S.H. Sheth, J.
1. Sabarkantha District Co-operative Milk Producers' Union Ltd. (hereinafter referred to as the 'Sabar Dairy') is the petitioner. It challenges in this petition the demand made by the central excise authorities for payment of excise duty on the whole milk powder produced by it from natural milk. It is not in dispute that the whole milk power is subject to central excise duty under Tariff Item 1B in the First Schedule to the Central Excises and Salt Act, 1944. Indisputably, 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, as the case may be.
3. Mr. Nanavati has contended before us that Sabar Dairy is not liable to pay central excise duty on the whole milk powder under Tariff Item 1B because it pays central excise duty under Tariff Item 1B or 1C on the skimmed milk powder and butter (as the case may be) which are produced out of it. The contention which Mr. Nanavati has raised is not well-founded. Two mechanical processes are applied to produce two commodities at two different times. By one mechanical process, whole milk powder is manufactured. Manufacture of whole milk powder is itself the manufacturing event. Therefore, upon the whole milk powder, the petitioner must pay central excise duty under Tariff Item 1B. The second manufacturing event takes place when the whole milk powder is ultimately converted into skimmed milk powder as well as butter. In view of the fact that two manufacturing processes are applied at two different times which bring into existence two different sets to products which are distinct in character and which are also known in the market by different names, central excise duty is attracted to all of them under the relevant Tariff Items. The petitioner, therefore cannot argue that since it has been paying central excise duty on the skimmed milk powder and butter under Tariff Item 1B or 1C as the case may be it is not liable to pay central excise duty on the whole milk powder under Tariff Item 1B.
4. Mr. Nanavati has further argued that the whole milk powder is not directly 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 taxable because it is an intermediate product and not a final product. Secondly, if the regenerated fluid milk is not an intermediate product but a final product, then if will fall under Tariff Item 1B. Such a milk, however, has been exempted from taxation under Notification No. 185 of 1975 C issued on 30th August 1975. We have, therefore, no doubt in our minds that whereas the regenerated fluid milk is not taxable either because it is an intermediate product or, if it is not so, it is covered by the exemption notification, the whole milk powder as the skimmed milk powder and butter which are distinct products, brought into existence by applying different mechanical processes at different times, are all taxable the first under Tariff Item 1B and the second and third under Tariff Item 1B or 1C as the case may be.
5. It is necessary to not the following facts in this connection. Natural milk is a bio-chemical product of a cow or a buffalo. We are not concerned in this case with milk of other animals. The whole milk powder is natural milk application of a mechanical process. The regenerated fluid milk is not the natural milk. It is the whole milk powder and application of another mechanical process or it is natural milk application of one mechanical process at one time application of another mechanical process at a different time. The regenerated fluid milk undergoes a further mechanical process and is divided in two parts (i) watery milk and (ii) fat. Production of the skimmed milk powder and butter means application of fourth mechanical process to the last products watery milk and fat.
6. Therefore, whole milk powder means natural milk application of one mechanical process while skimmed milk powder and butter mean natural milk application of four mechanical processes. They are distinct commercial commodities known in the market.
7. Our attention has been invited by Mr. Nanavati to the decision of the Andhra Pradesh High Court in The Andhra Pradesh Dairy Development Corporation Pvt. Ltd. v. Union of India and Another, 1976 Taxation Law Reports 1976. The question which the learned single Judge of that High Court was required to answer was different. In that case, the whole milk powder was manufactured out of natural milk and, therefore, it was regenerated into fluid. The question which arose was whether the regenerated fluid milk was liable to excise duty. The learned single Judge answered the question in the negative. That view is quite sound. That is our view also. The liability to pay central excise duty is attracted again in the instant case because the regenerated fluid milk is subjected at a different time to a further mechanical process by which skimmed milk powder and butter are produced.
8. We, therefore, find no substance in this petition. The petition is dismissed. Notice is discharged.