9911796707
TMI Blog2019 (7) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... . The petitioner therein, a company incorporated under the Companies Act, 1956, carries on business in the manufacture of turpentine, rosin and its derivatives. It runs a unit where raw pine resin is processed by distillation for producing derivatives viz., rosin and turpentine. The raw pine resin, collected from pine trees, is used as a raw material in the industrial unit belonging to the first petitioner. The forest department, of the State of Uttarakhand, collects raw pine resin through its contract labour, and sells it to processing units, in a public auction, in its natural form. 2. Pursuant to an auction notice, issued by the Divisional Forest Officer, District Almora, the first petitioner participated in the auction held at the Resin Depot, and a number of lots of pine resin were purchased by them. After being informed by the Resin Depot Officer that e-auction sale of certain lots had been confirmed in their favour, the first petitioner was asked to deposit certain amounts which included Excise Duty. They were not permitted by the Forest Department to lift resin, and Central Excise Duty and Education Cess was insisted on being deposited. The petitioner claims not to have an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners, the material put to auction is raw pine resin which is a naturally growing forest produce, and is collected from pine trees; the forest department, in order to ensure that the forests are properly protected and to maintain forest hygiene, collect pine resin in its crude form every year, and put it to auction; this forest produce is sold by the forest department in an open auction, and is purchased by processing units for producing resin based products; the first petitioner uses raw pine resin for distillation and production of various end products, including rosin and turpentine oil etc; the respondents had misconstrued the provisions of the Central Excise Act, and were claiming that raw pine resin is an excisable good under Section 3 of the Central Excise Act; merely because some resins are mentioned in Chapter 13 of the 1st Schedule to the Central Excise Tariff Act, does not mean that raw oleo pine resin also becomes dutiable; to term a product, as having been produced, it is necessary that there must be an element of volition or effort in its coming into being; imposition of excise duty, on raw resin purchased by the first petitioner, is without authority of law; tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffort or volition. 6. In his counter affidavit the Assistant Commissioner, Customs and Central Excise, Haldwani stated that, in terms of Entry 84 of List I of the Union List, Section 3 provides for levy and collection of a duty of excise on all excisable goods which are produced or manufactured in India; the word "manufacture" is different from the word "produced"; the word "production" has a wider connotation than the word "manufacture"; while every manufacture can be characterized as production, every production need not amount to manufacture; the word, "produced" or "production", also takes in all by-products, intermediate products and residual products, which are dutiable even if they are not manufactured as they are produced; the word 'produced' is used to cover goods like tobacco, tea, coal, ores, lac, gum resin and other vegetable saps/extracts etc, though no manufacturing process is carried on; and excise duty can, therefore, be levied on goods which are produced. 7. It is further stated in the counter-affidavit that, although pine resin oozes out of pine trees, it cannot be exploited without involving human effort/volition or skill (which is by the rill method fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auction; the petitioners were not permitted to lift the resin, as the Forest Department had insisted that they pay excise duty before lifting the resin; and, since excise duty was actually levied by the Central Excise Department, they were made party to the Writ Petition. The learned Single Judge, thereafter, observed that the word "manufacture" and 'produce' have been used in juxta-position to each other; it was contended on behalf of the petitioner that, irrespective of whether there was a process of 'manufacture' or 'production', the product undergoing this process must come out as a 'new product' before excise duty can be levied on it; reliance was placed on Commissioner of Income Tax, Orissa & others Vs. N.C. Budharaja & Company & others, 1993 AIR(SC) 2529 which elaborately dealt with the phrase 'manufactured or produced articles', which occurred in Section 80-HH and Section 84 of the Income Tax Act; the question whether construction of a dam amounted to either 'manufacture' or 'production' was examined; and, while holding that it did not, the Supreme Court held that 'production' had a wider connotation than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned from demanding central excise duty. 11. Elaborate oral and written submissions were made both by Mr. Shobhit Saharia, learned counsel appearing on behalf of the appellant-Central Excise Department and Mr. Sandeep Narain, learned counsel appearing on behalf of the respondent-writ petitioners. It is convenient to examine the rival submissions, urged by learned counsel on either side, under different heads. I. ARE THE RESPONDENT-WRIT PETITIONERS ENTITLED TO QUESTION LEVY OF EXCISE DUTY ON OLEO-PINE RESIN : 12. Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that the assessee (i.e. the Forest Department) has not assailed or challenged the levy of Excise duty; it is only the respondent-writ petitioners, the subsequent purchasers of excisable goods, who have assailed the action of the assessee in including excise duty in the auction price; the respondent-writ petitioners lack locus-standi to file the writ petitions, as they are only prospective buyers who, admittedly, participated in the auction process with their eyes open, and without demur or protest; the terms and conditions of the auction notice provide for levy of excise duty; th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their Counsel during the final hearing of the writ petition; no such objection was raised in any of the grounds of the present Special Appeal; and the objection to the locus of the respondent-writ petitioner, to maintain a Writ Petition before this Court, is therefore liable to be rejected. Learned counsel would place reliance on I.D.L. Chemicals Ltd. Vs. Union of India & Ors., 1996 5 SCC 373 and Indian Explosives Ltd. Vs. Commissioner, Sales Tax, U.P. & Ors., 1978 41 STC 315. 14. Before examining the aforesaid contentions, it is useful to note the law declared in the judgments on which reliance is placed by learned counsel on either side. In I.D.L. Chemicals, 1996 5 SCC 373, a notification was issued by the Central Government exempting ammonium nitrate from excise duty, if it was intended to be used in the manufacture of explosives, provided the procedure set out in the Central Excise Rules were followed. The Central Board of Excise and Customs opined that ammonium nitrate, hitherto classified as a "fertilizer", was not known as a fertilizer in commercial parlance, and should be assessed under Tariff Item 68. The Superintendent, Central Excise demanded excise duty from the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a party to the proceedings, it was a person aggrieved as the burden of tax was ultimately borne by it; it could not be said that the petitioner is a rank stranger; and it would, therefore, intervene to do justice between the parties ex debito justitiae. 16. On the other hand, in Uttar Pradesh State Road Transport Corporation, 2011 15 SCC 451 , the jurisdiction of the Allahabad High Court was invoked contending that no service tax could be imposed by the Central Excise department on the buses hired by the appellant, as no service tax was imposed on the buses owned and possessed by them; and similar treatment should also be afforded to the buses hired by them. The Allahabad High Court dismissed the writ petition holding that the appellant was not the aggrieved party, and could not come to the aid of private bus operators, so as to stall the endeavour and effort of the Central Excise department in collecting service tax from private bus operators, although the same had been hired by the appellant. In appeal, the Supreme Court noted that no notice was issued by the Central Excise department to the appellant demanding payment of service tax from them; according to the revenue, the lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue that the challenge to the locus standi of the respondents writ petitioners, to question the levy of excise duty on oleo-resin extracted from pine trees, was put forth by the appellants only during the course of hearing of these appeals. This question, however, relates to the jurisdiction of this Court, in exercising its discretion, to entertain such Writ Petitions. While excise duty was levied by the appellants on the producer of oleo-pine resin i.e. the Forest department, excise duty, being an indirect tax, was passed on by the Forest department to the subsequent purchasers, including the respondents-writ petitioners. The liability of the Forest department to pay excise duty is statutory in nature, and the obligation of the subsequent purchasers, such as the respondents-writ petitioners, is contractual in character. The assessee, which is liable to pay excise duty to the Union of India, is entitled to pass it on to the subsequent purchaser of the goods produced by it. Excise duty would, thereby, form part of the price at which the said goods are sold to the subsequent purchasers. Whether such goods should be purchased at a higher price (i.e. the sale price inclusive of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts-writ petitioners were aware, when they submitted their bids, that excise duty at 16%, with surcharge of 2%, would be added to the bid amount. It was always open to them, if they were of the view that the price of oleo-pine resin inclusive of excise duty was too high, not to participate in the auction. Having purchased oleo-pine resin with the knowledge that excise duty would be levied thereupon, the respondents-writ petitioners cannot now be heard to contend that the liability fastened on them is too heavy, and they are therefore entitled to question the levy of excise duty by the Central Excise Department on the Forest department of the Government of Uttarakhand. 22. Article 265 of the Constitution of India, to which a reference is made on behalf of the respondents-writ petitioners, stipulates that no tax shall be levied or collected except by authority of law. In the case on hand, levy of excise duty and its collection by the appellant is not from the respondents-writ petitioners, but from the Forest department. While it may have been open to the Forest department to question the levy of excise duty on them, on the ground that such a levy violates Article 265 of the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Parliament is not to restrict levy of excise duty only when the original commodity is used in a process where a new commodity comes into existence, and to levy excise duty only on the new commodity. 25. On the other hand Sri Sandeep Narain, learned counsel for the respondent writ petitioners, would submit that the words, "produced or manufactured", used in Entry 84 of List I to Schedule VII of the Constitution, and in Section 3(1)(a) of the Excise Act, should be read in the context of the Statute (Excise Act), the nature of the tax that it seeks to levy, and the object sought to be achieved by the charging provision of that particular statute; and the words "produced" and "manufactured" cannot be read in isolation from each other so as to mean that every "produce" or every "manufacture" would attract levy of excise duty. (a) "EXCISE DUTY" : ITS MEANING : 26. Before examining the meaning of words "manufacture" and "production", let us take note of what the words "excise duty" mean, as it is this duty/tax for which a law can be made under Entry 84 of List I of the VII Schedule, or is levied under Section 3(1)(a) of the Excise Act. "Excise duty" is an "indirect tax" on comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed with a tax upon sales or the proceeds of the sale of goods. (G.G. in Council v. Madras Province,1945 72 IndAp 91 LR; Chirukandan, 1984 15 ELT 7; In re the Central Provinces and Berar Act No. XIV of 1935,1939 FCR 18; and R.C. Jall Parsi, 1962 AIR(SC) 1281). 