Customs, Excise and Gold Tribunal - Delhi
Pressure Cookers And Appliances ... vs Collector Of Central Excise on 21 January, 1987
Equivalent citations: 1987(11)ECC233, 1987(12)ECR512(TRI.-DELHI), 1987(28)ELT566(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. M/s. Pressure Cookers and Appliances Limited of Nangal Shama (PCA) buy goods which they call basic grill mechanism or griller from another firm named P.C.A. Electricals and bring them to their depot at a placed called Nangal Shama. In that depot they pack the basic grill mechanism with other articles like sandwich plate, waffle plate, baking tray, tongs, spatula, surface scubber, instruction-cum-recipe book and guarantee card. This assembly is sold by M/s PCA as a unit of twink inframatic cuisinette.
2. M/s PCA also buy what they call electric stove from M/s PCA Electricals and pack it together in one box with one cook-n-serve bowl, a coaster-cum-meat rack, glass lid, instructions-cum-recipe book, and sell these assembled goods as twink simmermatic cuisinette.
3. M/s PCA say that duty has been paid on the stove and the griller which went into the units which they sell viz. twink inframatic cuisinette and twink simmermatic cuisinette. After much correspondence etc., the central excise came to the conclusion that M/s PCA had manufactured new excisable goods when they packed the articles to produce the twink inframatic cuisinette, twink simmermatic cuisinette from the different components parts and accessories which they bought from different people and which they bring to Nangal Shama in order to put the units together. M/s PCA resisted this move of the central excise department mainly on the ground that their activity at Nangal Shama was not the manufacture defined in the Central Excises and Salt Act and could not be defined as a manufacture even in conventional terms. They merely brought different goods manufactured by different people together to present them to customers in a form that in convenient and attractive to users of the devices but without undertaking any activity that can be remotely described as a manufacturing activity. They refute the claim of the central excise that they fix heat control on the twink simmermatic cuisinette, by saying that they merely pasted the name plate to show the product as a product marketed by them.
4. Several arguments were presented by the learned counsels for M/s PCA over several days. They pointed out that there have been contradictions in the central excise action because they seek to assess the goods they sell, under item 33C. There is a notification No. 33/69-CE which exempts all but a few specified articles failing under the item from duty. The central excise did not even trouble to specify which of the articles in the notification the goods fell it. Just to be able to assess the inframatic under item 33C, the central excise passed an order that the griller which was a component of the inframatic, was an electric cooker. About the simmermatic the Collector claimed that the M/s PCA installed the control panel. The actual control of the heat is not done by means of the panel but by the inbuilt component inside the stove which came already installed in the stove when it was bought from M/s PCA Electricals. Each of the items in the twink simmermatic cuisinette can function independently, but as a matter of business enterprise, the items are sold together after they are packed at Nangal Shama depot.
5. The Collector found that the stove in the simmermatic could not function independently unless all the four items are assembled, but he overlooks by this that all stoves which perform similar function will require a utensil to hold the food to be cooked on that stove. Merely because the stove and the bowl are sold together does not mean that M/s PCA manufactured them. The intention behind their packing the bowl, the coaster-meat-rack and the lid is only to see that the customers would not have to go shopping separately for these items; they find them conveniently in one packing. The coaster-meat-rack can be used both for cooking as well as a coaster for the bowl. The Collector therefore failed to appreciate the concept of a stove and so considered the packing at Nangal Shama, a process of manufacture.
6. The PCA has no machinery at Nangal Shama nor does it employ and labour except for packing the items they buy in the market.
7. This packing together is not a manufacture as can be seen by the decision of the Bombay High Court in 1975(35) STC 502 - Commissioner of Sales Tax v. Trinty Products. The court ruled that a man who buys a glass bottle, rubber nipples and plastic caps from different dealers, packs them in one carton and sells them as auto-feeders cannot be said to have manufactured auto-feeders and that selling the articles under different labels cannot amount to manufacture. The department has already classified the electric stove as an electric cooker in an order of the Assistant Collector of Central Excise, Pathankot dated 5.12.1983 though this assessment has been appealed before the Collector, Central Excise (Appeals) New Delhi. However, the Collector disregarding these facts said that the item was neither an electric stove nor an electric cooker but a component of electric cookers assessable under the residuary item 68.
