1980 (12) TMI 60

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....ubject to central excise duty under Tariff Item 1B in the First Schedule to the Central Excises and Salt Act, 1944. Indisputable this whole milk powder is ordinarily intended for sale. Therefore, the terms of Tariff Item 1B are fully satisfied. 2. Sabar Dairy is not able to sell the entire quantity of whole milk powder which it produces. After the expiry of six months, it cannot be sold in that form in the market. It becomes time-expired. Therefore, such whole milk powder is regenerated into fluid milk by applying a mechanical process to it and skimmed milk powder and butter are produced out of it. It is not in dispute that Sabar Dairy has been paying central excise duty on the skimmed milk powder and butter under Tariff Item 1B or 1C, a....

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....irectly converted into skimmed milk powder and butter. But, whole milk powder is subjected to a mechanical process by which fluid milk is regenerated and it is out of fluid milk that the skimmed milk powder and butter are produced. By a mechanical process, the regenerated fluid milk is separated into watery milk and fat. Watery milk is used for producing skimmed milk powder and fat is used for producing butter. Now, is it not the case of the department that the fluid milk which is regenerated out of the whole milk powder is also taxable. Otherwise also, this position appears to be correct. If the generation of fluid milk is an intermediate stage for the production of skimmed milk powder and butter out of the whole milk powder, it is not tax....