TaxTMI 
TaxTMI 
1997 (3) TMI 640
X X X X Extracts X X X X
X X X X Extracts X X X X
....word `Manufacture' has been defined in clause (f) of section 2 of the Act which reads as under :- "(f) 'manufacture' includes any process (d) incidental or ancillary to the Completion of a manufactured product; and (i) In relation to tobacco, includes the preparation of cigarettes, cigars, cheroots, bidis, 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 packing 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 salt, includes collection, removal, preparation, steeping, evaporation, boiling, or any one or more of these processes, the separation or purification of salt obtained in the manufacture of saltpetre, the separation of salt from earth or other substance so as to produce elementary salt, and the excavation or removal of natural saline deposits or efflorescence; (iii) In relation to patient or proprietary medicines, as defined in Item No. 14E of the First Schedule and in relation to cosmetics and toilet preparat....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Under sub-item (2), the rate of excise duty on package tea has been fixed at Rs. 1.25 per kilogram in addition to the duty leviable under sub-item (1). Excise duty on "instant tea" under sub-item (3), is levied at 10 per cent ad valorem in addition to excise duty leviable under sub-item (1). 5. The petitioner's case is that no excise duty is payable because it has already been paid by the Principals at Calcutta and the petitioner was only doing packaging at Ambala and, therefore, it did not fall within the meaning of 'manufacture'. It is argued by Shri J.K. Sibal, learned Senior Advocate for the petitioner, that packaging was not "manufacturing" as defined in clause (f) of section 2, of the Act. The word 'manufacture' means the bringing of a change in a material by some processing. Every change in a material is, however, not 'manufacture'. There must be a transformation and thereby a new and different article should emerge with a distinct name, character and use. Mere process of packaging of tea from bulk containers into small containers, without making any alteration in the ingredients of tea, would not amount to 'manufacture'. Shri Sibal has vehemently argued that charg....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be declared as ultra vires and the respondents be prohibited from recovering excess duty from the petitioner on the packaging of tea. 8. The respondents have contested the claim of the petitioner with the plea that the petitioner, after receiving tea in bulk from M/s. Duncans Tea Sales Limited, did two acts, namely, (i) blending and (ii) packaging. This has been admitted by the petitioner in its letter dated 16-12-1982 sent to the respondents. It is contended by Shri Arun Nehra, Senior Standing Counsel for the Central Government, that blending was an activity incidental and ancillary to the completion of manufacture and so was packaging. Since the petitioner was doing not only packaging but blending also, there was no force in the petitioner's plea that the package tea was not liable to excise duty. "Package tea" has been specifically subjected to the levy of excise duty under sub-item (2) of Item 3 of the First Schedule and, therefore, the levy of duty was legal and within the ambit of the schedule. Column 3 specifying the rate of duty in respect of package tea in sub-item (2) made it explicitly clear that package tea is subjected to the levy of duty in addition to the du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt in Orissa Industries Limited v. Union of India and others - 1979 (4) E.L.T (J 457). That was a case where chinaware, porcelain-ware, glass as well as glass-ware were delivered to customers in packed condition. It was held that 'packing' by itself did not constitute a process which may be treated as incidental or ancillary to the completion of such goods because they can be delivered to the customers even in wholesale without packing. 13. In another case, Calcutta High Court in Seth Chemical Works (P) Ltd. v. Union of India - 1993 (66) E.L.T. 76, examined the question of duty on the ultra-marine blue manufactured in bulk and sold in bulk as well as in small packets. It was held that packing in small packets, not being manufactured, was not liable for duty. 14. The Mysore High Court had also an occasion to examine 'paking' in Alembic Glass Industries Ltd. v. Union of India and others - 1979 (4) E.L.T. (J 461). There also, the company was engaged in the manufacture and sale of glassware. It was held that 'packing' was not incidental or ancillary to the process of manufacture of bottles. 15. The Bombay High Court has also, in Ogale Glass Works Ltd. v. Union ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... an act of manufacturing. 17. Shri Arun Nehra has placed reliance on a decision of the Supreme Court in Aditya Mills Ltd. v. Union of India - 1988 (37) E.L.T. 471 (S.C.) = AIR 1988 SC 2237. That was a case where two plies of Polyester Spun Yarn (PP) and one ply of Rayon Filament Yarn (RF), which are doubled together and the resultant yarn is referred to as PPRF Yarn. That resultant Yaran is a separate and distinct item and is taxable under Tariff Item 68 no withstanding that duties already paid on Polyester Spun Yarn and Rayon Filament Yarn. It was observed that excise duty is a duty on the manufacture of goods and not on sale. Manufacture is complete as soon as, by the application of one or more processes, the raw material undergoes some change. If a new substance is brought into existence or if a new or a different article, having a distinct name, character or use, results from a particular process or processes, such process or activity would amount to 'manufacture'. The moment there is transformation into a new commodity, commercially known as a separate and distinct commodity having its own character and use, 'manufacture' takes place. 18. In the case of the pre....