8. The inframatic is assembled from several other things, one being griller. This griller has already been charged to duty under item 33C and, therefore, cannot be charged to that duty again. The Collector was mistaken in his understanding that the griller cannot work independently or that it cannot cook vegetarian food. A griller can cook independently quite well without the other items and, furthermore, it can cook both meat and vegetable dishes. It was a simple case of putting together all these items and this action cannot constitute manufacture under central excise laws; "packing", "putting together" and "assembling" are distinct concept in central excise laws; individual items packed and sold under a trade name of their own is not an assembling and cannot be termed a process of manufacture or a manufacturing activity. Selling the items in one large carton instead of separate small cartons is not a manufacturing activity and the Collector did not appreciate the basis of the expression "manufacturing activity". The items are sold together in one packing as a matter of business undertaking and for winning customer approval, because when items that go together are sold together in one packing, all that the buyer needs in order to derive the optimum from the equipments he buys are in one package. He saves himself the botheration of hunting for the separate items which, even if he finds them, may not fit. The names that M/s PCA give their packed goods, namely - twink inframatic cuisinette and twink simmermatic cuisinette - are novel and attractive and place on the market a collection of items in a way that had not been done before. A new trade name to facilitate commerce cannot result in transformation of the goods packed together, giving rise to a manufacture, and excisability. The action to call the inframatic an electric cooker is wrong for many reasons, most of all because the basic grill mechanism was a griller purchased from M/s PCA Electricals, and was a complete functioning product and had already been paying duty under tariff item 33C as a griller. The electric cooker, as the twink inframatic cuisinette is called is, not a manufacture out of the components purchased from outside; there has been no fabrication and no new product, but only a packing of certain items as in the illustrated carton. There is no substance in the assertion of the Collector that the griller cannot cook individually; no opportunity was given to the appellants to prove the contrary. Had this been given, they would have shown the Collector the facts of the matter. The inframatic is not a product with a different purpose and use from the items which were sold together under one name as the twink inframatic cuisinette. Every single item in the collection performs a separate function and packing them together and selling them together is only for consumer convenience and nothing else.
9. There have been no clandestine removal of any of the products, because the activity of the PCA depot at Nangal Shama was well known to the central excise; there had been several visits by central excise officers to the depot; the activity of packing twink inframatic cuisinettes and twink simmermatic cuisinettes had been witnessed and watched by the central excise officers who knew in details the process which M/s PCA adopted in order to make the goods saleable under the new names.
10. A, great many arguments were presented on behalf of M/s PCA by the learned counsels and they were both long and voluminous and travelled the length and breadth of the case and examined every nook and cranny of the dispute. It is impossible to eloborate them all here: for example the learned counsel told the Bench how they were forced by the harassment of the central excise to approach the High Court of New Delhi and the High Court of Punjab, both of whom had to restrain the Collector in his headlong rush to penalise the party and to confiscate their goods. He spoke about the contradiction in the approach of the central excise department in first calling the item an electric appliance and then change it into an article falling under item 68; or forst calling one equipment a griller and then chaning it to a cooker. The Collector, said the counsel, changed the assessment of one article from item 33C to item 68 just in order to be able to take action against M/s PCA because if he had not done so he would have run into the problem of levying the same duty twice under item 33C. He even complained how they were not given a hearing by the Collector before the case was adjudicated and how they were penalised and duty demanded; but he said that he would not ask for a remand of the case to the Collector, because he did not know what lay in wait for them in a second round of proceedings. For our part we shall not pay too much attention to these details of the case but concentrate on the essentials so that we can get to the bottom of the matter without too many obfuscating minutiae. The learned counsel did submit that the learned counsel for department Mr. Sundra Rajan did not defend the case of the Collector but presented totally new arguments and these arguments were never the arguments of the Collector. He drew attention particularly to the judgement of the Supreme Court in McDowell and Company Limited v. Commercial Tax Officer 1985-5-ECC-259 decided on 17.4.1985 cited by the JDR. He said that this represented a conceptualisation of the case that was never in the view of the Collector when he proceeded and adjudicated the matter. The McDowell case was cited before the Tribunal to support the penalty, but, said the learned counsel for M/s PCA, the judgement of the Supreme Court does not justify imposition of the penalty. All that the judgement establishes is that in the circumstances stated in the case, tax must be paid as assessed by the tax collecting authorities, if such tax is leviable. McDowell cannot be cited by the department now to support the penalty imposed by the Collector.
11. As we have said we would like only to go by the facts as we know them and as have been accepted by the two sides, which is that M/s PCA bought electric griller and electric stove cooker from a party called M/s PCA Electricals; they also bought from other dealers other goods: goods like sandwich plates, waffle plates cook-n-serve bowl lid for the stove etc. Some of these purchases go with the griller and others go to with the stove or cooker or whatever one may choose to call it. The two parties have been calling the different items by different names at different times but as we shall unfold in the succeeding paras by these discussions, it does not matter who calls what by which name. M/s PCA resist the word assembly, preferring the word packing and so we shall call the process packing.
