1992 (2) TMI 98 - HC - Central Excise

Packaged Tea Not Subject to Excise Duty

KESHAODEO SHIVPRASAD Versus UNION OF INDIA

The court held that the package or container of duty paid tea is not subject to excise duty under the Act. It emphasized that the packaging process did ... Manufacture - Incidental or ancillary process - Meaning and scope - Tea - Excise duty Issues:1. Whether the package in which duty paid tea is sold to consumers is liable to payment of excise duty under Tariff Item No. 3 of the schedule to the Act.Analysis:The petitioners, a partnership firm, engaged in packaging duty paid tea, argued that they were compelled to obtain a central excise license to continue their business. The central issue was whether the package or packet containing duty paid tea is subject to excise duty under the Act. The relevant provisions of the Act, particularly Section 3(1), were examined to determine the applicability of excise duty. It was established that excise duty is levied on excisable goods produced or manufactured in India, as specified in the First Schedule. The definition of 'excisable goods' and 'manufacture' under the Act were crucial in understanding the scope of excise duty.The interpretation of the term 'manufacture' was pivotal in deciding whether the packaging process constituted manufacturing under the Act. The court emphasized that for an activity to amount to manufacture, there must be a transformation resulting in a new and distinct article. The court referred to relevant Supreme Court decisions to support its interpretation of 'manufacture.' It was highlighted that incidental or ancillary processes must be integral to the production or manufacture of a distinct product for it to be considered excisable goods.The court further analyzed the provisions of Item No. 3 of the First Schedule, specifically focusing on 'package tea.' The arguments presented by the respondents were countered, emphasizing that the package or container in which tea is contained does not qualify as an excisable good under the Act. The court delved into the description of goods in the First Schedule to establish that the package itself is not considered an excisable good. The intrinsic evidence from the schedule reinforced the conclusion that the package of tea is not subject to excise duty.The judgment concluded that the package or container of tea does not fall within the charging provisions of the Act, and therefore, is not liable for excise duty. The court dismissed the argument of unconstitutionality and declared the impugned provisions as neither unconstitutional nor illegal. Consequently, the petition was allowed, restraining the respondents from levying or collecting any alleged duty under the relevant tariff items.In summary, the judgment clarified the scope of excise duty on packaging material containing duty paid tea, emphasizing the definition of excisable goods and the manufacturing process under the Act. It concluded that the package or container of tea does not qualify as an excisable good, thereby exempting it from excise duty under the Act.