29. A duty of excise is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, i.e. its ultimate incidence is always on the consumer. The said tax can be levied at a convenient stage so long as the character of the impost is not lost. [R.C. Jall Parsi, 1962 AIR(SC) 1281 ; Boddu Paidanna,1942 FCR 90; Union of India & others vs. Bombay Tyre International Ltd. & others, 1984 1 SCC 467]. Duties of excise, as in the case of taxes on sale, are attracted by an industrial or trading activity. (Dennis Hotels Proprietary Limited Vs. The State of Victoria and Anr. , 104 CLR 529 ; Chirukandan, 1984 15 ELT 7). The taxable event, in the case of duties of excise, is not directly on the goods, but on the activity i.e. the manufacture or production thereof. Though both excise duty and sales-tax are levied with reference to the goods, the two are very different imposts; in one case the imposition is on the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excise on tobacco and other goods manufactured or produced in India. (Collector of Central Excise, Hyderabad & others vs. M/s Vazir Sultan Tobacco Co. Ltd., Hyderabad, 1996 3 SCC 434). In construing the words "manufacture" or "produced", appearing in Entry 84 of List I of the VII Schedule, we must bear in mind that Entry 84 is a head of legislative power. The rules which apply to the interpretation of other statutes apply equally to the interpretation of a constitutional enactment, subject to this reservation that their application is of necessity conditioned by the Constitution itself. A word appearing in the Constitution must not be construed in a narrow and pedantic sense. (Naveenchandra Mafatlal, Bombay Vs. Commissioner of Income Tax, Bombay, 1955 AIR(SC) 58; The Central Provinces and Berar Act No. XIV of 1938,1939 FCR 18). That they should be read in their ordinary, natural and grammatical meaning, is subject to this rider that, in construing words in a Constitutional enactment conferring legislative power, the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. (Naveenchandra Mafatlal, 1955 AIR(SC) 58; In re The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de of the subjects with which it purports to deal in very few words, should be given a large and liberal interpretation., Edwards Vs. Canada, 1930 AC 124; In the matter of Central Provinces and Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938, 1939 AIR(FC) 1]. 34. It is a salutary rule that words, conferring the right of legislation, should be interpreted liberally and the powers conferred should be given the widest scope. (Diamond Sugar Mills Ltd. & Anr. Vs. The State of Uttar Pradesh & anr., 1961 3 SCR 242 ; New Manek Chowk Spinning and Weaving Mills Co. Ltd. and Ors. Vs. Municipal Corporation of the City of Ahmedabad and Ors., 1967 AIR(SC) 1801). While a broad and liberal spirit should, no doubt, inspire those whose duty it is to interpret it, but they are not free to stretch or pervert the language of the Constitution in the interests of any legal or constitutional theory, or even for the purpose of supplying omissions or for correcting supposed errors. (In re. Central provinces and Berar Act No. XIV of 1938,1939 FCR 18; New Manek Chowk Spinning and Weaving Mills Co. Ltd., 1967 AIR(SC) 1801). An obsolete or watertight compartmentalization of the heads of the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise Act), and in Section 3(3)(b)(i) whereunder different tariff values may be fixed for excisable goods of the same class or description produced or manufactured by different classes of "producers" or "manufacturers", but also in the proviso to Section 3(3) of the Excise Act. Section 5A of the Excise Act, which confers power to grant exemption from excise duty, uses the words "produced or manufactured" in its proviso. These words are also found in sub-section (a) of Section 6 of the Excise Act, which relates to registration of certain persons; in Section 11A(3)(ii)(a) which relates to recovery of duties not levied or short levied; in Section 14AA(1)(a), which relates to special audit in cases where the credit of duty availed or utilized is not within the normal limits; in the definition of 'assessee' in Section 31(a); and in Sections 37(2)(iv), and Section 37(2)(iv)(b) and (c) which relate to the power of the Central Government to make rules. While these words are also used in several of the provisions of the CENVAT Credit Rules, 2004, including in the definition of 'assessee' in Rule 2(c), in Rule 4(1) which relates to a person on whom duty is leviable, and in var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson L.R.,1888 13 AC 603; Competition Commission of India, 2010 10 SCC 744]. 39. Yet another reason why "or" should not be read as "and" is that the duty of the Court is to interpret the word that the legislature has used. Those words may be ambiguous, but, even if they are, the power and duty of the Court to travel outside them on a voyage of discovery are strictly limited. To do so, is a naked usurpation of legislative function under the thin disguise of interpretation. [Standard Chartered Bank and Ors. Vs. Directorate of Enforcement and Ors., 2005 4 SCC 530; Magor & St. Mellons R.D.C. Vs. Newport Corporation, 1951 2 AllER 839 (HL); Punjab Land Development and Reclamation Corporation Ltd. Vs. Presiding Officer, Labour Court, 1990 3 SCC 682]. The maxim 'judicis est just dicere, nor dare' best expounds the role of the Court which is to interpret the law, and not to make it. If the legislation falls short of the mark, the Court can do no more than to declare it as such, assigning reasons, so that the legislature may take notice and remedy the situation. [Standard Chartered Bank and Ors., 2005 4 SCC 530]. 