12. The griller/stove/cooker with complementary items, are first packed individually in identifiable cartons, and then put together in a collection where the total unit of all the items can be seen to go together to form the unit: the twink inframatic and the twink simmermatic. The two units are not interchangeable, each having its own complementary hardware and they are advertised also to do the work of preparing food in different ways. The inframatic is said to cook by means of infrared rays - a process of cooking that ensures that none of the vital nutrients of the food cooked is lost, the way they are lost when food is cooked over open fires or by other conventional methods. Furthermore inframatic cooking preserves the taste of the cooked food, besides being economical and a saver of labour and bother.
13. The simmermatic is a cooking by slow simmering, the heat being applied to the food to be cooked from all sides; as a result, the cooking is done slowly and evenly. It has a further merit that goes with its slow cooking: working wives can go to work in the morning and come back in the evening from office to find dinner ready for the family. There is no watching or waiting for the food to be ready; and because of its intermittent application of heat, it saves energy and electricity cost.
14. It was the argument of the learned counsels for M/s PCA that the griller is a self sufficient equipment and can do the work of cooking quite independently of the other items that it comes with in the package. There was much debating back and forth between M/s PCA and the department that the griller is not an independent equipment; the department thought that the other items were required to make the collection a working unit; this assertion was hotly denied by the party M/s PCA. But the debating parties missed the main point : It is not important whether the griller can do work independently or not. What is important to the dispute we have before us is that the griller has in its company the sandwich plates, the waffle plates the backing tray, the skewers etc. And it makes no difference for the parties to this dispute whether the electric stove is a stove or a cooker, or whether it is assessable under item 33C or under item 68, and whether it can cook with cook-n-serve bowl or without the meat rack. What is important is that the twink simmermatic cuisinette goes into the market with a complementary collection of wares that makes cooking much easier and more convenient. This is the substance of this matter: it is not necessary to look at anything else. Because however the stove is called and assessed, and however the griller in the inframatic is called and assessed, or whatever name the electric stove or cooker in the twink simmermatic is known by, we are dealing only with goods which go out from M/s PCA depot into the wide world where customers buy them in their units/collection. It will make no difference even if the griller/cooker in the inframatic and the stove/cooker in the simmermatic are and can be obtained individually without the other attachments and companion items, because then that would be the dispute, a dispute that we are not called upon to arbitrate. We have the goods, and we know what they are, what they contain, ail the items in each collection or unit: the two parties agree that these are the goods, the items that together constitute the units of packing.
15. The twink inframatic cuisinette has the following items in the collection after packing by M/s PCA at Nangal Shama :-
1. basic griller mechanism or grillers
2. two sandwich plates
3. two waffle plates
4. one baking tray
5. a pair of tongs
6. one spatula
7. one surface scrubber
8. one instruction-cum-recipe book
9. one guarantee card.
16. The twink siminermatic cuisinette has the following items:
1. electric stove
2. one cook-n-serve bowl
3. one coaster-cum-meat rack
4. 4. one glass lid
5. one instruction-cum-recipe book.
17. These two units are gathered together from the different items listed and are packed in individual packings, one unit marked twink inframatic cuisinette and another marked twink simmermatic cuisinette. We will not enter into the dispute whether the stove in the simmermatic collection is a cooker or something else or whether the griller in the inframatic can cook meat or fish or vegetables, as they are unnecessary distractions to this problem.
18. We will then confine ourselves only to the main submissions, which we think lies at the root of this matter. M/s PCA submits that since they only pack the different equipments/pieces and items that they buy from different people, at their depot at Nangai Shama, they do not manufacture anything. Their submission about not having done anything more than just packing them in cartons and boxes is quite true and we will proceed from this point. Even the Collector's findings that they had manufactured the twink simmermatic by affixing the heat control panel is unimportant and need not lead us away from our path.
