Commissioner of Income Tax, vs. Agricultural Market Committee,

AIR 1993 SC 2529 2.

2008 (233) ELT 8 (SC) 56. 1988 (Supp) SCC 239 57. AIR 1963 SC 791 58. 46 S.T.C. 63 59.

Pursuant to an auction notice, issued by the Divisional Forest Officer, District Almora, the first petitioner participated in the auction held at the Resin Depot, and a number of lots of pine resin were purchased by them. After being informed by the Resin Depot Officer that e-auction sale of certain lots had been confirmed in their favour, the first petitioner was asked to deposit certain amounts which included Excise Duty. They were not permitted by the Forest Department to lift resin, and Central Excise Duty and Education Cess was insisted on being deposited. The petitioner claims not to have any other alternative, but to furnish fixed deposit receipts towards Central Excise duty.

It is the petitioner’s case that the forest department had earlier accepted bank guarantees/FDRs from them in respect of the disputed amount of Central

According to the respondent-writ petitioners, the material put to auction is raw pine resin which is a naturally growing forest produce, and is collected from pine trees; the forest department, in order to ensure that the forests are properly protected and to maintain forest hygiene, collect pine resin in its crude form every year, and put it to auction; this forest produce is sold by the forest department in an open auction, and is purchased by processing units for producing resin based products; the first petitioner uses raw pine resin for

It is further submitted by the respondent-writ petitioner that, in view of the charging Section 3 of the Act, what is required to be determined is whether raw pine resin has been manufactured by the forest department of the State of Uttarakhand, when it collects such resin from pine trees growing spontaneously in the forest; no manufacturing process is involved in collecting pine resin oozing out of trees; it does not fall within the definition of “manufacture” under Section 2(f) of the Act; Chapter 13 of the first Schedule to the Central Excise Tarriff Act, 1985 specifies “Tapping” or “rill method” as a process of manufacture for raw resin; resin in pine trees oozes out from the trees on its own through cracks in the bark of the trees; this resin is collected by the rill method to exploit it commercially; no new product comes into existence, as a result of the process employed by the forest department in collecting the resin and in its sale; such collection cannot be described as a process of manufacture; the test of manufacture of raw pine resin is not satisfied, as it exists in a natural state in pine trees and has not been converted into another commodity known to the trade as having a different name, character or use; the burden of proof, that there is a manufacture of some goods as spelt out in the First Schedule to the Central Excise Tariff Act, 1985, falls on the revenue; the revenue failed to discharge this burden by any evidence; no human skill or effort is needed for producing resin

In his counter affidavit the Assistant Commissioner, Customs and Central Excise, Haldwani stated that, in terms of Entry 84 of List I of the Union List, Section 3 provides for levy and collection of a duty of excise on all excisable goods which are produced or manufactured in India; the word “manufacture” is different from the word “produced”; the word “production” has a wider connotation than the word “manufacture”; while every manufacture can be characterized as production, every production need not amount to manufacture; the word, “produced” or “production”, also takes in all by-products, intermediate products and residual products, which are dutiable even if they are not manufactured as they are produced; the word ‘produced’ is used to cover goods like tobacco, tea, coal, ores, lac, gum resin and other vegetable saps/extracts etc, though no manufacturing process is carried on; and excise duty can, therefore, be levied on goods which are produced.

It is further stated in the counter-affidavit that, although pine resin oozes out of pine trees, it cannot be exploited without involving human effort/volition or skill (which is by the rill method followed by the forest department) in such a large scale or commercially; the pine resin extracted by the forest department, and sold by it in a public auction, falls under Chapter Sub-heading No. 13019049 of the Central Excise and Tariff Act, 1985, and attracts central excise duty at 16%; resins are the main raw material for resin based industries; excise duty is levied on the forest department which is engaged in the activity of production of pine resin, and not on the petitioner; Oleo Resin falls under Chapter 13, and covers different parts of the trees such as seeds, fruits, leaves, spices, flowers, roots; oleo resin is extracted from the stem of the tree, and is therefore rightly classified under the heading “Other” in Chapter 13; Section II deals exclusively with those excisable goods where the term “produced” is suitable, instead of the term “manufacture”; pine oleo resin has become dutiable only from 2006; there are four conditions by which the taxable event of any goods, which are dutiable,

In the supplementary counter affidavit, filed by the Assistant Commissioner, Customs and Central Excise, it is stated that, for the extraction of resin from pine trees, the rill method of resin tapping is adopted; in this process, chemicals such as sulphuric acid and nitric acid are also used; although pine resin oozes from out of pine trees, it cannot be extracted without involvement of human effort/volition or skill; the rill method, used by the forest department, involves use of sulphuric acid and nitric acid; human effort is required where extraction of resin is undertaken on a large scale, or for commercial use; and, therefore, extraction and processing of resin amounts to production on which excise duty is leviable.

