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Indian Cable Company Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(15)ELT434TriDel
AppellantIndian Cable Company Ltd.
RespondentCollector of Central Excise
Excerpt:
1. the captioned appeal was initially filed as a revision application before the central government which under section 35-p of the central excises & salt act, 1944 has come as transferred proceedings to this tribunal for disposal as if it were an appeal filed before it.2. the appellants are manufacturers of wires and cables. they also produce, among other things, a substance which they describe as "pvc compound" from out of duty-paid pvc resin. during the material time, namely, 18-6-1977 to 28-6-1977 they manufactured 31 m.ts. of pvc compound and removed the same for captive consumption within the factory. on 15-12-1977, the supdt. of central excise issued a show cause notice to the appellants to show cause why the duty leviable on the goods-rs. 1,21,768.00-should not be demanded.....
Judgment:
1. The captioned appeal was initially filed as a Revision Application before the Central Government which under Section 35-P of the Central Excises & Salt Act, 1944 has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.

2. The appellants are manufacturers of wires and cables. They also produce, among other things, a substance which they describe as "PVC Compound" from out of duty-paid PVC resin. During the material time, namely, 18-6-1977 to 28-6-1977 they manufactured 31 M.Ts. of PVC compound and removed the same for captive consumption within the factory. On 15-12-1977, the Supdt. of Central Excise issued a Show Cause Notice to the appellants to show cause why the duty leviable on the goods-Rs. 1,21,768.00-should not be demanded from them in terms of Rule 10 of the Central Excise Rules (hereinafter referred to as the Rules.). In reply, the appellants submitted that they were manufacturing "granule" (PVC Compound) from duty-paid PVC resin, that these granules were a modified form of PVC resin, that they were not polymerisation or co-polymerisation products, that the process of conversion of duty-paid PVC resin into granules did not amount to "manufacture" within the meaning of Section 2(f) of the Central Excises & Salt Act (hereinafter referred to as the Act), and so, they did not attract excise duty. After hearing the party, the Assistant Collector of Central Excise, Jamshedpur passed an order on 28-7-1978 demanding duty under Rule 10 on the said quantity of PVC compound at the appropriate rate. However, he allowed the appellants to avail set-off of the duty paid on the duty-paid PVC resin used in the manufacture of the said PVC compound. The appeal against this order was rejected by the Appellate Collector of Central Excise, Calcutta. Against this order, the appellants filed a revision application before the Central Government which, in terms of Section 35-P of the Act, has come to this Tribunal as transferred proceedings for disposal as if it were an appeal filed before us.

3. In the appeal before us, and during the hearing on 18-8-1983 when Shri Mukherjee, Advocate, appeared on behalf of the appellants, it has been contended that the appellants buy duty-paid PVC resin and that they only add fillers, plasticisers, stabiliser and lubricant in required quantities and the mixture is converted into granules. The resultant substance is modified PVC resin and is not really a compound.

No polymerisation or co-polymerisation takes place. In fact, no chemical reaction takes place. The conversion of PVC resin into modified resin does not result in production of a new product and does not amount to "manufacture" within the meaning of Section 2(f) of the Act. It is further contended that modified PVC resin does not attract further duty under item 15A(1)(ii) of the Central Excise Tariff Schedule (CET) even after the amendment in the wording of the item as a result of the 1977 Budget changes. The absence of the words "whether or not modified" [occurring in item 15A(1)(i) ] in item 15A(1)(ii) is significant. Further, Notification No. 206/77 dated 29-6-1977 exempting plastic material, commonly known as PVC compound, from excise duty was really unnecessary since PVC compound was not covered by item 15A(1)(ii).

4. Earlier, the Central Government had granted a hearing to the appellants on 16-8-1982 when the Revision Application was pending before the Government. A copy of the note of submissions dated 26-8-1982 made before the Revisional Authority on 16-8-1982 (as submitted to the Authority) has been submitted before us. In this note, there is reference to and reliance on a tour note issued by the Chemical Examiner, Custom House, Calcutta, on his visit to the factory of the appellants. A copy of this tour note has also been submitted before us. This note gives details of the manufacturing process adopted by the appellants and we shall refer to it shortly.

5. During the hearing before us, the learned Counsel for the appellants referred to the Chemical Examiner's tour note in support of his contention that the conversion of PVC resin into PVC compound does not involve any polymerisation or co-polymerisation of the original PVC resin molecules, that some of the physical and mechanical properties of the resin only are modified and that there is no change in the structural identity of the polymer (PVC) molecules. To a query from Bench whether the resultant product was moulding granules, the Counsel replied in the affirmative but submitted that moulding granules of polymerisation or co-polymerisation products were covered by the Tariff Item 15A(l)(ii) and PVC compound was not a polymerisation or co-polymerisation product.

6. The Counsel for the appellants also referred to the decision of the Bombay High Court in the case of India Plastic Corporation (P) Ltd. reported in 1983 ELT 425 wherein the Court had held that Phenolic resin and Phenolic moulding powder were not two different products.

