ivil Appeal No 2882 of 1989
From the Judgment and Order dated 2121988 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal No E1351 of 1988 C C Shirappa Adv
General for State of Karnataka AK Ganguli K Swami and Mrs Sushma Sun Advs
with them for the Appellant
326 Soli J Sorabji OP Malhotra Ms Indu Malhotra Ms Auesha Zaidi and Mrs Nisha Bagchi for the Respondent
The Judgment of the Court was delivered by VENKATACHALIAH J
This appeal under Section 35 Lb of the Central Excise and Salt Act 1944 arises out of and is directed against the Order No E135188 C dated 2121988 by the Customs Excise and Gold Control Appellate Tribu nal Tribunal New Delhi allowing the appeal preferred by the Respondent and holding that Respondent was entitled to certain proforma credits of the duty paid on Sodium Sul phate used in the manufacture of paper and paper boards in which respondent is engaged
The short point for consideration in this appeal is whether the Respondent Manufacturer The Ballarpur Indus tries Ltd was entitled to the benefit of Central Govern ment s Notification No 105 82 CE dated 2821982 a ques tion which in turn depends on whether Sodium Sulphate could be said to have been used as Raw Material in the manufac ture of paper  and paper board 
In the proceedings before the authorities the dispute initially concerned six other inputs
But the controversy before us was limited as it should rightly be only to Sodium Sulphate inasmuch as even in the appeal before the Collector Appeals the depart ment s grievance apparently was confined to the Proforma Credits of duty earlier paid on Sodium Sulphate See Col 6 of the Assistant Collector s Memorandum Appeal dated 1571987 before the Collector Appeals
Respondent is a manufacturer of paper and paper boards in the processes relating to which Sodium Sulphate is used in the chemical recovery cycle of Sodium Sulphate which forms an essential constituent of Sulphate cooking liquor used in the digestion operation
 The notification dated 2821982 under which the credit is claimed reads In exercise of the power conferred by sub rule 1 of rule 8 of the Central Excise Rules 1944 and in supersession of the Noti fication of the Government of India in the Ministry of Finance Department of Revenue No 17877 Central Excise Dated 18 June 1977 the Central Government hereby exempts all excisable goods hereinafter referred as the said goods on which the duty of excise is leviable and in the manufacture of which any goods failing under 327 Item No 68 of the First Schedule to the 1 of 1944 hereinafter referred as the inputs have been used as raw material or component parts hereinafter referred to as the inputs from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the  inputs
Emphasis Supplied The Superintendent of Central Excise Range 2 Yamunana gar declined the Proforma Credit to the duty paid on Sodium Sulphate on the ground that Sodium Sulphate was burnt up in the process of manufacture and was not retained in the paper and that therefore it could not be consid ered Raw Material in the manufacture of paper
According ly he caused a notice dated 1811983 to be issued requit ing respondent to show cause why the amounts of Proforma Credit availed of by the respondent for the period between 2821982 and 31101982 should not be recovered
The reason why Sodium Sulphate could not be held to be a raw materi al in the manufacture of paper was set out in the notice thus   
The Proforma Credit claimed and granted in respect of the above mentioned items from 28282 to 311082 is not admissi ble because these Chemicals are burn out and do not remain in the finished product
The amount of proforma credit availed is there fore liable to be recovered    Emphasis supplied However the Assistant Collector of Central Excise Ambala by his order dated 2761986 took a different view and held that Sodium Sulphate even as the other inputs referred to in the said notice was an essential raw materi al in the manufacture of paper and attracted the benefit of the notification
The show cause notice dated 1811983 was accordingly set aside
But the Collector of Central Excise Appeals set aside the order of the Assistant Collector and remitted the matter to Assistant Collector for a readjudication
The respondent manufacturer challenged this order before the Tribunal
The Tribunal upheld the contention of the Respond ent Manufacturer set aside the order of the Collector Appeals and restored the order of the Assistant Collector
The Tribunal adopted the reasoning in its earlier decision in Seshasayee Paper and Boards Ltd vs Collector of Central Excise 1985 22 in which the Tribunal had held    the term raw material has to be interpreted in the circumstances of each case in the absence of any acceptable or useful definition of the term either in the diction ary or in the technical literature       sodium sulphide lye Sodium Sul phate Daicol Gaur Gums and Fluo solid lime used for the bleaching of pulp should be considered as raw materials in the manufacture of paper they serve a distinct and definitive purpose in the normal and recognised process of manufacture of paper and are essential for the process of manufacture    In this appeal the Collector challenges the correctness of the decision of the Tribunal
