company, with full knowledge that duty is payable on package tea, has been paying the same voluntarily and challenges as thrown now, are wholly untrue, misconceived and not maintainable. It has further been claimed that the said company is not diligent at all and if not on any other ground, at least on that ground alone, the application was liable to be dismissed. Apart from the above defence, in support of their contentions for dismissal of the writ proceedings, the said company has also claimed such dismissal on the ground of availability of other alternative and efficacious remedy and for admitted non availing of the same. The said company has specifically claimed the application to be wholly misconceived, speculative, harassing and not maintainable (a) as the Parliament has specifically included package tea as a particular item in the Schedule to the said Central Excises and Salt Act, 1944 and the petitioner is not entitled to question its validity on the ground that such product did not involve manufacture, (b) the said company are guilty of gross delay and laches and no proper or any grounds or reasons have been given explaining such dealy or laches. In any event the petitioners have no been diligent and as such is not entitled to any relief in the present application, (c) they have intentionally and purposely suppressed the material facts from this Hon'ble Court, particularly the various mechanical processes it undertakes in order to manufacture or produce package tea and further, has suppressed the facts that such package tea are well known in the market and in the trade parlance as separate and distinct from the loose tea and (d) the grounds made out in the present case do not disclose any cause of action and they are misconceived and are not tenable in facts or in law.
65. The reply to the above affidavit-in-opposition was dated 18th August, 1982 and the same was filed through Satya Paul Saigal, petitioner No. 2, who is the Director. Finance of the said Compyny. He has alleged that the process of blending carried out by the said company, on which the answering respondents to the rule have mainly put forward their defence, was wholly misconceived as blending has no relevance to the dispute involving package tea. According to the said company those answering respondents were and are not entitled to introduce the case of blending or the concerned item as he claimed that packaging by itself would not amount to any case of manufacture and by such blending not only there has been no amount of manufacture but there is no new material which is brought into existence. It was also the case of the said campany that both before and after blending and packing as made by the said Company, the material, viz., manufactured tea would continue to be known as tea.
66. It was contended before the learned Trial Judge on behalf of the said company that item " package tea " as defined in item 3(2) in the concerned tariff did not contemplate the inclusion of such tea which is re-packed by the said company in their packaging centres and such repacking cannot be a part of the manufacturing process which was completed in the tea gardens. It was further stated that if at the time of manufacture at the gardens, tea was packed in small packets then such packing might be a process incidental to the completion of manufacturing process as tea was always produced in loose or unpacked state and the produce of the gardens in the final form, after manufacturing, is commercially known as tea. It has been pointed out that the difference between Clauses (1) and (2) [of] item 3 of the concerned tariff was only on packaging and not in case of manufacture and Clause (2) would not be attracted if the operation was only blending. It was also contended that the definition of the expression "manufacture" in Clause 2(f) of the said Act made it clear that mere packing in a small container from a larger bulk would not amount to manufacture of a new article. It was also contended that manufacture envisage a process by which the original commodity would lose or change its identity and the new product having a distinct name, character or use would come into existence. It was further contended that the impugned levy in the instant case was bad on the ground of double taxation as mentioned earlier and it was also the case of the said company that the fact that they have been paying excise duty all along without protest, could not preclude them from challenging the concerned levy at the late stage, as in this case.