Similarly, he argued that PVC resin and PVC moulding powder were not two different products. Reliance was also placed on a decision in revision of the Government of India reported in 1981 ELT 82 in the case of Gramophone Company of India Ltd. wherein it was held that "modification" refers to chemical modification and that addition of any lubricant, stabilisers etc. to a co-polymer of PVC and PVA, did not result in modified PVC or modified co-polymer of PVC and PVA.7. Another submission was that the product manufactured by the appellants was a physical mixture and not a chemically modified PVC resin. The constituents of the mixture could be separated.

8. The last submission of Shri Mukherjee was that the appellants were not using the duty-paid PVC resin for the manufacture of "any other commodity" within the meaning of Rule 9. In this connection, reference was made-to the decision of the Supreme Court reported in S.C. Vol. 37 1976 State of Tamil Nadu v. P.L. Malhotra. If at all PVC compound was excisable, it would fall for classification under Item No. 68 CET.9. Appearing for the Respondent, Smt. Vijay Zutshi, Sr. D.R. submitted; that the process of conversion of PVC resin into PVC compound involved a process of "manufacture" within the meaning of Section 2(f) of the Act. In this context, she referred to the meanings assigned to the expression "Compound", ''moulding powder" and "PVC" appearing on pages 268, 699 and 840 of Hawley's Condensed Chemical Dictionary. The argument was that to produce a compound, a chemical reaction was not an invariable must. For "manufacture", even physical changes would suffice so long as the resultant substance was known to the market as a distinct and different commodity, PVC compound, as distinct from PVC resin, was known to the market and' sold and bought as such. PVC compound was also known as PVC moulding granules. It was true that the process of conversion of PVC resin into PVC compound did not involve polymerisation or co-polymerisation, but this was not necessary. There was "manufacture" and moulding granules emerged which fell within the scope of item 15A(l)(ii) CET. Hence, the question of considering the residual item No. 68 CET did not arise. There was no question of double taxation here in the sense that the same goods were charged to duty twice over. In any event, the benefit of Rule 56A was available to the appellants. Reference was made to the Delhi High Court decision in the-case of Indian Aluminium Cables Ltd. reported in 1982 ELT p. 467 and the Bombay High Court decision in New Shakti Dye Works case reported in ECR August 1983 p. 1142. Duty was correctly leviable on the PVC compound produced and captively consumed in the appellant's factory.

10. In reply, the Counsel for the appellants submitted that the ratio of the decision in the Indian Aluminium Cables case had no relevance to the present case.

11. Before we proceed to consider the rival contentions, it is well to have a proper picture of the process of conversion of PVC resin to PVC compound as employed in the appellants' factory. For this, we have the benefit of the Tour Note of the Chemical Examiner to which reference has been made and on which a good deal of reliance is placed by the appellants. The relevant portions of the Tour Note are extracted hereunder :- (i) PVC synthetic resin powder-KOREA PVC grade P-1000 a purely homo-polymer resin-suspension polymerisation product (co-polymerisation products like polyvinyl choloracetate type are not suitable for the purpose being more susceptible to lump formation during processing).

(ii) Plasticizer-primarily used are D.O.P. (Diocty) phthalate and DIDP (De-iso-butyil phthalate). Sometimes chlorinated paraffin and secondary paraffin works ate also used as and when required. The function of the plasticizer is primarily to improve the flexibility of the plastic material to be produced.

iii) Stabilizer-AH PVC compound need stabilizer because both heat and light depending on intensity cause deterioration. Its primary function is to prevent the decomposition at the processing temperature Tribasic lead sulphate is the only material that is used by the factory.

The above mentioned ingredients are intimately mixed in a Mixture '(Ribbon Blender) a horizontal barrel fitted with a revolving agitator with blades, and having a capacity of blending on tonne charge at a time. The charge comprises approximately PVC resin powder--55% D.O.P.-16% Filler 23% Stabilizer-5% and Lubricants 2%. The sequence of addition of different ingredients for mixing is, as under : (b) The plasticizers and stabilizer are usually premixed in a small mixing tank provided with heating arrangement and the well mixed material is injected into the blender in a spray from the nozzle in top through the pipeline.

(c) In the intimately mixed materials under (a) and (b) is now added the Filler and lubricant.

Fixing is continued and is completed within an hour time. The material coming out of the Mixer is in the form of free flowing powder. The homogenously mixed material is discharged from the mixer into a big chamber from where it is fed into the Extruder. The material comes out of the Extruder in the form of a sheet which is cooled by allowing it to pass through cold water in a trough before it is chapped into granules or chips. The granules so obtained is usually known as PVC compound (moulding granules). These moulding granules are used for providing plastic covering on the bare conductor as insulating materials and sheathing of the insulated conductor.