We have heard Sri AK Ganguly learned Senior Coun sel for the Appellant and Sri Soli Sorabjee learned Senior Counsel for the Respondent Manufacturer
The thrust of Sri Ganguly s arguments is that the amplitude of the expression Raw material in the Notification has to be ascertained with reference to and in the context of the purpose in substituting that expression in place of the words obtaining in the earlier Notification No 79CE dated 461979 in which credit was given to duty paid on goods which have been used in the manufacture of excisable goods
Sri Ganguly says that the Tribunal has virtually and in effect ignored the essential and important distinction between goods being used in the manufacture on the one hand and goods used as Raw Material on the other ignoring the conscious change intended by the substitution of the expres sion Raw Material in the later notification dated 2821982 which was clearly intended to cut down the bene fit
Sri Ganguly referred to the following observations of this Court in Collector of Central Excise vs Eastend Paper Industries Ltd SC In JK Cotton Spinning and Weaving Mills Co Ltd vs Sales Tax Officer 1965 16 STC 563 SC this Court while construing the expression in the manufacture or processing of goods for sale  in the context of Sales Tax Law though the concept is different under the Excise Law has held that manufacture of goods should normally encompass the entire 329 process carried on by the dealer of convert ing raw materials into finished goods    P 204 Emphasis Supplied and contended that the import of the word Raw Material judicially accepted connotes something more than what is used  in the manufacture and requires that goods to become Raw Material must either in their original or altered form endure as a composite element of the end product
Ganguly submitted that the technical literature and evidence in the case as to the part played by Sodium Sulphate in the chemical technology of paper making suggested two things First that Sodium Sulphate was utilised in the preparation of an anterior intermediate product at the stage of diges tion  of the pulp and did not therefore strictly belong to the process of manufacture of paper itself and Secondly that Sodium Sulphate did not go directly into and find a place in the finished product and did not therefore quali fy for being Raw Material in the manufacture of paper
Learned Counsel said that no satisfactory answer to the question raised in the appeal could be afforded unless a clear line of demarcation between the material merely used in the manufacture of paper on the one hand and material used as Raw Material on the other is drawn
Sri Ganguly sought to substantiate this distinction in the present case with reference to certain observations of this Court in Deputy Commissioner of Sales Tax Board of Revenue vs Thomas Stephen  Co Ltd JT One of the ques tions there was whether cashew shells used in the kiln by the dealer who was a manufacturer of tiles terra cotta ware and ceramic items were exigible to purchase tax under Sec tion 5A 1a of the Kerala General Sales Tax Act 1963 on the ground that the dealer had consumed such goods in the The Tribunal had held that manufacture of other goods   cashew shells had been used only as fuel in the kiln for the manufacture of tiles and that therefore the condition of 5A 1a of the Act was not satisfied there having been no consumption of cashew shells in the manufacture of the ceramic goods
This Court held The cashew shells in the instant case had been used as fuel in the kiln
The cashew shells did not get transformed into the end product
These have not been used as raw materials in the manufacture of the goods
These have been used only as an aid in the manufacture of the goods by 330 the assessee
Consumption must be in the manufacture as raw material or of other compo nents which go into the making of the end product to come within the mischief of the section
Cashew shells do not tend to the making of the end product
Goods used for ancillary purposes like fuel in the process of the manufacture do not fail within section 5A1a of the Act
Cashew shells therefore do not attract levy of tax under the said section    p 634 Emphasis Supplied Sri Ganguly says that Sodium Sulphate in the present case must like the cashew shells be held to have been used as an aid in the manufacture of paper and for ancillary purposes like fuel and not as Raw Material in the manufac ture of paper
Sri Sorabjee for the Respondent sought to maintain that Sodium Sulphate was an essential chemical ingredient in the chemistry of paper technology and that the fact that the ingredient was actually burnt up or sublimated in the proc ess and did not retain its identity in the end product will not necessarily detract from its being a Raw Material
