AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
1982 (9) TMI 229
X X X X Extracts X X X X
X X X X Extracts X X X X
....xture". The activities of the petitioners consist of purchasing coffee seeds, roasting and grinding them and preparing coffee powder out of those seeds by mechanical process involving consumption of power. The petitioners also purchase chicory-roots and then they are subjected to roasting and grinding by mechanical process involving consumption of power. The powders thus obtained from coffee and chicory are then blended by mechanical process involving consumption of power and the product thus obtained is bottled and marketed as "Coffee-Chicory Blend", what is known as "French Coffee" in the business market. The proportion in which the coffee and chicory powders are mixed is equal. The sample bottles in which the French Coffee is sold have been shown to us and they describe with the mixture consisting of 50% coffee and 50% chicory. The petitioners paid duty on coffee-chicory blend under Item No. 68 of the First Schedule of the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Act") without any demur since 1-3-1975. But for the first time in their letter dated 10-1-1978, they raised an objection to the said levy and claimed exemption from duty under Notification No.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "Manufacture" are defined in Section 2 of the Act thus : "(c) `curing' includes wilting, drying, fermenting and any process for rendering an unmanufactured product fit for marketing or manufacture; (d) `excisable goods' means goods specified in the First Schedule as being subject to a duty of excise and includes salt; (e) `factory' means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on; (f) `manufacture' includes any process incidental or ancillary to the completing of a manufactured product; and (i) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff; (i-a) in relation to manufactured tobacco, includes the labelling or re-labelling 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; (ii) in relation to s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 First Schedule. (1-A) The provisions of sub-section (1) shall apply in respect of all excisable goods other than a salt which are produced or manufactured in India by, or on behalf of Government, as they apply in respect of goods which are not produced or manufactured by Government. (2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force. (3) Different tariff values may be fixed for different classes or description of the same article." 6. Section 37 of the Act reads thus : "37. Power of Central Government to make rules : The Central Government may make rules to carry into effect the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may.....mpt any goods from the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing and mathematical instruments; 6. Sports goods; 7. Omitted; 8. Handicrafts; 9. Animal feed including compound livestock feed; 10. Omitted; 11. Agricultural implements and parts thereof but excluding (i) power operated agricultural implements and parts thereof, and (ii) implements designed for use as attachments with tractors or power tillers and parts thereof; 12. Contraceptives; 13. All products of the printing industry including newspapers and printed periodicals; 14. Scented Chunnam (lime); 15. Katha (Catechu); 16. Artificial limbs and rehabilitation aids for the handicapped; 17. Vibuthi (Thiruneeru); 18. Insecticides, pesticides, weedicides and fungicides; 19. All drugs, medicines, pharmaceuticals and drug; intermediate not elsewhere specified; 20. Agricultural discs; 21. Engraved copper rollers or cylinders for use in textile industry; 22. Guar splits: Provided that food products and food preparations specified in the Schedule, shall not include boiled sweets, toffees, caramels, candies, nuts (including almonds) and fruit kernels coated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etation clauses declares that they shall include. The words used in the inclusive definition denote extension and cannot be treated as restricted in any sense. While dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation." (State of Bombay v. Hospital Mazdoor Sabha) (A.I.R. 1960 Supreme Court Page 610). 12. While the definition "manufacture" enumerates the processes incidental or ancillary to the completion of a manufactured product in relation to unmanufactured tobacco, in relation to manufactured tobacco, in relation to salt, in relation to patent or proprietary medicines as defined in Item No. 14E of the First Schedule, and in relation to goods comprised in Item No. 18, it is silent in relation to unmanufactured coffee or any other item not specified in the First Schedule which is likely to fall under Item No. 68. The First Schedule contains 67 designated commodities, 68th being a residuary item, out of which all goods but two tobacco and coffee are manufacture goods, the taxable event occurs, in theory, at the moment when the process of manufacture is completed. The definition of `manufacture' wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act. It is correct that that decision was rendered before the aforesaid definition of the word `manufacture' was inserted in the Act. It was so inserted by U.P. Act No. 38 of 1975 with effect from 13th October, 1972. Anyhow, grinding of wheat into flour has not been held to be manufacture, vide U.P. Atta Chakki Vyavasai Sangh, Varanasi v. Krishi Utpadan Mandi Samiti, Varanasi (1976 U.P.T.C. 322). Similarly, in the case of a dealer, who purchased til oil and, after adding scent to it, sold it as hair oil, it was held that the mixing of scents in ordinary til oil does not amount to manufacture of perfumed oil, vide Commissioner of Sales Tax v. Bechu Ram Kishori Lal (1976) 38 S.T.C. 236. 