6. Conclusion: It may be seen that the manufacturing process adopted for the production of PVC compound from PVC resin-powder does not involve any polymerisation and co-polymerisation reaction of the initial resin molecules. By compounding PVC resins with various ingredients like plasticizers stabilizer, Filler & lubricants, some of the physical & mechanical properties of the initial PVC polymer/resin are greatly modified, the PVC compound or modified form of PVC resin is obtained without bringing a change in the structural identity of the polymer molecules." 12. It is clear that a good deal of processing is involved and what emerges is a homogenously mixed material which is first formed into a sheet and then broken into granules or chips. Evidently, it is not a case of a simple loose mixture such as sand and pebble capable of being separated by simple physical means. It is also clear that the processing results in some of the physical and mechanical properties of the original PVC polymer or resin being modified chough the structural identity of the polymer molecule does not undergo change. We are of the opinion that there is a definite process of manufacture involved in the subject process.

13 Now, the question that arises is whether the aforesaid process of manufacture would amount to "manufacture" for the purpose of Section 2(f) of the Act read with Item No. 15-A CET. It is a well-settled proposition, reiterated time and again by various High Courts and the Supreme Court {South Bihar Sugar Mil's v. Union of India, AIR 1968 SC 922]. that for a process of manufacture to be considered as "manufacture" within the meaning of Section 2(f) of the Act for the levy of excise duty, a '{new and different) substance or goods having a distinct name, character or use different from those of the original substance or goods [which was subjected to the process (es) ] must emerge. Is this test satisfied here It is not disputed that PVC resin and PVC compound or moulding granules are not one and the same thing.

We have seen that the conversion of PVC resin into PVC compound involves the addition of fillers, plasticizers, stabiliser and lubricant, the ingredients being intimately and homogenously mixed with the aid of heat and machines Into a sheet which is then broken up into granules or chips. Again, the two products are known by different names. What the appellants purchase is PVC resin and what they manufacture is PVC compound or moulding granules. It is in evidence, as seen from the Chemical Examiner's Tour Notes, which have been referred to by the appellants, that some of the physical and mechanical properties of PVC resin are greatly modified by its conversion to PVC compound though, admittedly, no polymerisation or co-polymerisation results nor any change in the structural identity of the polymer molecules. In arriving at an answer to the question whether the conversion of PVC resin into PVC compound amounts to "manufacture" within the meaning of Section 2(f) of the Act, we have the benefit of the judgment of the Bombay High Court in Writ Petition No, 623/79 and other W. Ps. reported in 1983 ECR 1142-D (Bombay). The Gujarat High Court in Vijay Textile v. Union of India, 1979 ELT J-181 had held that the process of bleaching, dyeing or printing of grey cotton fabrics or man-made fabrics did not amount to manufacture of cotton fabrics or man-made fabrics falling under Items Nos. 19 or 22 CET, though they held that the said processes amounted to manufacturing activity attracting excise levy under Item No. 68 CET. After referring to the said judgment, the Bombay High Court, in its judgment referred to above, observed as follows, in Para 9, at 1150-D:- "9...Now, the argument of the learned Counsel for the petitioner is that after bleaching, dyeing, printing and finishing, the product continues to be cotton fabric and, therefore since grey cloth was handed over to the processors, it continues to be cotton fabric even after it is subjected to the other processes. There was no process of manufacture, nor is the printed material product resulting from manufacturing processes. It is undoubtedly true that both printed material and grey cloth could generally be described as cotton fabric but surely, the unbleached grey cloth is not the same cotton fabric as printed cotton fabric. It is difficult to accept the argument that a dyed and printed cotton fabric must be treated on the same footing or indeed as the same article as commonly known as grey cloth.. The use to which the bleached, dyed and printed and finished product could be put to is entirely different or in any case, in addition to the use to which grey cloth could be put. The printed material in its finished form is wholly different from the grey cloth and, in fact, the grey cloth could be treated as the basic material which is subjected to different processes, Admittedly, the printed material is known in the market not by the same name, i.e. "grey cloth". Cotton fabric is merely a genera! description but, there may be various types of cotton fabrics and yet it can never be said that all cotton fabrics are identical or are the same as the base material which was originally given to the processors. On first principles, therefore, we are not inclined to accept the contention of the learned Counsel for the Petitioners that bleaching, dyeing, printing and finishing processes are not manufacturing processes." "Having regard to what we have said earlier, unless it is possible for us to say that a dyed, printed and finished cotton fabric had substantially the same identity as the grey cloth, it would be difficult for us to accept the contention of the petitioners that these processes are not processes of manufacture. As already pointed out, the identity of the final material-which emerged as a result of processing was wholly different and distinguishable from the original grey cloth or cotton cloth." The above decision was, as is clear from the said judgment taken by the High Court on first principles and without taking into consideration the amendments brought about by the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980, by which Section 2(f) of the Act and Items Nos. 19 and 22 were amended with retrospective effect to specifically include the processes of dyeing, bleaching, printing and other processes. We have, therefore, no hesitation in holding that the conversion of PVC resin into PVC compound by the processes employed by the appellants amounts to "manufacture" within the meaning of Section 2(f) of the Act.