19. Since they have done nothing that even remotely resembles manufacture or any process of manufacture and since all the pieces and items come to them fully manufactured and finished from their manufacturers, M/s PCA at Nangal Shama are not the manufacturer of the twink inframatic cuisinette and twink simmermatic cuisinette. This is the argument of the learned counsels for M/s PCA. He points to the fact that packing can never be a manufacturing; it has never been understood to be a manufacture. The Collector makes several contradictory assumptions, because he took the act of putting together all various items as amounting to assembling; but the purpose of this agrument is lost because we have here not a conventional manufacture or process of manufacture in which a new article comes out or is brought forth by human manipulations and ingenuity. We have always understood manufacture to mean that something different comes from the raw material and results at the end of the process of manufacture, and that the work of manufacture is to create a product or an article which has never been in existence anywhere at any time. Such phenomenon is absent in this case because the griller, a stove, meat rack and waffle plates did not come forth at M/s PCA's Nangal Shama depot but at other factories. At Nangal Shama depot they were merely put together with their fellows and companions in a packing so that they go into a shop and are put over for sale in a collection which is understood to contain a given number of components or items or equipments. This according to the learned counsel for M/s PCA is not and cannot be a manufacture as understood in central excise law and as understood generally by people who are concerned with such things.
20. There would be much force in these arguments, had it not been for the fact that the law of central excise does not define manufacture. It may say that it includes this and that, but manufacture itself is not defined and this we believe is for a very good reason: it is impossible to agree on one definition for all the manufactures because there are hundreds and thousands of ways by which goods can be presented, brought out, created, made to appear; some processes of manufacture are complicated as when a. motor car is produced from steel which is cut, drilled, stamped, rolled, polished, shaped and treated in multifarious ways until the finished car rolls out of the assembly line. In the making of it, several goods have contributed, many of which were themselves manufactures in their own rights. The manufacturing process expended on the car is long and laborious and needs skilled workers, engineers and technicians. New parts and components are created from the steel; the steel or steel sections, sheets, angles, etc. were changed/transformed into a motor car, and are no longer recognisable except as integral part of the complete and finished motor car. Here science and technology as well as conventions recognise that there have been a manufacture. Some other manufactures are simpler such as when a man takes wood, saws, shapes and sizes it and with the help of nails, straps etc. produces a box; the level of the skill of the manufacturer may not be very high, but labour and skill have been employed in the process. The cobbler can make shoes and slippers even if sometimes the workmanship may not be of the highest order. He expends whatever craft he has on his work, and from plain flat leather, produces new product, a new article with a new utility, a shoe. We can multiply instances but these few will suffice our purpose. Not all manufactures require the some degree of skilled training, not every manufacturer does work as every other manufacturer does, because what the latter manufacturer produces may not require what the former manufacturer turns out. The degree of skill, workmanship, labour are directly proportional to the article being made or created - the more manipulation's and forming and treating that are required, generally speaking, the more the skill and expertise, that is required to be brought to bear on the manufacture. If the product is a simple one, then correspondingly and concomitantly its demand on skill, labour, expertise, goes down.
21. It is also impossible, depending on what is intended to be produced, the actual degree and amount of manipulations may be small or relatively small. A man can buy in the market readymade parts of a table fan and assemble them to produce a working fan in the house. Amateurs known as radio hams frequently assemble and build their own radio receiving and transmitting sets. These contraptions are frequently inelegant, unfinished in appearance but they serve the purpose for which the owners build them. It is possible for a man with a certain degree of expertise to assemble a motor cycle from parts he buys from different shops without himself manufacturing any of them in the conventional sense of the term. Though he has done no manipulations in forming and treating, by bringing together and fitting and putting together, the different parts, be brings forth the motor bicyle. Between the man who assembles motor cycle from parts he buys from the market, and the manufacturers who build a new motor car, there is a vast difference in the degree of application of machinery, appliances, apparatus, tools, expert knowledge of engineers and so on and so forth, to say nothing of raw materials and capital, expenditure of skilled work etc.
22. It is a matter of what one makes rather than how one makes it. A goods that requires little or no skill to produce it, is not less a product than one that took much skill and labour. It is a mistake to see manufacture only as conventionally understood and as meaning manipulations, treatment, shaping and forming of some materials into different products. The process can be a simple one of bringing different parts together to create a product that had not existed before. On the other hand, it can be a complicated process that depends not so much on bringing together different parts, as taking a material and shaping it into a new product to be used in totally different ways. The man who assembles a motor cycle from the parts he buys in different shops has made that motor cycle, which did not exist before he created a new motor cycle without forming or treating any material. His manipulations or process consisted of simply fitting together parts available in the market and which he simply bought; even when he has to buy nuts and bolts, they are ready in the market and are simply used to fasten the different parts together to assemble the motor cycle. It is not the act of manipulating or changing materials, but the act of creating or bringing forth a product, a property or a commodity that had not been in existence till the action to unite different parts together was taken. It is for this reason that the law did not explain manufacture, because by explaining manufacture or describing it, it is possible to fetter the tax collecting agencies in ways that may help many products and merchandise to escape taxation, when such is not the will of the law making power. What might at first sight appear to be not a manufacture, will undergo a revision when viewed against the questions: What was done? Does the object assume an identity which attracts to it the laws of taxation? If anything has been done that produces a unit, a collection, a utility, a body that has never been there before, then however that unit or collection came into being, the law will be attracted and we will therefore have to say that there have been a manufacture.