40. The word 'or', as used in Section 3 of the Excise Act, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Ed. Vol. 29 p.23) as a manner of adapting natural material by the hands of man or by man-made devices or machinery, and as the making of an article or material by physical labour or applied power; but "manufacture" is accepted to mean a wider range of industrial activities than such a definition would suggest. It includes articles made in situ as well as articles made in a factory. (Tara Agencies, 2007 214 ELT 491). Manufacture, under excise law, is the process or activity which brings into being articles which are known in the market as goods, and to be goods these must be different, identifiable and distinct articles known to the market as such. (Hindustan Polymers Vs. Collector of Central Excise, 1989 4 SCC 323; Moti Laminates (P) Ltd. Vs. Collector of Central Excise, Ahmedabad, 1995 3 SCC 23). 43. Section 2(f) of the Excise Act defines 'manufacture' to include any process (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, as amounting to manufacture; (iii) which, in relation to the goods specified in the Third Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 239; Union of India Vs. Delhi Cloth & General Mills, 1963 AIR(SC) 791 and South Bihar Sugar Mills Ltd., 1968 3 SCR 21). 46. "Manufacture", which is liable to excise duty under the Excise Act, must bring into existence a new substance known to the market." (Delhi Cloth and General Mills, 1963 AIR(SC) 791). The moment there is transformation into a new commodity commercially known as a distinct and separate commodity, be it the result of one process or several processes, 'manufacture' takes place and liability to duty is attracted. (Empire Industries Ltd., 1985 3 SCC 314). The test is whether the commodity, which is subjected to the process of manufacture, can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. (Deputy Commissioner of Sales Tax Vs. Pio Food Packers, 46 STC 63; N.C. Budharaja & Company & others, 1993 AIR(SC) 2529]. To say that manufacture is complete as soon as, by the application of one or more processes, the raw material has undergone some change is to equate "processing" to "manufacture". The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wider connotation than the word "manufacture". While every manufacture can be characterised as production, every production need not amount to manufacture. (N.C. Budharaja & Company, 1993 AIR(SC) 2529). The word 'produced' includes an activity of manufacturing the materials by applying human endeavour on some existing raw material, but the word 'produce' may include securing certain produce from natural elements, for example, by growing plants on soil, or by operating mines and the like or, for example, by milking the cow the milkman produces milk though he has not applied any process on any raw material for the purpose of bringing into existence the thing known as milk. (Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central, Zone, Ernakulam Vs. Palampadam Plantations Ltd., 1969 3 SCR 674; Tara Agencies, 2007 214 ELT 491). (e) DOES EXTRACTION OF OLEO-RESIN FROM PINE TREES AMOUNT TO "PRODUCTION" : 50. Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that oleo-resin is extracted from pine trees by following a well laid down scientific procedure; and it fulfills the test of marketability; natural oleo-re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acid mixture as a stimulant facilitates a prolonged resin flow and tapping season, resulting in increased resin production and employment to tappers for almost the whole year. (6) it yields about 50% more resin per tree per season. The tools, used in the rill method of tapping oleo-resin, include the bark shaver, the blaze frame, the marking gauge, the groove cutter, the wooden board, the pot, the pot scraper-cum-groove cleaner, the lip, the spray bottle, the freshening knife, the sharpening stones etc. Besides the tools prescribed for tapping in this method, several items of glass-ware and chemicals are required for preparing the acid mixture and its storage. The stimulant used is a 1:1 mixture of dilute sulphuric acid (20%). 53. The steps required for crop setting in the first year tapping are Step 1. Bark shaving:- The loose and rough bark over a surface area of about 45 cm X 30cm above 15 cm from the ground is removed with the bark shaver, leaving 2 mm thick live bark which will facilitate easy and smooth freshening of the blaze. The surface should be very smooth and should look reddish in colour. Step 2. Mark of blaze frame and central groove:- The blaze frame is vertical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. While it does not help in the production of resin, it keeps the resin ducts open facilitating the flow of resin for a longer duration. Freshly blazed rills are treated with acid mixtures by squeezing the plastic bottle sprayer keeping it at an angle of 45 degrees, and 3 to 5 cm away from it and moving its nozzle in a steady motion along the rill. Precautions should be taken to treat the rills properly and uniformly. This is possible only when the acid is discharged from the bottle in the form of a mist. After spraying, the pot should be hung on the nail after removing extra acid from the lips otherwise it will corrode the pots. 55. The mode of resin collection, and central groove cleaning, involves removal of the resin pots from the tree, and thereafter removal of resin from the pot with the help of a scraper and collected in the collection cans or tins. The central groove is also cleaned, after each collection, with a groove cleaner to facilitate smooth running of fresh resin in the resin pot. During the period April to July, when the resin yield is the maximum, the resin should be collected as early as possible to avoid overflow from the resin pot, but the freshening