TMI Blog1986 (4) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners purchase brake lining blanks from Messrs. Rane Brake Linings Ltd., Madras and other brake lining manufacturers. An exception was taken, in the course of the arguments, on behalf of the petitioners, to the learned single Judge calling the items purchased by the petitioners as 'brake lining blanks' and it was contended before us that what the petitioners purchase is only brake lining as such, after the process of its manufacture is completed. In our view, this contention appears to be a puerile and a feighed one to get over the implications, factual and legal, of what the petitioners themselves expressed before the Authorities with regard to the nature of the articles purchased by them from Messrs. Rane Brake Linings Ltd., and other brake lining manufacturers and subsequently marketed by them after putting the articles to specified processes. According to the petitioner, the brake linings which they purchase from the aforesaid concerns have to go through the processes of drilling, trimming and chamferring for the purpose of making them to suit the requirements of the users of the various vehicles and they are put in a carton and sold under the caption 'B.I. Girling Kit Lining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the past clearances are concerned, the assessment should be finalised on the basis of the price lists to be filed by the appellant firm. On approval of the price list by the proper officer, differential duty, if any, should be collected." As a result, he disposed of the appeal in the above terms. 3. The petitioners chose to approach this Court under Art. 226 of the Constitution of India, with the prayers projected as follows :- "(a) A writ of Mandamus or any other appropriate writ, or order or direction in the nature of writ or otherwise and restrain the respondents from the execution of the orders referred to in Ex. P. 3 and P. 5, enclosed with the affidavit i.e., restrain the respondents from directing the petitioner to take out a Central Excise Licence and observe all Central Excise formalities when the duty paid Brake Linings drilled, trimmed, chamferred in the petitioner's factory at Padi, Madras - 600 050. (b) To issue an order staying the operations of Ex. P. 3 and P. 5 i.e., restrain the respondents from raising any demand on their part clearance of duty paid Brake linings, and allow the clearance of duty paid Brake linings, after drilling, trimming, cham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute." The interpretation of fiscal statute imports nothing of reason and justice, but depends entirely upon the language of the Legislature. It is true that in case of doubt, they are construed most strongly against the Revenue and in favour of the citizen. With regard to statutes imposing burdens, the following passage in Maxwell on the Interpretation of Statutes, 12th Edn. is worth noting: "Statutes which impose pecuniary burdens are subject to the rule of strict construction. It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties; the subject is not to be taxed unless the language of the statute clearly imposes the obligation, and language must not be strained in order to tax a transaction which, had the legislature thought of it, would have been covered by appropriate words. 'In a taxing Act', 'one ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce a finished product, known as Vanaspathi, cannot affect the liability to duty, under the Act. The Supreme Court found on the factual materials disclosed that the substance produced by the manufacturers at any intermediate stage before Vanaspathi came into existence was not shown to be refined oil, as known to the market. On a consideration of the factual materials, the Supreme Court held that it had no doubt about the correctness of manufacture's case that the raw oil purchased by them for the purpose of manufacture of Vanaspathi did not become at any stage 'refined oil as is known to the consumers and commercial community.' There was a discussion in the pronouncement of the implication to be annexed to the concept of 'manufacture' under the Act. The following passages throw light as to how the Supreme Court dealt with this aspect :- "To say this is to equate 'processing' to 'manufacture' and for this we can find no warrant in law. The word 'manufacture, used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance', however minor in consequence the change may be. This distinction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'manufacture' and intended to make mere 'processing' as distinct from 'manufacture' in the sense of bringing into existence of a new substance known to the market, liable to duty. The sole purpose of inserting this definition is to make it clear that at certain places in the Act the word 'manufacture' has been used to mean a process incidental to the manufacture of the article. Thus in the very item under which excise duty is claimed in these cases, we find the words 'in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power'. The definition of 'manufacture' as in S.2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article, known to the market the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature in our opinion, inserted this definition of the word 'manufacture' in the definition section and not with a view to make the mere 'processing' of goods as liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to be subjected to excise duty and therefore excise duty was correctly levied by the revenue. 9. In Allenbury Engineers Pvt. Ltd. v. Shri Ram Krishna Dalmia and others, AIR 1973 S.C. 425, the court was more concerned as to what could be the manufacturing purpose within the meaning of S. 106 of the Transfer of Property Act. However, pronouncements under the Act and in particular Union of India v. Delhi Cotton and General Mills Co. Ltd., AIR 1963 S.C. 791 = 1977 E.L.T. (J 199) (S.C.), and South Bihar Sugar Mills Ltd. v. Union of India and another, AIR 1968 S.C. 922 = 1978 E.L.T. (J 336) (S.C.) were adverted to and it was observed as follows: "In all these cases the statute or the notification concerned did not furnish any artificial meaning to the expression 'manufacture' and the court applied, therefore, the ordinary meaning as commonly understood to that expression. The expression 'manufacturing purposes' in S. 106, thus, means purposes for making or fabricating articles or materials by physical labour, or skill, or by mechanical power, vendible, and useful as such. Such making or fabricating does not mean merely a change in an already existing article or material, but trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.T. 343 (S.C.), the question arose as to whether the pine-apple fruit consumed in the 'manufacture' of pine-apple slices will fall within S. 5-A(1)(a) of the Kerala General Sales Tax Act, 1963. That section reads as follows : "5.A. Levy of purchase tax .. (1) Every dealer, who, in the course of his business, purchases from a registered dealer or from any other person any goods the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under Sec. 5, and either - (a) consumes such goods in the manufacture of other goods for sale or otherwise, or ...... shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in Sec. 5". What actually happened in that case was the pine-apple purchased by the assessee was washed and then the inedible portion, the end, x crown, skin and inner core were removed; thereafter, the fruit was sliced and the slices were filled in cans, sugar was added as a preservative, the cans were sealed under temperature and then put in boiling water for sterilisation. The Supreme Court answers the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Excise Law is 'manufacture'. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to pay duty is attracted. Though in the facts of that case perhaps it was not necessary and as such the attention of the Court was not drawn to the definition of the term 'manufacture' under Sec. 2(f) of the Central Excise Act nor was the Tariff Item 1 B placed before the Court." The Supreme Court also pointed out that the question as to whether a process is a process of 'manufacture' or not has to be determined naturally having regard to the facts and circumstances of each case and having regard to the well known tests laid down by it. The following observations also indicates the principle to be kept in mind while deciding this question : "It is well-settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand, it is the transformation of a matter into something else and that something else is a question of degree. Whether that something else is a diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linings is to be used and that buyers cannot purchase the brake linings without drilling from the market. It was contended that in the above circumstances, drilling, tailoring cannot be considered as incidental or ancillary to the completion of manufacture of brake linings that Messrs. Brakes India Ltd. cannot be considered of being manufactured brake linings out of semi finished products purchased from M/s. Rane Brake Tinings Ltd., and, therefore, M/s. brakes India Ltd. are not required to comply with licensing formalities. As regards kit linings it was submitted that M/s. Brakes India Ltd., buy undrilled and duty paid brake linings from M/s. Rane Brake Linings Ltd., that depending upon the requirements of the vehicle holes are drilled in these duty paid goods, the brake linings so drilled with holes are packed in cartons of four sets or two sets each depending upon the type of vehicles in which they are going to be used, that such packings are called kit linings, and these cartons indicate that part number as per the service part catalogue of M/s. Brakes India Ltd., Shri Vedanthachari, Chief Cost Accountant of M/s. Brakes India Ltd., who was also present during the personal hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part numbers, furnished by the petitioner's company which are directly connectable to the catalogue of the petitioner's company. These duty paid brake linings are received by the petitioner's factory at Padi, where these Brake Linings are 'drilled, chamferred/trimmed' before supplying to their customers, along with other accessories, or parts of motor vehicles, in one container - a carton known as 'kit linings' and this container bear the brand name of the petitioner's company 'B.I. Girling' and carry the part number which figures in the petitioner's catalogue. Drilling/trimmering/chamferring are made by the petitioners for the convenience of customers." 14. The factual materials disclosed as above leave no room for any doubt in our mind that what the petitioners purchase from Messrs. Rane Brake Linings Ltd., Madras, and other manufacturers of brake linings are incomplete brake linings, which the petitioners themselves called as semi finished products and brake linings blanks. The petitioner drill holes on the brake linings blanks in addition to making it properly usable by trimming it or by tailoring adjustments. The drilling, trimming and tailoring are carried out on the brak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t numbers which are not the part numbers of Messrs. Rane Brake Linings Ltd. These part numbers are not used by Messrs. Rane Brake Lining. So it has to be concluded that the product at the time of leaving the premises of M/s. Rane Brake Linings are the belongings of M/s. Brakes India Ltd. This number is exclusively the part number given by M/s. Brakes India Ltd. for indicating on the blanks by Messrs. Rane Brake Linings. This part number as per the submissions of M/s. Brakes India Ltd., is the drilled part of number of M/s. Brakes India Ltd. only. This part number is actually the part number referring the blanks after the drilling and the other operations carried out by Messrs. Brakes India Ltd. Even before these operations are carried out, as per the directions of M/s. Brakes India this part number is indicated on the blanks by Messrs. Rane Brake Linings. This part number is associated with the Brake Assembly service Catalogue of Messrs. Brakes India Ltd., and the kit linings are referred to by this part number only. In the market these kit linings are sold with the part number only by Messrs. Brake India Ltd. and not by M/s. Rane Brake Linings. Hence it is evident that Messrs. Bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, it will certainly fall within the compass of 'manufacture' within the meaning of S.2(f) of the Act. Manufacture implies a change, though every change is not manufacture. If by a process, a change is effected in a product, which was not there previously, and which change facilitates the utility of the product for which it is meant, then the process is not a simple process, but a process incidental or ancillary to the completion of a manufactured product. It will not always be safe solely to go by a test as to whether the commodity after the change takes in a new name, though in stated circumstances, it may be useful to resort to it. This may prove deceptive sometimes, for it will suit the manufacturer to retain and stamp the same name to the end product also. The 'character or use' test has been given due importance by pronouncements of Supreme Court. When adopting a particular process, if a transformation takes place, which makes the product have a character and use of its own, which it did not bear earlier, then the process would amount to manufacture within the meaning of S.2(f) irrespective of the fact whether there has been a single process or have been several processes. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