23. It is a fact that the twink inframatic and twink simmermatic were packed by M/s PCA at their depot at Nangal Shama. It is a fact that they did not manufacture any of the parts or items that went to make the collections but it is also a fact that when they packed and brought the individual items in their respective units, they created two utility collections or commodities that have never been met with before. The griller by itself was never a twink inframatic nor was the stove by itself the twink simmermatic; to be the inframatic and the simmermatic, the griller and the stove require their adjuncts, auxiliaries and complements so that when the consuming public views the unit, it sees the unit that has such and such items or components that will do this and that. It is important to bear in mind that M/s PCA meant the units to be used in such a way so that individual items in each units of collection supplement and or complement the main equipment or the other items.
24. The main equipment is a griller in the inframatic cuisinette and the stove/cooker in . the simmermatic cuisinette. M/s PCA argue that the griller is able to work independently contrary to what the Collector held and this possibly is a fact; but this misses the real point of the matter. The griller grills with the help of grill plates but these grill plates are themselves only one of a number of such accessories which accompany the griller mechanism. The instruction book says that the inframatic cuisinette comes ready fitted with the griller plates but these are easily removable and interchangeable with the waffle plates and the sandwich plates. There are instructions in the book how to fit the griller plate in position and what it can do in this fitting. The book also provides instructions how to fit the sandwich plates and the waffle plates and what are the dishes that these auxiliary parts of the mechanism can do. The book provides information, for example, that skewers are used for making tikka, bacon rashers, sheekh kababs and veal shashlik when they (skewers) are employed in conjunction with a grill plate. Similarly a baking tray is also used when the griller unit is fitted with the grill plate and in this combination it makes apple stew, asparagus au gratin, beef stroganof and other delicacy.
25. Similarly, there was a debate between the Collector and M/s PCA as to whether the main unit in the simmermatic cuisinette can cook without the accompanying cook-n-serve bowl. The Collector said this stove cannot cook without its bowl. M/s PCA's reply to this was that this proved nothing as all stoves require a cooking dish or bowl to hold the food which is being cooked. This answer misses the point: it is quite true that all electric stoves require a bowl or container to hold the food to be cooked; but whether the bowl is this one or that one makes no difference to the proposition that this bowl goes with this stove and that, therefore, the two ought to be assessed together. It is not just any bowl that is to be put into this cooker/stove, but a bowl of the right size and depth with a lid also of the right circumference, dimensions and contours, if the full benefits of simmermatic cooking is to be extracted and obtained in the cooking. To be sure, perhaps any other bowl will do if it will go into the stove and, perhaps, cook just as well or almost just as well. But this again is beside the point, because when a dealer sells the product, and with that product he offers other complementary items, he does it with one object in mind and, that is, the complementary items are the best suited for the main item, thereby saving the customer much trouble, for example, when he is not able to determine what kind of bowl or dish he should use in cooking in the cooker/stove in order to get the best out of it. The meat rack according to M/s PCA can be used as a stand; this is true of many other things. The cook-n-serve bowl can be used for drinking soups, though that is not its purpose. The fact is that the meat rack comes to aid and to supplement, in a collection that is meant to be accepted as one unit to achieve certain desired results in cooking. For this purpose, the controversy that who fitted the heat control panel is meaningless and we will not waste time on it. We know that the seller M/s PCA claimed that the simmermatic cuisinette is a great help to the housewife who has to count every minute; on the one hand she looks after the home and on the other, she has to hold down a job in an office, leaving her little time for household chores. With the simmermatic cuisinette, the house wife need only put the food to be cooked in the cuisinette, turn the machine on and forget about it for the rest of the day because she knows on her return back home from work in the evening (or when she wakes up in the morning) the food has been cooked in the slow cooking cuisinette. It cannot be suggested that this highly desirable time-saving equipment can do its work properly unless it does it with the collaboration and in the company of the extra added and auxiliary items that come with the main electric stove/cooker.