15. 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. Mere labour bestowed on an article, even if the labour is applied through machinery, will not make it a manufacture, unless it has progressed so far that a transformation ensues, and the article becomes a commercially known as another and different article from that wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....= 1978 E.L.T. (J 336), the Act with which the Court was concerned was the Central Excises and Salt Act, 1944, which furnishes no special definition of the word `manufacture'. The question canvassed there was whether carbon dioxide one of the constituents of kiln gas, produced as one of the processes necessary for refining sugar, could be said to have been manufactured, quite apart from the manufacture of sugar itself. It was held that what was produced was kiln gas, a compound of different gases and not carbon dioxide, though it was one of the different gases, which made up kiln gas, and, therefore, did not attract Item 14H in the Schedule to the Act. Since the excise duty was leviable under the Act on `manufacture' of goods, the Court explained the connotation of the word `manufacture'. In so doing, the court said that the word `manufacture' implied a change, but that a mere change in the material was not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character, use. This was also the meaning given to the word `manufacture' in Union of India v. Delhi Cloth and General Mills (AIR 1963 S.C. 791 = 1977 E.L.T. (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtion, the end crown, the skin and the inner core with the addition of sugar would amount to consumption of pineapple fruit in the manufacture of those goods so as to be liable to purchase tax under Section 5A of the Kerala General Sales Tax Act, 1963, and it was held as under : "........... 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 vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can not longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....daptation having different name, characteristic or use so that the end-product does not retain a continuing substantial identity, it can be said that manufacturing has been taken place. Accordingly, where the Tribunal found as a matter of fact that the constituent articles composing the two varieties of pan-masala sold by the assessee retained their original form and that the substantial identity of those articles continued. The Court held that : (i) it could not be said that there was a transformation of the different constituent elements in the sense of a new or different article emerging therefrom, (ii) the mixture of supari, variyali, dhanadal, sweet flavoured powder etc. as effected by the assessees and sold under the popular name of pan-masala did not amount to `manufacture' within the meaning of that expression as defined in Section 2(16) of the Act and accordingly the assessee was entitled to deduct the sales thereof as resales of goods purchased from registered dealers in terms of Section 7(ii) of the Act, (iii) the assessee's sales of pan-masala containing the mixture of supari, chuna and tobacco were sales of a `form of tobacco' within the meaning of Item 4 of the Fir....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of consumption with which people are most familiar occurs when they eat, or drink or smoke. Thus, we speak of people consuming bread, or fish or meat or vegetables, when they eat these articles of food; we speak of people consuming tea or coffee or water or wine, when they drink these articles; we speak of people consuming cigars or cigarettes or bidis, when they smoke these. The production of wealth, as economists put it, consists in the creation of `utilities'. Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the `utilisation' thereof. For some commodities, there may be even more than one kind of final consumption......... But the act that there is for each commodity what may be considered ordinarily to be the final act of consumption, should not make us forget that in reaching the stage at which this final act of consumption takes place the commodity may pass through different stages of production and, for such different stages, there would exist one or more intermediate acts of conversion. (10) ....... This conversion of a commodity into a different commercial commodity by subjecting it to some processi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d rice could be considered as identical goods for the purpose of imposition of sales-tax. The argument advanced by the appellant before the Supreme Court was that both rice and paddy are identical goods and that when paddy was dehusked there is no change in the identity of the goods. Reliance was placed by the appellants in support of their contention on the previous decisions of the Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer (1961) (12 S.T.C. p. 286) (S.C.) wherein the Court was called upon to consider whether betel leaves could be considered as vegetables. Further reliance was placed on another earlier decision of the Supreme Court in Commissioner of Sales Tax v. Jaswant Singh Charan Singh (1967) (19 S.T.C. 469) (S.C.), wherein the Supreme Court held that the word "coal" included "charcoal" on the ground that in ordinary parlance `coal' includes `charcoal'. The appellant therein also relied upon the earlier decision of the Supreme Court in State of Madhya Bharat v. Hiralal (1966) (17 S.T.C. 313) (S.C.) wherein the Court was called upon to consider whether when a dealer purchased scrap iron locally and imported iron plates from outside and after convert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9). 