67. We have indicated earlier the observations made by the learned Trial Judge on the cases as cited before him.
68. Before us, Mr. Ghosh appearing for the appellant placed the relevant facts as indicated hereinbefore and contended that Section 3 of the said Act is a charging section, which deals with levy at the rate as specified in the First Schedule and contended that no duty could be levied in this case because, as mentioned earlier, by packing tea from bulk tea into smaller packets there was really no process or any kind of manufacture involved and the species tea remain the same and by such packaging the quality, character and use of the same is not changed and package tea is also known, not only in the ordinary parlance, but in the commercial world as tea, and the same is used as such. He, of course, in his usual fairness stated that if by such packaging as involved in this case, there was formation of the product to anything else which was not tea, then the answering respondents in the rule could have claimed such tranformation to be a case of manufacture under Section 2(f) of the said Act. In any event, he submitted that since packing in small cartons of tea would not bring into existence any separate material or identity, having a separate or distinctive character and use and as such, so there would not be any case of manufacture through such packing process and prior to the incorporation of the amendment through Section 2(f) of the said Act, such packeting of tea or blending of the same would not be a case of manufacture. Mr. Ghosh referred to the case of Union of India and Ors. v. Godfrey Philips India Ltd. and Ors. (supra), where the Supreme Court has observed while dealing with how valuation is to be made, that cost of secondary packing done for protection of excisable goods during transportation would not be included in the assessable value and such cost of packing, which is necessary for sale of the excisable goods in the wholesale market at the factory gate would be included under Section 3 and 4(4)(d)(i) of the said Act. That was a case where the respondents before the Supreme Court were manufacturers of cigarettes and by majority, the Supreme Court has observed that cigarettes after manufacture are usually placed in paper/card board packets, each packet containing 10 or 20 cigarettes. These packets before delivery to the wholesale buyer are packed together in paper/card board/cartons/outers, each of such cartons containing a number of packets of cigarettes with 10 or 20 cigarates in each packet. The cost of packing cigarettes in packets of 10 or 20 cigarettes each and thereafter in cartons outers for delivery to the buyer in the course of wholesale trade at the factory gate must necessarily be included in the value for the purpose of levy of excise duty. But when a number of these cartons are put in corrugated fibre board containers for delivery, the cost of the further packing incurred for putting cartons/outers in the corrugated fibre board containers cannot be included in the value of cigarettes for the purpose of assessment of excise duty. Thus, further packing of cartons in which the packets of cigarettes have been packed in the corrugated fibre board containers is not, indeed, in the course of delivery to the buyer in the wholesale trade at the factory gate but is only for the purpose of facilitating the smooth transport of the cartons containing the packets of cigarettes to the buyer in the wholesale trade. On a proper construction of Section 4(4)(d)(i) of the Act read with the explanation, the secondary packing done for the purpose of facilitating transport and smooth transit of the goods to be delivered to the buyer in the wholesale trade cannot be included in the value for the purpose of assessment of excise duty. It is perfectly conceivable that the wholesale dealer who takes delivery may have his depot at a very short distance only from the factory gate or may have such transport arrangements available that damage or injury to the cigarettes can be avoided. The corrugared fibre board containers are not necessary for selling the cigarettes in the wholesale market at the factory gate. Therefore, the cost of corrugated fibre board containers cannot be included in the value for the purpose of assessment of excise duty. Further, the position expressed by the Central Board of Excise and Customs in its letter dated 24-5-1976, that " the cost of corrugated fibre board containers in question does not form part of the value of cigarettes for the purpose of excise duty " is perfectly right, apart from holding that cigarettes are packed initially in paper/and board packing of 10 and 20 and these packets are then packed together in paper/board cartons/ outers. These cartons/outers are then placed in corrugated fibre board containers and it is these corrugated fibre board containers filled with cartons/outers containing packets of cigarettes of 10 and 20 which are delivered by the respondent to the wholesale dealers at the factory gate. In view of the enlarged definition of the term " value " as given in Section 4(4)(d)(i) read with explanation, the cost of packing of all the three stages, i. e., initial packing, secondary packing and final packing is includible in the assessable value of the cigarettes. The manufacturer's contention that the packing which was necessitated in order to protect the packed cigarettes and to provide them from being damaged during the course of transportation from the factory gate to the godown or warehouse of the wholesaler is not includible in the assessable