26. All the accompanying items in the inframatic cuisinette and simmermatic cuisinette are made so that they fit. The grill plate, sandwich plate, the waffle plate all fit into the inframatic cuisinette and are easily removable. Indeed the accompanying items will be of no use if they are not made to measure so that they fit in the working equipment - the griller or stove/ cooker. The equipments like griller plates/the waffle plates, and cook-n-serve bowl are all attachments of the main pieces, quite clearly having been made to fit and to serve as their subsidiary helpmeets.
27. The instruction books support the arguments that each collection of inframatic and simmermatic is a team of collaborating parts, which are meant to work in concert or in groups of two or three as the need arises or as the occasion demands. There has been very clearly an activity that brought on the stage an equipment consisting of a number of items, but all going to complete a collection or an assembly of items that are meant to fulfil the stated function. That collection of items in each unit brings into the market or into the vision of a customer, a good which had never been there before and it would not have been there but for the activity at Nangal Shama by M/s PCA, an activity which they call packing, but which we, after all we have seen and read, would call manufacture.
28. The learned counsel for M/s PCA argued that putting together and packing these goods will not make a manufacture and in support quoted the judgment in 1975(35) STC 502 that packing of glass bottle, rubber nipple and plastic cap would not be a process of manufacture. That decision related to a sales tax dispute; the court gave the ruling because it said packing of the bottle with nipple and cap would not be a manufacture under the Sales Tax Act. We are not aware of the definition of manufacture in the Sales Tax Act; and furthermore a matter under the Sales Tax Act cannot decide a dispute under the central excise Jaws. In addition there cannot be the kind of planning and scheming in the packing of the glass bottle feeder that we see at Nangal Shama.
29. The following cases were cited on behalf of M/s. PCA in support of their case :-
AIR 1982 SC 127 1983 ELT 681 T.S. Cycle 1984(18) ELT 14 Agro Industries 1979 ELT 3 243 1979 ELT J 158 1978 ELT J 18 1983 ELT J 1956 1983 ELT 179 1980 ELT 164 AIR 1963 SC 791.
These rulings concern themselves with whether packing or colouring was a manufacture or not. Not one of them deals with a case in which a manufacturer by careful and deliberate thought, works out a strategy by which his product or the goods that he puts on sale are assessed at a fraction of the value or escape assessment altogether in their recreation. The cases regarding packing not being a manufacture are true and correct. These were disputes only about packing of given goods; goods which could be subject to central excise duty, should have their packing added to the value of the goods which form the centre of dispute. The packing which the inframatic cuisinette and the simmermatic cuisinette underwent at Nangal Shama by M/s. PCA is not a packing that brought into the open the dispute in the case before us. This is a packing which has never figured in any case that we have seen; M/s. PCA calls it packing, and to all appearance, it is indeed a packing and it seems that some central excise officers fell in with it. The collection of goods and items that came to Nangal Shama Depot were assembled and packed in such a way that it created a veritable commodity that had never appeared before and one that had never been seen by central excise in the form it appeared at Nangal Shama. Packing perhaps it may be, but it is a packing with a difference, and what a difference it was. This packing is not the conventional one we usually see putting some goods in a box or a can and tying it up With straps or stappling it down, and then shipping it off to its destination. It is a packing that was meant to beguile by submerging in an appearance of packing the truth of the emergence of the units which would form new commodities and which should attract excise duty. The packing was not an innocent trade and business packing; after all, the individual units that came to Nangal Shama could themselves have been packed at their factory of origin and could have been marketed without the packing at Nangai Shama. It is not a packing that we see; we must look under this "packing" to see what led to or necessitated this "packing" at M/s. PCA's depot. There can be little doubt, if we look deeply under the surface, that this packing was merely a disguise, a dissembling, adopted with the sole purpose of escaping duty that would have been collected on the complete collection of each unit, the twink inframatic cuisinette and the twink simmermatic cuisinette. We shall further elaborate the meaning and the consequences of this action. But before that, we shall discuss a few other judgements quoted on behalf of M/s. PCA.
30. The High Court at Ahmedabad gave the judgment in 1979 ELT 407 that the proceedings before the central excise authorities must be supported only on material in the impugned orders. That is precisely what we are going to do and nothing that is in other proceedings will be given heed to or noticed.