32. It was contended before the Supreme Court in the last mentioned case that since the assessees would be exposed to double taxation both as buyers of paddy and as sellers of rice that we should hold that the levy in question is impermissible because paddy and rice are liable to be taxed at a single point. Their Lordships observed thus : "No provision is shown to us which bars such a taxation when the commodities are different. In fact, in this case, there is no double taxation on the same commodity". A similar contention was rejected by this Court in the case of Baburam Jagdish Kumar & Co. v. State of Punjab (44 S.T.C. 159) (S.C.) thus : "We may at this stage refer to one other subsidiary argument urged on behalf of the appellants. It is urged that because paddy and rice are not different kinds of goods, but one and the same, the inclusion of both paddy and rice in Schedule C to the Act would amount to imposition of double taxation under the Act. There is no merit in this contention also because the assumption that paddy and rice are one and the same is erroneous. In Ganesh Trading Co. v. State of Haryana (1973) (32 S.T.C. 623) (S.C.) arising under the Act, this Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
....manufacture of a different goods. The Madras High Court negatived the contentions of the assessee and observed thus : "We are unable to agree. Unless the scrap retained its identity, it could not be said that it was not consumed in the manufacture of other goods. Ingots would be `other goods' as scrap and ingots are not the same. Anyone going into the market and asking for scrap will not be given ingot and vice versa. Further the process employed by the assessee by putting the steel scrap into fire and making ingots out of them is a process of manufacture and therefore, there is consumption of steel scrap and manufacture of the same into goods". 35. In Ghennakesavulu v. Board of Revenue (1981) (47 S.T.C. 403) the assessee purchased old silver jewellery or silverware from customers, and after melting them manufactured new silver jewellery of silverware and sold them. It was contended on behalf of the dealer before the Madras High Court that whether they are old jewellery or new jewellery or whether they are different kinds of jewellery, still the jewellery continued to be silver jewellery. The Court held that the old silver jewellery of silverware purchased, melted subsequen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the purchase turnover. The Supreme Court, while accepting the contention of the applicants, the State of Punjab that the ginning involves a manufacturing process and that the seeds and the cotton were two distinct commercial goods observed thus : "On behalf of the appellants the argument was stressed that ginning process was a manufacturing process, and ginned cotton and cotton seeds were different commercial commodities and the respondent was not entitled to the exemption under Section 5(2)(a)(vi) of the Act. It was said that unginned cotton was transformed into two distinct commercial commodities and there was no substantial identity between unginned cotton and ginned cotton or cotton seeds. It was argued that the ginning process required complicated machinery of manufacture. Reference was made in this connection to the mechanical aspect of the ginning process described in Encyclopeadia Britannica, Vol. 6 : 'Hand separation of lint and seed was replaced rapidly by use of saw-type gins in the United States after the inventions of Eli Whitney in 1794 and of Hogden Holmes in 1796. Whitney's gin was improved upon by Holmes who substituted toothed saws for the hooked cylinder a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duct can be said to be a second sale only if the same goods had been the subject-matter of a sale at an anterior stage. In this case if the assessee has purchased the various items of chemical manure referred in Item 21 and brings about a new product by mixing one or more of the said articles with one or more of any organic manure, that product cannot be said to be the same chemical manure or fertiliser which he had purchased and which had already been subjected to tax. The produce got by the petitioner by mixing one or more of chemical manure with one or more of the organic manure will have different properties of its own and it cannot be said it retains the same characteristics or properties of any one of the chemical manures or organic manures which went to make up the resultant mixture. For getting an exemption on the ground that the sale of an article is a second or subsequent sale, it must by established that there has been a sale of the same goods at an anterior point of time. If there is no identity between the product purchased with the product sold it is not possible to treat the sales of the products manufactured and sold by the petitioner as second sales". This decision....