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2015 (4) TMI 356 - SUPREME COURT

2015 (4) TMI 356 - SUPREME COURT - 2015 (318) E.L.T. 538 (SC), 2015 (4) SCR 437, 2015 (13) SCC 166, 2015 (6) JT 168, 2015 (5) SCALE 59 - Manufacture - packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of 'Rice and Spice'. - Classification under Heading 11.01 or under sub-heading 21.08 - Held that:- it is clear that there is no dispute about the legal proposition that the process would be treated as “manufacture” only if new product known to the market comes .....

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hich contains cooking instructions. Reading thereof amply demonstrates that it is to be cooked in the same form as any other rice is to be cooked. Therefore, we do not agree with the CEGAT that there is a transformation into a new commodity, commercially known as distinct and separate commodity. - Activity undertaken by the assessee does not amount to manufacture, this appeal is liable to succeed on this ground itself inasmuch in the absence of any manufacture there is no question of payment .....

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manufacture' as the essential characteristics of the product, still remains the same, namely, rice, a natural corollary would be that it continues to be the product of the milling industry and would be classifiable under sub-heading 11.01. Rate of duty on this product, in any case, is 'nil'. - Decided in favour of assessee. - Civil Appeal No. 8958 of 2003 - Dated:- 18-3-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Appellant : M/s. L.Charanaya, V.Lakshmikumaran,M. P. Devanath,Vivek Sh .....

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ppeals) who had upheld the Order-in-Original dated 17.3.1999 passed by the Additional Commissioner pursuant to show cause notice dated 4.8.1997 issued by him. In the said show cause notice the Additional Commissioner had proposed to classify the product of the appellant/assessee under Heading 2108 of the Central Excise Tariff Act, 1985, as Miscellaneous Edible preparation not elsewhere specified or included. It may be stated that assessee is engaged in the packing combination of mixture of raw r .....

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mixed product is the packed in pouches with Nitrogen flushing for a longer shelf life . The defence putforth by the assessee to the show cause notice issued by the Additional Commissioner was that the aforesaid process does not amount to manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944. It was also argued that, in any case, the product was not classifiable under Heading 2108 of the Central Excise Tariff Act, 1985 as claimed by the Revenue but it should be cove .....

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d by the Commissioner (Appeals) as well as by CEGAT. Ms. Charanaya, the Learned counsel appearing for the appellant argued before us that the authorities committed serious error in holding the aforesaid process of the assessee as manufacturing process . Her arguments was that from the reading of the process described above, it would be manifest that it only involved mixing of raw rice, dehydrated vegetable with some spice and did not bring about any new product. It was submitted that the aforesa .....

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ently for approximately 15 minutes or until all water is absorbed. It was further submitted that there was no new product which came into existence as that product was still known as rice which did not lose its essential character and therefore it could not be treated as manufacture'. In support the aforesaid submission Ms. Charanya referred to certain judgments which shall be discussed by us at the later stage. In support of her other submission viz. that the product would still be classifi .....

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, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the go .....

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equally merit consideration. Mr. A.K. Sanghi learned senior counsel appearing on behalf of the Revenue, countered the aforesaid submission by pointing out that a specific finding was arrived at by the Tribunal, affirming the finding of the quasi-judicial authorities below to the effect that a new product had come into existence as a result of the processes undertaken by the assessee. It was specifically held by the CEGAT that rice did not remain rice at all as a mixed product containing rice, ve .....

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he trigger point for the levy of excise duty under the Excise Act. He further submitted that in view of the aforesaid, viz. coming into existence a new product, that particular edible product had to be fallen under Chapter 11 of the Tariff as it is not a product of milling industry not classifiable under Chapter 11 of the Tariff. From the aforesaid arguments advanced by counsel on the either side, it is clear that there is no dispute about the legal proposition that the process would be treated .....

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, is Crane Betel Nut Powder Works vs. Commissioner of Customs, Central Excise, Tirupathi (2007 (210) ELT, 171 (S.C.). In the said case the assessee was engaged in the business of marketing betel nuts in different sizes after processing them by adding essential/nonessential oils, menthol, sweetening agent etc. Initially, the assessee cleared the goods under Chapter Sub-heading 2107 of the Central Excise Tariff and was paying duty accordingly. However, the assessee filed a revised classification d .....