value of the cigarettes because packing in corrugated fibre board containers to the wholesale dealers at the factory gate but it was done only with a view to facilitating transportation of the cigarettes from the factory gate to the godown or warehouse of the wholesale dealer, cannot be accepted because a distinction cannot be drawn between the secondary packing necessary for the purpose of selling the goods at the factory gate and the secondary packing used in order to protect for goods against damage during the course of transportation so that they may safely reach the consumers in proper condition, as under the provisions of Section 4(4)(d)(i) read with explanation, the purpose of particular kind of packing is not relevant. The real test, whether cost of a particular kind of packing is includible in the assessable value of the article, is whether such packing is done in order to put the goods in the condition in which they are generally sold in the wholesale market at the factory gate and if they are generally sold in the wholesale market at the factory gate in packed condition, whatever may be the reason for such packing, the cost of such packing would be includible in the value of goods for assessment to excise duty. But as held in the Bombay Tyres International's case , this is subject to the condition that if any special secondary packing is provided by the assessee at the instance of a wholesale-buyer which is not generally provided as a normal feature of the wholesale trade, the cost of such special packing would not be includible in the value of goods and would have to be deducted from the wholesale cash price. Section 4(4)(d)(i) enacts an inclusive definition of "value" and provides that "value" in the relation to any excisable goods, where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. The condition for applicability of this inclusive definition of "value" is that the goods are delivered at the time of removal in a packed condition and where this condition is satisfied, the "value" of goods would include the cost of such packing. The explanation to Section 4(4)(d)(i) provides an exclusive definition of the term "packing" and it includes not only the outer packing but also what may be called the inner packing. Ordinarily, bobbin, pirl, spool, reel and wrap beam on which yarn is wound would not be regarded as packing of such yarn, but they are brought within the definition of "packing" by the explanation. The explanation thus extends the meaning of the word "packing" to cover items which would not ordinarily be regarded as forming part of packing. Therefore, there can be no doubt that corrugated fibre board containers in which cigarettes are contained fall within the definition of "packing", and their cost is liable to be included in value of the cigarettes and the question of cost of packing was broadly dealt with in the judgment delivered by the Supreme Court in the Bombay Tyres International's case 1983 ELT 1896. The general proposition laid down in the said case was that the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be included in the 'value' of the article for the purpose of the excise levy.
But the Supreme Court in the Bombay Tyres International's case did not proceed to decide whether the cost of every degree of secondary packing would be liable to be included in the value of the goods or whether a distinction could be drawn between one degree of secondary packing and another. In that case the Supreme Court posed the question:
Is all the packing, no matter to what degree, in which the wholesale dealer takes delivery of the goods to be considered for including the cost thereof in the 'value'?
Or does the law require a line to be drawn somewhere?
The Supreme Court did not answer the question specifically in the said case leaving it to a later date when this question would directly came up for consideration on the facts of a particular case. On the basis of such determinations of the Supreme Court as indicated above, it was Mr. Ghosh's specific submission that packing of tea in small containers, thus, cannot be subject matter of levy, since levy is on manufactures of tea.
69. He further pointed out that on the basis of the scheme of the said Act, levy is on manufacture or on manufactured goods and in such case the manufaturer is to pay the duty. According to him, every word in the tariff item as involved in this case, has a separate meaning and that will have to be considered by the Court. It was further pointed out by Mr. Ghosh that package tea is a class species and since there has been no mention about blending in the concerned provisions of the statute, so, even when blending is made, the tea after blending and packaging would not be liable to any levy. Mr. Ghosh further pointed out that the Schedule to the said Act must be deemed to be a part of the same in some cases and thus there should be harmonious construction with the concerned Schedule and section.
70. It was Mr. Ghosh's further contention that tea manufactured and packed in different packages, on the basis of the levy as made, has been subjected to levy, treating the same as different class and he claimed further that packaging of tea, which has discharged the duty liability and which is really the case before us, would not be manufacture. He indicated further that every process of manufacture would imply a change, but every process is not manufacture. He reiterated that by such manufacture as involved in this case, there would be a new article, having the distinct name, use and character should be presumed.
