1997 (12) TMI 110 - SC - Central Excise

Supreme Court: Printing on glass bottles not 'manufacture' under Central Excise Act. Assessable value excludes decorating cost.

UNION OF INDIA Versus JG. GLASS INDUSTRIES LTD.

The Supreme Court held that printing on glass bottles does not constitute 'manufacture' under the Central Excise Act, 1944. Therefore, the cost of ... Whether printing on glass bottles amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944? Held that:- It is useful to refer to the tariff description in Item No. 23A of the Central Excise Tariff. The general description of the item is `glass' and `glassware'. There are four categories namely, (1) flat-glass (2) laboratory glassware (3) glass shells, glass globes and chimneys for lamps and lanterns and (4) other glass and glasswares including tableware. Admittedly, the bottles whether printed or not fall under category (4) mentioned above. If the contention of the Revenue is accepted it would lead to double taxation under the same tariff item. While at the gate of the main factory duty is leviable on the plain bottles under 23A(4), once again duty will be leviable on the printed bottles after the process of printing is over in the premises where such printing is carried out. Such duty will undoubtedly be on the value of the printed bottles which will include not only the cost of manufacture of the bottles but also the cost of printing charges. The Revenue cannot be permitted to levy duty twice on the same item when there is no warrant therefor in the relevant provisions of the Act. Appeal allowed of assesse. No difficulty in holding that the view taken by the Appellate Tribunal is erroneous inasmuch as the process of printing is being carried out in a separate premises as found by the Tribunal and such process is not `manufacture' within the meaning of the Act. Issues Involved:1. Whether printing on glass bottles amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944.2. Whether the assessable value of glass bottles should include the cost of decorating the same with ceramic colors.3. Whether the process of printing on bottles within the same factory premises affects the assessable value for excise duty purposes.4. Whether the Trade Notice No. 28/1980 issued by Pune Central Excise and Customs Collectorate is binding on the Revenue.Issue-wise Detailed Analysis:1. Whether printing on glass bottles amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944:The primary issue in the appeals and the Special Leave Petition was whether the act of printing on glass bottles constitutes 'manufacture' under Section 2(f) of the Central Excise Act, 1944. The appellants argued that printing logos or names on plain bottles does not transform them into a new commercial product. The Supreme Court referenced previous judgments, including Union of India v. Delhi Cloth & General Mills and Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. M/s. Pio Food Packers, to emphasize that 'manufacture' implies the creation of a new and distinct product. The Court concluded that printing on bottles does not result in a new commercial commodity, and hence, does not amount to manufacture.2. Whether the assessable value of glass bottles should include the cost of decorating the same with ceramic colors:In Civil Appeal No. 767 of 1991, the appellants challenged the directive that required them to include the cost of decorating glass bottles in the assessable value for excise duty. The Tribunal had previously held that printing and decoration amounted to manufacture, thus justifying the inclusion of decoration costs in the assessable value. However, the Supreme Court overturned this, stating that the process of printing does not transform the bottles into a new product, and therefore, the decoration costs should not be included in the assessable value.3. Whether the process of printing on bottles within the same factory premises affects the assessable value for excise duty purposes:In Civil Appeal No. 2882 of 1993, the appellant (Union of India) contested the High Court's decision that printing on glass bottles should not be included in the assessable value for excise duty. The Supreme Court noted that in this case, the entire process, including printing, was carried out within the same factory. The Court held that since the final excisable product at the factory gate was the printed bottle, the assessable value must include printing charges. Thus, the appeal was allowed, and the High Court's judgment was set aside.4. Whether the Trade Notice No. 28/1980 issued by Pune Central Excise and Customs Collectorate is binding on the Revenue:The assessee argued that the Trade Notice No. 28/1980, which stated that decorated glassware in a different factory after receipt of duty-paid plain glassware would not be liable to additional duty, should bind the Revenue. The Supreme Court acknowledged that while the trade notice could reflect the Department's understanding, it was not necessary to rely on it for the present case. The Court reiterated that printing on bottles does not amount to manufacture, and thus, the trade notice's interpretation aligned with their judgment.Conclusion:The Supreme Court concluded that printing on glass bottles does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. Consequently, the process of printing should not be included in the assessable value for excise duty purposes unless the entire manufacturing process, including printing, is carried out within the same factory premises. The appeals were decided accordingly, with Civil Appeal No. 767 of 1991 allowed, Special Leave Petition No. 8316 of 1994 dismissed, and Civil Appeal No. 2882 of 1993 allowed, setting aside the High Court's judgment. Each party was ordered to bear its own costs.