TMI Blog1976 (7) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... xcises and Salt Act, 1944. The contention of the Petitioners being that Cocoa powder in item I-A which is liable for excise is flavoured and blended cocoa powder known to the trade as such and unblended and unflavoured powder of cocoa bean which is sought to be made liable for the payment of excise duty under Item I-A is not known to the trade as cocoa powder and is not in excisable item and was not therefore liable for excise duty. On the other hand, it is contended by the Respondents that since the said unblended or unflavoured cocoa powder was a marketable product, it being imported into India and hence sold in India it was liable to excise duty under the said Item I-A. 3. A few relevant facts to appreciate the said rival contentions are as follows : - The Petitioners factory manufactures amongst other things, two food products derived from cocoa beans viz. chocolates and food drinks such as cocoa powder, drinking chocolate and Bournvita. The basic law material for the manufacture of these products is cocoa-beans which at all times relevant have been imported by the Petitioners from abroad. After their importation, the following process in the order mentioned is applied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. Item I-A of the Schedule to the Central Excises and Salt Act, 1944, as amended on 1st of March, 1970, read as follows : - CONFECTIONERY, COCOA POWDER AND CHOCOLATES IN OR IN RELATION TO THE MANUFACTURE OF WHICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER, NAMELY - (1) Boiled sweets, toffees, caramels, candies, nuts, (including almonds) and fruits kernels coated with sweetening agent, and chewing gums.... 10 percent ad valorem (2) Cocoa Powder........ 10 percent ad valorem (3) Drinking chocolates, chocolates in the form of granules or powder 10 percent ad valorem (4) Chocolates in the form of blocks, slabs, tablets, bars, pastilles or croquettes, or in any other form, not elsewhere specified, whether or not containing nuts, fruit kernels, or fruits 10 percent ad valorem 6. By an order dated 1st September, 1971 the Assistant Collector of Central Excise rejected the Petitioners contention as regards the said powder not being known in the market as cocoa powder and could not be liable for excise levy and held that the said unblended and unflavoured cocoa powder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, if no duty was paid on such cocoa powder, it will go outside the excise net. He further held that even on the product manufactured for captive consumption, duty was levied. The said Revisional Authority, however, did not even refer to the various affidavits filed by the Petitioners or deal with the Petitioners contention that the said item cocoa powder is to be given the trade meaning which has flavoured and blended cocoa powder . 10. The Petitioners have, therefore, filed this Petition, challenging the validity of the said orders on various grounds mentioned in paragraph 11 of the Petition. The main ground being (1) that the expression cocoa powder used in the said Item I-A has not been defined in the said Tariff and must, therefore, be interpreted in the light of the meaning given to it in the trade, that the expression cocoa powder as understood in the trade means a product which is flavoured and blended and that the said product being unblended or unflavoured cocoa powder was not known in the trade as cocoa powder, and therefore, was not liable for excise duty, (2) that the test of marketability as applied by the authorities to the said product for brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, the said item I-A covered all sorts of cocoa powder blended or not, sweetened or not or flavoured or not. 11. Broadly speaking, the main question involved in this case is; What test is to be applied to determine the meaning to be given to the excisable article cocoa powder found in item I-A, the petitioners contended that the term cocoa powder to be excisable has to be understood in the same manner as it is understood by the trade and: The test that was applicable was that of the common commercial sense in which it is understood in trade by purchasers and consumers. As against this, it is contended by the Respondents that test to find out whether the item on which excise is sought to be levied as being included in Schedule, was to find out whether it was marketable. 12. Item I-A with which we are concerned, relates to confectionery, cocoa powder and chocolates in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power viz. (1) Boiled sweets, toffees, caramels, candies, nuts etc. (2) Cocoa powder, (3) Drinking chocolates, chocolates in the form of granules or powder, and (4) Chocolates in the form of blocks, slab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the relevant document, inasmuch as the chemist and laboratory expert may attribute to it a meaning different from that which the lay mind would adopt. As has been said, the chemical contents of the petroleum and the natural gas found in the field are the same, and regarded scientifically, the substances are, therefore, the same. But a scientific similarity of substance does not establish that the materials are themselves rightly to be described by the same name. The proper approach, says the appellant, is to ascertain the meaning of the word in the mouths of those non-scientific persons who are concerned with its use, such as landowners, business men and engineers, and to be guided by them as to the true construction of the reservation. The vernacular, not the scientific, meaning is, he maintains, the true one, and in support of this contentions, he calls attention to the observations of Lord Halsbury, L.C., in Glasgow Corporation v. Farie (1), when he says of mines and minerals, that, in construing the expression, it has to be determined what these words mean in the vernacular of the mining world, the commercial world and landowners at the time