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... first additional point raised is that when iron scrap is converted into rolled steel it does not involve the process of manufacture. It is contended that said conversion does not involve any process of manufacture, but the scrap is made into a better marketable commodity. Before the High Court this contention was not pressed. That apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses its identity and becomes a new marketable commodity. The process is certainly one of manufacture". 42. The Supreme Court further observed thus : "It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object appears to us to be tax sales of goods of each variety and not the sale of the substance out of which they are made...... As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax........ The law of sales tax is also concerned with `goods' of various descriptions. It, therefore, becomes necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description. 45. In State of Gujarat v. Oil & Natural Gas Commission [(1982) 49 S.T.C. p. 310)], a Division Bench of the Gujarat High Court considered the question whether the operation of mining mineral from the earth or for that matter extracting oil from the oil well can be considered to be a process which can be included in the term `manufacture' as defined under the provisions of the Bombay Sales Tax Act, 1959, as applicable to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....echanical ore handling plant results in a change in the physical and chemical composition of ore and, therefore, the blended product suffered a change in its respective chemical and physical composition. The Supreme Court disapproved the view of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (1959) 10 S.T.C. 500 where the Bombay High Court had held that manual mixing of different kinds of tea would not bring into any product of a different characteristic, name or use and, therefore, mixing cannot be said to be any process of manufacturing. The Supreme Court held that the said decision did not lay down the correct law because the means employed for the purpose of carrying out the operation would not be relevant for purposes of determining whether any process is applied or not, but it is the effect of the operation on the commodity that is material for purposes of determining whether the operation constituted `processing' or not. In that view of the matter, therefore, the Supreme Court held that in the course of loading the blending of ore taken from different stock piles would amount to processing and, therefore, would be an activity of manufacturing". ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the tube from a metal slug or dump the learned Judges held that the said process had already been applied fully when the plain extruded aluminium tubes purchased by the petitioner were originally manufactured. Dealing with the scope of the definition contained in Section 2(f) the learned Judges held that any process that is incidental or ancillary to the completion of a manufactured product, however unessential it may be, will fall within the compass of the expression `manufacture'. But, in order that any process can be regarded as incidental or ancillary to the completion of a manufactured product it must have some relation to the manufacture of finished product. On the facts of that case the learned Judges came to the conclusion that the printing or lacquering could not be said to be incidental or ancillary to the completion of the process of manufacture referred to in Item 27(e) of the First Schedule since the said item takes in only a manufacture of tubes by application of the process of extrusion. This decision is, in our opinion, of little assistance to the petitioner because the conclusion of the learned Judges that excise duty was not leviable in that case was rested who....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis that at the stage when the billets were rolled into circles, the process of manufacture of circles was complete and consequently these circles became liable to excise duty at the rates mentioned against Item 26A(2) of the First Schedule of the Central Excises and Salt Act, 1944. The respondents claim that the product, as it appears in the form of uncut circles after rolling of billets by the rolling mills, unless these uncut circles are trimmed and after further work on them, they are converted into utensils. The contention on behalf of the respondent was that when the billets were rolled into circles no process of manufacture was carried out and consequently excise duty could not be charged under Item No. 26A, which imposes the liability only when goods like circles are manufactured. Reliance was placed by the respondent on the interpretation of the word `manufacture' as defined in the Central Excises and Salt Act and interpreted in two decisions of the Supreme Court in Union of India v. Delhi Cloth & General Mills (A.I.R. 1963 S.C. 791) and South Bihar Sugar Mills Ltd. v. Union of India (1968) S.C. 922). Justice Bhargava of the Supreme Court repelled the contention raised on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to be imposed on circles in any form. When the rolling mills have rolled the billets, what comes into existence are circles known as such, even though they are in uncut form. The product at that stage fully satisfies the description contained in Item 26A(2)." "Similarly, the decision in South Bihar Sugar Mills Ltd. v. Union of India is of no help on this point, because again the gas, which was subjected to excise duty, was held by the court not to be carbondioxide, while only carbondioxide was liable to duty. It was held that the product that came into existence was a mixture of gases containing only a percentage of carbondioxide and could not, therefore, be held to be carbondioxide alone which could be subjected to excise duty under Item 14H of the First Schedule." 