In the order under appeal, the learned Single Judge noted that resin is a fluid which is recovered by tapping pine trees, collected in cups which are kept with the pine trees and, thereafter, unloaded into large cans by the Forest Department, and sold by way of auction; the petitioners were not permitted to lift the resin, as the Forest Department had insisted that they pay excise duty before lifting the resin; and, since excise duty was actually levied by the Central Excise Department, they were made party to the Writ Petition. The learned Single Judge, thereafter, observed that the word “manufacture” and ‘produce’ have been used in juxta-position to each other; it was contended on behalf of the petitioner that, irrespective of whether there was a process of ‘manufacture’ or ‘production’, the product undergoing this process must come out as a ‘new product’ before excise duty can be levied on it; reliance was placed on Commissioner of Income Tax, Orissa & others Vs. N.C. Budharaja & Company & others[1] which elaborately dealt with the phrase ‘manufactured or produced articles’, which occurred in Section 80-HH and Section 84 of the Income Tax Act; the question whether construction of a dam amounted to either ‘manufacture’ or ‘production’ was examined; and, while holding that it did not, the Supreme Court held that ‘production’ had a wider connotation than the word ‘manufacture’; while every manufacture can be categorized as production, every production need not amount

After referring to the judgments of the Supreme Court, in Commissioner of Central Excise, Chennai II Commissionerate Vs. Tarpaulin International[2]; Commissioner of Central Excise & Customs, Bhubaneswar- I Vs. Tata Iron and Steel Co. Ltd.[3]; Hyderabad Industries Ltd. Vs. Union of India[4] and Commissioner of Income Tax, Kerala Vs. Tara Agencies[5], the learned Single Judge held that, from these rulings, it was clear that what goes to the root of the matter was that the product, on which excise duty was to be levied, was one which had emerged as a ‘new product’, out of a process which could either be called ‘manufacture’ or ‘production’; the context in which the two words, ‘production’ and ‘manufacture’, were used should be examined; the essential factor for a good to be subjected to levy of excise duty was whether that good, after the process of ‘manufacture’, had come out as a new commodity or product; only when a new commodity had come into existence, could the commodity be subjected to levy of excise duty-otherwise it was not; the context where these words had been used was important; in the present context, these two words would mean ‘bringing a new product into existence’; the legislature, while putting these two words in the Legislation, meant that excise duty was liable only if a new product came into existence; this was the core of the whole meaning of excise duty; since ‘resin’ or ‘olea pine resin’ does not come out as a new product, but remains the same resin when it comes out from the tree, no excise duty was liable to be levied on it; it may still be open in law to put any other duty on ‘resin’, but not excise duty; and no excise duty was liable to be levied on ‘resin’ or ‘oleo pine resin’. The learned Single Judge declared that imposition of central excise duty, on raw pine resin collected and sold by the Uttarakhand Forest Department to the processing units, was arbitrary and illegal. The respondents were restrained from demanding central excise duty.

Elaborate oral and written submissions were made both by Mr. Shobhit Saharia, learned counsel appearing on behalf of the appellant-Central Excise Department and Mr. Sandeep Narain, learned counsel appearing on behalf of the respondent-writ petitioners. It is convenient to examine the rival submissions, urged by learned counsel on either side, under different heads.

Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that the assessee (i.e. the Forest Department) has not assailed or challenged the levy of Excise duty; it is only the respondent-writ petitioners, the subsequent purchasers of excisable goods, who have assailed the action of the assessee in including excise duty in the auction price; the respondent-writ petitioners lack locus-standi to file the writ petitions, as they are only prospective buyers who, admittedly, participated in the auction process with their eyes open, and without demur or protest; the terms and conditions of the auction notice provide for levy of excise duty; the assessee (Forest Department) admits that excise duty can be levied; they have supported the stand of the revenue by filing a specific counter affidavit in the writ petitions; neither the subject clause, in the auction notice, nor the order/notification issued under Section 5(1) of the Tariff Act, (in terms of which excise duty was imposed upon the goods mentioned in Chapter 13), have been assailed; and the learned Single Judge has erred in holding that the levy and collection of excise duty, on oleo- resin, is illegal. Reliance is placed by Sri Shobhit Saharia, learned counsel, on Uttar Pradesh State Road Transport Corporation Vs. Commissioner of Central Excise and Service Tax and another[6], and J. Narasimha Rao and Company Vs. State of A.P.[7], in this regard.

