Case: South Bihar Sugar Mills Ltd., Etc Vs. Union Of India &amp; Ors

transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market.That it would be such an article which would attract the Act was brought out in Union of India v. Delhi Cloth and General Mills Ltd., 1963 Supp (1) SCR 586 = (AIR 1963 SC 791 ). The contention there was that in the course of manufacture of vanaspati, a vegetable product from groundnut and til oil, the respondents brought into existence at an intermediate stage of manufacturing refined oil which fell within the description of "vegetable nonessential oil, all sorts," in Item 23 of the First Schedule. The contention would seem to assume that the goods subjected to duty must be goods known as such in the market. The contention was that the respondents, after they bought raw oil with all its impurities, manufactured, by application of certain processes of refinement, refined oil which was the same as refined oil available in the market and that it was "refined oil" which became after further processes the ultimate vegetable product. It was argued that the fact that the vegetable product was the ultimate product and was chargeable to duty did not alter the position that at an earlier stage, the respondents manufactured "refined oil" as known to the market and that the fact that they did not put this "refined oil" in the market but used it to produce the finished product did not affect their liability. This Court held that if a new substance was brought into existence from raw materials and that substance was the same as "refined oil" as known to the market it would be subject to duty. The question, therefore, was the substance sought to be charged "refined oil" known to the market? The affidavits showed that deodorization was necessary before the product could be called "refined oil". It was not in dispute that that process was employed after hydrogenation and not at the stage when what was called "refined oil" came into existence at an intermediate stage. No evidence was produced by the Union of refined oil being brought to the market without deodorization. It was held that raw oil purchased by the respondents for the purpose of manufacturing vanaspati did not become at any stage "refined oil" as known to the consumers and the commercial community. 14. The affidavits filed in the instant cases and the scientific works referred to above show that the mixture of gases produced from the kiln is known both in trade and in science as kiln gas and not as carbon dioxide. The Revenue has not produced any affidavit of persons dealing in carbon dioxide to show that kiln gas is known to the market as carbon dioxide. The aforesaid affidavits show that carbon dioxide known to and brought in the market for being bought and sold for its diverse uses is carbon dioxide compress, liquified or solidified as Item 14-H describes it. The analogy given by the leaned Attorney-General of a manufacturer of cotton cloth also producing at an intermediate stage cotton yarn and such cotton yarn being liable to excise duty would not help the Revenue as cotton yarn obtained by such a manufacturer is known as such in the commercial community and brought to the market for being bought and sold. That cannot be said of kiln gas. If kiln gas were to be offered in discharge of a contract to supply carbon dioxide it would certainly be rejected on the ground that it is not carbon dioxide but is kiln gas. It is also not correct to say that because the sugar manufacturer wants carbon dioxide for carbonation purpose and sets up a kiln for it that he produces carbon dioxide and not kiln gas. In fact what he produces is a mixture known both to trade and science as kiln gas, one of the constituents of which is, no doubt, carbon dioxide. The kiln gas which is generated in these cases is admittedly never liquified nor solidified and is therefore neither liquified nor solidified carbon dioxide assuming that it can be termed carbon dioxide. It cannot be called compressed carbon dioxide as understood in the market among those who deal in compressed carbon dioxide. Compressed carbon dioxide is understood generally as carbon dioxide compressed in cylinders with pressure ranging from 1,000 to 1,800 lbs. per sq. inch. The mere fact that at one stage or the other kiln gas is pressed at 40 to 45 lbs. per sq. inch by a pump or otherwise cannot mean that it is compressed carbon dioxide.At the same time the duty being on manufacture and not on sale the mere fact that kiln gas generated by these concerns is not actually sold would not make any difference if what they generate and use in their manufacturing processes is carbon dioxide. The fact that the gas so generated has carbon dioxide below 98 percent and does not conform to the specifications of the Indian Standard Institution also would not matter for the gas may be substandard, provided what is produced is carbon dioxide. 15. In our view, the gas generated by these concerns is kiln gas and not carbon dioxide as known to the trade, i. e., to those who deal in it or who use it. The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract Item 14-H in the First Schedule.In this view it is not necessary for us to consider certain other. Contentions raised by the appellants and the petitioners in the writ petition. 16. In t