14. The next question which arises is whether the resultant substance, PVC compound, is liable to duty under Item No. 15A(l)(ii) of the CET.The learned Counsel for the appellants has referred to the Budget, changes of 1977 and contended that they have not resulted in any difference to the pre-existing position, namely, that PVC compound did not fall within the scope of Item No. 15A(1) (ii) CET.15. The wordings of Item No. 15A, to the extent they are relevant for our present purpose, read as follows :- "15A. Artificial or Synthetic Resins and Plastic Materials and Articles thereof.

(1) Artificial or synthetic resins and plastic materials in any form whether solid, liquid or pasty, or as powder, granules or flakes, or in the form of moulding powders, the following namely:- (i) Condensation, Poly-condensation and polyaddition products, whether or not modified or polymerised, including Phenoplasts, Aminoplasts, Alkyds, Polyamides, Polyurethane, Polyallyl Esters and other unsaturated polyesters; (ii) Polymerisation and co-polymerisation products including polyethylene and Polytetra haloethylene Polyisobutylene, Polystyrene Polyvinyl Chloride, Polyvinyl acetate, Polyvinyl Chloroacetate and other Polyvinyl derivatives, Polyacrylic and Polymethacrylic derivatives and coumarone-Indene resins; and 15A. Artificial or Synthetic Resins and Plastic Materials and Cellulose Esters and Ethers, and Articles thereof- (1) The following artificial or synthetic resins and plastic materials, and cellulose esters and ethers, in any form, whether solid, liquid or pasty, or as powder, granules or flakes, or in the form of moulding powders, namely :- (i) Condensation, Poly-condensation and polyaddition products, whether or not modified or polymerised, and whether or not linear such as Phenoplasts, Aminoplasts Alkyds, Polyamides, Super polyamides, Polyesters, Polyallyl esters, Polycarbonates Polyethers, Polyethylene-imines, Polyurethanes, Epoxide resins and Silicones; (ii) Polymerisation and co-polymerisation products such as Polyethylene, Polytetrahaloethylenes, Polyisobutylene Polystyrene, Polyvinyl Chloride, Polyvinyl acetate, Polyvinyl Chloroacetate and other Polyvinyl derivatives, Polyacrylic and Polymethacrylic derivatives and Coumarone-Indene Resins ; and 16. Shri Mukherjee has drawn our attention to the replacement of the word "including" by the words "such as" in items 15A(1) (i) and 15A(1) (ii). We need not dwell on this point, as nothing in this case turns on it. What is relevant, according to Shri Mukherjee, is the absence of the words "whether or not modified" in Item 15A(1) (ii) in contradistinction to their occurrence in Item ] 5(1) (i). The argument is that modified PVC resin, which is what PVC compound is claimed to be, would not fall within the ambit of Item 15A(1) (ii). Hawley's Condensed Chemical Dictionary has this to say on "Modification" (page 699, Tenth Edition) :- "Modification. A chemical reaction in which some or all of the substituent radicals of a high polymer are replaced by other chemical entities, resulting in a marked change in one or more properties of the polymer without destroying its structural identity. Cellulose, for example, can be modified by substitution of its hydroxyl groups by carboxyl or alkyl radicals along with carbon chain. These reactions are usually not stoichiometric. Their products have many properties foreign to the original cellulose, e.g., water solubility, high viscosity, gel and film-forming ability. Other polymeric substances that can undergo modification are rubber, starches, polyacry-lonitrile, and some other synthetic resins. See also cellulose, modified." Having regard to process of manufacture, the contents of the Chemical Examiner's Tour Note and the above-quoted extracts from the Chemical Dictionary, one may safely conclude that PVC compound is not "modified" PVC resin, i.e. not chemically modified PVC resin. At first sight, therefore, one could surmise that Item 15A(l)(ii) would not cover PVC compound. However, one has to keep in view the opening words constituting the general description of Item 15A(1) which are :- "15A(1), The following artificial or synthetic resins and plastic materials, and cellulose esters and ethers, in any form, whether solid, liquid or pasty, or as powder, granules or flakes, or in the form of moulding powders, namely : - ...".

It is clear from the above that PVC resin in any form, solid, liquid or pasty or as powder, granules or flakes or in the form of moulding powder would be covered within the ambit of Item No. 15A(1). Of course, if it is merely a question of form ('solid, liquid, powder, etc.), it cannot be said that the products are different. They are different forms of the same product. However, when we come to moulding powder or moulding granules, the situation is different. As we have seen earlier, PVC compound or PVC moulding granules are not the same thing as PVC resin. The former product is distinct and different from the latter product. Therefore, we have to conclude that the goods manufactured by the appellants did fall for classification under Item No. 15A(1) (ii).

The absence of the words "modified" in 15A(1) (ii) would not, in our opinion, detract from this position since it is nobody's case that PVC compound is chemically modified PVC resin.

17. The next question that would arise is whether PVC compound made out of duty-paid resin would attract duty again under Item No. 15A(l) (ii).

