1. Messrs Bapalal and Co. (Manufacturing) is the petitioner herein. The petitioner firm has been registered as a partnership firm under the Indian Partnership Act in 1933, the registration number being No. 63 of 1933. In the same year another partnership firm was also registered under the name and style of M/s. Bapalal and Co. (Diamonds) with registration number 64 of 1933. The respective registration certificates were issued by the Registrar of firms as M/s. Bapalal and Co. (Manufacturing Department) and M/s. Bapalal and Co. (Diamonds Department). According to the petitioner excepting for the fact that certain partners are common, the partnership firms are two independent and distinct entities. Though both the firms are situate in the same premises, they function separately. M/s. Bapalal and Co. (Diamonds) supply raw materials such as diamonds and gold to the petitioner and the latter manufactures the jewellery by setting the diamonds in gold. It returns the diamonds and gold received from M/s. Bapalal and Co. (Diamonds) in the form of diamond jewellery such as necklaces, ear studs and nose screw. The petitioner in return receives labour charges from M/s. Bapalal and Co. (Diamonds). Similarly, the petitioner does job work for private customers who supply the petitioner with diamonds and gold and charges them for the manufacture of the jewellery. Apart from the job work that is done by the petitioner for M/s. Bapalal and Co. (Diamonds) and private customers, it receives gold ornaments and silverwares manufactured in workshops situated in Bombay, Calcutta, Coimbatore, Delhi, Kanwar, Mangalore, Marmagoa, Kumbakonam etc. and affixes its seal on these ornaments and then sells them in the open market. Admittedly as on 28-2-1975, the petitioner had a factory which was power operated one, employing more than 20 workmen. In view of the fact that the petitioner's manufactory fell within the meaning of 'factory' the articles of jewellery manufactured by the petitioner became assessable to excise duty.
2. The Central Excise Tariff Item No. 68, reads as follows :-
'68. All other goods not elsewhere specified manufactured in a factory but excluding -
(a) alcohol, all sorts, including alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics, and
(c) dutiable goods as defined in S. 2(c) of the Medical and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).
Explanation. - In this item, the expression 'factory' has the meaning assigned to it in S. 2(m) of the Factories Act, 1948 (63 of 1948).'
Notification No. 119 of 1975, dated 30-4-1975 issued by the Government of India reads as follows :-
'The goods falling under item No. 68 of Tariff in respect of goods manufactured in a factory as a 'job work' from so much of the duty of excise leviable thereon as in excess of the duty calculated on the basis of the amount charged for the job work.
Explanation. - For the purpose of this notification, the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier after the articles have undergone the intended manufacturing process as charging only for the job work done by him.'
3. The petitioner took advantage of the Notification No. 119 of 1975 and claimed before the respondent that it was liable to pay duty only on the basis of the amount charged for the job work done by it for M/s. Bapalal and Co. (Diamonds) and other private customers. As regards the gold jewellery and silverware which were bought from other manufacturers and sold by the petitioner with its seal affixed, the petitioner contended that such items of jewellery and silverwares were not dutiable as it did not manufacture the said articles.
4. The third respondent the Assistant Collector of Central Excise, Madras did not accept the stand of the petitioner. On 22-6-1976 he passed an order stating that the petitioner was liable to pay excise duty at 1% under tariff item 68 of the invoice value of the jewellery manufactured at the instance of M/s. Bapalal and Co. (Diamonds) and also on the invoice value of the jewellery and silverware manufactured outside and bought and sold by it. The Assistant Collector took the view that the crude diamonds supplied by M/s. Bapalal and Co. (Diamonds) did not undergo any further manufacturing process at the hands of the petitioner. As regards the gold ornaments and silverware manufactured outside and sold by the petitioner, the third respondent held that such articles were manufactured by the petitioner. Against the said order the petitioner preferred an appeal to the Appellate Collector of Customs and Central Excise, Madras. The appeal was dismissed by the Appellate Collector, the second respondent herein, on 27-10-1976. The Appellate Collector took the view that the petitioner firm and M/s. Bapalal and Co. (Diamonds) had common partners. Though two licences were issued in 1963 under the Gold Control Act, later there was only one common licence under the Gold Control Act and another licence under the Central Excise Act. Further, there was unit of management and control and that the petitioner firm was part and parcel of M/s. Bapalal and Co. (Diamonds). As regards the other items of gold jewellery and silverware, the second respondent took the view that such items were being manufactured by the petitioner in view of the fact the seal of the petitioner was affixed on those articles. The petitioner filed a further revision before the Government of India which was also dismissed on 25-2-1978. The revision authority took the view that both the firms were being treated as one and the same and consequently the petitioner was not entitled to the concession under the notification. It further held that the petitioner by affixing its seal on the articles must be deemed to be manufacturing the other items of jewellery and silverware. Hence this writ petition.