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

Explanation:
1[ds]As the Revenue argued these concerns undoubtedly require carbon dioxide in the processes employed by them while manufacturing sugar and soda ash and to meet their requirement they have set up lime kilns by which they produce kiln gas which includes carbon dioxide to the extent of about 30 to 35 per cent, which they in fact use after compressing it through a pump or otherwise, at one stage or the other in their manufacturing processes. Nonetheless, it is possible to say that the lime kilns set up for the aforesaid purpose produce carbon dioxide and even if it be so, that at one stage or the other, through the pump or otherwise, the carbon dioxide so produced becomes compressed carbon dioxide as envisaged by the legislature when it decided to introduce Item 14-H in the First Schedule ? It cannot be gainsaid that by burning limestone with coke in the kiln the manufacturer actually produces kiln gas of which one of the constituents undoubtedly is carbon dioxide and which he utilises while producing his ultimate excisable goods. But if it is possible to say that what he produces is carbon dioxide during the process which Mr. Palkhiwala termed as an integrated and continuous manufacturing process or separately as the Revenue insisted, it is equally possible to say that the combustion of limestone with coke results in the manufacture of nitrogen, whose content in the kiln gas is about 53 per cent. As the text-books produced before us and the affidavits show, the correct picture is that what is produced is kiln gas which consists of several gases, viz., carbon dioxide, carbon monoxide, oxygen and nitrogen, the last one being in a larger quantity than carbon dioxide. The mixture of gases so generated is known as kiln gas in the trade, i. e. to those who manufacture sugar and soda ash. The affidavits of concerns which use carbon dioxide definitely assert that kiln gas is never known in the market as carbon dioxide nor is it a marketable article in the sense that it is loose and is not transportable nor is it brought to the market for being bought and sold unless carbon dioxide is extracted out of it. Such extraction requires an elaborate plant. After extraction it would have to be compressed in cylinders of certain specifications or liquified or solidified before it can become a marketable articleIt is true as the Revenue contended that the gas produced through the kiln can be made marketable in the sense that it can be sold in the very same condition in which it is produced to concerns interested in the carbonation process through, for example, pipes But, apart from such a method of disposal being uneconomic and hardly likely to be employed by the trade, though it is possible in theory, what would be transported is that which is produced through the kiln, viz., the kiln gas containing among other things a certain quantity of carbon dioxide. As one of the text-books points out, carbonation process is employed by manufacturers of sugar because it is one of the cheapest method to ensure production of sugar of standard quality. The fact is that in employing carbonation process the manufacturer who requires carbon dioxide produces kiln gas and as that mixture of gases contains carbon dioxide he pumps through a pipe that mixture of gases and not carbon dioxide alone extracted from it. Therefore, in truth and in fact what he uses is the kiln gas produced by him in the lime kiln. Even assuming that this gas is compressed either through a narrow pipe what is compressed is the kiln gas and it is that kiln gas containing no doubt a certain percentage of carbon dioxide which is inducted in the sugarcane juice far refining. The same must also be said of the solvay process used in the production of soda ash though in that case the percentage of carbon dioxide is larger than in the case of refining sugarcane juiceThe affidavits filed in the instant cases and the scientific works referred to above show that the mixture of gases produced from the kiln is known both in trade and in science as kiln gas and not as carbon dioxide. The Revenue has not produced any affidavit of persons dealing in carbon dioxide to show that kiln gas is known to the market as carbon dioxide. The aforesaid affidavits show that carbon dioxide known to and brought in the market for being bought and sold for its diverse uses is carbon dioxide compress, liquified or solidified as Item 14-H describes it. The analogy given by the leaned Attorney-General of a manufacturer of cotton cloth also producing at an intermediate stage cotton yarn and such cotton yarn being liable to excise duty would not help the Revenue as cotton yarn obtained by such a manufacturer is known as such in the commercial community and brought to the market for being bought and sold. That cannot be said of kiln gas. If kiln gas were to be offered in discharge of a contract to supply carbon dioxide it would certainly be rejected on the ground that it is not carbon dioxide but is kiln gas. It is also not correct to say that because the sugar manufacturer wants carbon dioxide for carbonation purpose and sets up a kiln for it that he produces carbon dioxide and not kiln gas. In fact what he produces is a mixture known both to trade and science as kiln gas, one of the constituents of which is, no doubt, carbon dioxide. The kiln gas which is generated in these cases is admittedly never liquified nor solidified and is therefore neither liquified nor solidified carbon dioxide assuming that it can be termed carbon dioxide. It cannot be called compressed carbon dioxide as understood in the market among those who deal in compressed carbon dioxide. Compressed carbon dioxide is understood generally as carbon dioxide compressed in cylinders with pressure ranging from 1,000 to 1,800 lbs. per sq. inch. The mere fact that at one stage or the other kiln gas is pressed at 40 to 45 lbs. per sq. inch by a pump or otherwise cannot mean that it is compressed carbon dioxide.At the same time the duty being on manufacture and not on sale the mere fact that kiln gas generated by these concerns is not actually sold would not make any difference if what they generate and use in their manufacturing processes is carbon dioxide. The fact that the gas so generated has carbon dioxide below 98 percent and does not conform to thespecificationsof theIndian Standard Institution also would not matter for the gas may be substandard, provided what is produced is carbon dioxide16. Inour view, the gas generated by these concerns is kiln gas and not carbon dioxide as known to the trade, i. e., to those who deal in it or who use it. The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract Item 14-H in the First Schedule.In this view it is not necessary for us to consider certain other. Contentions raised by the appellants and the petitioners in the writ petition.