when the grant is made. This m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power . According to the Respondents, however, in the course of the manufacture of Vanaspati, i.e. the vegetable product from raw groundnut and til oil, the Petitioners brought into existence at an intermediate stage after carrying out some processes with the aid of power, a product which was known to the market as refined oil , which falls within the Item 23 of the Schedule, and was therefore, liable for excise duty. 18. The Supreme Court firstly held that the fact that the substance produced by Petitioners at an intermediate stage is not put in the market would not make any difference, if from the raw material has been brought into existence a new substance by the application of processes one or more of which are with the aid of power and that substance is the same as alleged by the Respondents refined oil as known to the market, an excise duty may be leviable under Item 23. However, as regards the question whether the intermediary brought into existence, was refined oil as alleged by the Respondents, so as to be liable to excise duty under Item 23, the Court observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et to be bought and sold . This decision, in my view, puts beyond pale of doubt, that while interpreting the meaning of the word in a taxing statute, the court has to look to the meaning given to the expression in the commercial world and not its technical or scientific meaning or even a dictionary meaning. 21. The next decision is in case of The Commissioner of Sale Tax, Madhya Pradesh, Indore, v. Messrs. Jaswant Singh Charan Singh, reported in A.I R. 1967 Supreme Court 1454. That was the matter under M. P. General Sales Tax Act, and the items concerned there were charcoal and coal. The question was whether the charcoal was covered under Entry I of Part III of Schedule II to the M.P. General Sales Tax Act, 1958; which provided Sales Tax payable on coal at the rate of 2 per cent or whether it was liable for sales tax under Entry I of Part VI of Schedule II to the said Schedule which provided for payment of sales tax on other goods not included in Schedule I or any other part of the Schedule at 4 per cent. While trying to find out under which of the said entry charcoal would be liable for sales tax, the Supreme Court, following the aforesaid decision of the Canadian High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied. While negativing the contention of the Department, the Court observed as follows :- The Act charges duty on manufacture of goods. The word manufacture implies a charge but every change in the raw material is not manufacture. There must be such a transformation that a 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 that 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. That it would be such an article which would attract the Act was brought out in Union of India v. Delhi Cloth and General Mills Ltd., 1963 Supp (1)) SCR 586 - (AIR 1963 SC 791). In our view, the gas generated by these concerns is kiln gas and not carbon dioxide as known to the trade, i.e. to those win deal in it or who use it. The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract Item 14-H in the First Schedule . ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be mined. There is a good deal of force in the argument of Mr. Setalvad for the appellant that the normally acceptable merchantable quality of Wolfram or tungsten contains a minimum 65% WO 3. This is the usable ore and it is in that sense that it is commercially understood. Wolfram ore when mined contains only .5 to 2 per cent WO3 and in order to make it usable and merchantable ore with minimum 65% WO 3, concentration is necessary. If Item 26 of the Import Tariff is to be restricted to Wolfram being material containing .5 to 2 per cent WO 3 it would be mainly rock which can neither be imported in large quantity and which will have no market. The separating of Wolfram ore from the rock to make it usable ore is a process of selective mining. It is not a manufacturing process. The important test is that the chemical structure of the ore should remain the same. Whether the ore imported is in powder or granule form is wholly immaterial. What has to be seen is what meant in international trade and in the market by Wolfram ore containing 60% or more WO3. On that there is a preponderating weight of authority both of experts and books and writings on the subject which show that Wolfram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olours used in Entry No. 10 and the words scents and perfumes used in Entry No. 37 have to be construed in their own context and in the sense, as ordinarily understood and attributed to these words by people usually conversant with and dealing in such goods. Similarly the words food colours and syrup essences which are descriptive of the class of goods the sales of which are to be taxed under the Act have to be construed in the sense in which they are popularly understood by those who deal in them and who purchase and use them . (Emphasis supplied). 28. Reliance was also placed on certain observations of the Supreme Court in case of Madras Rubber Factory Ltd. v. Union of India and Others, reported in 1976 S.C.C. 242. In that case the Supreme Court had observed that while interpreting the meaning of the words in a Taxing Statute, the acceptance of a particular word by the trade and its popular meaning should commend itself to the authority . 