On the other hand Sri Sandeep Narain, learned counsel for the respondent- writ petitioners, would submit that the burden of payment of excise duty, which was levied by the Excise Department, ultimately falls on the respondent-writ petitioner; since the respondent-writ petitioner was required to secure amounts, equivalent to excise duty, in favour of the Forest Department at the time of auction of the resin, they are a “person aggrieved” by the demand of excise duty; the respondents-writ petitioners have the locus to challenge the levy of such excise duty; since there is no other forum, other than the High Court, where such wrong of the respondent can be remedied, they are entitled to approach the High Court by way of a Writ Petition; the respondent-writ petitioner had, initially, filed Writ Petition No. 262 of 2007 before the Supreme Court, along with S.L.P. No. 18409 of 2006 filed by Balaji Rosins, challenging the levy of excise on Oleo Pine Resin which had been upheld earlier by a Division Bench of this Court; by its

Before examining the aforesaid contentions, it is useful to note the law declared in the judgments on which reliance is placed by learned counsel on either side. In I.D.L. Chemicals[8], a notification was issued by the Central Government exempting ammonium nitrate from excise duty, if it was intended to be used in the manufacture of explosives, provided the procedure set out in the Central Excise Rules were followed. The Central Board of Excise and Customs opined that ammonium nitrate, hitherto classified as a “fertilizer”, was not known as a fertilizer in commercial parlance, and should be assessed under Tariff Item 68. The Superintendent, Central Excise demanded excise duty from the assessee- Steel Authority of India Ltd, and as it was sought to be passed on to them, the appellant invoked the jurisdiction of the High Court. In the meanwhile, a notification was issued excluding ammonium nitrate from the purview of the exemption notification. On this notification also being subjected to challenge, both the Writ Petitions filed by the appellant were dismissed by the High Court. On an appeal being preferred thereagainst, the Supreme Court observed that the burden of payment of excise duty, under Tariff Item 68 upon the said ammonium nitrate, fell upon the appellants, and they were affected thereby; reclassification of ammonium nitrate cast an obligation on the appellants to pay excise duty, that was leviable as a result; such an obligation did not arise merely by reason of an agreement between SAIL and the appellants, but also by virtue of the provisions of Chapter X of the Central Excise Rules; the appellant had suffered adverse civil

In Indian Explosives[9], the Division Bench of the Allahabad High Court was called upon to examine whether the appellant, which had entered into an agreement with the Indian Oil Corporation for purchase of raw naphtha used in the manufacture of fertilizers, was entitled to question the levy of tax on the ground that the sale, which was subjected to tax, was an inter-State sale, and no tax could be levied thereupon under the U.P. Sales Tax Act. It was contended, on behalf of the Revenue, that the writ petition was not maintainable at its instance, since tax had been levied upon the dealer i.e. IOC and not the petitioner. It is in this context that the Division Bench of the Allahabad High Court held that the relief, under Article 226 of the Constitution of India, may be claimed not only by a party to the proceedings or by a person aggrieved, but also by a stranger; when the intervention of the Court is sought by a party to the proceedings, or by a person aggrieved, the Court would intervene ex debito justitiae; but when it is sought by a stranger, the Court would intervene only if the public interest demands; while the petitioner was not a party to the proceedings, it was a person aggrieved as the burden of tax was ultimately borne by it; it could not be said that the petitioner is a rank stranger; and it would, therefore, intervene to do justice between the parties ex debito justitiae.

On the other hand, in Uttar Pradesh State Road Transport Corporation[6], the jurisdiction of the Allahabad High Court was invoked contending that no service tax could be imposed by the Central Excise department on the buses hired by the appellant, as no service tax was imposed on the buses owned and possessed by them; and similar treatment should also be afforded to the buses hired by them. The Allahabad High Court dismissed the writ petition holding that the appellant was not the aggrieved party, and could not come to the aid of private bus operators, so as to stall the endeavour and effort of the Central Excise department in collecting service tax from private bus operators, although the same had been hired by the appellant. In appeal, the Supreme Court noted that no notice was issued by the Central Excise department