The relevant test is how essential is the ingredient in the manufacture
Learned counsel said that in the complexity of the chain of chemical reactions in the manufacturing proc ess undue emphasis on the search for the identity of any individual chemical ingredient in the final product would be artificial and unrealistic
Sri Sorabjee submitted that authoritative scientific treatises on the paper technology recognise that Sodium Sulphate is an essential raw materi al
Sri Sorabjee referred to the publication of the Food and Agriculture Organisation of the United Nations under the caption Guide for Planning Pulp and Paper Enterprises in which the following statement occurs For any pulp and paper enterprise a variety of non fibrous raw materials are required water fuel power and paper making chemicals and for pulp mills pulping and bleaching chemicals    p 270 The sulphate kraft pulping proc ess now the most common pulping process for both wood and nonwood fibrous raw materials requires the purchase of salteake sodium sulphate and limestone calcium carbonate
De 331 pending on the efficiency of the recovery system about 40 to 80 kilogrammes of salteake and 25 kilogrammes of limestone are needed per ton of pulp
These chemicals are converted in the chemical recovery and causticizing systems to give sodium hydroxide and sodium sulphide which are the active chemicals in the pulping liquor p 275 Sri Sorabjee submitted that the Tribunal had consistent ly taken this view in several cases and that the department not having carried those matters up in appeal must be held to have accepted the correctness of that view
As instances in point Learned Counsel referred to two decisions in Collector of Central Excise Nagpur vs Ballarpur Industries Ltd Chandrapur and in Collector of Cen tral Excise Bhubaneswar vs Titaghur Paper Mills Adverting to appellant s contention that use of Sodium Sulphate was at a stage of preparation of the Pulp which is a stage anterior to the actual manufacture of paper Sri Sorabjee submitted that apart from the fallacy inherent in the attempt to dissect an otherwise integrated process of manufacture the definition of manufacture  in Section 2f of the Act  which takes with in it all ancillary and inci dental processes should secure to render the contention insubstantial
The question in the ultimate analysis is whether the input of Sodium Sulphate in the manufacture of paper would cease to be a Raw Material by reason alone of the fact that in the course of the chemical reactions this ingredient is consumed and burnt up
The expression Raw Material is not a defined term
The meaning to be given to it is the ordinary and well accepted connotation in the common parlance of those who deal with the matter
The ingredients used in the chemical technology of manufacture of any end product might comprise amongst others of those which may retain their dominant individual identity and character throughout the process and also in the end product those which as a result of interaction with other chemicals or ingredients might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end product those which like cata lytic agents while influencing and accelerating the chemi cal reactions however may themselves remain uninfluenced and unaltered and remain independent of and outside the end products and those as here which might be burnt up or consumed in the chemical reactions
The ques 332 tion in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called Raw Material for the end product
One of the valid tests in our opinion could be that the ingredient should be so essential for the chemical processes culminat ing in the emergence of the desired end product that having regard to its importance in and indispensability for the process it could be said that its very consumption on burning up is its quality and value as raw material
In such a case the relevant test is not its absence in the end product but the dependance of the endproduct for its essen tial presence at the delivery and of the process
The ingre dient goes into the making of the end product in the sense that without its absence the presence of the end product as such is rendered impossible
This quality should coalesce with the requirement that its utilisation is in the manufac turing process as distinct from the manufacturing apparatus
The decision of this Court in Deputy Commissioner of Sales Tax Board of Revenue vs Thomas Stephen  Co Ltd relied upon by Sri Ganguly does not really advance the appellant s case
The observations therein to the effect that consumption must be in the manufacture of raw material or of other component which go into the making of end product were made to emphasise the distinction between the fuel used for the kiln to impart the heat treatment to ceramics and what actually went into the manufacture of such ceramics