should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as resols under tariff item No. 15A, were not exigible to duty. 59. For articles to be goods, they must not only be "moveable" but also be known in the market as such, and they must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in captive consumption is not determinative, but the articles must be capable of being sold in the market or known in the market as goods. (Bhor Industries Ltd. Vs. Collector of Central Excise, 1990 184 ITR 129 (SC); Moti Laminates, 1995 3 SCC 23). In order to become "goods" an article must be something which can ordinarily come to the market to be bought and sold. (Delhi Cloth & General Mills Co. Ltd., 1997 5 SCC 767; Moti Laminates, 1995 3 SCC 23). The expression "produce or manufacture" means that the goods so produced must satisfy the test of marketability. (Moti Laminates, 1995 3 SCC 23). In the present case, the oleo resin extracted from Pine trees are "moveable goods" which are put to auction by the Forest Department; and the respondent-writ petitioners have, in fact, purchased oleo resin from the Forest Department. Since Oleo Pine Resin has been bought by the respondent-writ petitioners, and has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and crustaceans, mollusks and other aquatic invertebrates, (b) cultures of micro-organisms and other products, and (c) animals of Heading 9508. Chapter 2 relates to meat and edible meat offal. Chapter 3 relates to fish and crustaceans etc. 63. Section II relates to vegetable products. Chapter 4 thereunder relates to dairy produce, birds' eggs, natural honey, edible products of animal origin not elsewhere specified or included. Chapter 5 relates to products of animal origin, not elsewhere specified or included. Chapter 6 relates to live trees and other plants, bulbs, roots and the like. Chapter 7 relates to edible vegetables and certain roots and tubers. Chapter 8 lists edible fruits and nuts. Chapter 9 relates to coffee, tea and spices. Chapter 10 relates to cereals. Chapter 13 relates to lac, gums, resins and other vegetable saps and extracts. Under Tariff Item 1301 9040 are oleo-resins. While oleo-resin of seeds is classified under Tariff Item No. 1301 9041, Oleo-resin of fruits is specified under Tariff Item 1301 90 42, oleoresin of leaves under Tariff Item No. 1301 90 43, oleo-resin of spices under Tariff Item No. 1301 90 44, oleo-resin of flowers under Tariff Item No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were not marketed or capable of being marketed. [Moti Laminates, 1995 3 SCC 23;Hyderabad Industries Ltd., 1999 108 ELT 321); A.P. State Electricity Board Vs. Collector of Central Excise, Hyderabad, 1994 ECR 349 (SC)]. 66. As has been held in Markfed Vanaspati & Allied Industries, 2003 4 SCC 184; B.P.L. Pharmaceuticals Ltd. Vs. Collector of Central Excise, 1995 Supp3 SCC 1 and Wimco Ltd., 1990 184 ITR 129 (SC) ; Ahmedabad Electricity Co. Ltd. & others, 2003 11 SCC 129; Hyderabad Industries Ltd., 1999 108 ELT 321 and , simply because a particular item is mentioned in the First Schedule, it does not become exigible to excise duty. For being exigible to excise duty, excisable goods must satisfy the test of being produced or manufactured in India. Likewise, an article does not become liable to excise duty merely because of its specification in the schedule to the Central Excise Tariff Act unless it is salable and known to the market. [Commissioner of Central Excise, Chandigarh vs. Gurdaspur Distillery, 2008 224 ELT 337 (S.C.)]. 67. We must, however, also bear in mind that the importance of Tariff entries in the First Schedule has been emphasized by Parliament when, in Section 2(f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNDER THE EXCISE ACT? 69. Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that oleo-resin is an excisable good as per Section 2 (d) of the Excise Act, and finds mention in Chapter 13 of the Tariff Act which relates to "lac, natural gums, resins, gum-resin and oleo resins" and are natural oleo-resins; excise duty is leviable also on natural products; accepting the contention, that no excise duty can be levied on natural produce, would render levy of duty on many goods, which are only extracted, tapped and mined, illegal; and this cannot be the legislative intent, as the legislature has repeatedly made a distinction between "Produce" and "Manufacture", and between "Producer" and "Manufacturer". 70. On the other hand Sri Sandeep Narain, learned counsel for the respondent writ petitioners, would contend that the Oleo Resins mentioned in Chapter 13 are those which are extracted after subjecting the raw material to industrial processes; the resin enumerated in the said Chapter 13 are of seeds, fruits, leaves, spices, flowers and roots; oleo resin is extracted from such seeds, fruits, roots and flowers which, upon being crushed, result in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in reading the words "production" in a restricted sense and thereby exclude "natural produce" from its ambit. Reading the word "produced" in Entry 84 of List I in a wide manner to include "natural produce" would not result in its trenching upon any Entry in List II of the Seventh Schedule. We see no reason, therefore, to hold that "natural produce" would not amount to "production of goods". This contention, urged on behalf of the respondent-writ petitioners, also necessitates rejection. V. WOULD APPLICATION OF THE EJUSDEM GENERIS RULE REQUIRE EXCLUSION OF OLEO-RESIN, EXTRACTED FROM PINE TREES, FROM THE AMBIT OF CHAPTER-13 OF THE TARIFF ACT ? 