Adltya Mills Ltd. Vs. Union of India [1988] INSC 248 (29 August 1988)

Mukharji, Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.

CITATION: 1988 AIR 2237 1988 SCR Supl. (2) 668 1988 SCC (4) 315 JT 1988 (4) 151 1988 SCALE (2)1068

ACT:

Central Excises and Salt Act, l944/Central Excise Rules, 1944: Schedule I Tariff Item l8E/Rule l73B--PPRF yarn-Levy of excise duty--Polyster spun yarn and Rayon filament yarn- Difference between-`New commodity' distinct and separate coming into cxistence-Necessity for it to be commercially known.

% Statutory Construction_ Fiscal entry-Ascertaining correct meaning-Correct guide is the context and the Trade meaning-Trade meaning always given preference.

HEAD NOTE:

According to the appellant company, PPRF yarn consists of two varieties of yarn on which duty has already been paid, namely, two plies of polyster spun yarn (PP) and one ply of Rayon Filament Yarn (RF), which are doubted together and the resultant yarn is referred to as PPRF yarn. The appellant filed classification list under Rule l73B of the Central Excise Rules stating: that it intended to clear PPRF yarn, on which duty has been paid. But it was rejected with a direction to file a fresh classification list showing:

PPRF yarn under Tariff Item 68.

Since the appellant was not permitted to clear PPRF yarn without further payment of duty under Tariff Item 68, it started making clearance on payment of duty under protest.

When it filed claim for refund of the same, it was issued a show cause notice' as to why the claim should not be rejected. Appellant filed its reply. The refund claim was rejected by the Assistant Collector which was later upheld by the Appellate Collector. On appeal the Central Excise & (Gold Control Appellate Tribunal also held that PPRF yarn was taxable under Tariff Item 68 and that no refund was due to the appellant.

This appeal, a statutory one, is against the Tribunal's Order.

Dismissing the appeal,

HELD: 1. Excise duty is a duty on the manufacture of goods and not on i sale. Manufacture is complete as soon as by the application of one or more process, the raw material PG NO 668 PG NO 669 undergoes some change. If a new substance is brought into existence or if a new or different article having a distinct name, character or use results from particular process or processes, such process or activity would amount to manufacture. The moment there is transformation into a new commodity commercially known as a separate and distinct commodity having its own character and use, Manufacture, takes place. [671C-F] Union of India v. Delhi Cloth & General Mills, [l963] Suppl. 1 SCR 586; union of India v. HUF Business known as Ramlal Man-sukhrai Rowari & Anr., [1971] 1 SCR 936;

Allenburry Engineers P.Ltd. v. Ramakrishna Dalmia & Ors., [1973] 2 SCR 257; Deputy Commissioner, Sales Tax (Law) Board of Revenue (Taxes) Ernakulam v, Pio Food Packers, [1980] 3 SCR 1271; Chowgule & Co. Pvt. Ltd. & Anr. v. Union of lndia, [1981] 1 SCC 653 and Empire Industries Ltd. & Ors. v. Union oflndia & Ors., [l985] Suppl. 1 SCR 292, relied on Hyderabad Asbestos Cement Product Ltd. & Anr. v. Union of India & Ors., [1980] ELT 735 and Piramal Spg. & Wvg. Mills Ltd. v. Union oflndia & Ors., [1982] ELT 145, referred to.

2.1 The question is not whether it is a mixture of two yarns, where as a process of mixing, a separate and distinct good known in them market as such, comes into being. For ascertaining the correct meaning of a fiscal entry reference to a dictionary is apt to be a somewhat delusive guide, as it gives all the different shades of meaning. The correct guide is the context and the trade meaning. The trade meaning is always to be given preference. 672C-D]

2.2 The Tribunal has found that indisputably a new yarn has come into being which is known in the market on the evidence adduced before it, and that PPRF is treated differently from Polyster Spun Yarn and Rayon. Filament Yarn. The Tribunal rightly came to the conclusion that this is a separate and distinct item. [l672E] Commissioner of Sales Tax, U.P.v. Sarin Textile Mills, [1975]35 STC 634, referred to.

The King v. Planters, [l951] CLR (Ex) l22, relied on.

CIVIL APPELLATE JUlRISDICTION: Civil Appeal No. 2124 of 1984.

PG NO 670 From the Order dated 4.6. 1983 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in Ed (SB) (T) A No. 312/80-D 'and Order No. D-395/1983.

Harish N. Salve, Ravinder Narain. P.K. Ram and D.N.Mishra for the Appellant.

The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This is a statutory appeal against the decision of the Customs Excise & Gold (Control) Appel-late Tribunal (for short CEGAT). The appellant Company had filed a Classification List under Rule l73B of the Central Excise Rules stating intended to clear PPRF yarn, on which duty had already been paid.

According to the appellant, the PPRF yarn consists of two varieties of yarn on which duty has already been paid, namely, two plies of Polyester Spun Yarn-PP and one ply of Rayon Filament Yarn-RF, which are doubled together and the resultant yarn is refer-red to as PPRF Yarn. The aforesaid classification list filed by the appellant was rejected and it was directed to file a fresh classification list showing PPRF yarn under Tariff item 68 of the Central Excise Rules. The case of the appellant is that since it was not permitted to clear PPRF Yarn without further payment of duty under Tariff Item 68 of the said Rules, on or from 27th April, l976, they started making clearance on payment of duty on PPRF Yarn under protest.