49. As regards the contention that there was no process of manufacture in the goods, the Supreme Court further observed as follows : "According to the respondents, the conversion of billets into circles did not bring any new substance into existence, nor did it bring into existence any completed product, so that there was no process of manufacture which alone could render the circles liable to excise dut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....modity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity. The tests laid down by Pathak, J. in Pio Food Packers, case (1980) 46 S.T.C. 63 (S.C.) = 1983 E.L.T. 1582 should be the guiding principles in determining the question whether a particular commodity has been subjected to the process of manufacture. 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 vary from one case to another and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered the original commodity experiences a change. But 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 recognised as a new and distinct article that a manufacture can be said to take place. The test that is required to be applied is: does the processing of the original commodity being into existence a commercially different and dist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dule covers only two kinds of coffee viz, "Coffee cured" and "Coffee" commercially known as "Instant Coffee". For the purpose of this item "Coffee" means the seed of the Coffee tree (coffee) whether with or without husk, whether cured or uncured. Section 3 of the Act provides for the levy on all excisable goods, other than salt which are produced or manufactured in India at the rates set forth in the First Schedule. The Central Government framed the Central Excise Rules, 1944 in exercise of the powers conferred on it by Sections 6, 12 and 17 of the Act. Under Rule 8 (1) the Central Government is empowered by notification in the Official Gazette to exempt, subject to such conditions as may be specified, any excisable goods from the whole or part of duty leviable on such goods. The rate of excise duty was mostly on the ad valorem basis and hence Section 4 laid down the principles to be followed in calculating the value of an article. 52. In the present case, as we have already indicated earlier, the product that is sought to be subjected to duty is the goods viz., mixture or blend of 'Coffee and Chicory'. Chicory is neither an excisable goods nor it is an item of the First Sc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed and marketed such product as "Coffee-Chicory Blend" known in the commercial world as "French Coffee". 55. The levy of duty on this commodity or goods by the Department is challenged before this Court. 56. Shri K. Srinivasa Murthy, the learned Counsel for the appellant, relied upon various articles, journals and books written by experts and also the provisions of the Prevention of Food Adulteration Act, 1954 and the rules made thereunder to explain as to the meaning and content of "Coffee" of various kinds and Chicory and also "Coffee-Chicory Mixture". It is not in dispute that Chicory is a perennial herb. As a cultivated crop, common Chicory is grown to some extent for its roots. Its roots roasted and ground are used as a substitute for an adulterant of or an addition to Coffee. In Great Britain it is chiefly in connection with coffee that Chicory is employed. Chicory gives the coffee additional colour, bitterness and body. The roots of Chicory, dried, ground and roasted are used by the appellants for admixture with Coffee. The flavour of Chicory is very peculiar and popular. The Prevention of Food Adulteration Rules defined the standards of quality for and fixed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e matter......Not less than 50.0 per cent on dry basis. A.08.03-COFFFE-CHICORY MIXTURE or coffee mixed with chicory or coffee and chicory shall be pure ground coffee mixed with roasted and ground chicory and shall be in sound, dry and dust-free condition with no rancid or obnoxious flavour. The coffee-chicory mixture shall contain caffeine not less than 0.6 per cent and the aqueous extract shall not be more than 50 per cent. Any tin or other receptacle containing a mixture of coffee and chicory shall not bear any misleading expression. The expression "French Coffee" may be used if followed by the words "mixed with chicory" or "blended with chicory".' 