Case: Union of India and Ors Vs. J.G. Glass Industries Ltd. and Ors

3. The appellants in Civil Appeal No. 767 of 1991 have a factory for manufacturing glass and glasswares falling under T1 23-A of the Central Excise Tariff. Till 1983 they were manufacturing and supplying plain glass bottles to customers. In 1983 they filed an application before the Assistant Collector, Central Excise, Saharanpur enclosing a revised layout of the factory in substitution of the existing plan. Under the revised plan, the premises in which the manufacturing operation of glass and glassware was undertaken was segregated from the premises in which the machinery for printing of glass bottles with ceramic colour was to be installed for carrying on the printing operation. The Superintendent, (Central Excise) approved of the revised plan. The appellants commenced the process of printing of bottles in the separate demarcated unit for which no excise licence was taken. The said demarcated unit is situated within a shed enclosed by walls separate from the main factory which is licensed for manufacturing glass and glassware. The Range Superintendent of Central Excise issued a directive vide letter dated 29-6-1983 that the appellants shall not remove any printed bottles without payment of Central excise duty on the enhanced value after including the expenditure incurred on printing/decorating. That was challenged by the appellants on appeal before the Collector (Appeals) who set aside the directive and directed the Assistant Collector to pass a speaking order after complying with the principles of natural justice. After a show-cause notice and a reply thereto, the Assistant Collector passed an order on 23-9-1983 that assessable value of glass bottles should include the cost of decorating the same with ceramic colours. On appeal the Collector confirmed the same by his order dated 3-3-1984. The Tribunal dismissed the appeal preferred by the appellants by its order dated 26-10-1990. It is that order which is under challenge in this appeal4. Though the Tribunal observed that the Superintendent of Central Excise was not competent to approve the revised ground plan, proceeded to discuss the question formulated above on the footing that the unit wherein the decoration of glass bottles is being carried out is separate from the factory manufacturing the said bottles. The following passage in the order of the Tribunal is relevant in thisthe ACL unit is located in the enclosed space with an opening on the main road apart from the gate of the factory licensed for the manufacture of glassware. The shed in which the ACL unit is located, was also excluded from the layout of the factory. From the above, it follows that the ACL unit, which was carved out of the old premises is a space covered by walls and is adjunct to the principal premises, i.e., the licensed premises." *Again the Tribunal has observed in para 20 of its order that "admittedly the plain bottles are manufactured in the main premises and the printing and decoration is done in the premises adjunct toIt is on the above factual premise the question stated above which was formulated by the Tribunal itself has to be considered. The Tribunal has proceeded to hold that printing and decoration would amount to manufacture within the meaning of Section 2(f) of the Act6. In Civil Appeal No. 2882 of 1993 the appellant is the Union of India. The respondent in that appeal is none other than the appellant in Civil Appeal No. 767 of 1991. That appeal arises out of a claim for refund made by the respondents therein on the ground that they had paid excise duty on the charges incurred for printing of glass bottles which did not form part of manufacturing process and therefore they were entitled to get refund of the said duty. They had paid the duty on the price of the bottles as supplied to the customers as per the approved Price List No. 37 which included the printing charges. The claim for refund was accepted by the Assistant Collector of Central Excise but rejected by the Collector. The assessee filed a writ petition in the High Court of Bombay to quash the order of the Collector. A Division Bench of the High Court upheld the contention of the assessee and held that printing on the glass bottles cannot be included in the assessable value for the purpose of levy of excise duty. Aggrieved by the order of the Division Bench, the Union of India has preferred this appeal7. Insofar as the factual position in this appeal is concerned, there is no dispute that the entire process including the printing on the bottles is carried out in one factory and the excisable goods supplied to the customers by the respondents are the printed bottles at the price set out in the approved price list inclusive of the printing charges8. In Special Leave Petition No. 8316 of 1994 the first respondent is a company which undertakes the process of decorating glass bottles at its factory at Chinchwad, Poona. The Company purchases plain bottles from the manufacturers thereof including appellants in Civil Appeal No. 767 of 1991 and carries out the decoration and printing on such bottles as per the contracts entered into with its customers. The Company had not taken any licence for carrying out that process within its premises on the ground that it was not a manufacturing process. The Superintendent of Central Excise detained the bottles and issued a show-cause notice as to why excise duty should not be demanded, penalty should not be imposed and goods should not be seized. The respondents filed a writ petition in the High Court of Bombay challenging the said proceedings. The Division Bench of the High Court followed the judgment rendered in the earlier case of J. G. Glass Industries Ltd. and allowed the writ petition. Aggrieved thereby the Union of India has preferred the petition for special leave. Insofar as this case is concerned, there is no dispute regarding the fact that the respondents are only carrying on the process of decoration and printing and have nothing to do with the manufacture of bottles as such