71. Mr. Ghosh claimed and submitted that there could not be any levy on package tea and by such packaging, there is no transformation or creation of a new product and to establish such submission or the other particulars of his submissions on the points as indicated hereinbefore, he first referred to the case of Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd, (supra), where it has been observed that the produce of vanaspati cannot be held to manufacture some kind of non-essential vegetable oil within the meaning of item 12 of Schedule I under the said Act, by applying to the new material purchased by them, the processes of neutralisation by alkali and blending by activated earth and or carbon. It has been observed in that case by the Supreme Court that "manufacture" will be complete as soon as by the application of one or more processes, the raw material undergoes some change is to a equate proceessing to manufacture and for this there is no warrant in law. It has also been indicated that the word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance" however minor in consequence the change may be. In that case it has also been indicated that the definition of "goods" make it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold. The "manufacture" which is thus liable to excise duty under the provisions of the said Act, must therefore be the "bringing into existence known to the market". As indicated earlier, it was Mr. Ghosh's specific contentions that by packing tea in small packets from larger bulk, as purchased from auctions will not be a case of manufacture. To establish his submissions as indicated hereinbefore, he also relied on the case of S.B. Sugar Mills and Anr. v. Union of India and Anr. (supra), where the meaning of the word "manufacture goods" have been considered and on placing reliance on the case of Union of India v. Delhi Cloth Mills Co. Ltd. (supra), the Supreme Court has in fact and effect observed in the manner as was done in that case. Then, a reference was made by Mr. Ghosh to the case of The Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers (supra), where on consideration of the large number of cases, the point which arose for consideration as to whether the processing of the original commodity bring into existence a commercially different and distinct article? The case under consideration was under the provisions of Kerala General Sales Tax Act, 1963 and the effect of consumption of a commodity in the process of manufacture under Section 5A(1)(a) of that Act was considered and it has been held that if the provisions as indicated hereinbefore, are truly read, they would speak of goods consumed in the manufacture of other goods for sale or goods consumed in the manufacture of other goods for purposes other than sale. It was contended by Mr. Ghosh, since tea even after packaging remanis tea, there would be no consumption of any other article when package tea is consumed and as such also, he claimed that such packaging of tea would not come within the definition of manufacture under Section 2(f) of the said Act. Thereafter, reference was made by Mr. Ghosh to the case of P.C. Cherivan v. Mst. Barfi Devi (supra), where the Supreme Court has observed that "manufacturing process" will not include business of retreading of tyres and the broad test for determining whether the process is a manufacturing process, whether it brings out a complete transformation for the old components so as to produce a commercially different articles or commodity. It has also been observed in that case that the retreading of old tyres would not bring into being commercially distinct or different entity. The old tyre retains its original character or identity as a tyre and retreading does not completely transform it into another commercial article, although it proves its performance and serviceability as a tyre. While on the point a further reference was made by Mr. Ghosh to the case of Sterling Foods v. State of Karnataka and Anr. (supra) where practically the same view as to the emergence of a new commodity in the use of manufacturing process to constitute "manufacture" has also been indicated. We have not indicated the specific findings on the abovementioned cases now as we have indicated them in our judgment earlier.
72. As pointed out earlier, Mr. Ghosh indicated that amendment in question, was brought into force-effect on and from 1st March, 1986 and blending as a factor has not been mentioned or included in the concerned definition. In that view, he also submitted that in case of blending even, which is admittedly carried on by the said company, the same would not bring the blended product within the definition of manufacture.
73. In the case of State of Maharashtra v. C. P. Manganese Ore. Co. Ltd. (supra), it has been observed that mere giving a new name to a product would not be a case of "manufacture" and what is to be determined is whether there has been the manufacture of a new product which has a separate commercially known name in the market, apart from holding that the mere giving of a new name by the seller to what is really the same product is not the ''manufacture" of a new product. In that view of the matter Mr. Ghosh wanted to supplement his submissions to the effect that blending or packaging of tea in small packets from bulk tea cannot thus be considered to be a case of manufacture. He then referred to the case of Chowgule & Co. Pvt. Ltd., and Anr. v. Union of India and Ors. (supra) and on a reference to the observations as made therein, submitted that processing as in this case, would not amount to manufacture. As submitted earlier, he restated further that every process no doubt would bring a change but every change will not be a case of manufacture and the test in this case would be whether on such manufacture as claimed the original tea loses its quality, character and use in the commerial market. Following the determinations in the case of Piramal Spinning and Weaving Mills Ltd. v. Union of India (supra), the Bombay High Court has observed that by blending or twisting of cotton and nylon yarn no new product came into existence, within the meaning of Section 2(f) of the said Act, though the process led to a twinkling effect and the blended product had a different name in the market. On such view, it was also contended by Mr. Ghosh, that since by blending or packaging, the original tea will not lose its quality, character and identity and the same would be known to the commercial market as tea, the process as in this case, would not be a case of manufacture of a new product. He also relied on the case of J.K. Steel Ltd. v. Union of India and more particularly to paragraphs 22-23 where the contentions for the Revenue have been recorded. In that case, a point arose as to whether wires manufactured out of steel rods imported by the assessee prior to 24th April, 1962, can be levied under the said Act. We have already indicated that in the said determinations, the Supreme Court has quoted with approval, the observations of Lord Cairns in Partington v. Attorney General (supra) and it has been indicated that the Crown, seeking to recover the tax cannot bring the subject within the letter of the law, the case might otherwise' appear to be. On such observations, it was Mr. Ghosh's specific submission that since the case of manufacture as in this proceeding, cannot be brought within the purview of the said Act or the Rules and Tariffs thereunder, the Revenue would not be entitled to ask for the levy as made or make any levy at all.
