TMI Blog2019 (7) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petitioners were required to pay in order to purchase oleo-pine resin from the Forest department, would not make the sale price a levy of excise duty on them. Permitting such challenges may well result in a third party questioning the assessment order, passed against another, in writ proceedings. Such a course of action, in our opinion, is impermissible. While we have strong reservations regarding the maintainability of the Writ Petition, at the instance of a third party questioning the levy and collection of excise duty from another, we cannot also ignore the fact that the learned Single Judge has examined, on merits, the power of the appellants to levy excise duty on oleo-pine resin. We shall not, therefore, non-suit the respondent-writ petitioners on the ground of lack of standing, and shall instead examine the question whether or not extraction of oleo-pine resin, from pine trees by the Forest department, would amount to production of goods on which excise duty can be levied under Section 3(1)(a) of the Excise Act. Scope of the words 'manufacture' and 'production' used in Entry 84 of List I of the Seventh Schedule to the Constitution and in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or on production or on both. The language of Section 3 is clear, and the Excise Act does not require us to substitute 'or', or read this word interchangeably, for achieving its object. On the contrary, the object of the Excise Act is to subject both manufacture and production to levy of excise duty. Use of the word or between them would require the words manufacture / production to be read disjunctively. Consequently, even if the subject goods are not manufactured articles, but are only those which are produced, they can still be subjected to excise duty under Section 3 of the Act - The word produced is used, besides the word manufactured , not in one particular Section, but in several provisions of the Excise Act. Similarly, the word producer is also used, besides the word manufacturer , in several Sections of the said Act. If, as is contended before us, the word produced were to mean the same as manufactured , would Parliament, having used the word produced besides the word manufactured , in several Sections of the Excise Act, not be held to have indulged in a redundant exercise of using two words with the same meaning, over and over again, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - 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 been sold to them by the Forest Department, it satisfies the test of marketability ; and, since it is referred under Tariff Entry No. 13019049, it constitutes excisable goods on which excise duty can be levied under Section 3(1)(a) of the Excise Act. Inclusion of a particular 'good' in a tariff entry does not automatically render it exigible to Excise Duty - HELD THAT:- Unlike oleoresins from seeds, fruits, leaves, spices, flowers or roots, which are specifically enumerated under Chapter 13, the subject goods are oleoresins extracted from the bark of oleo pine trees and, therefore, fall under other oleoresins under chapter heading 1301 90 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient indication of a category that can properly be described as a class or genus, even though not specified as such in the enactment - 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 - The general words other oleo resins are broad enough to bring within its ambit all kinds of oleo resins, other than oleo resins from seeds, fruits, roots, flowers etc, and may not call for the application of the Ejusdem Generis test. Even if the ejusdem generis rule were to be applied, it would only require the general words other oleo-resins in Tariff Item No. 1301 9049 to take their colour from the earlier special words and, since the earlier special words are oleo-resin extracted from different parts of a plant , the general words other oleo-resins must, at best, be confined to plants alone. Consequently, applying the ejusdem generis rule, the words other oleo-resins in Item No. 1301 9049 would bring within its ambit oleo-resin extracted from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any other alternative, but to furnish fixed deposit receipts towards Central Excise duty. 3. It is the petitioner's case that the forest department had earlier acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 natural or forest produce cannot be imposed, under the Central Excise Act, in the absence of any process of manufacture; the first petitioner was not liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 followed by the forest department) in such a large scale or commercially; the pine resin extracted by the forest department, and sold by it in a public auction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 word 'manufacture'; while every manufacture can be categorized as production, every production need not amount to manufacture; but what was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing 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; the assessee (Forest Department) admits that excise duty can be levied; they have supported the stand of the revenue by filing a specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 assessee Steel Authority of India Ltd, and as it was sought to be passed on to them, the appellant invoked the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 liability to pay such service tax was on the private bus operators; and show-cause notices were also issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 duty) is for the purchaser to decide. It is not as if they have been compelled to purchase the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Constitution of India, the Forest department has, in its counter-affidavit, stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 commodities manufactured, produced, sold, used or transported with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeds 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 of manufacture