TMI Blog1985 (11) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... have prayed for declaring that the sawing of timber logs into different sizes, planks, beams, etc., does not amount to 'manufacture* within the meaning of the said term as defined in Sec. 2(f) of the Central Excises and Salt Act, 1944 (Hereinafter referred to as 'the Act'), and as a consequence to prohibit the levy of duty or penalty under the Act and to quash the notices, Annexures A and H, issued by the 2nd respondent in each writ petition. 4. The petitioners replied to the said show cause notices and contended that they did not indulge in the manufacture of any excisable goods within the meaning of Section 2(f) of the Act and what they were doing was only cutting the timber logs into smaller sizes for the purpose of facilitating stacking and transport and that therefore they were not liable to take out a licence and submit the returns and pay duty thereon, as required in the show cause notices. 5. The Assistant Collector, Mangalore, did not agree with the said reply relying upon the Central Excise Trade Notice No. 145 of 1976 dated 17-6-1976 insisted on the petitioner to produce books of accounts etc., and issued summons for this purpose under Section 15 of the Act. Being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show cause notices issued solely relying on the 'trade .notice', is without jurisdiction and that the trade notice should be quashed in view of the settled position in law. 10. The said 'Trade Notice' reads thus :- "A question has been raised. as to whether sawn timber and wood waste products viz., chips, waste veneers and saw dust would be classifiable under Item 68 of the Central Excise Tariff. 2. The matter has been examined and without prejudice to the quasi-judicial functioning of the Assessing Appellate authorities it is hereby clarified for information of the trade that sawn timber, wood chips, waste veneers and saw dust are classifiable under Item 68 of the Central Excise Tariff." It is argued on behalf of the respondents that sawn timber is excisable goods and is therefore liable to duty under Tariff Item No. 68 of the Act and the proposed levy is in conformity with the Trade Notice No. 145/76 issued by the Collector of Central Excise, Bangalore. 11. It is the case of the Department that the process of sawing timber logs into planks, rafters, etc., involves to manufacture and the planks, sawn timber and other products are new commodity different from the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely 'to produce some changes in a substance', however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passage runs thus :- 'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." 16. (2) South Bihar Sugar Mills v. Tata and Chemical Mills Ltd. (intervener) [1978 E.L.T. (J 336)=A.LR. 1968 S.C. 922]. The ratio laid down in DCM Mills case was followed and referred to by the Supreme Court in this case. On the facts of that case, the Supreme Court held : that the kiln gas generated by the petitioners was not a commercial commodity to attract levy of duty under the Act. The gas generated by the kilns set up by the sugar mills was utilised in the process of manufacture of sugar and therefore it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he writ petitions. It was held by the Orissa High Court that the sales of dressed or sized logs by the forest contractor had already been assessed to sales tax and hence the sales to the forest contractor of timber, by the State Government insofar as the timber was concerned, should not be subjected to tax over again. 21. The correctness of the judgment of the Orissa High Court was challenged by the State of Orissa before the Supreme Court in the appeals considered along with the other batch of appeals relating to the 'timber contracts'. 22. The respondents in Civil Appeal No. 220/82 were Mangalji Mulji Khara and others, who were dealers in timber and had been subjected to single point tax on the sales effected by them in respect of sawn timber, cut sizes, rafters, etc., under the Orissa Sales Tax Act, 23. The dealers resisted the proposed levy of tax at the point of purchase of the said 'timber' at the auctions held by the Government. The business of the firm consisted of bidding at auctions held by the Government of Orissa in respect of trees standing in forest areas and if it was the highest bidder, entering into an agreement with the Government for felling and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. The same learned Judge had held in another case reported in Baccha Tewari v. Divisional Forest Officer (14 S.T.C. 1064), that the chopping of timber into fire-wood involved manufacturing process and that, therefore, the imposition of tax on timber and on fire-wood manufactured from that timber did not amount to double taxation. 30. Dealing with these two decisions, the Supreme Court held that the question involved in those cases was different and the Supreme Court observed thus: "But even where the question is : whether a certain process has resulted in a manufacture, the resultant product must be a different commercial commodity and merely because certain articles are known by different names, it does not mean that they are different commercial commodities, if in fact, they are merely different forms of the same commodity." For this proposition, their Lordships have referred to the decision in Tungabadra Industries Ltd., Kurnool v. C.T.O., Kurnool (1961 S.C. 412), known as the 'Vanaspathi case'. 31. It was held in that decision that hydrogenated ground-nut oil, commonly called as 'Vanaspathi' is ground-nut oil for purposes of levy under the Madras General Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that what is relevant for purpose of sales tax is, how entries are understood in common parlance, specially in commercial circles. 36. The Court (Supreme Court) then considered the statutory definition of the term 'timber' since the Orissa Act did not define timber or logs, 'Timber' as defined in Orissa Forest Act, 1972, includes, trees fallen or felled and all wood cut-up or sawn. 37. Under the Madras Forest Act, "timber" as including "trees when they have fallen or have been felled, and all wood, whether cut up of fashioned or hollowed out for any purpose or not". The Indian Forest Act defines "timber" in identical terms. Under the Orissa Forest Produce (Control of Trade) Act, "timber" means "marketable wood, round, sawn or fashioned, straight piece of and above two metres in length, standing or felled (excluding fuel). 38. The definition of "timber" in the Forests Acts, referred to above, was referred by the Supreme Court, and in their view what was pertinent was that the cardinal concept that can be gathered from the various definitions stated above is timber is not merely felled trees. 39. Turning next to the dictionary meaning of the word 'timber' their Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct name, character or use in the commercial parlance. 46. Though the petitioners have approached this Court even before an adjudication is made by the authorities under the Act, it is strenuously contended by the learned Counsel for the petitioners is that in view of the position in law being more or less settled by the Supreme Court in earlier cases and in the latest decision in Titaghur Paper Mills' case, they should not be driven to agitate this matter before the various forums provided under the Act. It is also submitted that in view of the Trade Notice issued by the Collector of Central Excise, the authorities under the Act cannot take a different view and challenge to the order of the original authority before other appellate forums would be a futile exercise. 47. The Supreme Court went into both the aspects, namely : the real connotation and meaning of the term; 'manufacture', vis-a-vis the meaning of the term 'timber'. As to what is manufacture is settled by the various decisions of the Supreme Court which are already referred to. 48. As to how the timber is to be understood for the purpose of taxing it even after it was cut into sizes, was the subject-matter of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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