In Jonnala Narasimharao[7], the appellants before the Supreme Court were commission agents carrying on trade in Jaggery. Agriculturists who prepared jaggery out of surplus sugarcane, which they were unable to sell to the sugar factories, employed the appellants as their Commission Agents to sell the jaggery. The appellant-Commission Agents had collected tax, as agents of the principals from the purchasers, which was illegal. After the Amendment Act, the levy and collection by the dealers became legal. In this context, the Supreme Court observed that, whatever objections the principals may have to the constitutional validity of the provisions, introduced by the Amending Act, under Article 14 of the Constitution of India, the agent-dealers had no locus standi to complain about discrimination between Principals inter-se; that apart the dealers were not expected to and, in fact, did not pay any money of their own towards the tax which was levied; the tax so levied and paid to the assessing authorities by the dealer was not returnable under the provisions of the Act; nor could the Principals, under the provisions of the Act, make any claim against any dealer Agents; tax had already been collected which was illegal but, due to the Amendment Act, that collection had become legal; as a dealer, he was liable to pay that amount to the State in respect of the assessments made; and as there was nothing to show that what was sought to be recovered from the dealer was more than what he had collected, he had not suffered any loss or disadvantage which would entitle him to seek a remedy under Article 226 of the Constitution of India.

It is no doubt true that the challenge to the locus standi of the respondents- writ petitioners, to question the levy of excise duty on oleo-resin extracted from

The incidence of excise duty is on to the producer of excisable goods which, in the present case, is the Forest department of the Government of Uttarakhand. The transactions between the Forest department and the respondents-writ petitioners is one of sale of the produced oleo-resin. Permitting a subsequent purchaser, to question the levy of excise duty on his vendor, would also enable subsequent purchasers of turpentine, manufactured by the respondents-writ petitioners using oleo-resin, to question the levy of excise duty on oleo-pine resin, by the appellants on the Forest department, on the ground that the turpentine purchased by them, from the respondents-writ petitioners, included the element of excise duty on oleo-pine resin, which had resulted in their having to pay a higher price for the turpentine purchased by them.

Further the High Court, in the exercise of its jurisdiction under Article 226 of the Constitution of India, would, ordinarily, not undertake an examination of factual aspects. In I.D.L. Chemicals[8], the question was one of law regarding reclassification of ammonium nitrate, and the Supreme Court was not called upon

It is not as if the respondents-writ petitioners were unaware that excise duty would be charged on the oleo-pine resin produced by the Forest department. The auction notice dated 07.04.2006, pursuant to which the respondents-writ petitioners had submitted their bids for purchase of oleo-pine resin, refers to the letter dated 24.03.2006, of the Assistant Commissioner, Central Excise, that the duty of central excise was 16%, and on this surcharge at 2% was payable. The respondents-writ petitioners were aware, when they submitted their bids, that excise duty at 16%, with surcharge of 2%, would be added to the bid amount. It was always open to them, if they were of the view that the price of oleo-pine resin inclusive of excise duty was too high, not to participate in the auction. Having purchased oleo-pine resin with the knowledge that excise duty would be levied thereupon, the respondents-writ petitioners cannot now be heard to contend that the liability fastened on them is too heavy, and they are therefore entitled to question the levy of excise duty by the Central Excise Department on the Forest department of the Government of Uttarakhand.

Article 265 of the Constitution of India, to which a reference is made on behalf of the respondents-writ petitioners, stipulates that no tax shall be levied or collected except by authority of law. In the case on hand, levy of excise duty and its collection by the appellant is not from the respondents-writ petitioners, but from the Forest department. While it may have been open to the Forest department to question the levy of excise duty on them, on the ground that such a levy violates Article 265 of the Constitution of India, the Forest department has, in its counter-affidavit, stated that the appellants were justified in levying excise duty. In any event, it is not the Forest department which has questioned the levy or collection of excise duty by the appellants. The appellants have neither levied nor collected excise duty from the respondents-writ petitioners. The mere fact that excise duty was included in the sale price, which the respondents-writ petitioners were required to pay in order to purchase oleo-pine resin from the

While we have strong reservations regarding the maintainability of the Writ Petition, at the instance of a third party questioning the levy and collection of excise duty from another, we cannot also ignore the fact that the learned Single Judge has examined, on merits, the power of the appellants to levy excise duty on oleo-pine resin. We shall not, therefore, non-suit the respondent-writ petitioners on the ground of lack of standing, and shall instead examine the question whether or not extraction of oleo-pine resin, from pine trees by the Forest department, would amount to “production” of goods on which excise duty can be levied under Section 3(1)(a) of the Excise Act. II. SCOPE OF THE WORDS “MANUFACTURE” AND “PRODUCTION” USED IN ENTRY 84 OF LIST I OF THE SEVENTH SCHEDULE TO THE CONSTITUTION, AND IN SECTION 3(1)(a) OF THE EXCISE ACT :

Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that the learned Single Judge, while passing the order under appeal, proceeded on the premise that, only when a new commodity or product comes into existence, can it be subjected to the levy of excise duty; the words produce/manufacture, in Section 3 of the Excise Act, are parted (differentiated) by the word "or" which is disjunctive; the classes of persons are also differentiated as "Producers" or "Manufacturers"; several Sections of the Excise Act use both the words “Produce” and “manufacture”; likewise in several Sections in the Excise Act and in the Rules, the word “Producer” is used besides the word “Manufacturer”; and the intention of Parliament is not to restrict levy of excise duty only when the original commodity is used in a process where a new commodity comes into existence, and to levy excise duty only on the new commodity.