5. It is not disputed that the petitioner firm has been registered in the Register of Firms as M/s. Bapalal and Co. (Manufacturing Department) with the registration No. 63 of 1933. M/s. Bapalal and Co. (Diamonds) has been registered separately with the registration No. 64 of 1933. It is admitted that the petitioner firm has nine partners, while M/s. Bapalal and Co. (Diamonds) has six partners. Six partners are common to both. It is not disputed that for the purpose of sales tax and income tax the two firms are considered and treated as different entities. For the purpose of sales tax M/s. Bapalal and Co. (Diamonds) is given No. CST 1367 and TNGST No. 23746, while the petitioner is given No. CST NM 1370 and TNGST 23501. These facts clearly show that the two firms are distinct and separate entities. No doubt, both the firms hold a common licence under the Gold Control Act, and the Central Excise Act and some of the partners are common. However, these facts cannot in any manner prove that the two firms are one and the same. As a matter of fact Mr. Balasubrahmanian did not seriously contend that the petitioner and M/s. Bapalal and Co. (Diamonds) are one and the same. I have therefore no hesitation in holding that the two firms are not one and the same but are independent of each other.
6. The next question for consideration is whether the petitioner is entitled to the benefit of Notification No. 119 of 1975. For the purpose of attracting the Notification No. 119 of 1975, the following essentials are required : (1) The article must be supplied to the job worker for the purpose of being subjected to a manufacturing process; (2) The article must be returned by the job worker to the supplier after it had undergone the intended manufacturing process; (3) The job worker must charge only for the job work done by him. From the very wording of the Notification itself it follows that the concerned article must undergo manufacturing process at the hands of the job worker. While the petitioner's case is that M/s. Bapalal and Co. (Diamonds) supplies both diamond and gold for being covered into jewellery, the respondents have admitted that only diamonds are supplied by the said firm to the petitioner and that the gold belongs to both. In the order passed by the respondents as well as in the counter affidavit filed in this court one of the contentions taken is that no manufacturing process is involved in the act of cutting and setting diamonds in gold and converting them into diamond necklaces or ear-stud or nose screw. It is not possible to accept this contention. Admittedly diamonds in crude form are handed over by M/s. Bapalal and Co. (Diamonds) to the petitioner firm. The said diamonds are cut, set in gold and converted into diamond jewellery such as necklaces, ear-studs and nose-screws. The articles of diamond jewellery that are manufactured by the petitioner are entirely different articles and have no identity with the crude diamond which was originally handed over to the petitioner. As a matter of fact, Mr. Balasubramanian, the learned Standing Counsel for the respondents, did not take the contention before me that the diamonds supplied by M/s. Bapalal and Co. (Diamonds) do not undergo any manufacturing process at the hands of the petitioner.
7. The contention of Mr. Balasubramanian are as follows :- The petitioner and M/s. Bapalal and Co. (Diamonds) owned a common licence under the Gold Control Act. Consequently, the gold purchased by them belong to both. M/s. Bapalal and Co. (Diamonds) was supplying only diamonds, the petitioner used its own gold and with the aid of the crude diamonds that were supplied by M/s. Bapalal and Co. (Diamonds) the petitioner was manufacturing diamond jewellery. The learned counsel contended that a process of manufacture was involved in the conversion of crude diamond into diamond jewellery. But according to the learned counsel the petitioner is not entitled to the benefits of the Notification No. 119 of 1975 since the petitioner uses its own gold in the manufacture of the diamond jewellery.