The observations correctly apprehended do not lend themselves to the understanding that for something to qualify itself as Raw Material it must necessarily and in all cases go into and be found in the end product
We also find no substance in the contention of Sri Ganguly that the process in which the Sodium Sulphate was used was anterior to and at one stage removed from the actual manufacture of paper
Sri Sorabjee s answer to this contention is in our view appropriate
That apart the following observations in Collector of Central Excise vs Eastend Paper Industries Ltd cited by Sri Ganguly himself is a complete answer   
Where any particular process this Court further emphasised is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be commercially inexpedient articles required in that proc ess would fall within the expression in the manufacture of goods     333 8
On a consideration of the matter we are persuaded to the view that the Tribunal was right in its conclusion that Sodium Sulphate was used in the manufacture of paper as Raw Material  within the meaning of the Notification No 10582 CE dated 2821982
Now a word about Sri Ganguly s insistence on drawing a line of strict demarcation between what can be said to be goods  merely used in the manufacture and what constitute goods used as Raw Material for the purpose
We are afraid in the infinite variety of ways in which these problems present themselves it is neither necessary nor wise to enunciate principles of any general validity intended to cover all cases
The matter must rest upon the facts of each case
Though in many cases it might be diffi cult to draw a line of demarcation it is easy to discern on which side of the border line a particular case fails
Sri Ganguly s insistence however serves to recall the pertinent observations of an eminent author on the point
It was said   
A common form of argument used by counsel in legal cases is to suggest that if the court decides in favour of the opposing counsel s arguments it will become necessary to draw lines which may be very difficult or impossible to draw
Where will you draw the line 1s of course a question which must be faced by a legislator who is actually propos ing to lay down lines for all future cases but it is not a question which needs in gener al to be faced by common law courts who pro ceed in slow stages moving from case to case     See Pragmatism and Theory in English Law page 75 Hamlyn Lectures of 1987 The learned author recalls Lord Lindley s robust answer to the question Where will you draw the line Nothing is more common in life than to be unable to draw the line between two things
Who can draw the line between plants and animals And yet who has any difficulty in saying that an oak tree is a plant and not an animal See Att
Gen vs Brighton  Hove Co operative Assoc at p 282 334 Again Lord Coleridge in Mayor of Southport vs Morris at 361 said The Attorney General has asked where we are to draw the line
The answer is that it is not necessary to draw it at any precise point
It is enough for us to say that the present case is on the right side of any line that could reasonably be drawn
In the result for the foregoing reasons we find no merit in this appeal which is accordingly dismissed
GN Appeal dis missed


Summary:
The appellant is a manufacturer of various types of food products known as Sapaghetti Macaroni Vermicelli etc failing under Heading No 190210 of the Central Excise Tariff Act
The said goods had been made dutiable only by the Finance Bill 1987 88 with effect from Ist March 1987
The appellant claimed that their pre budget stocks of fully manufactured non excisable goods were entitled to duty free clearance
The Assistant Collector of Central Excise the Collector of Central Excise Appeals and the Tribunal rejected the claim of the appellant
Before this Court it was contended on behalf of the appellant that the relevant date would be the date of manu facture and in this case the manufacture was complete before the introduction of the budget
Dismissing the appeal this Court HELD 1 Excise is a duty on manufacture or production
But the realisation of the duty may be postponed for admin istrative convenience to the date of removal of goods from the factory
Rule 9A of the Central Excise Rules merely does that
314C 2 The scheme of the Act read with the relevant rules framed under the Act particularly rule 9A reveals that the taxable even is the fact of manufacture or production of an excisable article the 312 payment of duty is related to the date of removal of such article from the factory
313F 3 On the basis of rule 9A of the Central Excise Rules the Central Excise authorities were within the competence to apply the rate prevailing on the date of removal
314E Karnataka Cement Pipe Factory vs Supdt
of Central Excise and Tamil Nadu Madras State Handloom Weavers Co operative Society Ltd vs Assistant Collector of Central Excise 1978 ELT J 57 referred to