2003 JTR(SC) 437
2003 6 AIC 125 ; 2003 AIR(SC) 3534 ; 2003 AIR(SCW) 2158 ; 2003 153 ELT 491 ; 2003 3 KLT(SN) 109 ; 2003 3 MLJ 74 ; 2003 3 Scale 708 ; 2003 4 SCC 184 ; 2003 3 SCR 480 ; 2003 KHC 1390 ; 2003 3 Supreme 281
2003(3) Supreme 281
SUPREME COURT OF INDIA
(From Central Excise, Customs and Gold (Control) Appellate Tribunal, Chandigarh)
S.N. Variava & H.K. Sema, JJ.
Commissioner of Central Excise, Chandigarh-I -Appellant
versus
M/s. Markfed Vanaspati & Allied Industries -Respondents
Civil Appeal Nos. 77-80 of 2001
With
Civil Appeal Nos. 765-768 of 2001
With
Civil Appeal No. 1074 of 2001
Decided on 9-4-2003
Counsel for the Parties :
For the Appellant : Raju Ramachandran, Additional Solicitor General, Hemant Sharma, Sanjiv Sen and B. Krishna Prasad, Advocates.
For the Respondents : Rajesh Mahale, Advocate.
IMPORTANT POINT
"Spent earth" is not liable to excise duty though it falls within a tariff item as it is not a manufacture.
Act Referred :CENTRAL EXCISE TARIFF ACT : .
(A) The Central Excise Tariff Act governs the excise liability of goods in this dispute concerning "spent earth." Prior to the 1985 amendment, Tariff items consistently held that "spent earth" was not dutiable as it remained the same product post-processing, with its absorption capacity reduced, and levying duty again would constitute double taxation. After 1985, item 1507, reading "residue resulting from the treatment of fatty substances," was introduced, creating a conflict among Tribunal benches on whether the specific entry alone made the good excisable. This conflict prompted the reference to a larger bench, which held that the well-established tests of manufacture and marketability continue to apply, and the mere inclusion in a tariff item does not, by itself, render a non-manufactured good excisable.
(B) A good does not become excisable merely by being covered under a tariff entry; the twin tests of manufacture and marketability must be satisfied. The burden lies on the revenue to prove that manufacture has occurred and that the resultant product is marketable. Double taxation is to be avoided where a previously duty-paid good remains unchanged in its essential nature after processing.
Facts of the case:
The dispute involves whether "spent earth," used in the treatment of fatty substances, is liable to excise duty. It was established that "spent earth" is essentially the same "earth" as before processing, with only its absorbing capacity diminished, and that duty had already been paid on the original material.
Findings of Court:
The court found no manufacture of a new good, emphasized that the substance remained earth, and held that re-levying duty would amount to double taxation. The prior consistent stance of non-dutability was reaffirmed, and the specific tariff entry was not deemed sufficient to override the established principles.
Issues:
Whether a tariff entry alone can make a non-manufactured good excisable, and whether the principles of manufacture, marketability, and double taxation apply in such a scenario.
Ratio Decidendi:
The mere fact that a good falls within a tariff item does not automatically make it excisable; the critical determination is whether there is manufacture resulting in a marketable product, and where the same product attracts duty previously, further taxation is barred.
Result:
The appeals are dismissed, and no order as to costs is made.
(A) The Central Excise Tariff Act governs the excise liability of goods in this dispute concerning "spent earth." Prior to the 1985 amendment, Tariff items consistently held that "spent earth" was not dutiable as it remained the same product post-processing, with its absorption capacity reduced, and levying duty again would constitute double taxation. After 1985, item 1507, reading "residue resulting from the treatment of fatty substances," was introduced, creating a conflict among Tribunal benches on whether the specific entry alone made the good excisable. This conflict prompted the reference to a larger bench, which held that the well-established tests of manufacture and marketability continue to apply, and the mere inclusion in a tariff item does not, by itself, render a non-manufactured good excisable.
(B) A good does not become excisable merely by being covered under a tariff entry; the twin tests of manufacture and marketability must be satisfied. The burden lies on the revenue to prove that manufacture has occurred and that the resultant product is marketable. Double taxation is to be avoided where a previously duty-paid good remains unchanged in its essential nature after processing.
Facts of the case:
The dispute involves whether "spent earth," used in the treatment of fatty substances, is liable to excise duty. It was established that "spent earth" is essentially the same "earth" as before processing, with only its absorbing capacity diminished, and that duty had already been paid on the original material.