31. The Garrard record changer placed on the wooden base with a cover to make it salable was ruled by central excise to be a manufacture. The Bombay High Court said in 1980 ELT 758 that it was not open to the authorities to urge in an affidavit a ground that had not been taken in the order. 1983(140) ITR 490 was a decision of the Punjab & Haryana High Court which said, amongst other things, that the Tribunal was not competent to take into consideration a fact that the lower authorities had not relied upon in coming to their conclusion. We are in agreement with all the above. This Tribunal will not accept any ground not already in the order of the Collector. The facts of this case are only that the packing at Nangal Shama by M/s. PCA was held by central excise to be creation and manufacture of new commodities and M/s. PCA stoutly resist this. It is admitted by both parties that such a packing took place at Nangal Shama: this is the only fact that we rely upon. The counsel said that in 1979 ELT 3 543 the Bombay High Court said that the department must substantiate classification of a product. The Collector has done so, as we can see, even though M/s. PCA do not accept it and evidently found his classification unacceptable.
32. By adding perfume and colour to liquid seap, there has not been a manufacture of soap, declared the Bombay High -Court in 1981 ELT 268. It was not a new and different product. Furthermore, shave cream, leather cream and shampoo are not known commercially as soaps. In this case, we cannot understand why the central excise department announced that soap had been manufactured from soap, the thing remaining the same. It was not even that the soap, by addition of perfume or by colour became more soapy or lathered better or cleaned better. What the hon'ble court decided was just and proper, but we do not understand why this case has been quoted in favour of M/s. PCA in this dispute.
33. The Bombay High Court pronounced as improper an assessment based on advertisement 1980 ELT 280. This assessment of the cuisinettes is not based on advertisement but on the fact of assembling and packing that took place at Nangal Shama; it is this activity, and not the advertisement put up by M/s. PCA about their product, that set off the dispute. Reference may have been made to their instruction book and advertisement but nothing is claimed by the department in favour of their assessment by attributing to the product, properties that they are held to possess by advertisement pamphlets but which in fact the equipments do not possess; therefore, the problem does not appear to trouble us here.
34. The only judgment which needs full discussion and which has a direct bearing in this dispute is the decision quoted by Mr. Sundra Rajan learned counsel for the department in McDowell and Company Limited v. Commercial Tax Officer [1985] 5 ECC 259.
35. The Supreme Court had before it a case in which the company, McDowell, by arranging that excise duty on liquor supplied by it to its customers should be paid directly by such customers to the excise department, reduced its turnover. The Supreme Court said that the payment of excise duty was a legal liability of the manufacturer and its payment was the condition precedent to the removal of the liquor from the distillery and payment by the purchaser on account of the manufacturer. According to normal commercial practices, excise duty should have been reflected in the bill either as merged price or by being shown separately. The court was of the opinion that though the excise duty was paid by the purchaser to meet the liability of the appellant, it was part of the consideration for the sale and was includible in the turnover of the appellant distillery, the McDowell Company. It was argued on behalf of M/s. McDowell that the excise duty never came to the hands of the company and that the company had no occasion or opportunity to turn it over in its hands; and therefore the same could never be considered as a part of its turnover. The court rejected this contention saying that it would be very prejudicial to the revenue, as by such arrangements between the buyers and the sellers, a part of what ordinarily would constitute consideration proper could even be kept out and the turnover could be reduced and the tax liability avoided. It was also submitted on behalf of M/s McDowell that it was open to every one to so arrange his affairs as to reduce the brunt of taxation to the minimum and that such a process did not constitute tax evasion nor did carry any ignominy. So the court quoted the observation of Viscount Simon in Latilla v. Inland Revenue Commissioner :
Of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residence in this country while receiving the equivalent of such income, without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that however elaborate and artificial such methods may be, those who adopt them are entitled to do so. There is, of course, no doubt that they are within their legal rights but that is no reason why their efforts or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary, one result of such methods, if they succeed, is of course to increase pro tanto the load of tax on the shoulders of the great body of good citizens who do not desire, or do not know how, to adopt these manoeuvres. Another consequence is that the Legislature has made amendments to our Income-tax Code which aim at nullifying the effectiveness of such schemes.
Said the court in the next paragraph :
Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.
36. This judgement is crucial for more reasons than one: for the first time the Supreme Court rejected the doctrine that tax avoidance, as opposed to tax evasion, was not improper. There seems to have been a philosophy in the country that as long as one did not break the law and evade tax, he was free to dodge tax and in the process employ all the wiles and artfulness that he can think of; as long as he took care not to break the law, the law would indulge him. The judgement by His Lordship Justice Chinnappa Reddy makes a total departure, a complete break with the past, to lay down the dictum that every man must pay his tax and must do nothing to avoid it.
37. At page 274 the court observed :
We are, therefore, clearly of the opinion that excise duty though paid by the purchaser to meet the liability of the appellants, is a part of the consideration for the sale and is includible in the turn over of the appellants. The purchaser has paid the tax because the law asks him to pay it on behalf of the manufacturers.