57. From what is stated above it is clear that coffee and chicory are two separate and independent commodities or goods. Coffee is an excisable goods covered by item No. 2 of the First Schedule. Chicory does not find place in the items of the First Schedule. There is nothing on record to show that Chicory has been declared as an excisable goods, even under Item No. 68 of the First Schedule. The Central Excises and Salt Act, 1944 does not define 'Goods'. The Legislature, therefore, must be taken to have used every word in it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chicory cannot be treated as excisable goods falling under item No. 2 of the First Schedule as "Coffee" as defined thereunder. 58. In Dy. Commissioner of Commercial Taxes v. lyanar Coffee & Tea Co. (1962) 13 S.T.C. 457, the High Court of Madras happened to consider the similar question whether the expression "Coffee" as found in Section 5 (v) of the Madras General Sales Tax Act, 1959 would include a variety of stuff known as "French Coffee" or by any other trade name which is made by an admixture of Coffee powder and Chicory powder. It was held in that case that the term "Coffee" should be confined only to the forms of Coffee as explained in Madras General Sales Tax Act, 1959 and that it could not be extended to coffee Blended with chicory which, according to the usage, is different article from coffee and is often referred to as "French Coffee". It was further observed that: "When.........we find that there are several enactments dealinh with the Coffee which defined Coffee in a particular manner, confined only to pure coffee, there is no reason why a similar connotation to the expression "Coffee" in the absence of any particular definition thereof in the Madras General Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the Bengal Finance (Sales Tax) Act, 1941, where the turnover of a dealer who himself manufactured or sold any goods exceeded Rs. 10,000, he was liable to pay tax under the said Act. The court came to the conclusion that the dealer in that case was liable to pay tax. Gentle, J. did not give any finding whether dispensing of medicines constituted a manufacture, but he held that dispensing resulted in a new mixture and thereby the chemist produced goods for sale. He observed (at page 160): "When dispensing has taken place, but not before the chemist has the goods with which to supply his customers and which he has agreed to sell to them. The resultant mixtures, after dispensing prescriptions, are the goods sold by a dispensing chemist to his customers the process of dispensing is to produce those goods for sale, without which process sales of mixtures or compounds cannot be effected by a chemist. Even if that process is not the manufacture of goods, as articles of furniture, mechanical appliances and paints are made from raw materials, nevertheless, since it is the production of goods for the purpose of selling to customers, the chemist who dispense prescriptions thereby produc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o doubt that the mixing and blending of coffee powder with chicory powder so as to bring being a different commercial product known as "French Coffee" is a process which amounts to manufacture within the definition of the expression 'manufacture' defined in Bombay Sales Tax Act, 1959. The learned Judges referred to Anwarkhan Mehboob's case (11 S.T.C. 698) (S.C.) relied upon by the company and observed that it is not a direct authority on the question of what is 'manufacture' and that it does not furnish a guide that in such cases the test should be the bringing into existence of a different commercial commodity. Again referring to the decision of Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (10 S.T.C. 500), the learned Judges observed that it is pertinent to note that in that case what was bought was tea leaves and what was sold was also tea leaves and that there was no plea that it was commercially different article, as the commodity remains in the same condition. In fact the Supreme Court in Pio Food Packers, case (46 S.T.C. p. 63) = 1980 E.L.T. 343 disapproved the view of Bombay High Court in Nilgiri Ceylon Tea Supplying Company (10 S.T.C. 500). The Supreme Court held tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re was no manufacturing process. In the case of State of Maharashtra v. C.P. Manganese Ore (A.I.R. 1977 S.C. 879), the Supreme Court held that no new commodity was produced in the process and 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 the case of the State of Gujarat v. Sukharam Jagannath (50 S.T.C. 76), it was found, as a matter of fact that the constituent articles composing the two varieties of pan-masala retained their original form and that the substantial identity of those articles continued. Thus in almost all the cases relied upon by the learned Counsel for the appellants the original commodity has not lost its original identity. In our view, on the facts, each of the above cases relied upon by Shri K. Srinivasa Murthy, the learned Counsel for the appellants, has been rightly decided and their is no conflict as such with the decisions rendered by the Supreme Court relied upon by Shri Upendralal Waghray, Counsel for the Central Government discussed hereunder. 