or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for levy of duties of 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 Mafatl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical construction, but, considering the magnitude 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the charging Section 3(1)(a) of the Central Excise Act, 1944 (for short the Excise 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limits of interpretation. [ Tek Chand Bhatia, 1980 1 SCC 158; Marsey Docks Harbour Board Vs. Henderson 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( Tara Agencies, 2007 214 ELT 491 ). The word 'manufacture' has been defined in Halsbury's Laws of England, (3rd 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 Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle emerges having a distinct name, character and use. ( Collector of Central Excise, Madras Vs. M/s Kutty Flush Doors Furniture Co. (P), 1988 Supp1 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be construed in the context of the provisions of the Act. Let us, therefore, take note of how the word produced has been construed in judicial pronouncements. 49. The word production has 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby increasing the tapping life of a tree, and conserving the pine forest. (3) it does not reduce resistance to wind storms. (4) it helps in reducing incidence of fire in pine forests. (5) the essential use of 20% 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The total number of rills are 32 in eight months, from 1st March to 31st October. 54. The process of treatment of blaze with acid mixture involves a mixture of sulphuric and nitric acid which is used as a stimulant for treating the blazes. 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as goods on which any excise duty could be levied; and since the test of marketability, or capable of being marketable, applies even to those goods which are mentioned in the tariff item, the intermediate resin produced by the appellants, which are mentioned 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. (D elhi 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 extracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Section II is from Chapters 4 to 14, Section III contains Chapter 15, Section IV is from Chapters 16 to 24, Section V is from Chapters 25 to 27 and Section VI is from Chapters 28 to 38. 62. Chapter I in Section I, which relates to live animals, covers all live animals except (a) fish 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. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied. It is always open to an assessee to prove that, even though the goods in which he was carrying on business were excisable goods mentioned in the Schedule, they cannot be subjected to duty as they are not goods produced or manufactured by it, or if they had been produced or manufactured they 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 Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds, fruit, leaves, spices, flowers and roots being crushed, therefore necessitates rejection. The subject goods are also plant-produce extracted from the stem or the bark of a pine tree, and stand on a similar footing as oleo-resins from the aforesaid categories. IV. CAN NATURAL PRODUCTS BE SUBJECTED TO DUTY 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchards. Another instance is of rubber plantations. Even in meat processing industries, production of meat is from live animals, and no new substance comes into existence. 73. If Entries, in the three Lists of the Seventh Schedule to the Constitution of India, are to be given the widest possible meaning, there is no justification 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 Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riff Item No. 1301 9046 relate to oleo-resins of seeds, of fruits, of leaves, of spices, of flowers, and of roots respectively. The aforesaid species of oleo-resins are all plant produce, the genus of which are Plants. 77. In examining the question whether a Tariff Entry in the first Schedule to the Tariff Act should be read broadly or narrowly, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Rupert Cross (p.116); Amar Chandra Chakraborty Vs. The Collector of Excise, Tripura, 1972 AIR(SC) 1863;UPSEB Vs. Hari Shankar, 1979 AIR(SC) 65). 80. For the ejusdem generis principle to apply there must be sufficient indication of a category that can properly be described as a class or genus, even though not specified as such in the enactment. (Francis Bennion : Statutory Construction [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der appeal; and the distinction between these two words has been ignored. 84. On the other hand Sri Sandeep Narain, learned counsel for the respondent writ petitioners, would submit that (i) excise is a duty leviable on goods ; (ii) such goods should be produced or manufactured by the assessee; (iii) goods are produced or manufactured by the assessee only when there is a change in the form of the 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the duty of excise. Learned counsel would rely on Tarpaulin International, 2010 9 SCC 103; M/s Kutty Flush Doors Furniture Co. (P) Ltd, 1988 Supp1 SCC 239; Empire Industries Ltd., 1985 3 SCC 314 ; Hyderabad Industries Ltd., 1999 108 ELT 321; Minerals and Metals Trading Corporation of India, Ltd. Vs. Union of India and Ors., 1972 2 SCC 620; Delhi Cloth and General Mills Co. Ltd., 1963 AIR(SC) 791; and Moti 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man-made fabrics was illegal. It is in this context that the Supreme Court observed that, whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be a part of 'manufacture'; and any process creating something else having a distinctive name, character and use would be manufacture. 