8. On the other hand, Mr. V. P. Raman, learned counsel for the petitioner, contended that gold was owned separately by both the firms. The petitioner had no right or interest over the gold possessed and owned by M/s. Bapalal and Co. (Diamonds). The common licence held under the Gold Control Act was only for the purpose of convenience. The learned counsel further argued that the books of account of the two firms would show that the gold was owned by them separately. Once it is found that the two firms are distinct and separate it has to be held, in the absence of any evidence contra, that the petitioner has no manner of right to the gold owned by M/s. Bapalal and Co. (Diamonds). In this context, it should not be forgotten that it was not the case of the respondents that even though the two firms were different and distinct entities they owned the gold in common and since the petitioner manufactured diamond jewellery with the common gold, it must be deemed to be manufacturing diamond jewellery and not doing only job work and therefore was not entitled to the benefit of the Notification No. 119 of 1975. On the other hand, it was the definite case of the respondents that both the firms were one and the same and therefore the petitioner would not be entitled to take advantage of the said notification. Once it is found that the two firms are separate and distinct it must naturally follow that one firm has no right over the gold owned by the other. It is therefore clear on the facts and circumstances of the case that what is supplied by M/s. Bapalal and Co. (Diamonds) to the petitioner is not only diamond in crude form but also gold. The petitioner merely applies its labour and converts them into diamond jewellery for which act of conversion it receives labour charges from M/s. Bapalal and Co. (Diamonds). No attempt has been made by the respondents to show that the petitioner firm is not only billing for the labour charges for the job work done by it, but also for the value of the gold used in the making of the diamond jewellery. It therefore follows that in converting the diamond into diamond jewellery the petitioner is only doing a job work as is contemplated under Notification No. 119 of 1975. Hence the petitioner is entitled to the benefit of the notification.
9. The next question for consideration is whether the gold jewellery and silverwares purchased by the petitioner firm from outside dealers and stamped with its marking and sold will attract excise duty. It is not in dispute that so far as these items of jewellery are concerned, the petitioner firm purchases them from manufacturing in Bombay, Calcutta, Coimbatore, Delhi, Kanwar, Mangalore Marmagoa, Kumbakonam etc. The petitioner firm then stamps those jewellery with its own seal and then sells them in the open market. Mr. V. P. Raman's contention is that in stamping these gold jewellery and silverwares with its seal no manufacturing process is involved and consequently such articles cannot be subjected to excise duty in the hands of the petitioner firm. On the other hand, Mr. Balasubramanian contended that even though these items of jewellery were manufactured in other workshops yet by affixing its seal the petitioner must be considered to be doing an act which is necessary for the completion of manufacture and therefore it must be deemed to be manufacturing these articles. The Central Excises and Salt Act, 1944 gives an inclusive definition of the word 'manufacture'. S. 2(f) defines 'manufacture' thus - '. v. Union of India - 1978ELT(J 18). The learned Judge had to consider the question whether packing of the fertiliser lying in stock with the petitioner could be regarded as a process incidental or ancillary to the completion of the manufactured product. The learned Judge observed as follows :-
'In my opinion packing cannot be so regarded. The expression 'completion of the manufactured product' would in my opinion mean subjection of a product which, though answering to the description of the name by which it is sold in the market but is yet in a crude form, to processes which may raise its quality. Such processes would include those meant for purification, colouring and otherwise beautifying the end product. But then such proceses must be limited to the process of manufacture properly so called. In this view of the matter, processes which are incidental or ancillary not the manufacturing process but to the process of sale of the end product would not fall within the definition of 'manufacture' appearing in clause (f) above extracted. Thus the mere transfer of the end product into containers which can be handled conveniently, the sealing of such containers with the object of preservation of the end product and ensuring that they would not be subjected to adulteration easily and of putting marks or labels on the containers with the object of identifying the end product and enhancing the goodwill of the manufacture would not form part of manufacture. In this view of the matter, the fact that Section 13 of the Fertiliser (Control) Order, 1957 enjoins a particular type of packing for the fertiliser before it is sold and the stage at which excise duty shall be collected on fertilisers are wholly irrelevant for they do not determine whether packing is a process of manufacture. This interpretation finds support from the judgment in Amar Dye Chem. Ltd., Bombay v. Union of India, Spl. C.A. No. 2070 of 1963, dt. 18-1-1965 decided by Chainani, C.J. and Gonala, J. of the Bombay High Court. In the result I hold that the goods in question were not subjected to any process of manufacture by the petitioners after 28-2-1969, that on that date they were lying with the petitioners in the form of chemical fertilisers fully manufactured and that no excise duty was leviable in respect thereof.'
The same principles are applicable to the facts of this case. Admittedly, the articles of jewellery and silverware at the time they are received by the petitioner from outside, are in a manufactured state. The petitioner affixes its seal to the said articles only for the purpose of identifying and enhancing the goodwill of the product. In the circumstances, the process of stamping the jewellery and silverware with the seal of the petitioner cannot be said to be incidental or ancillary to the completion of the manufactured product. I therefore hold that the petitioner is not liable to pay excise duty on these items of jewellery and silverware.
10. In the result, the writ petition is allowed; the orders of the respondent are quashed but under the circumstances without costs.