On the other hand Sri Sandeep Narain, learned counsel for the respondent- writ petitioners, would submit that the words, “produced or manufactured”, used in Entry 84 of List I to Schedule VII of the Constitution, and in Section 3(1)(a) of

The meaning of “Excise Duty” is that of a tax on articles produced or manufactured in the taxing country, and intended for home consumption.[In re the Central Provinces and Berar Act No. XIV of 1938[11]; R.C. Jall Parsi & another vs. Union of India[12]]. The mere passing on of Excise Duty to the consumer is not its essential characteristic. Even if borne by the producer or the

While duties of Excise are levied upon the manufacturer or producer, the levy is in respect of the manufacture or production of the commodity taxed (The Province of Madras v. Boddu Paidanna & Sons[14]; Chirukandan[10]) i.e. the duty is attracted by the activity of manufacture or production. [Boddu Paidanna[14]; Governor-General in Council Vs. Province of Madras[15] and R.C. Jall Parsi[12]]. It should not be confused with a tax upon sales or the proceeds of the sale of goods. (G.G. in Council v. Madras Province[15]; Chirukandan[10]; In re the Central Provinces and Berar Act No. XIV of 1935[11]; and R.C. Jall Parsi[12]).

A duty of excise is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, i.e. its ultimate incidence is always on the consumer. The said tax can be levied at a convenient stage so long as the character of the impost is not lost. [R.C. Jall Parsi[12]; Boddu Paidanna[14]; Union of India & others vs. Bombay Tyre International Ltd. & others[16]]. Duties of excise, as in the case of taxes on sale, are attracted by an industrial or trading activity. (Dennis Hotels Proprietary Limited Vs. The State of Victoria and Anr. [17]; Chirukandan[10]). The taxable event, in the case of duties of excise, is not directly on the goods, but on the activity i.e. the manufacture or production thereof. Though both excise duty and sales-tax are levied with reference to the goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production, while in the other it is on the act of sale. In neither case, can it be said that the excise duty or sales tax is a tax directly on the goods for, in that event, they will really become the same tax. (In Re. Sea Customs Act[18]; Chirukandan[10]). To be justified as such, the tax should be closely related to production or manufacture of goods. (Shinde Brothers Vs. Dy. Commr., Raichur[19]; Chirukandan[10]).

Both Entry 45 of List I of the Seventh Schedule to the Government of India Act, 1935, under which the original Central Excise and Salt Act was enacted, and Entry 84 of List I of the Seventh Schedule to the Constitution of India, refer to “Duties of excise on goods manufactured or produced in India”. [Bombay Tyre International Ltd.[16]]. A Constitution of a country has, of all instruments, the greatest claim to be construed ut res magis valeat quam pereat, ‘It is better that it should live than that it should perish’. [India Cement Ltd. and Ors. Vs. State of Tamil Nadu and Ors.[20]; C.P. and Berar Sales of Motor Spirit & Lubricants Taxation Act; James vs. Commonwealth of Australia[21]]. The power to legislate is given to the appropriate legislature by Article 246 of the Constitution. The Entries in the three lists, which are legislative heads or fields of legislation, demarcate the area over which the appropriate legislature can operate. The widest amplitude should be given to the language of the Entries. [Harakchand Ratanchand Banthia & others vs. Union of India & others[22]; India Cement Ltd. [20]; Calcutta Gas Co. Vs. State of West Bengal[23]]. The Lists are designed to define and delimit the respective areas of the respective competence of the Union and the States. They neither impose any implied restriction on the legislative power conferred by Article 246 of the Constitution, nor prescribe any duty to exercise that legislative power in any particular manner. [India Cement Ltd. [20]; D.C. Rataria Vs. Bhuwalka Brothers Ltd. [24]].