90. In Hyderabad 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional, 2010 9 SCC 103 , the question which arose for consideration was whether tarpaulin made-ups, prepared after cutting and stitching tarpaulin fabric, and fixing the eyelets on them, fell within the definition of 'manufacture'. The Supreme Court observed that when tarpaulin sheets are stitched, and eyelets are made, it does not change the basic characteristic of the raw material, and the end product; the process does not bring into existence a new 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 La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities would fall within the ambit of production , the converse is not true, and the activity of production of goods, in all cases, need not amount to manufacture. Further, in none of the aforesaid cases, were the goods natural produce . The only judgments which relate to such goods are M .R.F. Ltd., 1987 32 ELT 465 (Mad); Venkateswara Hatcheries, 1999 3 SCC 632 and Chirukandan, 1984 15 ELT 7. 97. In M.R.F. Ltd., 1987 32 ELT 465 (Mad), the liability of the assessee to pay customs duty on '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of some other Statutes, held that the meaning assigned to a particular word in a Statute cannot be imported to a word used in a different Statute. Income Tax is a tax on income, unlike Central Excise Duty which is a tax on the activity of manufacture or production of goods. In Chirukandan, 1984 15 ELT 7 , cess, under the Copra Cess Act, was levied on copra consumed in mills. While Copra (dry coconut) is, no doubt, a natural produce, levy of cess was not on the production of coconut or copra, but on its consumption 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 jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, a road, an underground canal and a multi-storied building; it is equally difficult to say that the process of constructing a dam is a process of manufacture or a process of production; a dam is constructed, and it is not manufactured or produced; the expressions 'manufacture' and 'produce' are normally associated with movables - articles and goods, big and small- but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road or a building. 103. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the setting in which they appear to have been stated. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. (N .R. Vairamani, 2004 8 SCC 579; The State of A.P. Vs. M/s Seven Hills Constructions, Full Bench Judgment in TRC Nos.274 of 2001 and batch dated 25.11.2011 ). A word here, or a word there, should not be made the basis for inferring inconsistency or conflict of opinion. Law does not develop in a casual manner. It develops by conscious, considered steps. ( Sri Konaseema Cooperative Central 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The aforesaid judgments, on which reliance is placed on behalf of the respondents-writ petitioners, cannot be read out of context, or a few sentences therein be read in isolation, to contend that, even in cases relating to production of goods, wherein no manufacturing process is involved, a new commodity or good should come into existence. 109. In Palampadam Plantations, 1969 3 SCR 674, the Supreme Court was called upon to examine whether a person owning and maintaining a private forest, and selling trees of spontaneous growth, was a 'dealer' within the meaning of Section 2(viii) of the Kerala 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OREST DEPARTMENT OF THE GOVERNMENT OF UTTARAKHAND : 111. This appeal is preferred against the order passed by the learned Single Judge in Modification Application No.893 of 2011 in Writ Petition (M/S) No.446 of 2008 dated 19.03.2012, rejecting the said modification application. In the said Application, the petitioner stated that the application was filed by way of abundant caution seeking a specific direction to refund the principal amount of excise duty with interest; no such direction had been issued for refund of the illegally collected excise duty; and as the levy of excise duty was declared illegal, the petitioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt during such period, only mentioned the cost of resin supplied, and the element of Central Sales Tax that was to be levied thereon; these bills did not mention any amount of excise duty that may be levied on oleo pine resin; no excise duty was charged, from the respondents-writ petitioners, in any of the Bills that were raised by the Forest Department during the period 23.05.2006 and 05.12.2006; a perusal of the Invoices raised by the Forest Department, on the respondent-writ petitioner, would reveal that (a) no amount of excise duty, which was chargeable on resin, was mentioned in the Invoices in compliance with Section 12A of the Central Excise 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchasers, who were specifically put on notice by the Forest Department, have no legal right to seek refund of duty directly from the department; under Section 12B of the Central Excise Act, there is a presumption that every person, who has paid Excise duty on any goods, shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods; and this issue cannot be agitated by preferring a writ petition under Article 226 of the Constitution of India, more so as no material has been brought on record to show that the excise duty paid to the Forest Department has not been passed on by the respondents 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, examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereunder, to approach the Central Excise department claiming refund of the excise duty paid not by them, but by the Forest department. Section 12(B) of the Excise Act, which relates to the presumption that the incidence of duty has been passed on to the buyer, stipulates that every person who has paid the duty of excise on any goods under the Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods. The presumption under Section 12(B) is on the person who has paid the duty which, in the present case, is the Forest department. Section 12(B) has, therefore, no application to the respondents-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 afores ..... X X X X Extracts X X X X X X X X Extracts X X X X
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