64. In Anwarkhan Mehboob Co. v. State of Bombay (A.I.R 1961 S.C. 213), the Supreme Court held that the conversion of raw to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on Imperial Fertiliser case held that the preparation of fertiliser mixture involved manufacturing process resulting in production of a new commodity different from the ingredients composed for the mixture. In the case of Metro Readywear Co. v. Collector of Customs (1978 II Excise Law Times, p. J 520), the Kerala High Court held that the ironing of stitched brassieres using electric iron to be a manufacturing process involving a transformation in the commercial identity of the article. In the case of Union of India v. Ramlal Mansukharai (A.I.R. 1971 S.C. 2333), the process of melting the metals and mixing them together was held by the Supreme Court as a manufacturing process, resulting in the production of a new commercial commodity. Relying upon the ratio decided in these cases and applying the test laid down therein and on a consideration of all the facts and circumstances of the case we hold that the process adopted by the appellants of roasting and grinding coffee seeds and Chicory roots by the mechanical process involving consumption of powder and then mixing the powders thus obtained from coffee and chicory by mechanical process involving consumption of power constitute th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in State of Karnataka v. Raghurama Shetty (47 S.T.C. 369) (S.C.). In the instant case we cannot accept the contention raised by Shri K. Srinivasa Murthy, the learned Counsel for the appellants that "Coffee" and "French Coffee" are not different kinds of goods, but one and the same. We have already held above that although the mixture of "Coffee and Chicory" is called "French Coffee", the resultant product does not continue to be coffee and that "Coffee" and "French Coffee" are two different goods in commercial circles and that there is a change in the identity of the goods. 67. In Alladi Venkateswarlu v. Government of A.P. (41 S.T.C. 394), Beg, C.J. observed thus : "It may be that an item may be taxed once as raw material and after it is manufactured and converted into separately taxable goods, taxed again as another taxable item altogether. But in such cases, the identity of the goods sold would be deemed to be different even though the raw materials may have been taxed already in a different form earlier. The question, therefore, before us is whether rice which is obtained form paddy already taxed under Item No. 8 of the Second Schedule ceased to be "rice" falling prima....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od" in the First Schedule, the item "Coffee" cannot be treated as "Food Product" or "Food Preparation", much less the "Coffee-Chicory Mixture", which is a distinct commercial commodity from "Coffee" in view of the specific definition of "Coffee" in Item No. 2 of the First Schedule and that in any case the exemption notification is not applicable to goods "Coffee-Chicory Mixture". 69. Shri K. Srinivasa Murthy, the learned Counsel for the appellants relied upon certain passages in Corpus Juris Secundum, Vol. X 36 under the heading "Food" in General: which reads thus : 'Except as used in some statutes, the word "Food" includes that which is drunk, as well as that which is eaten, for nourishment, as used in statutes. It may include food for animals as well as food for human beings, although in common use the word "feed" is employed when referring to articles fed to animals.' 'In the general sense of the term, food is "that which is eaten or drunk for nourishment". It includes lard, milk, milk chocolate, cheese, coffee, condiments, confectionary, popcorn, and oleo oil, but not talc, tobacco, whisky, or saccharin. What constitutes food within the meaning of statutes making ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od proper (as understood in the narrow sense) to make it more palatable and digestible. In my opinion, the problem posed cannot be answered in the abstract and must be viewed in relation to its background and context. But before I dilate on this, I will examine the dictionary meaning of the words." "The Oxford English Dictionary defines 'food-stuff' as follows : "that which is taken into the system to maintain life and growth and to supply waste of tissue". In Webster's international Dictionary 'food' is defined as- "nutritive material absorbed or taken into the body of an organism which serve, for purposes of growth, work or repair and for the maintenance of the vital process." 'Then follows this explanation : "Animals differ greatly from plants in their nutritive processes and require in addition to certain organic substances (water, salts etc.) and organic substances of unknown composition (vitamins) not 'ordinarily' classed as foods (though absolutely indispensable of life, and contained in greater or less quantities in the substances eaten complex organic substances which fall into three principal groups, Proteins, Carbohydrates and Fats." 'Next is given a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to that particular class of persons, without the addition of the spices which make it nutritive. Put more colloquially, "one man's food is another man's poison" I refer to this not for the sake of splitting hairs but to show the undesirability of such a mode of approach. The problem must I think, be solved in a common sense way." 72. His Lordship further observed thus: "Now the comparison of one Act with another is dangerous, especially when the Act used for comparison is an English Act and a war-time measure, and I have no intention of falling into that error. I am concerned herewith the Act before me and must interpret its provisions uninfluenced by expressions, however similar, used in other Acts. I have referred to the case discussed above, not for purposes of comparison but to show that the terms 'food' and 'food-stuffs' can be used in both a wide and a narrow sense and that the circumstances and background can alone determine which is proper in any given case". 