We must straightaway observe that this is not a case of double taxation in the ordinary understood sense of the term, i.e. taxing the same product twice over under the same tariff entry. The question here is excisability of PVC compound falling under Item 15A(1) (ii) made out of duty-paid PVC resin which also falls under the same sub-item. As we have noticed earlier, the Bombay High Court, in its judgment reported in 1983 ECR 1183-D (Bombay), has held that processed cotton fabrics made out of grey cotton fabrics are excisable under the same tariff item as the latter since a process of manufacture is involved in producing processed fabrics out. of grey fabrics. The situation in the present case is analogous. We do not, therefore, see why PVC compound made out of duty-paid PVC resin cannot be subjected to excise duty under the same tariff sub-item as the PVC resin. In fact, it is precisely to mitigate the rigours of multiple-stage taxation that Rule 56-A finds a place in the Central Excise Rules and we must take judicial notice of the fact that goods falling under Item No. 15A of the CET have been notified by the Central Government as eligible for availment of the benefits of Rule 56-A.18. We do not see any substance in Shri Mukherjee's contention that Notification No. 206/77 dated 29-6-1977 exempting PVC compound from excise duty was really unncecessary [since PVC compound did not fall under Item 15A(1) (ii)] for the reason that we have already held that PVC compound did fall under 15A(1) (ii).

19. We also do not see any force in Shri Mukherjee's contention that since no polymerisation or co-polymerisation takes place nor any chemical changes in the process of conversion of PVC resin into PVC compound, no process of "manufacture" takes place. We have already held that the conversion process amounts to "manufacture" and that PVC compound is different from PVC resin.

20. Shri Mukherjee has referred to the judgment of the Bombay High Court in India Plastic Corporation Pvt. Ltd., reported in 1983 ELT 425.

The question before the Court in that case was whether Phenolic moulding powder would be eligible to the concessional rate of duty for which phenolic resin was eligible in terms of a Central Government Notification issued under Rule 8(1). The Government's contention was that phenolic moulding powder was not phenolic resin but a plastic material. Their Lordships were interpreting an explanation appended to the said Notification which defined the expression "Phenolic Resin".

The Court concluded that the expression would take in chemically or physically modified resin. The said judgment does not seem to have application to the facts and circumstances of the present matter. Nor in our opinion, has the Government of India's decision in revision in the Gramophone Company case, referred to by Shri Mukherjee, apart from the fact that this decision is of no binding effect.

21. Shri Mukherjee's submission that the appellants were not using duty-paid PVC resin for the manufacture of "any other commodity" within the meaning of Rule 9 also lacks substance. As we have seen PVC compound is an excisable commodity distinct and different from PVC resin. The fact that the appellants had been captively consuming the PVC compound manufactured by them for production of cables would not detract from the appellants' liability to pay duty on the PVC compound so captively consumed. Any doubts in this regard have been set at rest by the amendments to Rules 9 and 49, to which retrospective effect has been given by Section 51 of the Finance Act, 1982. The validity of this provision has been upheld in the J.K. Cotton Spinning & Weaving Mills case by the judgment of the Delhi High Court reported in 1983 ELT 239.

Though Shri Mukherjee referred to the judgment of the Supreme Court in State of Tamil Nadu v. P.L. Malhotra (Sales Tax cases SC Vol. 37, 1976 p. 319), he did not clarify how the said judgment had application to the facts of the present case. The Court in that case was concerned with certain entries in the list of goods liable to Central Sales Tax.

We have gone through this judgment and we do not think that it has any application to the case before us.

22. In the result, we hold that the PVC compound manufactured by the appellants out of duty-paid PVC resin was liable to be charged with excise duty under Item No. 15A(1) (ii) of the Central Excise Tariff from 18-6-1977 to 28-6-1977 when it was exempted from duty by Notification No. 206/77. The orders appealed against are upheld and the appeal is rejected.

23. I regret my respectful inability to agree with my learned colleagues on the issues arising in this Appeal.

24. The material facts do not require to be repeated. Admittedly, P.V.C. resin, duty paid in terms of item 15(A)(1) (ii) of the 1st Schedule to the Act, was processed into a substance called "P.V.C.compound" which was, as observed by the chemical examiner, none other than a modified form of P.V.C. resin itself" obtained without bringing a change in the structural identity of the polymer molecules".

Nevertheless, for the purpose of the determination of the issues of manufacture and leviability to duty, I am willing to assume the concession of the learned Counsel that the product was moulding granules. Still, I cannot help conclude that, for one thing, there has been so "manufacture" and for another, even if there be a manufacture, the legislative intent to levy duty all over again in terms of the same item under which the P.V.C. resin was already assessed to duty, is not manifest in the 1st Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act).