74. Mr. Sandeep Narain, learned counsel for the respondent-writ petitioners, would submit that "Raw Oleo Pine Resin", sold to the respondents, does not fall under Tariff Item 1301.90.49 in Chapter 13 of Schedule I to the Tariff Act; and the term "Other" should be read ejusdemjuris with the other terms under the Head "Oleo Resins" i.e. it should be read and understood as other resins which have been subjected to some processes, and where oleo resin emanates from any other kinds of seeds, roots, flowers etc. 75. In ascertaining the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules of Noscitur a sociisand ejusdem generis should be borne in mind. The Rule 'Noscitur a sociis', according to Maxwell, means that where two or more words which are susceptible of analogus meaning are coupled together they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. (State of Bombay Vs. Hospital Mazdoor Sabha, 1960 AIR(SC) 610; Lokmat Newspapers Pvt. Ltd. Vs. Shankar Prasad, 1999 6 SCC 275; Bharat Heavy Electricals Ltd. Vs. Globe Hi Fabs Ltd., 2015 5 SCC 718; Brindavan Bangles Stores Vs. Asst. Commissioner of Commercial Taxes, 2000 1 SCC 674). The term ejusdem generis, a facet of Nositur a Sociis, means that the general words following certain specific words would take colour from the specific words. (Commissioner of Trade Tax, U.P. Vs. M/s. Kartos International, (Judgment in Civil Appeal Nos.2983-2988 of 2011 dated 06.04.2011) ). Entries in the Schedules of Tax statutes list some articles separately, and some articles are grouped together. When they are found grouped together, each word in the entry draws colour f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction [pgs 830- 831). 'Unless you can find a category' 'there is no room for the application of the ejusdem generis doctrine'. The only test is whether the specified things which precede the general words can be placed under some common category. This means that the specified things must possess some common and dominant feature. (S.S. Magnhild Vs. Mclntyre Bros. & Co., 1920 3 KB 321). 81. To invoke the application of the ejusdem generis rule, there must be a distinct genus or category running through the bodies already named. The specific words must apply not to different objects of a widely differing character but to something which can be called a class or kind of objects. (Rajasthan State Electricity Board Vs. Mohan Lal, 1967 AIR(SC) 1857; Maxwell : Interpretation of Statutes ; United Town Electric Co., Ltd. Vs. Attorney-General for Newfoundland,1939 1 AllER 423 (PC)). The nature of the special words and the general words must be considered before the rule is applied. (Jagdish Chander Gupta Vs. Kajaria Traders (India) Ltd., 1964 AIR(SC) 1882). It is a requisite that there must be a distinct genus, which must comprise more than one species, before this rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods as a result of which a new commodity or new goods come into being; (iv) such new goods or commodities, produced or manufactured by the assessee, do not remain the same as the original goods, and the new product (goods) must have new features distinct from the original product; such new goods, if produced or manufactured, must have a distinct name, character and use which is different from the original goods/product/commodity; it is only then that a duty of excise can be levied on such new goods; collection of natural Oleo Resin, from the barks of Pine trees, by the Forest Department of Uttarakhand, by tapping and/or employing any other method for collection of this naturally oozing resin, does not result either in the "transformation" of oleo pine resin as a result of any human activity, nor does such tapped oleo pine resin differ in its form, character etc., after such collection so as to be called a different product with a different and distinct use in comparison to the natural resin oozing from out of the bark of Pine trees; tapping and collection of Oleo Pine Resin from Pine Trees does not amount to production or manufacture of any "new goods" which are different from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ti Laminates, 1995 3 SCC 23. 86. It is no doubt true that goods are manufactured when there is a change in the form of the goods as a result of which a new commodity or a new good comes into being; such new goods should have a feature distinct from the original product; and it must have a distinct name, character or use which is different from the original goods. These tests may, however, not apply to "production" of goods. As noted hereinabove, while the word "produced" includes an activity of manufacturing material by applying human endeavor on some existing raw material, it would also bring within its ambit securing certain produce from natural elements by applying human endeavor or effort, for the word "production" has a wider connotation than the word "manufacture"; and while every "manufacture" can be characterized as "production", every "production" need not amount to "manufacture". 87. Let us now examine the judgments on which reliance has been placed on behalf of the respondent-writ petitioners. In Chirukandan, 1984 15 ELT 7, the petitioners were required to pay Excise Duty, on the copra consumed in their mills, under the Copra Cess Act, 1979 (for short the "Cess Act"). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad Industries Ltd., 1999 108 ELT 321, the dispute was regarding levy of excise duty on imported asbestos fibre. The assessee also mined asbestos in India, and was made liable to pay excise duty under Tariff Item 22-F. Both these levies were questioned by the assessee, and the Supreme Court held that all that the appellants do is to separate asbestos fibre, from the rock in which it is embedded, by manual and mechanical means; the asbestos fibre, that is so removed from the parent rock is, in every respect, the asbestos that was embedded in it; no process of manufacture can be said to have been employed by the appellants nor is it a new or a distinct commodity realised therefrom; assuming that Tariff item 22F, when it refers to "asbestos fibre and yarn", covers asbestos fibre that has been separated from its parent rock in the manner aforementioned, such asbestos fibre is not the result of a process of manufacture, it is not a new and commercially identifiable article; and it is, therefore, not liable to excise duty. 91. In Minerals & Metals Trading Corporation of India Ltd., 1972 2 SCC 620, the appellant imported wolfram ore on which duty was levied under Article 87 