Case: Commissioner Central Excise Vs. M/S.United Spirits Ltd

tax, etc. because the activity did not constitute manufacture.” 29. At this juncture, it is obligatory to state that revenue has heavily relied upon on Pepsi Foods Ltd. (supra). In the said case the Court had found that the consideration payable as royalty was an inevitable consequence of the sale of the concentrate and in such circumstances the price paid for the concentrate was not the sole consideration paid by the purchaser. The terms of agreement had obligated the bottler to purchase the concentrate from the assessee alone, use the assessees’ trade mark on the bottled beverage and also pay royalty for assessees’ trade mark at the specified percentage of the maximum retail price of each bottle. In the given circumstances and evidence available, it was held that the price actually paid for sale of concentrate was not to be the determinative factor as the price paid for the sale of concentrate, i.e., invoice would not be determinative, as the royalty payment was inseparably linked with the sale consideration paid for the concentrate. The indelible nexus and connect was established to club the two considerations. 30. The respondent, in its turn, has placed reliance on Shyam Oil Cake Ltd. (supra) and contended that mere separate tariff entry is not indicative whether the same amounts to manufacture, for tariff entry can be merely for the purpose of identifying the product and the rate applicable to it. In such case, it would not have the effect of rendering the specified commodity to be excisable. Section 2(f) defines “manufacture” and by deeming effect, a process can amount to manufacture. Albeit, for a deeming provision to come into play, it must be specifically stated that a particular process amounts to manufacture. The respondent has also placed reliance on Circular no. 495/61/99-CX-3 dated 22nd November, 1998, but the said circular relates to compound preparation during the course of manufacture of agarbati. In the context of the said product, clarification was issued. It is noticeable that the respondent had pleaded a different factual matrix which has been accepted by the tribunal, albeit, without referring to specific details. General observation and broad brush approach need not reflect true consideration paid for all transactions. A far greater and deeper scrutiny of facts is required before forming any opinion, one way or the other. It would be wrong to be assumptuous without full factual matrix being lucent and absolutely clear. 31. Recently, in The Additional Commissioner of Commercial Taxes, Bangalore v. Ayili Stone Industries Etc. Etc. (Civil Appeal Nos. 1983-2039 of 2016 dated 18.10.2016)the Court was dealing with the issue of grant of exemption on polished granite stone and the view of the revenue that the polished and unpolished granite stones are under separate Entries in the second schedule to the Karnataka Sales Tax Act, 1957. The question arose before this Court pertained to interpretation of polished and granite stones and in that context the concept of manufacture and after referring to various judgments, it held that:- “28. There is a distinction between polished granite stone or slabs and tiles. If a polished granite stone is used in a building for any purpose, it will come under Entry 17(i) of Part S of the second schedule, but if it is a tile, which comes into existence by different process, a new and distinct commodity emerges and it has a different commercial identity in the market. The process involved is extremely relevant. That aspect has not been gone into. The Assessing Officer while framing the assessment order has referred to Entry 17(i) of Part S but without any elaboration on Entry 8. Entry 8 carves out tiles as a different commodity. It uses the words “other titles”. A granite tile would come within the said Entry if involvement of certain activities is established. To elaborate, if a polished granite which is a slab and used on the floor, it cannot be called a tile for the purpose of coming within the ambit and sweep of Entry 8. Some other process has to be undertaken. If tiles are manufactured or produced after undertaking some other activities, the position would be different. A finding has to be arrived at by carrying out due enquiry and for that purpose appropriate exercise has to be undertaken. In the absence of that, a final conclusion cannot be reached.” 32. In the case at hand, as we find from the order of the tribunal the exact nature of the process undertaking and how mixing is undertaken and the process involved is not discernible and has not been ascertained and commented. It remains ambiguous and inconclusive. The respondent claims that about 26% of the sales of odoriferous substances were brought from third party and sold without any modification or process. These are all questions of fact which must be first authenticated and the actual factual position validated. The tribunal has answered the question in favour of the respondent without the background check as to the actual process involved and undertaken. Different flavours may have different processes.33. The third issue relates to the issue of limitation. The tribunal has held that certain show cause notices are barred by limitation. Mr. Bagaria, learned senior counsel has submitted that the said conclusion is absolutely flawless, if the dates are taken into consideration. For the aforesaid purpose, he has commended us to the decision already referred to hereinabove. As we notice, the tribunal on this score has also not scrutinized the dates appropriately, but has returned a cryptic finding.34. In view of the aforesaid analysis, we are constrained to remit the matter to the tribunal for reconsideration of the aforesaid aspects on the basis of observations made hereinabove and the law in the field. However, we may proceed to state that we have not expressed anything on the merits of the case including the imposition of penalty and interest. We expect the tribunal shall advert to each and every facet in detail so that this Court can appropriately appreciate the controversy.

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

Explanation:
1[ds]32. In the case at hand, as we find from the order of the tribunal the exact nature of the process undertaking and how mixing is undertaken and the process involved is not discernible and has not been ascertained and commented. It remains ambiguous and inconclusive. The respondent claims that about 26% of the sales of odoriferous substances were brought from third party and sold without any modification or process. These are all questions of fact which must be first authenticated and the actual factual position validated. The tribunal has answered the question in favour of the respondent without the background check as to the actual process involved and undertaken. Different flavours may have different processes.33. The third issue relates to the issue of limitation. The tribunal has held that certain show cause notices are barred by limitation. Mr. Bagaria, learned senior counsel has submitted that the said conclusion is absolutely flawless, if the dates are taken into consideration. For the aforesaid purpose, he has commended us to the decision already referred to hereinabove. As we notice, the tribunal on this score has also not scrutinized the dates appropriately, but has returned a cryptic finding.34. In view of the aforesaid analysis, we are constrained to remit the matter to the tribunal for reconsideration of the aforesaid aspects on the basis of observations made hereinabove and the law in the field. However, we may proceed to state that we have not expressed anything on the merits of the case including the imposition of penalty and interest. We expect the tribunal shall advert to each and every facet in detail so that this Court can appropriately appreciate the controversy.