25. It is excisable goods produced or manufactured in India that are subjected to levy of Excise at the rates set forth in the First Schedule to the Act. (Sec. 3 of the Act). "Excisable" goods are also those specified in the 1st Schedule to the Act. Once, therefore, an article is, admittedly, named or clearly described or defined in the 1st Schedule, it becomes assessable to duty, provided the intent of the legislature in regard to its levy is manifest, regardless of whether there has been, indeed, a "manufacture" as understood in law, and the product is known in the market. ( AIR 1973 S.C. 2333 - Union of India v. H.U.F. business known as Ramlal Mansukh Raj). The question as to whether there has been a "manufacture" in the sense that a new product comes into existence having a distinct name, character and use in the market becomes germane in a case where there is a doubt or dispute regarding the identity of the product with the description in the 1st Schedule like in the DCM case (Union of India v. Delhi Cloth Mills- 1978 ELT 121). Even when such an issue becomes relevant, one should remember that it is not every change that can be "manufacture" regardless of the actual process-sophisticated or otherwise-so that either a single or multiple levy, as the case may be, is attracted. It should be a change that amounts to a transformation, bringing into existence a new and a different article, having a distinct name, character and use and, necessarily, assessable to duty in terms of one or the other of the entries in the 1st Schedule. Obviously, if the new and different article is not assessable under any of the items of the 1st Schedule-as it could have happened prior to the introduction of item 68-or even thereafter, if not produced in a factory, there could be no levy.

(a) in a taxing statute; the objects of taxation, the charge to duty, the quantum of levy and the factors which condition the levy have all to be specified with precision so as to leave no room for doubt or dispute. For (i) "in a taxing statute, one has merely to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used [Justice Rowlatt in Cape Brandy Syndicate v. I.R.C. (192) 1KB 65 at 71-approved by Viscount Simon, L.C. in Candian Eagle Oil Co.

v. R.-(1946) AC. 119] ; (ii) "in interpreting a fiscal statute, the Court cannot proceed to make good deficiencies if there may be any ; the Court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer" [C.A. Abraham v. I.T.O. Kottayam- AIR 1961 S.C. 609 at p. 612]; (iii) to cite Lord Russel of Kilowen, "I confess that I view with disfavour the doctrine that in taxation cases, the subject is to be taxed, if, in accordance with the Court's view of what it considers the substance of a transaction, the Court thinks the case that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of the case" [Inland Revenue Commissioners v. Duke of Westminister-1916 AC 1 at 24] ; and (iv) if there is any ambiguity of language in a fiscal statute, benefit of that ambiguity must be given to the assessee [Commissioner of I.T. v. Karamcnand Premchand Ltd., Ahemadabad-AIR. 1960 S.C. 1175 at 1182== 1960(3) S.C. 727 at 742].

(b) in specifying the objects of levy, the device of an inclusive definition is, at times, made use of to "enlarge the words or phrases occurring in the statute ; and when it is so used, these words or phrases must be construed as comprehending not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include" [per Lord Watson in Dilworth v. Commissioner of Stamps-(1899) A.C. 99 at pp. 105, 106-and cited in p. 270 of Maxwell on Interpretation of Statutes-12th Edition] ; (c) on the contrary, the use of the expression, "the following, namely" is restrictive of a general category or description, otherwise wide in its scope and amplitude, to one or more specific object, or objects, class or classes, falling within the general category or description.

We are not merely to pay lip service to these principles of interpretation of fiscal statutes, but apply them to a construction of the definitions of the objects of levy as well as the rates of levy specified, all in the 1st Schedule to the Act.

27. Once an inclusive definition is made use of to enlarge the meaning of a word or words generally descriptive of an item in the First Schedule, or, when the amplitude of a word or words of general description restricted to those specified, does it follow that each of those sought to be included, or, as the case may be, specified or singled out of a word or words of general description becomes, straightaway and without more, subject to levy in a taxing statute To put it differently, does mere inclusion in a general description or particularisation from out of it amount to a charge and levy of duty not only once qua the product conforming to the general description but again as the specific goods either included in or particularised out of the general description ?Golden Paper Udyog Ltd. v. Collector of Central Excise (a) the object sought to be either included within (or for that matter, singled out from) a word or words of general description in a definition are identifiable as no other than the things conforming to and comprised within the word or words of general description.

They are not anything other than what the word or words of general description usually signify in their natural import or comprehended within their scope in accordance with the legislative intent expressed in the definition ; (b) thus, when paper board is subjected to the various treatments (like for e.g. corrugation or bituminisation), the resulting product does not cease to be paper board in terms of the inclusive definition thereof in item 17(2) of the Schedule ; (c) when such paper board is already duty paid, there is no legislative intent, categorically manifest that it should be again levied to duty unlike "cotton fabrics", (to cite but one example), in item 19 of the Schedule, as it reads now, wherein each separate product in the inclusive generic description of "cotton fabrics" is separately made exigible to duty.

29. Another Bench, consisting of three learned Brothers of this Tribunal, considered the identical issue in 1983 ECR 1349 [Golden Udyog Ltd. v. Collector of Central Excise = 1983 (2) ETR 355] wherein they cited with approval the earlier decision in 1983 ELT 1123 and followed it, again unanimously.

(a) It may be mentioned that when we decided the case reported in 1983 ELT 1123, the Division Bench ruling in the case of Vijay Textiles (1979 Cencus 145) was not cited by us.

(b) It would, however, appear that the ratio of the said decision is substantially identical to our decision in 1983 ELT 1123.