We will see from this that the law required the purchaser, not McDowell, to pay the tax; but even so the Hon'ble Judges said that such tax paid by the purchaser to the excise, was a part of the consideration for the sale, and, therefore, entered the turnover of the seller, M/s McDowell. When they arranged for the purchasers of their liquor to pay excise duty directly to the revenue without themselves handling any of the money, M/s McDowell wanted to be able to say, as they truthfully could do, that they did not turn the excise money over in their hands and, therefore, it did not form part of their turnover. Not so, said the Hon'ble Judges: the excise was part of the consideration for the sale; therefore, it was part of the turnover of the liquor seller the appellant company. What M/s McDowell did was according to law, but when they failed to show the excise as part of their turnover, the Supreme Court censured the action as a subterfuge to avoid tax rightfully due to the state. The company reduced its turnover by simply not including in it sums of money that it had never received but which went directly from the purchaser of the liquor to the treasury. The court held that if that money was a part of the consideration for the sale of the liquor, then failure to include it in the turnover was an act of avoidance of tax and the act found disfavour with the court.
38. The acts of M/s PCA was on a comparable level. They arranged their affairs in such a way that they could present a case that what they sold is not a manufacture of theirs but of somebody else's. If the worst came to the worst, it would be the other people who might have to confront the central excise and not themselves. However that may be, they set out on a journey that took many a turn; but one which to a right mind, looks as nothing but a scheme to avoid tax, if not evaded it: we see it as the latter, because the goods presented by them, the inframatic cuisinette and the simmermatic cuisinette, are new goods which have ensemble values higher than they ever had before and which in their new ensemble, have never paid duty. It may be true that the goods were manufactured in the physical sense of manipulation and handling, elsewhere than at Nangal Shama, but the goods as presented by M/s PCA from Nangal Shama to the world were completed at their Nangal Shama depot. In this process of completion, they created and brought forth a new generation of goods not seen and not sold before, of which the other parts which they say had been manufactured by other people were only contributor - components and subsidiaries. In this new nature, in their total combination, some parts may be more important than others, while some merely serve or wait upon the more important members, to facilitate and to enhance their utility, virtues and, perhaps, range. The griller that M/s PCA received became a far more versatile equipment with the waffle plate and sandwich plate, all of which were made in order to fit into the griller cuisinette. The grill plate, the waffle plate and the sandwich plate all have evidently been designed and finished with the common cuisinette in view. Similarly the simmermatic is multiplied by the meatrack and the bowl in which to cook. With a bowl and a lid that fit just right, the cooking stove/cooker performs in a manner which cannot be achieved if an ordinary dish or bowl which does not fit is used. But the stove can cook with any bowl like all stoves; pointed out the learned counsel for M/s PCA; but the circumstances and conditions are not the same. The ensemble in this case is of items made to travel and work together: the stove is not meant to go alone nor is the bowl or the lid. The three were designed and packed together for teamwork and they were united at M/s PCA Nangal Shama depot to complete the process that brought out a finished product. It was at Nangal Shama that the two cuisinettes attained fulfilment.
39. The learned counsel for M/s PCA dismissed Mr. Sundra Rajan's enlistment of the McDowell judgement, of the Supreme Court by saying that this judgement was irrelevant, that it might perhaps support penalty but it did not support the demand of duty etc. This is not a correct understanding. Mr. Suridra Rajan was right when he said that this judgement showed that the right thinking in tax matters was that not only evasion but avoidance of tax was beyond the pale of the law and that far from being tolerated or suffered as in the past, tax avoidance would henceforth be viewed as wrong-doing. We cannot understand why the judgement is not relevant; it is the only relevant judgement that has been quoted before us by the two sides. We do not know if the person who bought bottle, nipple and cap for the bottle feeder planned for his operation what was planned here. He bought bottle, nipple and caps and from their nature the rubber nippies and rubber caps will fit any feeding bottle. They do not need the exact measurements as have gone into manufacture of griller cuisinette plates and trays and others.
40. There seems to have been some confusion in the minds of the department about the stove and griller but these need not deflect us unduly from our present direction. Whatever may have been done in the classification of the . components, we are satisfied that the two cuisinettes are cookers and would therefore be assessable to duty under tariff item 33C of central excise tariff. There may have been a certain awkwardness in the department's approach to the matter but we would not say that the flaws were such that they have destroyed the present case. The case is true and right.
41. The duty demanded by the Collector shall be paid. The imposition of penalty was proper and needs no revision.
42. The appeal is rejected.