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2021 (6) TMI 26
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....ls (P) Ltd vs. Commissioner of Central Excise, Madura, 2015 (37) STR 1079 (Tri-Chennai) and in Sara Spices vs. Commissioner of Central Excise, Cochin, 2018 (362) ELT 151 (Tri-Bang) necessitating the constitution of this Larger Bench to answer the reference framed thus: (a) Whether the activity of crushing, pulverizing, converting and packing of spices into powder form amount to manufacture or not? (b) If not, whether service tax is payable under the category of 'business auxiliary service' or not? 2. In the hearing before us, the assistance rendered by Mr Raghavan Ramabhadran, Learned Counsel appearing for M/s Nilgiri Oil & Allied Industries, and Mr L.V. Rao, Learned Authorized Representative, for arriving at the response has been invaluable. The preliminary submission of Learned Counsel that the latter of the references would, in the scheme of taxation empowerment, directly follow from the answer to the first finds resonance with Learned Authorized Representative and we, accordingly, restrict the scope of these proceedings. 3. The appellant, M/s Nilgiri Oil & Allied Industries, has contracted with M/s Shalimar Chemical Works Ltd, Kolkata to process whole 't....
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....of power". The definition of 'manufacture' as in S.2 (f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion inserted this definition of the word 'manufacture' in the definition section and not with a view to make the mere "processing" of goods as liable to excise duty.' was subsequently restated as "11.....Therefore, any goods to attract excise duty must satisfy the test of marketability. The Tariff Schedule by placing the goods in specific and general category does not alter the basic character of leviability. The duty is attracted not because an article is covered in any one of the items or it falls in the residuary category but it must further have been produced or manufactured and it is capable of being bought and sold......" in the judgement of the Supreme Court in Moti Laminates Pvt Ltd an....
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....to crushing of 'whole chilly' into 'chilly powder' but in the context of inclusion in computing threshold of taxability as 'small scale' manufacturer. It has been pointed out by Learned Counsel that the dispute therein did not entail considering the applicability of definition of 'manufacture' for extinguishing liability under Finance Act, 1944 as provider of service which the Tribunal did, in Jayakrishna Flour Mills (P) Ltd, and which, though in the context of conversion of 'wheat' into 'wheat products', offers more acceptability as precedent. 7. Learned Authorized Representative argued, with reference to the decision of the Supreme Court in AP Products vs. State of Andhra Pradesh 2007 (214) ELT 485 (SC), that every transformation cannot claim to be the outcome of 'manufacture' and that the clarification in relation to 'turmeric powder' applies with no diminishment of relevance to any other powdered spice. Reliance has been placed by him on circular no. 521/17/2000-CX dated 16th March 2000 of Central Board of Excise & Customs while discounting the relevance of letter of Central Board of Excise & Customs issued from F no. 11/01/2012-CX1 dated 9th July 2013 on which the Tribunal ....
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.... new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used the word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market......" (emphasis supplied) 10. A landmark decision of the Supreme Court in Empire Industries Limited & others vs. Union of India 1985 (20) ELT 179 (SC), on reference, along with other disputes in writ petitions and appeals, to a five member Bench, was approved, in the judgment famously known by the cause title of the petitioner, whose facts were most typical, as Ujagar Prints and others vs. Union of India and others 1989 AIR 516, with the finding that "16. On a consideration of the matter, we are persuaded to think that the view taken in the Empire Industries case that 'Grey fabric' after they undergo the various processes ......emerges as a commercially different commodity with its own price structure, custom and other commercial incidents and that there was in that sense a 'manuf....
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....ng the test to the disputed goods. 12. A subsequent decision of the Supreme Court in Union of India vs. JG Glass Industries Ltd 1998 (97) ELT 5 (SC) added a new dimension with "16. On an analysis of the aforesaid rulings, a two-fold test emerges for deciding whether the process is that of "manufacture". First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words whether the commodity already in existence will be of no commercial use but for the said process." while adjudging a dispute on whether the process of printing on bottles should be subjected to duties of central excise, as yet another prescription for tax authorities to bear in mind while saddling liability. 13. Prior to the enactment of Central Excise Tariff Act, 1985, with its comprehensive and near-exhaustive enumeration of 'excisable goods' in the Schedule, rates of duty, referred to in section 3, corresponding to descriptions were added over successive years since 1944 in the Schedul....
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.... process. (3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely short duration. In this case also no manufacture takes place. (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place." 16. Therefore, while goods are 'excisable' by enumeration in the Schedule to the Central Excise Tariff Act, 1985 and to the extent of rate prescribed against each, liability to the levy will rest on establishing that it is the outcome of 'manufacture', viz., by transformation into marketable commodity with distinct usage. 17. The goods impugned in this appeal, viz., 'turmeric powder', 'chilly powder', 'cumin powder' and 'coriander powder' would have to conform to this test to be excluded from the tax on 'business auxiliary service' which, inter alia, extended to '(v) production or processin....
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....r for that clarification was rendered in the context of intendment by field formations to subject the packaging of high quality turmeric powder by manufacturers of cosmetics to duties of excise corresponding to tariff item 3304 of the Schedule to the Central Excise Tariff Act, 1985. 22. That "3. The manufacturing process for this appears to be that good quality Turmeric, rich in oil content and strong smell, are powderised/pulverized and the resultant product, in its powderised form, is sold in tin and plastic containers. Therefore, there appears to be no manufacturing activity involved as is visualized in the present Central Excise Act, i.e. no new product emerges.", in the said circular, does not describe the process undertaken by the cosmetic industry, except to the extent of segregating of richer content for packaging, is apparent from the conclusion that "4. Accordingly it is clarified that Turmeric Powder after crushing remains Turmeric Powder only and is therefore not an excisable product." 23. The issuing of that clarification necessitated by the imperative of forestalling future controversy over subjecting a product that was already in existence ....
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....he conclusions therein as a template for determination of taxability under a statute designed to give effect to the constitutional assignment of duties on manufacture is to stretch the characteristic of precedent beyond the manifest competence of a tax tribunal. 27. In Krishna Chander Dutta (Spice) Pvt Ltd which, in courteous acknowledgement of specific reference by Learned Authorized Representative, we attend to, the Supreme Court took note of the generality of the description in the tariff, insofar as 'turmeric' and 'pepper' was concerned as well as the unvarying use to which 'pepper', irrespective of form, is put before concluding that discharge of tax on sales at 'first point' precluded further levy on the same goods. The due discharge of tax at one stage, and the subsequent non-existence of taxable event thereafter, led the Supreme to that conclusion. The circumstances in which 'manufacture' is to be determined in the present dispute cannot be more removed than the relevance of 'manufacture' in sales tax disputes. 28. On the other hand, the foundation of the decision in Jayakrishna Flour Mills (P) Ltd, even if not about production of powdered spice is, yet, on taxability....