Findings of Court:
The court found no manufacture of a new good, emphasized that the substance remained earth, and held that re-levying duty would amount to double taxation. The prior consistent stance of non-dutability was reaffirmed, and the specific tariff entry was not deemed sufficient to override the established principles.
Issues:
Whether a tariff entry alone can make a non-manufactured good excisable, and whether the principles of manufacture, marketability, and double taxation apply in such a scenario.
Ratio Decidendi:
The mere fact that a good falls within a tariff item does not automatically make it excisable; the critical determination is whether there is manufacture resulting in a marketable product, and where the same product attracts duty previously, further taxation is barred.
Result:
The appeals are dismissed, and no order as to costs is made.
JUDGMENT
Variava, J.-These appeals are against the judgment of the larger bench of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The question for consideration is whether "spent earth" is liable to excise duty or not. Under the Tariff, prior to its amendment in 1985, it had been consistently held that "spent earth" was not liable to duty. However, with the enforcement of new Tariff in 1985, a conflict arose between various benches of the Tribunal. Some benches held that "spent earth" was still not excisable, whereas other benches held that, as it now stood included by a specific sub-heading, it became excisable. In view of these conflicting decisions, the matter was placed before the larger Bench of the CEGAT which by the impugned judgment has held that "spent earth" was still not dutiable. Hence these Appeals.
2. The only question for consideration for us is whether a goods becomes excisable merely because it falls within a tariff item. After 1985 Tariff item 1507 reads as "residue resulting from the treatment of fatty substances". It is submitted that "spent earth" is a residue resulting from treatment and is thus now excisable. What we have to consider is whether the well settled twin tests of "manufacture and marketability" cease to apply if a good falls within a tariff entry.
3. Prior to this Entry being introduced in 1985, it had been consistently held that "spent earth" was not manufactured. It had been consistently held that "spent earth" remained "earth" even after processing. It had been consistently held that all that happened was that its capacity to absorb was reduced. It had been consistently held that duty having been paid on "earth", no duty was leviable on "spent earth" as it remained the same product. It had been held that to levy duty on "spent earth" would amount to levying duty twice. It is on this ground that it has been held that "spent earth" was not excisable. Even now it has not been shown that there is manufacture. The only submission is that "spent earth" is a residue resulting from the treatment of fatty substances. The submission is that now that there is a specific Entry which makes "residue resulting from the treatment of fatty substances" excisable, duty has to be paid on "spent earth". In other words, what is submitted is that merely because a good falls within one of the Tariff items it becomes excisable.
4. In support of their submission, reliance is placed on the case of Lal Woollen & Silk Mills (P) Ltd., Amritsar vs. Collector of Central Excise, Chandigarh reported in 1999 (4) SCC 466. In this case the question was whether excise duty was to be paid on dyed worsted woollen yarn made from duty paid worsted woollen grey yarn. It was argued that there was no manufacture. The Court however held as follows:
"Admittedly both "dyed yarn" and "grey yarn" are covered by two separate distinct heads of tariff items with different duty. So this itself recognizes them to be two different goods with separate levy. In view of this it cannot be urged that there is no manufacture of "dyed yarn" from the "grey yarn".
Undoubtedly this authority appears to support the contention which is raised.
5. However, it appears to us that the observation made in this authority are "per incuram". In so observing, the decision of a larger Bench of this Court in the case of Collector of Central Excise, Indore vs. Universal Cable Ltd. reported in 1995 Supp. (2) SCC 465, has not been noted or considered. In this case an argument that a good become excisable because it is covered by Tariff Entry, has been negatived. In the case of B.P.L. Pharmaceuticals Ltd. vs. Collector of Central Excise reported in 1995 Supp (3) SCC 1 it has also been held that merely because there is a change in the Tariff Item the goods does not become excisable. Subsequently in a judgment dated 13th February, 2003 in Civil Appeal No. 6745 of 1999 it has been held that merely because an item falls in a Tariff Entry, it does not become excisable unless there is manufacture and the good is marketable. In Lal Woollen & Silk Mills case (supra) it has not been held that the twin test of manufacture and marketability is not to apply. It is not possible to accept the contention that merely because an item falls in a Tariff Entry it must be deemed that there is manufacture. The law still remains that the burden to prove that there is manufacture and that what is manufactured is on the revenue. In this case no new evidence is placed to show that there is manufacture. "Spent earth" was earth on which duty has been paid. It remains earth even after the processing. Thus if duty was to be levied on it again, it would amount to levying double duty on the same product.
6. Under the circumstances, we find no infirmity in the impugned judgment. The Appeals stand dismissed. There shall be no order as to costs.
(N.K.R.) Appeals dismissed.
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