Entry 84 of List-I of the Seventh Schedule to the Constitution empowers Parliament to make a law providing for levy of duties of excise on tobacco and other goods manufactured or produced in India. (Collector of Central Excise, Hyderabad & others vs. M/s Vazir Sultan Tobacco Co. Ltd., Hyderabad[25]). In construing the words “manufacture” or “produced”, appearing in Entry 84 of List I of the VII Schedule, we must bear in mind that Entry 84 is a head of legislative power. The rules which apply to the interpretation of other statutes apply equally to the interpretation of a constitutional enactment, subject to this reservation that their application is of necessity conditioned by the Constitution itself. A word appearing in the Constitution must not be construed in a narrow

The language of the respective Entries should be given the widest scope of their meaning, fairly capable to meet the machinery of the Government settled by the Constitution. If there is any difficulty in ascertaining the limits of the legislative power, the difficulty must be resolved, as far as possible, in favour of the legislature putting the most liberal construction upon the legislative entry so that it may have the widest amplitude. A construction, which is beneficial to the amplitude of legislative powers, should be adopted. The broad and liberal spirit should inspire those whose duty it is to interpret the Constitution. [Jilubhai Nanbhai Khachar & others Vs. State of Gujarat and Ors.[29]; India Cement Ltd. and Ors.[20]; C.P. and Berar Sales of Motor Spirit & Lubricants Taxation Act; Commonwealth of Australia[21]; Jayant Verma and Ors. Vs. Union of India (UOI) and Ors.[30]].

Courts of law are enjoined to gather the meaning of the Constitution from the language used, and although one should interpret the words of the Constitution on the same principles of interpretation as one applies to an ordinary law, but these very principles of interpretation compel one to take into account the nature and scope of the Act which requires interpretation. It should be borne in mind that it is a Constitution that requires interpretation. A Constitution is the mechanism under which the laws are to be made, and not merely any Act which

It is a salutary rule that words, conferring the right of legislation, should be interpreted liberally and the powers conferred should be given the widest scope. (Diamond Sugar Mills Ltd. & Anr. Vs. The State of Uttar Pradesh & anr. [33]; New Manek Chowk Spinning and Weaving Mills Co. Ltd. and Ors. Vs. Municipal Corporation of the City of Ahmedabad and Ors.[34]). While a broad and liberal spirit should, no doubt, inspire those whose duty it is to interpret it, but they are not free to stretch or pervert the language of the Constitution in the interests of any legal or constitutional theory, or even for the purpose of supplying omissions or for correcting supposed errors. (In re. Central provinces and Berar Act No. XIV of 1938[11]; New Manek Chowk Spinning and Weaving Mills Co. Ltd.[34]). An obsolete or watertight compartmentalization of the heads of the subject for legislation may not be possible, but at the same time entrenching into the field of another entry cannot mean its total sweeping off, even though it may be in the exclusive List of heads of the subjects for legislation by the other Legislature. [I.T.C. Limited Vs. The Agricultural Produce Market Committee and Ors.[35]].

As long as the amplitude of Entry 84 in List I is not so extended as to trench upon the Entries in List-II which are reserved for law making to the State Legislatures, the widest possible meaning should be given thereto. In the absence of any limitation placed on the word “produce” in Entry 84, and as the widest meaning should be given to the Entries in the Lists in the VII Schedule, there is no justification in restricting its scope, and in not extending it to all kinds of “production”. It will be very difficult for us, therefore, to accept that the words “manufacture”/ “production” used in Entry 84 of List I, on being given a liberal construction and the widest amplitude, would nonetheless require us to hold that

The charging section, i.e. Section 3 of the Central Excise Act, empowers the levy and collection, in such manner as may be prescribed, of duties of excise on all excisable goods which are “produced” or “manufactured” in India. (Empire Industries Ltd. & others vs. Union of India & others[36]). It is because duty of excise is leviable, under Entry 84 of List I of the VIIth Schedule to the Constitution of India, on goods manufactured or produced, that the charge under Section 3(1)(a) of the Excise Act is on all, ‘excisable goods’, ‘produced or manufactured’.

The words “manufacture” and “production” are separated by the word “or” (and not “and”) both in Entry 84 of List I of the VII Schedule to the Constitution, and in Section 3(1)(a) of the Excise Act. The words “produced or manufactured” are not only used in the charging Section 3(1)(a) of the Central Excise Act, 1944 (for short the Excise Act), and in Section 3(3)(b)(i) whereunder different tariff values may be fixed for excisable goods of the same class or description produced or manufactured by different classes of “producers” or “manufacturers”, but also in the proviso to Section 3(3) of the Excise Act. Section 5A of the Excise Act, which confers power to grant exemption from excise duty, uses the words “produced or manufactured” in its proviso. These words are also found in sub-section (a) of Section 6 of the Excise Act, which relates to registration of certain persons; in Section 11A(3)(ii)(a) which relates to recovery of duties not levied or short levied; in Section 14AA(1)(a), which relates to special audit in cases where the credit of duty availed or utilized is not within the normal limits; in the definition of ‘assessee’ in Section 31(a); and in Sections 37(2)(iv), and Section 37(2)(iv)(b) and (c) which relate to the power of the Central Government to make rules. While these words are also used in several of the provisions of the CENVAT Credit Rules, 2004, including in the definition