(c) Amongst the cases cited with approval in the Vijay Taxtiles case and followed were- (i) (1974) 15 G.L.R. 161 (DB) (Extrusion Processes Pvt. Ltd. v. H.R. Jadhav), wherein it was held that painting and lacquering did not involve further extrusion of completely extruded aluminium tubes within item 27 of the 1st Schedule. Nor did such process of painting or lacquering amount to manufacture of aluminium tubes extruded or otherwise ; (ii) (1906)2 K.B. 352 (Monical v. Pinch) wherein it was laid down that a process enhancing the sweetness of sachharin did not amount to manufacture thereof since it was "Sachharin before it was treated and Sachharin after it was treated" ; and (iii) interestingly enough, a ruling of a Division Bench of the Bombay High Court in 1977 ELT 34 (Empire Dyeing and Manufacturing Co. v. V.P. Bhide) holding, inter alia, that- "Admittedly in this case, duty of excise is claimed against the petitioner Company on the basis that the goods processed by the petitioner Company, were cotton fabrics not otherwise specified thus falling in sub-item (5) of Item 19. The goods are the same as have been subjected to payment of excise duty when they were released from the factories of the manufacturers. In respect of the goods which have already borne excise duty and do not fall into a different item of excisable goods in the First Schedule, it is impossible that duty could come again to be levied and/or recovered." (i) in terms of Item 19 of the 1st Schedule to the Act (as it read at the relevant time) the goods in question remain even after the processing the same as "cotton fabrics" [i.e. woven material as defined in 1977 ELT 24 (Union of India & Ors. v. Gujarat Woollen Felt Mills] speaking in terms of excisable goods. "Processing did not involve any further manufacture of the woven stuff or woven substance : there is no specific mention in the inclusive definition so far as processed cloth is concerned" in item 19 (para 17 of the Judgment), following the ratio of a Division Bench of the Bombay High Court in 1977 ELT 34 (Empire Dyeing & Mfg. Co. Ltd. v. V.P. Bhide); (ii) the levy of excise duty on the basis that the various processes amounted to manufacture was ultra vires and contrary to law and the petitioners are entitled to the refund of the excess duty paid during the period of three years immediately preceding the filing of the writ petition over what they were bound to pay on the footing that processing of cotton fabrics is an excisable activity covered by Item 68 of the 1st Schedule ; (e) It is not understood, with respect, however, how, once it was held that processing of cotton fabrics was not either a manufacturing activity or a taxable event, duty could still be lawfully collected under Item 68 of the 1st Schedule as observed by the learned Chief Justice.

30. It was as a sequel to the decision in Vijay Textiles case that on 24-11-79, the Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979 was promulgated which was later on enacted as the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980 (hereinafter called the Amending Act). By the Amending Act, which was retrospective w.e.f. 1st March, 1955, not only was the word "manufacture" redefined, specifically, in relation to goods comprised in Item No. 19(1) of the 1st Schedule so as to include within its compass various processes like bleaching, mercerising, dyeing, printing, water proofing, etc. but Item No. 19(1) was itself substituted. "Cotton fabrics" (excluding embroidery in the piece, in strips, or in motifs as well as fabrics coated, laminated with preparations of cellulose derivates or other plastic materials) the generic description was particularised and classified separately into unprocessed cotton fabrics and processed cotton fabrics and they were brought separately to levy of duty. Thus the legislative intent to- (a) declare each of the various processes specified as a separate manufacture in itself; and (b) levy duty upon the unprocessed cotton fabrics as well as each of the processed cotton fabrics separately, became categorically manifest, even though the inclusive definition of cotton fabrics in item 19 was retained. In effect, therefore, after the amending Act, while "cotton fabrics" had been inclusively defined (by the retention of item 19} and levied to duty as unprocessed cotton fabrics,- (c) certain specified processes carried out on the basis cotton fabrics had been each declared to be a separate manufacturer in itself; and It is a clear manifestation of the legislative intent to levy duty twice over- once on unprocessed cotton fabrics and again as processed cotton fabrics, if any of the processes specified is carried out.

31. Once the aforesaid legislative changes had been effected with retrospective effect, specifically to overcome the aforesaid decision of the Gujarat High Court in the case of Vijay Textiles, one would have thought it to be totally unnecessary to consider or canvass against the said decision. Nevertheless in 1983 ECR 1142 (New Shakti Dye Works Pvt.

Ltd. & Ors. v. Union of India), a Division Bench of the Bombay High Court considered the decision in Vijay Textiles case and disagreed with the ratio thereof on the grounds that- (a) the Gujarat High Court had itself proceeded on the footing that the processes of bleaching, dyeing, etc. are manufacturing processes and held that excise duty would be leviable under Item No. 68 of the 1st Schedule ; (b) the aforesaid processes must be described as manufacturing processes ; (c) the decision of the Gujarat High Court in 1979 ELT 380 (Extrusion Process Pvt. Ltd. v. H.R. Jadhav) cannot be of any assistance because it bears no similarity to the instant case ; (d) when by the Amending Act, Item No. 19(1) was substituted in place of the original entry it was not any longer necessary to amend further the definition of the expression 'cotton fabrics' in Item No. 19. What the Parliament has done is that though the meaning of the expression 'cotton fabrics' is not changed in Item No. 19, two different kinds of cotton fabrics have been specified as excisable articles and when clauses (a) and (b) of 19(1) referred to cotton fabrics they are undoubtedly cotton fabrics covered by Item No. 19 and when it comes to specifying the duty the entries independently refer to cotton fabrics not subjected to any processes and cotton fabrics subjected to different processes. Excise duty payable on these cotton fabrics have been separately specified.