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of betel nuts into smaller pieces did not bring into existence a different commodity which had a distinct character of its own. Though the authorities below had decided against the assessee, this Court reversed the said view holding that the said process would not amount to manufacture' as the process involving manufacture does not always result in the creation of a new product. In the instant case notwithstanding the manufacturing process, it could not be said that a transformation had tak .....

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. General Mills Ltd. (supra) and the passage from the American Judgment (supra) become meaningful. The observation that manufacture implies a change, but every change of not manufacture and yet every change of an article is the result of treatment, labour and manipulation is apposite to the situation at hand. The process involved in the manufacture of sweetened betel nut pieces does not result in the manufacture of a new product as the end product continues to retain its original character thoug .....

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the manufacture of a new product as the end product continued to retain its original character. Another judgment which was referred to by learned counsel for the appellant is Commissioner of Central Excise vs. Laljee Godhoo & Co. (2007 (216) ELT 514 (S.C). Vide this judgment the Court affirmed the view taken by the CEGAT, holding that the process of subjecting raw asafoetida (hing) resulting in formation of compounded asafoetida does not amount to manufacture, even when this process has unde .....

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oo & Co. vs. Commissioner of Central Excise, Mumbai (2001 (132) ELT 287 (S.C.). The process noted in the judgment of the CEGAT runs thus: The gum Arabic and wheat flour are blended in the sigma mixers. Filtered water mixed asafoetida is then poured slowly into the mixer over the gum and wheat flour. This gets the product ready. Further the resultant product is given a heat treatment by suction in pipes through which a heater is attached and the moisture is sucked out. The powder is then pass .....

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aluminium trays and dried for a day before it is packed in cartons. We would like to reproduce para 5 of the order of the CEGAT, since this judgment was upheld by this Court in the said case. This para is to the following effect: It is common ground that the processes to which the raw asafoetida is subjected, resulting in the lump or powder which is sold does not bring about any chemical change in the asafoetida.The process, as we have seen, is nothing more than the addition to the asafoetida o .....

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hter flavour is desired. The essential character of the product therefore does not change. It is used in both its concentrated and blended form only as an addition to food preparation, flavouring agent or for the medicinal properties that it is reputed to possess. Again the test which was applied was that essential character of the product did not change and, therefore, it would not amount to manufacture. It was so held even when gum arebic as well as wheat flour were mixed in the process. A per .....

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ons the pineapple fruit used to be sliced and the slices were filled in canes after adding sugar as preservative. Thereafter, canes would be sealed under temperature and then put in a boiled water for sterlisation. Identical question was posed viz. whether this process amounted to manufacture'. Giving the answer in the negative, the Court held that even when with each process suffered, the original commodity experienced a change, such a change would not amount to manufacture' unless it s .....

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goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed th .....

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iginal commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity. 5. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied: Does the processing of the original commodity bring into existence a commercially different and distinct article ? Some of th .....

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rading Co. Karnal v. State of Haryana and Another, (paddy dehusked into rice). On the other side, cases where this Court has held that although the original commodity has undergone a degree of processing it has not lost its original identity include Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool (where hydrogenated groundnut oil was regarded as groundnut oil) and Commissioner of Sales Tax, U.P., Lucknow v. Harbiles Rai and sons (where bristles plucked from pigs, boiled, .....

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ntion as well by observing that the process undertaken by the assessee may have made value addition to the product but the essential character of the product did not undergo any change, which is the determinative factor, inasmuch as pineapple remained the pineapple; albeit in slice form and continued to be known as pineapple in the market. For this proposition the Court decided to rely upon a foreign judgment where the U.S. Supreme Court had held that dressed and frozen chicken was not a commerc .....

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the change which takes place in milk from pasteurising, homogenizing, adding vitamin concentrates, standardizing and bottling . It was also observed: ……………………there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton seed, as well as the d .....

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r on use. And further: At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been manufactured. The comment applies fully in the case before us. Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter .....

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It is said that pineapple slices appeal to a different sector of the trade and that when a customer asks for a cane of pineapple slices he had in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the essential identity of the two, but is derived from the mere form in which the fruit is desired. Learned counsel for the Revenue contends that even if no manufacturing process involved, the case still f .....

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roduct has undergone certain process, would not bring it within the definition of 'manufacture' unless its original identity also under goes transformation and it becomes a distinctive and new product. When we apply the aforesaid principle to the facts of this case, it is clear that mere addition of dehydrated vegetables and certain spices to the raw rice, would not make it a different product. Its primary and essential character still remains the same as it is continued to be known in t .....

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