73. The Supreme Court has laid down guidelines as to the use of Foreign Decisions and Laws, while considering the provisions of the Indian Statutes. The Supreme Court made the following observations in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pal Corporation of City of Poona, A.I.R. 1959 S.C. 586). "If the words of the section of an Act admit of a reasonable doubt, the title or heading of the chapter or group of sections may be looked to for interpreting the section. But, although such heading may be looked for interpreting a section, the words of which admit of any reasonable doubt, it cannot be taken to restrict the plain terms of the section. It does not also prevail, where the intention of the legislature can be gathered by reference to other sections. The heading of a chapter may be referred to in order to determine the sense of any doubtful expression in a section ranged under it. But it cannot control unambiguous expressions." "It has repeatedly been said by the Supreme Court that it is not safe to pronounce on the provisions of one Act with reference to decisions dealing with other Acts, which may not be in pari materi (Hari Khemu Gawali v. Deputy Commissioner of Police, Bombay, A.I.R. 1956 S.C. 559 at p. 568). It is no sound principle of construction to interpret expressions used in one Act with reference to their use in another Act. The meaning of words and expressions used in an Act must take their colo....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., to know always without its dangers and we have, therefore, to be relied upon with some caution, if not without hesitation because of difference in the nature of those laws, concepts and definitions. In the present case we are concerned with the interpretation of words and expressions "Coffee", "Food", "Food product", and "Food preparation" used in the Central Excises and Salt Act, 1944, which is a taxing statute. Now there is one cardinal rule of interpretation which is always to be borne in mind, while interpreting entries and expressions in a tax legislation and it is that the words used the entries must be construed not in any technical sense, not from the scientific point of view but as understood in the common parlance. We must give the words used by the legislature the popular sense meaning "That sense which people conversant with the subject-matter with which the statute is dealing would attribute to it". The words "Coffee", "Food" and "Food Products" and "Food preparations" must, therefore, be interpreted according to ordinary parlance and must be given a meaning which people conversant with these commodities would ascribe to them. 78. The question in this appeal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tute, or Dictionary or case law under other Acts. Item No. I B deals with "Prepared or preserved foods put up in unit containers and ordinarily intended for sale including preparations of vegetables, fruit, animal blood, fish, crustaceans or molluscs, not elsewhere specified". Item No. 1C deals with "Food products, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power, the following, namely :- (1) Biscuits, (2) Butter, whether pasteurised or not, and (3) pasteurised or processed cheese". 80. Item No. 1C is restricted only to the three kinds of mechanically manufactured "food products". mentioned therein. If really the intention of the Legislature was to consider the goods "Coffee" or "Instant Coffee" or "Coffee-chicory Mixture" manufactured with the aid of power, as "Food" or "Food product", then these commodities would have been under Item 1C and not as a separate item under Item No. 2 and that too in a very restricted manner and sense. Evidently the intention of the Legislature is to treat each of the goods "Coffee" covered by Item No 2, and "food" and "food-products" covered by Item Nos. 1B and 1C respectively as separat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....goods under Item No. 68, nor any other excisable goods which are exempted from the duty of excise by a special notification. As a logical corollary, if the article of "Coffee" cannot fall under Item No. 68 or under any item of "food product" or "food preparation" declared as excisable goods or goods exempted from duty of excise by a special notification, the question of "Coffee-chicory Mixture" falling under exemption notification issued under Item No 68 of the First Schedule does not arise. The burden of proof that "Coffee-chicory Mixture" was food or food product or food preparation was on the appellants to be entitled for exemption of "Coffee-chicory Mixture". The appellants must show that the goods "Coffee-chicory Mixture" was covered by the aforementioned exemption notification. The fact that the item `coffee' covered by Item No. 2 of the First Schedule is distinct from the items mentioned in the exemption notification falling under Item No 68 of the First Schedule, one has to irresistibly conclude that the goods "Coffee-chicory Mixture" is neither food, nor food product nor food preparation, so as to enable the appellants to claim exemption from excise duty. 81. In th....