of the Ist Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew and distinct product with a total transformation in the original commodity; the original material used, i.e., the tarpaulin, is still called tarpaulin made-ups even after undergoing the said process; hence, it cannot be said that the process is a manufacturing process; the process of stitching and fixing eyelets would not amount to a manufacturing process, since tarpaulin after stitching and eyeleting continues to be only cotton fabric; the purpose of fixing eyelets is not to change the fabric; even if there is value addition, the same is minimum; and to attract duty there should be a manufacture to result in different goods, and the goods sought to be subject to duty should be known in the market as such. 94. In Moti Laminates, 1995 3 SCC 23, Resol, obtained in a fluid state at a particular stage, was a solution which could be retained only by the addition of some stabilizer or retarder. The assessee used it, in a semi-finished stage without any processing or adding any stabilizer or retarder, for manufacturing laminated sheets; its life was for two or three days and could survive only if it was regulated, and a controlled temperature was maintained, otherwise it got converted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;natural rubber', imported by them, was in issue; and a learned Single Judge of the Madras High Court observed that the fundamental postulate, for levy of excise duty, is that there should be manufacture of the goods in question; in the affidavits filed in support of the writ petitions, the uniform stand taken was that 'natural rubber' does not involve any element of manufacture, and hence it cannot attract the levy of excise duty; in the counter affidavits, filed by the respondents, there was no rebuttal of these specific averments made by the petitioners in their affidavits; and hence it was proper for the Court to accept the unrebutted case of the petitioners that obtaining natural rubber did not involve any element of manufacture to attract the levy of excise duty. 98. In Venkateswara Hatcheries, 1999 3 SCC 632, the assessees were running hatcheries where eggs were hatched on a large scale. They claimed that, since they were industrial undertakings engaged in the business of producing articles or things, they were entitled to investment allowance and other deductions under the Income-Tax Act. The Supreme Court opined that the provision, giving benefit to those wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the mills, which the Supreme Court held was an essential and integral part of manufacture. Reliance placed by Mr. Sandeep Narain, learned counsel, on MRF Limited, 1987 32 ELT 465 (Mad), Venkateswara Hatcheries, 1999 3 SCC 632 andChirukandan, 1984 15 ELT 7, to contend that Oleo Resin, extracted from a pine tree, does not amount to production of goods on which excise duty can be levied, is misplaced. (a) JUDGMENTS SHOULD NOT BE READ OUT OF CONTEXT OR AS STATUTES : 100. Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would then contend that various taxing statutes have used the expression "produced or manufactured" just as in the Excise Act; the Supreme Court has consistently held that when the two words "produced" and "manufactured" are used in juxta-position with each other, they imply that a change / transformation of the original goods, resulting in a new article being brought into existence with a distinct name, character and use, is necessary to either attract the levy and/or to be exempt from the levy; contextual interpretation should be given to the said expression; and the two words cannot be read in isolation from each other. Reliance is pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The respondent (assessee) before the Supreme Court, in Pio Food Packers, 46 S.T.C. 63 , was carrying on business of canned fruits, besides other products. They contended that, by conversion of pineapple fruit into its products, no new commodity was created, and it could not therefore be said that there was consumption of pineapple fruit for the manufacture of those goods attracting levy of tax under Section 5A(1) of the Kerala General Sales Tax Act, 1963. In this context, the Supreme Court observed that, in the present case, there is no essential difference between pineapple fruit and the canned pineapple slices; the dealer and the consumer regard both as pineapple; the only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling; the additional sweetness in the canned pineapple arises from the sugar added as a preservative; the pineapple slices must be held to possess the same identity as the original pineapple fruit; and although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bank Ltd Vs. N. Seetharama Raju, 1990 AIR(AP) 171). 106. It would be wholly inappropriate, therefore, to place such a construction on the words "production" and "manufacture" as to obliterate its distinction. As noted hereinabove, every manufacture has been held to amount to production. The converse, however, has been held not to apply. Production not only includes manufacture, but other processes which may not amount to manufacture. Consequently, in situations where the manufacture of goods also amounts to production, the words 'manufacture' and 'production' when read in juxtaposition may require the original product, after undergoing a process, to result in a new product coming into existence. However in cases, such as the present, where no process of manufacture is involved, and is only a case of production of goods, the test, of a new product having to come into existence, may not apply for the activity to fall within the ambit of "production of goods". (b) MEANING SHOULD BE GIVEN TO EACH AND EVERY WORD USED IN A STATUTE : 107. Courts have adhered to the principle that effort should be made to give meaning to each and every word used by the legislature, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a General Sales Tax Act, 1963, and whether such a person was liable to levy of sales-tax