74. On the basis of the observations in the case of Union of India v. Godfrey Philips India Ltd and Ors. (supra), Mr. Ghosh pointed out that "manufacture" must and should mean manufacture of a new product, which is not the case here and such packaging as involved, is not also the subject matter of the concerned levy. It was also submitted by him that unless there is some activity or action, which transforms the original product into another product, having the characters as indicated hereinbefore, there will be no manufacture and to substantiate his submissions, he also referred to the case of In re: M/s. S. S. Jain & Co. and Anr. , where on dismantling a ship, it has been observed by a learned Judge of this Court, that waste and scrap arising from such dismantling and used by mini steel plants, would amount to manufacture, because new commodity comes into existence. But goods like angles, hoops, strips on such dismantling and only separated from composite whole, would not produce new excisable goods and because excise duty levied on them, would not be proper or such levy would be ultra vires the concerned items of the tariff. The definition of "manufacture" in Section 2(f) has also been held to be an inclusive one and it has also been observed that the section of the said Act being the charging section, levies duty on all excisable goods which are produced or manufactured in India. The question is whether the dismantling of a ship comes within the phrase, "produced or manufactured in India". It is to be noted that the definition of "manufacture" given in Section 2(f) is an inclusive definition. Certain activities which might not otherwise be regarded as manufacture has been specifically included in the definition of "manufacture". It is argued on behalf of the Department that second part of the definition has specifically provided that process relating to any goods in the Section or Notes of the Schedule to the Central Excise Tariff Act, 1985 will have to be regarded as "manufacture" is without any substance. The Department has not been able to show any Chapter Notes or Section in which the activity of dismantling of the ship has been specifically treated as amounting to "manufacture". Therefore, it cannot be held that the dismantling of ship amounts to manufacture as envisaged by Section 2(f) of the Central Excises Act, apart from indicating, whether an activity amounts to manufacture or not, several aspects have to be taken into consideration. For instance, a new marketable commodity may be brought into existence by the act of fitting together a number of manufactured parts into a complete machine, structure or unit of a machine. In such a case, the activity of fitting together of manufactured parts must be regarded as "manufacture" and the end product must be regarded as goods produced or manufactured by this process. But, the converse process by which a manufactured commodity is broken up or taken apart cannot be regarded as manufacture or production of the components. To take the simple illustration of a car which is produced by assembling various parts in the assembly line. The activity of fitting together various components to make a complete car must be regarded as manufacture of car. The end product of the product is the car. But, when that car is broken up and things like carburettor, battery or other fittings are taken apart can it be said that these things have been manufactured by the process of taking apart the car. Neither in common parlance nor by the definition of "manufacture" given in the Act, can it be said that these components which were taken apart in the process of breaking up the car were manufactured or produced by the activity of breaking up of the car. On the same analogy the nails or tacks or rivets used in construction of a ship do not cease to be the same nails or tacks or rivets when ship is broken or taken apart. It cannot be said that the nails, tacks and rivets have been manufactured in the process of breaking up of the ships and therefore, were not liable to duty and the word "manufacture" has generally been understood to mean making of a thing which is useful for its own sake and which has a market of its own. It cannot be denied that at the moment there is tremendous demand in India for "waste and scrap" which are re-rolled by the mini steel plants or re-rolling mills. In fact, there is a tremendous demand for scrap iron and it is reported that the Metal Scrap Trade Corporation has assessed the scrap import requirements of the country for 1986-87 at 1.4 million tonnes. Therefore, the question will have to be examined in the context of economic realities. Judicial notice must be taken of the fact that ship breaking has become a big industry in India. The main object of this ship breaking industry is to obtain waste and scrap for sale in the market. The things that are obtained by breaking up of ships have a ready market. The ships are broken up for the purpose of catering to the demands of mainly mini steel plants and re-rolling mills. Ships are being imported regularly from foreign countries for the purpose of breaking in India. When there is an organised