The dictionary meaning of the word ‘or’ is: “a particle used to connect words, phrases, or classes representing alternatives”. The word ‘or’, which is a conjunction, is normally used for the purpose of joining alternatives. [J. Jayalalitha vs. Union of India (UOI) and Ors.[37]]. The expression ‘and’ has generally a cumulative effect, requiring the fulfillment of all the conditions that it joins together, and it is the antithesis of ‘or’. [M. Satyanarayana Vs. State of Karnataka and another[38]; A.K. Gopalan Vs. The State of Madras[39]; Ishwar Singh Bindra and Ors. Vs. The State of U.P. [40]]. In order ‘to carry out the intention of the legislature, it is occasionally found necessary to read the conjunctions “or” and “and”, one for the other’. The word ‘or’ is normally disjunctive, and ‘and’ is normally conjunctive, but at times they are read as vice versa. You do sometimes read ‘or’ as ‘and’ in a Statute. But you do not do it unless you are obliged, because ‘or’ does not generally mean ‘and’, and ‘and’ does not generally mean ‘or’. [Municipal Corporation of Delhi Vs. Tek Chand Bhatia[41]; Maxwell on Interpretation of Statutes, 11th Edn., p. 229-30; Competition Commission of India Vs. Steel Authority of India Ltd. and Ors.[42]; Green Vs. Premier Glynrhonwy State Co.[43]]. You will find it said in some cases that ‘or’ means ‘and’; but ‘or’ never does mean ‘and’. [Tek Chand Bhatia[41]; Stroud’s Judicial Dictionary, 3rd Edn., Vol. 1 and 3]. Reading of ‘or’ as ‘and’ is not to be resorted to unless some other part of the same statute, or the clear intention of it, requires that to be done. The substitution of conjunctions, however, has been sometimes made without sufficient reason, and it has been doubted whether some of cases of turning ‘or’ into ‘and’ and vice versa have not gone to the extreme limits of interpretation. [Tek Chand Bhatia[41]; Marsey Docks & Harbour Board Vs. Henderson L.R.[44]; Competition Commission of India[42]].

Yet another reason why “or” should not be read as “and” is that the duty of the Court is to interpret the word that the legislature has used. Those words may be ambiguous, but, even if they are, the power and duty of the Court to travel

The word ‘or’, as used in Section 3 of the Excise Act, can only mean that the Central Government has the power to levy duty either on “manufacture” or on “production” or on both. The language of Section 3 is clear, and the Excise Act does not require us to substitute ‘or’, or read this word interchangeably, for achieving its object. On the contrary, the object of the Excise Act is to subject both “manufacture” and “production” to levy of excise duty. Use of the word “or” between them would require the words “manufacture” / “production” to be read disjunctively. Consequently, even if the subject goods are not manufactured articles, but are only those which are produced, they can still be subjected to excise duty under Section 3 of the Act. [Competition Commission of India[42].

The word “produced” is used, besides the word “manufactured”, not in one particular Section, but in several provisions of the Excise Act. Similarly, the word “producer” is also used, besides the word “manufacturer”, in several Sections of the said Act. If, as is contended before us, the word “produced” were to mean the same as “manufactured”, would Parliament, having used the word “produced” besides the word “manufactured”, in several Sections of the Excise Act, not be held to have indulged in a redundant exercise of using two words with the same meaning, over and over again, when use of either one of them would have sufficed? As Parliament has used the two words “produced or manufactured”, and “producer or manufacturer”, in several Sections of the Excise Act, and each word in a Statute must be given its natural meaning, it is difficult for us to hold that the word “production” means “manufacture”, and vice versa.

Let us now examine what these two words “manufacture” and “produce” actually mean. The term 'manufacture' has been defined by the Black Law Dictionary (5th Edition) as the process or operation of making goods or any material produced by hand, by machinery or by other agency; anything made from raw materials by the hand, by machinery, or by Art; the production of articles for use from raw or prepared materials by giving such material new forms, qualities, properties or combinations, whether by hand labor or machine. (Tara Agencies[5]). The word 'manufacture' has been defined in Halsbury's Laws of England, (3rd Ed. Vol. 29 p.23) as a manner of adapting natural material by the hands of man or by man-made devices or machinery, and as the making of an article or material by physical labour or applied power; but “manufacture” is accepted to mean a wider range of industrial activities than such a definition would suggest. It includes articles made in situ as well as articles made in a factory. (Tara Agencies[5]). Manufacture, under excise law, is the process or activity which brings into being articles which are known in the market as goods, and to be goods these must be different, identifiable and distinct articles known to the market as such. (Hindustan Polymers Vs. Collector of Central Excise[48]; Moti Laminates (P) Ltd. Vs. Collector of Central Excise, Ahmedabad[49]).