29. The next Supreme Court decision in that connection relied upon by the Learned Counsel for the Petitioners is in the case of Messrs. Healthwave Dairy Products Co. v. The Union of India and others, reported in (1976) 2 Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excises and Salt Act is not an Act applied to any particular science or art but is a general statute, whose object is to raise revenue and for this purpose to classify substances according to general usage and known denomination of trade and, therefore, the proper ride of construction applicable in respect of the items or entries OCCURING IN Schedule I to the said Act would be that these items or entries inclusive of the words and expressions comprised in sub-clauses thereof will have to be construed not in the scientific or technical or laboratory sense but in the sense which person dealing with or commercially conversant with those items or sub-items would attribute to them. It is true that several words and expressions occurring in sub-clauses (i), (ii) and (iii) of item 15A(1) are high sounding, jaw-breaking and unpronounceable words from layman s point of view but from such appearance these words it cannot be concluded that these are scientific or technical terms and the true criterion would be whether these words and expressions are well known to and are freely used by manufacturers, traders and dealers in that line as if they have become common place words of everyday use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Ors. reported in A.I.R. 1975 Supreme Court, 1492, to show that the ordinary meaning is to be given to the expression used under the Central Sales Tax Act. In that case a notification exempted milk and milk products such as Chhena, Dahi, Khoa, Butter and Cream, but excluding (i) products sold in sealed containers (ii) Sweet meats and (iii) ghee from duty . In that case, the Petitioners had sold the product included in the said entry in containers which were soldered and not sealed and on that ground had claimed exemption. The Supreme Court negatived the said contention by observing :- All that the notification stales is that products sold in sealed containers must sail out of the harbour of exemption. The simple question is this: Was the sale of cream? Yes. Was it, when sold, packed in containers which were sealed? Yes. On these two affirmative answers the exclusion from the exemption operates . 36. That decision has no reliance to the question before me particularly because, what the Supreme Court was concerned in that case was to find the meaning of the word sealed and not with the meaning of any excisable item in the Schedule. 37. The above cited decisions, in my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Revisional Authority who have in their orders applied the test of marketability have decided the matter by applying a wrong test and their orders therefore cannot be sustained in law. This is more so in the case of the revisional order passed by the Joint Secretary to the Government of India, who had passed the order holding the said goods viz. unblended and unflavoured cocoa powder as liable for excise duty mainly relying on the marketability test by completely ignoring the several affidavits filed by the Petitioners before him to show how the said word Cocoa Powder was understood in trade, viz., it covered only flavoured and blended Cocoa powder, and further, on a strange reasoning that if no duty was paid on cocoa powder, it would go outside the excise net. 42. Dealing further with the merits, it may be first pointed out that as laid down by Supreme Court in the case of Deputy Commissioner of Agriculture Income-tax and Sales Tax Quilon v. Travancore Rubber and Tea Co., reported in 20, Sales Tax Cases at page 520, in all cases of taxation the burden of proving the necessary ingredients laid down by law to justify taxation is upon the taxing authority. In this case if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The said Entry also cannot help Learned Counsel for the Respondents in his contention. Firstly, it does not indicate whether cocoa powder referred to therein was unblended and unflavoured cocoa paste or otherwise. Moreover, apart from that the said entry cannot be of help in determining the com mercial or trade meaning in India of the said goods cocoa powder . 45. As against this, the Petitioners had produced before the Revisional Authority certain materials by way of affidavits, to substantiate their said contention that in trade only the flavoured and blended cocoa powder is known as cocoa powder referred to in item I-A. It would be proper to see whether the said material can be said to substantiate the Petitioners said contention. The Petitioners had filed five following affidavits :- (1) The first affidavit was of one K. K. Kapoor, Export Manager of the Petitioner Company. According to him, in International Trade and parlance, the word Cocoa Powder meant flavoured and blended cocoa powder packed in proprietory packs. Cocoa Powder without flavouring and blending is not a recognised article of consumer purchase and would not be accepted by the export markets again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them against import licence, and asking the Petitioner Company to process the same for them into cocoa powder, and that the cocoa powder that they buy from the Petitioner company was flavoured and blended cocoa powder, and they did not know of any other form of Cocoa powder . (5) The last one was the affidavit of one Dr. Dinanath V. Rege, attached to the Department of Chemical Technology of the University of Bombay, in its Food Technology section. He has pointed out that the unflavoured and unblended cocoa powder was pulverised or powdered form of cocoa cake after it was broken up. Cocoa cake is obtained from cocoa beans which were roasted, kibbled, winnowed for shell separation, ground, treated and pressed. At that stage, the pulverised cocoa cake is bitter and unpalatable. As far as he was aware, such pulverised cocoa cake was not capable of being consumed directly and in fact is not being so consumed. In his opinion, the pulverised cocoa cake cannot be regarded as Cocoa Powder as known to the trade, and so far as he was aware, pulverised cocoa cake without being flavoured and blended cannot be used and is never used as a food drinks; that it can be and is only used as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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