activity on such a large scale for obtaining waste and scrap it is difficult to hold that the end product of the activity "waste and scrap", cannot be regarded as products of the industry. Therefore, waste and scrap obtained by dismantling of ships in the instant case, must be regarded as "goods" which are "produced or manufactured in India", hence, liable to duty under Section 3 of the Central Excise Act. There having been no activity in this case, in the matter of blending and packaging tea, Mr. Ghosh also contended that package tea could not be made subject to further levy when admittedly, the duty on original tea has already been levied and paid. We cannot agree that in packaging tea, there is no activity involved, as in the cases under reference and consideration. So on that point the determination is distinguishable.
75. Mr. Ghosh claimed that the determinations in the case of Dunlop India Ltd., etc. v. Union of India (supra), will not apply in this case, rather the same is distinguishable, as the said determination was on the question of classification and liability, was not in dispute in that case and submissions as made hereinbefore, Mr. Ghosh pointed out would apparently be satisfied from paragraph 38 of the reports. The determinations in Union of India v. Godfrey Philips India Ltd. and Ors. (supra) will not help as in this case, the packaging of "package tea" by the said company or anybody concerned is made or the same is necessary for the sale of the excisable goods "tea" in the wholesale market. At a late stage of his submissions, Mr. Bhattacharjee made a further reference to the case of Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai, Rewari and Anr. (supra), the relevant findings whereof have been quoted hereinbefore. Mr. Ghosh also claimed that the said determination has also no application in the facts of this case. The rolled circles in that case have been found to be liable to excise duty under item 26A(2) with the further observations, that only trimmed circles cannot be treated as circles and as finished product and even uncut circles, as envisaged by the concerned item, apart from holding that the rolling [of] a billet into a circle is a process in the course of completion of a manufactured product, i.e. , circles as contemplated by Section 2(f) of the said Act. That being the position and finding, it is very difficult to agree with the submissions as made by Mr. Ghosh. It should also be noted that the cases as mentioned above and which were relied on by Mr. Ghosh, for the proposition that there would be a case of manufacture, if an application of any process, a completely different item from the original item emerges, were also cited amongst others in the other appeal.
76. Mr. Roy Chowdhury appearing for the respondents in this appeal, referred to the terms "excisable goods" as used in Section 3 of the said Act and claimed that the said term would mean and include goods produced and therefore, the same would also include goods manufactured. It was his specific and further contention that when the Parliament has elected to put package tea in the Schedule, this Court will not be entitled and justified to interfere. To establish the effect of putting the item in the Schedule, reference was made by him to the case of Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai, Rewari and Anr. (supra). It was his further and specific submission that when classification of the product/goods has been made in the Schedule and as indicated earlier, the Parliament put the concerned item in the Schedule, the validity thereof cannot be gone into and questioned or challenged. He also referred to the case of Kores (India) Ltd. v. Union of India (supra), a Division Bench determination of the Bombay High Court, and which has held that when Parliament has specifically included a particular product in the Schedule to the said Act, the validity of the same cannot be questioned on the ground that the said product did not involve manufacture. While on the point and also on the point of Section 3(1) of the said Act, Mr. Roy Chowdhury referred to the case of Khandelwal Metal & Engineering Works and Anr., etc. v. Union of India and Ors. (supra). While on the point, this case was very heavily relied on by Mr. Bhattacharjee, appearing for the appellants in the other appeal, apart from relying with vigour to the determinations in Kores (India) Ltd. v. Union of India (supra). It was the categorical submissions of Mr. Roy Chowdhury that package tea is another class of tea, the manufacturing whereof, would not be complete unless some process is done in the matter of packing or until the packaging is complete. According to him, thus manufacture is the touchstone in the case of package tea and that should also be the due construction of Section 2(f) of the said Act and the words "any process" would not only mean process incidental or ancillary, but that would also mean and include, manufacturing of tea including packaging of tea or package tea. The above submissions that package tea is a different variety or class were also sought to be supported and supplemented on a reference to item 3 of the tariff.