in respect of the sale of his timber under the said Act. After taking note of the definition of the word 'dealer' to mean any person who carries on the business of buying, selling, supplying or distributing goods directly, or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, and to include a person who sells goods produced by him by manufacture, agriculture, horticulture or otherwise, the Supreme Court held that, in order to fall within the definition of 'dealer', a person must sell goods produced by him by manufacture , agriculture, horticulture or otherwise; trees which had grown spontaneously, and without any plantation by that person, could not possibly be regarded as having been produced by him by agriculture or horticulture; the word "otherwise" also did not cover trees of spontaneous growth, since the element of production must be present; the context in which the word "produced" appeared in the definition could only mean 'to bring forth, bring into being or existence-to bring (a thing) into existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was entitled for refund of the amount with interest from the date of deposit. After furnishing details of the Fixed Deposit Receipts/Demand Drafts submitted to the Uttarakhand Forest Department which, in turn, was taken by the Central Excise Department pursuant to their letter dated 28.03.2007, the petitioner stated that the Forest Department had earlier accepted bank guarantees from them with respect to the disputed amount of central excise on the raw pine resin purchased by way of auction; they had, subsequently, encashed and used the amount; the petitioner was claiming interest in terms of Section 11-B read with Section 11-BB of the Excise Act; in State of Madhya Pradesh Vs. Nathabhai Desaibhai Patel, 1972 4 SCC 396, the Supreme Court affirmed the position that, where an amount had been illegally withheld, awarding interest over the said amount was justified; and this Court should direct the respondents to refund the amount with interest @18% per annum. 112. In his order in Special Appeal No.354 of 2013 dated 19.03.2012, the learned Single Judge, relying on the judgment of the Constitution Bench of the Supreme Court in Mafatlal Industries Ltd. Vs. Union of India, 1997 5 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1944; (b) the Invoices did not contain any Registration Number of the Forest Department, or the name of the Excise Division with which the Forest Department was registered, for payment of excise duty and/or the address of the Excise Division as was required by Rule 11(2) of the Central Excise Rules, 2002; (c) the Invoices did not even mention the rate of duty which was leviable on every sale; and (d) the Invoices did not mention the amount of duty which was payable on every billed amount. 114. Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would submit that, since none of the Bills raised by the Forest Department mentioned any rate of excise duty, or the amount of excise duty that was payable on the purchase of Raw Oleo Pine Resin, the respondents-writ petitioners cannot be said to have paid "Excise Duty" to the Forest Department; as the respondents writ petitioners have not paid any "duty of excise" to the department, no presumption can be drawn against them, under Section 12-B, that they had passed on the incidence of such excise duty to their buyers; as a consequence, the provisions of Section 11A of the Excise Act, for seeking refund by followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to those who had purchased the products further manufactured from oleo-resin. 116. In the light of our conclusion that the appellants have the power to levy excise duty on the Forest department, since extraction of resin from the stem or the bark of pine trees following a scientific method amounts to "production", the question of refund of the amount collected by the Forest department from the respondents-writ petitioners, and which was paid thereafter to the Excise Department, does not arise. We shall, nonetheless, examine the respondents-writ petitioners' claim for refund since the learned Single Judge has, in the order under appeal, held that the respondents-writ petitioners could only seek refund in accordance with the procedure prescribed under the Excise Act, and the issue of unjust enrichment was required to be examined therein. 117. The claim of unjust enrichment would apply to a person who is liable to, and has in fact paid central excise duty. As noted hereinabove, under Section 3(1)(a) of the Excise Act, excise duty is levied on all excisable goods which are produced and manufactured in India at the rates set forth in the First Schedule to the Tariff Act. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts-writ petitioners. 119. Elaborate submissions were put forth on the failure of the Forest department to comply with the provisions of Section 12(A) of the Excise Act which requires the price of goods to include the amount of duty paid thereon, and of Rule 11(2) of the Central Excise Rules, 2002 which obligates the invoices to be serially numbered, and to contain the registration number, address of the concerned Central Excise Division etc. Even assuming that the Forest department had failed to comply with the aforesaid statutory provisions, that would not confer any right on the respondents-writ petitioners to claim refund of the excise duty, (paid by the Forest department to the appellants), by the appellants to them. The claim, if any, for recovery of the amount paid, can be made by the respondents-writ petitioners against the Forest department, only in terms of the contract of sale of resin to them by the Forest Department. Disputes in the contractual realm, more so those relating to non-statutory contracts, would ordinarily not be entertained by the High Court in the exercise of its discretionary jurisdiction under Article 226 of the Constitution of India. The remedy availab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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