Case: Union Of India Vs. Hindu Undivided Family Business Known As Ramlal Mansukhra

of which any process is ordinarily carried on with the aid of power," and so is liable to excise duty under Item 12 of the First Schedule. The Court examined the process of manufacture of Vanaspati and found that vegetable non-essential oils as obtained by crushing containing the impurities were first produced as raw vegetable non-essential oils. They had then to undergo the process of refining which consisted of adding an aqueous solution of an alkali which will combine with the free fatty acids to form a soap and settle down with it a large amount of suspended and mucilaginous matter; after settling the clear supernatant layer is drawn off and treated with an appropriate quantity of bleaching earth and carbon is then filtered. In this process, the colouring matter is removed and the moisture that was originally present in the neutralised oil will also be removed. At this stage, the oil is a refined oil and is suitable for hydrogenation into vegetable product. What was sought to be taxed was the refined oil at this stage; but that contention was rejected, because the Court held that the oil produced at that stage is not known as refined oil to the consumers in the commercial community and can be described as refined oil only after deodorization. Since the process of deodorization is not carried out before that stage, no refined oil had come into existence and, consequently, the oil could not be taxed as such. That case has no applicability to the case before us where the tax is to be imposed on circles in any form. When the rolling mills have rolled the billets, what comes into existence are circles known as such, even though they are in uncut form. The product at that stage fully satisfies the description contained in Item 26-A (2).6. Similarly, the decision in (1968) 3 SCR 21 = (AIR 1968 SC 922 ) (supra) is of no help on this point, because, again, the gas, which was subjected to excise duty, was held by the Court not to be carbon dioxide, while only carbon dioxide was liable to duty. It was held that the product that came into existence was a mixture of gases containing only a percentage of carbon dioxide and could not, therefore, be held to be carbon dioxide alone which could be subjected to excise duty under Item 14-H of the First Schedule.7. Dr. Barlingay, relying on these two decisions of this Court, urged a further point that, when the billets were rolled into circles, no process of manufacture was carded out and, consequently, excise duty could not be charged under Item 26-A which imposes the liability only when goods like circles are manufactured. Reliance was placed on the interpretation of the word "manufacture" given in both the cases where it was indicated that manufacture implies the bringing into existence of a new substance known to the market. According to the respondents, the conversion of billets into circles did not bring any new substance into existence, nor did it bring into existence any completed product, so that there was no process of manufacture which alone could render the circles liable to excise duty. This argument again appears to be based on a misunderstanding of the law. There is, first, the circumstance that, in Item 26-A itself, the legislature has laid down that excise duty shall be leviable on billets at a lower rate and on manufactures of circles at a higher rate. This provision itself makes it clear that the legislature was aware that billets are converted into circles, and it was decided that excise duty should be leviable at both stages. When the legislature used the word "manufacture" in connection with circles, after having taken account of the fact that billets were already subjected to excise duty, it is obvious that the process, by which the billets were converted into circles, was held by the legislature to amount to manufacture. The word "manufacture" is defined in Sec. 2 (f) of the Act as including any process incidental or ancillary to the completion of a manufactured product. The rolling of a billet into a circle is certainly a process in the course of completion of the manufactured product, viz., circles. In the present case, as we have already indicated earlier, the product, that is sought to be subjected to duty, is a circle within the meaning of that word used in Item 26-A(2). In the other two cases which came before this Court, the articles mentioned in the relevant items of the First Schedule were never held to have come into existence, so that the completed product, which was liable to excise duty under the First Schedule, was never produced by any process. In the case before us, circles in any form are envisaged as the completed product produced by manufacture which are subjected to excise duty. The process of conversion of billets into circles was described by the legislature itself as manufacture of circles.8. A second aspect is that, so far as the respondents are concerned, they start the process of manufacture of utensils by initially taking metals in crude form as raw materials. Two different kinds of metals in each case are mixed together to prepare alloys of kansi and brass. These alloys are then brought into the form of billets and, later on, the billets are rolled into circles. It cannot be contended that the whole of this process cannot be described as manufacture of circles. In this process of manufacture of circles, there are two stages. At the first stage, billets are produced and, at the second stage, circles. In any case, it has to be held that the circles thus prepared are the result of the process of manufacture. The end-result of this process of manufacture is the production of circles in some form which is envisaged as the goods to be subjected to excise duty. The excise duty was, therefore, correctly levied by the appellant.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. Dr. Barlingay, relying on these two decisions of this Court, urged a further point that, when the billets were rolled into circles, no process of manufacture was carded out and, consequently, excise duty could not be charged under Item 26-A which imposes the liability only when goods like circles are manufactured. Reliance was placed on the interpretation of the word "manufacture" given in both the cases where it was indicated that manufacture implies the bringing into existence of a new substance known to the market. According to the respondents, the conversion of billets into circles did not bring any new substance into existence, nor did it bring into existence any completed product, so that there was no process of manufacture which alone could render the circles liable to excise duty. This argument again appears to be based on a misunderstanding of the law. There is, first, the circumstance that, in Item 26-A itself, the legislature has laid down that excise duty shall be leviable on billets at a lower rate and on manufactures of circles at a higher rate. This provision itself makes it clear that the legislature was aware that billets are converted into circles, and it was decided that excise duty should be leviable at both stages. When the legislature used the word "manufacture" in connection with circles, after having taken account of the fact that billets were already subjected to excise duty, it is obvious that the process, by which the billets were converted into circles, was held by the legislature to amount to manufacture. The word "manufacture" is defined in Sec. 2 (f) of the Act as including any process incidental or ancillary to the completion of a manufactured product. The rolling of a billet into a circle is certainly a process in the course of completion of the manufactured product, viz., circles. In the present case, as we have already indicated earlier, the product, that is sought to be subjected to duty, is a circle within the meaning of that word used in Item 26-A(2). In the other two cases which came before this Court, the articles mentioned in the relevant items of the First Schedule were never held to have come into existence, so that the completed product, which was liable to excise duty under the First Schedule, was never produced by any process. In the case before us, circles in any form are envisaged as the completed product produced by manufacture which are subjected to excise duty. The process of conversion of billets into circles was described by the legislature itself as manufacture of circles.8. A second aspect is that, so far as the respondents are concerned, they start the process of manufacture of utensils by initially taking metals in crude form as raw materials. Two different kinds of metals in each case are mixed together to prepare alloys of kansi and brass. These alloys are then brought into the form of billets and, later on, the billets are rolled into circles. It cannot be contended that the whole of this process cannot be described as manufacture of circles. In this process of manufacture of circles, there are two stages. At the first stage, billets are produced and, at the second stage, circles. In any case, it has to be held that the circles thus prepared are the result of the process of manufacture. The end-result of this process of manufacture is the production of circles in some form which is envisaged as the goods to be subjected to excise duty. The excise duty was, therefore, correctly levied by the appellant.