77. Excepting the cases which we have already indicated to be distinguishable in the facts of this case, the other cases as cited by Mr. Ghosh in this appeal and by Mr. Gupta in the other appeal, do support the contentions as indicated hereinbefore and more particularly, the submissions that there would not be a case of levy on any product, if even after manufacture or any manufacturing process, the character, use and quality of the original item is not changed. As indicated earlier, it was submitted by Mr. Ghosh that since after packaging, tea remains tea and the quality, character and use of the same is not changed for the common users or in the commercial market, so package tea cannot be levied to any additional duty. Since we have heard the two appeals together, so we can take cognizance of the cases as cited in the other appeal by the learned advocates appearing and more particularly when, most of the cases as cited were common and the points involved were the same and when really, we feel that the disposal of the points as involved in one appeal would also dispose of the other appeal.
78. We have earlier indicated the cases as discussed by the learned Trial Judge in this appeal and since that determination was also and really the basis of the determinations in the other Appeal, Mr. Gupta appearing in support of the same contended, that the observation as made by the learned Trial Judge in Brook Bond's case, on the leviability of package tea or his determinations on the effect of Section 2(f) of the said Act and the Schedule, were improper and he also contended that when admittedly, there has been inconsistency between the Schedule and the section, the section should have precedence and in not holding so, the learned Judge was wrong. We have also indicated earlier, the cases which were cited by Mr. Gupta, Mr. Bajoria and also by Mr. Bhattacharjee and how they wanted to distinguish the cases as cited by their adversary.
79. On consideration of the cases as cited, so also the submissions as made by the learned advocates, we feel that package tea is itself a concept and the same has a different and distinct use from the bulk tea as purchased and such package tea grew as a concept and gained popularity prior to 1953. In fact, because of such gaining of package tea as a concept, the same has been levied to tax by the Legislature and as such, the same was included/inserted in the concerned tariff with effect from 15th April, 1953. So, when package tea has been entered into the Schedule of the said Act, no doubt the same became excisable and such excisability, which is the real object of Section 3 of the said Act, viz., the charging section, has thus satisfied the real object of the section and that being the position, the levy of duty as made, cannot be said to be contrary to the intention of Section 3 of the said Act. There is also no doubt that to have package tea made ready for sale, separate specific treatment and dealing of the bulk tea with the help of labour, capital, power and other machineries is required and as such also, the levy as made cannot be said to be without justification. We also find that "package tea" as mentioned in Schedule 3(2) is an inclusive one and as such also, the imposition or levy of tax as made, was with jurisdiction. The cases as cited by Mr. Bhattacharjee on the question and meaning of the word "include", in our view do also support the views which we have expressed.