32. With the utmost respect, one might submit that, in the circumstances and in view of the observations summed up in para 10(d) supra, the discussion and the reasons expressed for disagreement [barring sub-para (d) of para 10 supra] with the ratio of Vijay Textiles case would appear to be in the nature of obiter. Further they appeared to ignore the categorical finding that the processes did not involve manufacture. Nor does it appear that the ratio of the Division Bench of the Bombay High Court itself in 1977 ELT 34 which was relied upon by the Gujarat High Court considered, distinguished or over-ruled.

33. In the circumstances, one would be reluctant, again with respect, to follow the ratio of the Bombay High Court in New Shakti Dye Works v.Union of India in preference to the decision of the Gujarat High Court in the case of Vijay Textiles. In my opinion, (i) an inclusive definition is used, or, for that matter, certain specific goods are singled or carved out of a generic description in a manner restrictive of its scope and amplitude ; (ii) the goods so included in a definition or singled out of a generic description are, accordingly, in so far as the first Schedule is concerned, identified with the definition or generic description ; each of the processes employed to convert goods from one form into another within the inclusive definition or generic description is not "manufacture", since the goods originally conformed to the definition or description and still do, notwithstanding the change in form after the process. The change effected by the process in such a case does not take them out of the inclusive definition or generic description, in so far as the first Schedule is concerned ; (b) when duty had, previously, been paid in respect of such goods qua goods conforming to the inclusive definition or generic description, duty cannot be levied all over again-just because of change in form within the definition or description-unless the legislative intent to bring such products to duty is clearly manifest like in items 3, 19, 20, 21, 22, 28, 37A, etc ; and (c) a contrary interpretation of a fiscal legislation will fly in the face of all the canons of interpretation summed up in para (4) supra.

34. (a) A perusal of item 15(A) of the 1st Schedule on and from 18-6-77 would reveal that- (i) the broad generic description of the objects of levy is synthetic resins, plastic materials, cellulose esters, ethers and articles thereof; (ii) from out of the amplitude of the generic description certain goods conforming to two different classes-condensation products and polymerisation products, are singled out for levy regardless of form-whether solid, liquid, or pastry, or as powder, granules, or flakes, or in the form of moulding powder.

(b) When P.V.C. resin-a polymerisation product, duty paid in terms of item 15(A)(1) (ii)-changes merely its form into P.V.C. compound or moulding granules, [there was, in accordance with the chemical Examiner's opinion, no change in the structural identity of the polymer molecules], it is still P.V.C. resin. The change in form makes no difference in the identity of the goods in so far as the first Schedule is concerned. Consequently, every time there is a change, from solid to liquid or from liquid to powder or granules, it is not as if there has been a "manufacture". The process employed is of no significance whatsoever. One cannot ignore the words "in any form" and conclude that whenever there is a change in the form there is a manufacture, although the product chemically retains its identity all the time and in terms of the description, it is still P.V.C. resin.

(c) Indeed, my learned colleagues concede that "if it were merely a question of form (solid, liquid, powder, etc.) it cannot be said that the products are different" (para 16 of the order of the majority). It is inscrutable, however, what esoteric reasoning compelled a contrary conclusion in regard to moulding powder or granules, notwithstanding the clear and categorical language of item 15A(1) ("in any form, whether solid...or as powder, granules or flakes, or in the form of moulding powders), the legislative mandate to disregard the form and the chemical Examiner's report. The length or the complication or the sophistication involved in the process cannot render the conversion a "manufacture" ; nor the difference in names, regardless of the legislative declaration equating one with the other. The difference in name, character and use is irrelevant, moulding powder and granules specifically having, been mentioned in the 1st Schedule as a form of polymerisation product-P.V.C. resin.

(d) in 1983 ELT 425 [Industrial Plastic Corporation (Pvt.) Ltd. v. Union of India], it was held that the addition of fillers does not render the resulting powder to be anything other than phenolic Resin. The decision does not seem to be inapplicable merely because it was a case of an interpretation of a notification, containing an explanation of the expression "phenolic resins". What we are concerned with is the finding of the Bombay High Court to the effect that the addition of fillers to a phenolic resin to make moulding powder does not render the product any different from Phenolic resin.

(e) We had ourselves held, following the aforesaid decision, that moulding powder was none other than a phenolic resin in Appeal ED(SB); No. 835/80-C [Plastic Powders (P) Ltd. v. Collector of Central Excise]. We have no reason to hold the contrary view in this case.

(f) Nor is the legislative intent to bring to levy the products, every time there is a change in form, manifest. Quite to the contrary.


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