Court's reasoning:
12. The literature referred to by the appellant only shows that the printing industry has advanced to such an extent that one can print on almost anything such as glass, metal or synthetic base. Earlier the printing activity was primarily confined to printing of books, literature, newspaper and periodicals etc. The advanced printing industry covers a much wider field of activity than it did in the past. Can we, therefore, say that every material on which printing work is done becomes a product of the printing industry ? The answer has to be in the negative. An ordinary carton without any printing on it is a completed product and undisputably the product of packaging industry. The question for our consideration is, does it cease to be the product of packaging industry as and when some printing is done on the said carton ? We are of the view that to a common man in the trade and in common parlance a carton remains a carton whether it is a plain carton or a printed carton. The extreme contention that all products, on which some printing is done, are the products of the printing industry cannot be accepted. The Division Bench of the High Court has rightly rejected the contention on the following reasoning... in our view, it would be an extreme proposition to hold that all products on which some printing is done is a product of the printing industry. In that event, printed cloth would be a product of the printing industry and not of the textile industry. A metal can with printed material on it will similarly be a product of the printing industry and not the packaging industry. The same can be said of cardboard packet and even wooden boxes over which some printing is done to identify the goods or its manufacturer. In our view, the mere fact that something is printed on a product by itself does not make it a product of the printing industry. A carton is a carton and has only one use, namely of packing a product to be sold in the market. The mere fact that something is printed on it does not change its essential nature or use. The learned Judge has observed that the end use of a product is immaterial. In the case of a carton the question does not arise, because it has only one use and therefore any distinction between its intermediate use and end use is unwarranted. In our view, the printed cartons are designed at times to make the product attractive for the purchaser, and at times to identify the goods and highlight its qualities, and at times to identify the manufacturer of the goods. All the same, the carton remains a carton and is used for the purpose of packaging.On an analysis of the aforesaid rulings, a twofold test emerges for deciding whether the process is that of "manufacture". First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity already in existence will be of no commercial use but for the said process. In the present case, the plain bottles are themselves commercial commodities and can be sold and used as such. By the process of printing names or logos on the bottles, the basic character of the commodity does not change. They continue to be bottles. It cannot be said that but for the process of printing, the bottles will serve no purpose or are of no commercialCourt referred to various earlier decisions dealing with the expression "manufacture". We are unable to appreciate as to how the ruling helps the Revenue in the present case. We have already pointed out that the printing on the bottles does not bring into existence a new commercial commodity which is distinct and separate in its character, use and name from the original commodity. Hence, we are unable to accept the contention of the Revenue in this case that printing on bottles involves a process ofIt is useful to refer to the tariff description in Item 23-A of the Central Excise Tariff. The general description of the item is "glass" and "glassware". There are four categories namely, (1) flat glass (2) laboratory glassware (3) glass shells, glass globes and chimneys for lamps and lanterns and (4) other glass and glasswares including tableware. Admittedly, the bottles whether printed or not fall under category (4) mentioned above. If the contention of the Revenue is accepted it would lead to double taxation under the same tariff item. While at the gate of the main factory duty is leviable on a the plain bottles under Item 23-A(4), once again duty will be leviable on the printed bottles after the process of printing is over in the premises where such printing is carried out. Such duty will undoubtedly be on the value of the printed bottles which will include not only the cost of manufacture of the bottles but also the cost of printing charges. The Revenue cannot be permitted to levy duty twice on the same item when there is no warrant therefor in the relevant provisions of the Act23. In the circumstances there is no difficulty in holding that the view taken by the Appellate Tribunal in Appeal No. ED/SB 682/84-A is erroneous inasmuch as the process of printing is being carried out in a separate premises as found by the Tribunal and such process is not "manufacture" within the meaning of the Act. Consequently, Civil Appeal No. 767 of 1991 has to be and is hereby allowed.