80. We further feel and find and that too on the principles as indicated by the cases as cited at the Bar, that every endeavour should be made to preserve the intention of the legislature as indicated in the Schedule/Tariff and every endeavour should further be made to avoid any repugnancy. The definition of the word "manufacture" in Section 2(f) of the said Act is no doubt inclusive and any clause appended thereto, should be deemed to be merely illustrative and not exhaustive. The amendment as incorporated to the definition of "manufacture" is only clarificatory also and it is needless to point out that the word "include" is often used in interpretation clause for enlarging the meaning and scope of the words and phrases as used in the statutes. The present definition of the term "manufacture", which is all inclusive, has been incorporated in the statute ex abundanti cautela. While on the point, we have not accepted the contrary submissions as made by Mr. Ghosh in Brooke Bond's appeal when "tea" has been included in tariff item No. 3 long before the present definition of "manufacture". Agreeing with the submissions of Mr. Bhattacharjee, we find that there was no restrictions on the authorities concerned to levy and impose tax on package tea and there can hardly be any doubt, that when package tea has been included in the tariff, the imposition or levy as made, was authorised, more particularly when, such was the intention of the legislature, which should be culled out from the nearest proximity and against, must have preference. In any event, the will of the Legislature will have to be honoured and should receive preference and to give effect to the same, the Court should not give such construction, which will create any ambiguity. While making such determination as above, an Act has to be read and construed as a whole and the Schedule to the same is to be treated as a part of the Act and the first and foremost endeavour of a Court should be, to avoid any ambiguity, which again cannot be achieved in this case, if the Schedule to the said Act is considered separately from the provisions of the said Act. While on the point, we find and hold, if two constructions are possible, which incidentally was the claim and counter claim of the parties before us, that one, which leads to any uncertainty and ambiguity must be avoided or which interpretation would preserve the provisions from the challenge of unconstitutionality, must be sought to be adhered to. The Central Excise Tariff Act, 1985 has really brought in major change in the said Act, including the change in the definition of the word "manufacture" in Section 2(f) and on the basis of such amendment, "manufacture" would now mean and include labelling, relabelling and repacking. The above Act is not only an independent one, but the same is also a classificatory law, for explaining an existing law, viz , the said Act. The analogy in respect of "pan masala" as put forward by the appellants, will not really hold good as the said product, like package tea, has no universal recognition, rather the same is a new concept in the commercial world.
81. No doubt the Legislature in this case has elected to levy and impose duty on tea and package tea. Even if we agree with the submissions of the appellants, that by manufacturing package tea through the process as indicated hereinbefore, the species tea remains tea and does not change its quality, character and use by such packaging there will be no difficulty in holding in favour of such imposition of levy of duty in respect of package tea, as there is nothing in Article 265 of the Constitution of India, holding such taxation to be void and unconstitutional and there would be no inherent illegality or irregularity, and such imposition would be valid, unless there are specific prohibitions, which are really absent in this case.
82. In view of the findings as above, we uphold the findings of the learned Trial Judge in Brooke Bond's case, that the First Schedule and the items thereunder are part of the said Act and have statutory force. The Legislature having specifically indicated package tea as a different item must be considered to have taken into consideration the fact that package tea is produced out of tea already produced and is levied to tax and such package tea is produced out of tea already manufactured in the gardens. They must also be deemed to have considered the process by which tea is packed after manufacture and comes to the category of package tea as an independent item of merchandise and which makes the same excisable. The creation of differentiation as in this case is not unintelligible. On the basis of the submissions as put forward before us, we also find in agreement with the learned Trial Judge in Brooke Bond's case that package tea is not necessarily produced or manufactured by the undertaking which manufactures tea in bulk and furthermore, package tea is sold to a class of buyers different from the class which purchase tea in bulk and which can be treated as a different commercial item.
83. We thus hold that the duty as levied on package tea is valid and legal and the said item/product is a separate and specific excisable item.
84. Thus the two appeals under consideration should be dismissed.
85. We order accordingly. There will however be no order as to costs in the appeals.
86. Consequent to our findings as above, we also dismiss the appeals in F.M. A.T. Nos. 95 and 96 of 1986 where, in fact no separate arguments were advanced by the learned advocates, as the points as involved, would be covered by the judgment as proposed by us in F.M.A.T. No. 4198 of 1985 and F.M.A.T. No. 2338. There will be no order as to costs in these appeals also. Since the point involved in this case are not only matters of great public importance and also requires the determination by the Hon'ble Supreme Court, as prayed for by the learned Advocates appearing for the appellants, we grant necessary certificate for him to appeal to the Supreme Court.
Samir Kumar Mookherjee, J.
I agree.