Thereafter, in October, 1978, the appellant filed refund claim for the period from April to September, l978 for a sum of Rs.84,65l.77 collected by the revenue as duty on PPRF Yarn under Tariff Item NO.68. The appellant Company, thereafter, received a show cause notice requiring it to show cause as to why the refund claim should not be rejected. The appellant Company filed its reply stating therein that the duty had already been paid on Polyester Spun Yarn, which Was manufactured by it in its factory (under Tariff Item I8E of the 1st Schedule to the Central Excises & Salt Act, 1994, hereinafter called `the Act') and futher that the appellant was purchasing Rayon Filament Yarn, on which duty had already been paid (under Tariff item No. 18-11) and that the appellant was only doubling two plies of duty paid Polyester Spun Yarn with one ply of Rayon Filament Yarn and no process of manufacture was carried out and further no new product came into being.

PG NO 671 On or about 3rd July, 1979, the Assistant Collector of Central Excise rejected the refund claim of the appellant despite the fact that a representation was pending before the Collector of Central Excise & Customs, Jaipur, against the action of the Inspector, Central' Excise, in rejecting the Classification list dated 10.4. 1978 and demanding duty of excise on the PPRF Yarn, on which duty has already been paid. In February, 1980, the appeal filed before the Revisional Authority against the order of the Appellate Collector was transferred to the CEGAT under Section 35P of the Act.

By the judgment in appeal, the Tribunai held that the goods in question, namely, PPRF Yarn was taxable under Tariff Item 68 and there was no question of any refund being due to the appellant.

Hence, the short question involved in this appeal, is:

whether the goods in question, namely, a special type of yarn marked as a finished product known as `PPRF Yarn', should be treated as such and taxed on that basis. Excise duty is a duty on the manufacture of goods and not on sale.

Manufacture is complete as soon as by the application of one or more processes, the raw material undergoes some change. If a new substance is brought into existence or if a new or different article having a distinct name, character or use results from particular process or processes, such process or activity would amount to manufacture. The moment there is transformation into a new commodity commercially known as a separate and distinct commodity having its own character and use, `manufacture'. takes place. See the observations of this Court in Union of India v. Delhi Cloth & General Mills, [1963] Suppl 1 SCR 586; Union of India v. HUF Business known as Ramlal Mansukhrai, Rewari & Anr., [1197] 1 SCR 936; Allenburry Engineers P. Ltd. v. Ramakrishna Dalmia & Ors., [1973] 3 SCR 257; Deputy Commissioner, Sales Tax (Law) Board of of Revenue (taxes) Ernakulam v. Pio Food Packers, (1980] 3 SCR 1271, Chowgule & Co. Pvt. Ltd. & Anr. v. Union of India, [1981] 1 SCC 653 and the cases referred to in the decision of this Court in Empire Industries Ltd. & Ors. v. Union of India & Ors., [l985] Suppl ] SCR 292.

In our opinion, the Tribunal was justified in the view it took. The Tribunal's view is corroborated by its own view as expressed in its decision in Hyderabad Asbestos Cement Product Ltd. & Anr. v. Union of India & Ors., 1 1980] ELT 735. Our attention was, however, drawn to the observations of the Bombay High Court in the case of Piramal SPg. & Wvg. Mills Ltd. v. Union of India & Ors., [1982]ELT 145, where the facts were slightly different but the learned Single Judge of the High Court held that merely by inter- PG NO 672 twinning strings of cotton yarn and nylon yarn, no new product comes into being. Whether by a certain process a new product comes into being or not, is a question of fact.

There is no particular definition of Lyarn, in the Act or the Rutes or the Notifications. According to the Oxford Dictionary 'yarn' means any spun thread specially of kinds prepared by weaving, knitting or rope making.

According to the Webster's new World Dictionary, it is defined as any fibre, as wool, silk, flax, cotton, nylon, etc., spun into strands for weaving, knitting or making thread.

This Court in Commissioner of Sales Tax, U.P. v. Sarin Textile Mills, [l975] 35 STC 634 held that the fibre in order to answer the description of yarn must have two characteristics, firstly, it should be a spun strand and secondly such Strand should be primarily meant for use in weaving, knitting or rope-making. The question is not whether it is a mixture of two yarns where as a process of mixing a separate and distinct goods known in the market as such, comes into being. For ascertaining the correct meaning of a fiscal entry reference to a dictionary is apt to be a somewhat delusive guide, as it gives all the different shades of meaning. The correct guide is the context and the trade meaning. The trade meaning is always to be given preference. See in this connection the observations in the famous Canadian case of The King v. Planters, [1951] CLR (Ex) 122.

The Tribunal has found that indisputably a new yarn has come into being which is known In the market on the evidence adduced before the Tribunal, and that PPRF is treated differently from Polyester Spun Yarn and Rayon Filament Yarn. We are, therefore, of the view that the Tribunal rightly came to the conclusion that this is a separate and distinct item. If having borne the correct legal principles in mind and in the light of the facts and without ignoring any relevant or material fact, the Tribunal cornes to a conclusion on a question of classification of an item for tariff purpose, in our opinion, that finding cannot and should not be interfered with in appeal before this Court.

ln that view of the matter the appeal cannot be entertained and is, therefore, dismissed.

G.N. Appeal dismissed.

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