Section 2(f) of the Excise Act defines ‘manufacture’ to include any process

The term 'manufacture' means a process which results in an alteration or change in the goods which are subjected to the process of manufacturing, leading to the production of a commercially new article. In determining what constitutes 'manufacture' no hard and fast rule can be applied, and each case must be decided on its own facts having regard to the context in which the term is used in the provision under consideration. (Tara Agencies[5]; Tarpaulin International[2]; Union of India v. H.U.F, Business known as Ramlal Mansukhrai, Rewari[50]; Empire Industries Ltd.[36]).

Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary. There must be a transformation; a new and different article must emerge, having a distinctive name, character or use. (Anheuser-Busch Brewing Assn. Vs. United States[51]; Tungabhadra Industries Vs. CTO[52], Union of India Vs. Delhi Cloth & General Mills Co. Ltd.[53]; Empire Industries Ltd.[36]; South Bihar Sugar Mills Vs. Union of India[54]; Tarpulin International[2]; Tara Agencies[5]). It is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity, that a manufacture can be said to take place. (India Cine Agencies Vs. Commissioner of Income Tax, Madras[55]; Tarpulin International[2]). Excise-duty becomes chargeable only when a new and different article emerges having a distinct name, character and use. (Collector of Central Excise, Madras Vs. M/s Kutty Flush Doors & Furniture Co. (P)[56]; Union of India Vs. Delhi Cloth & General Mills[57] and South Bihar Sugar Mills Ltd.[54]).

“Manufacture”, which is liable to excise duty under the Excise Act, must bring into existence a new substance known to the market.” (Delhi Cloth and General Mills[57]). The moment there is transformation into a new commodity commercially known as a distinct and separate commodity, be it the result of one process or several processes, 'manufacture' takes place and liability to duty is attracted. (Empire Industries Ltd.[36]). The test is whether the commodity, which is subjected to the process of manufacture, can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. (Deputy Commissioner of Sales Tax Vs. Pio Food Packers[58];

Unlike the word “manufacture” which is defined in Section 2(f) of the Excise Act, the word 'produce' has been not defined in the Act. When a word is not so defined in the Act it may be permissible to refer to the dictionary to find out the meaning of that word as it is understood in common parlance. Black's Law Dictionary (5th Edition) defines the term 'production' as a process or act of producing; that which is produced or made i.e. goods; fruits of labor, as the production of the earth, comprehending all vegetables and fruits; the productions of intellect, or genius, as poems and prose compositions; the productions or art. (Tara Agencies[5]). The term 'produce', is defined in the New Webster's Dictionary of the English Language (Deluxe Encyclopedic Edition), as to bring forth into existence; to bring about; to cause or effect, esp. intellectually or creatively; to give birth to; to bear, furnish, yield; to make accrue; to bring about the performance of, as a movie or play; to extend, as a line, to bring forth or yield appropriate offspring, products, or consequences. (Tara Agencies[5]; CIT Vs. Venkateswara Hatcheries[59]).

In Venkateswara Hatcheries[59], the Supreme Court held that the meaning of the words, occurring in the provisions of an Act, must take their colour from the context in which they are so used; when the word read in the context conveys a meaning, that meaning would be the appropriate meaning of that word; and in that case the Court need not rely upon the dictionary meaning of that word. Placing reliance on Venkateswara Hatcheries[59], it is contended, on behalf of the respondent-writ petitioners, that, where the dictionary gives divergent or more than one meaning of a word, it may not be safe to construe the said word according to the suggested dictionary meaning of that word; and, in such a situation, the word has to be construed in the context of the provisions of the Act.

The word "production" has a wider connotation than the word "manufacture". While every manufacture can be characterised as production, every production need not amount to manufacture. (N.C. Budharaja & Company[1]). The word 'produced' includes an activity of manufacturing the materials by applying human endeavour on some existing raw material, but the word 'produce' may include securing certain produce from natural elements, for example, by growing plants on soil, or by operating mines and the like or, for example, by milking the cow the milkman produces milk though he has not applied any process on any raw material for the purpose of bringing into existence the thing known as milk. (Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central, Zone, Ernakulam Vs. Palampadam Plantations Ltd. [60]; Tara Agencies[5]).

Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that oleo-resin is extracted from pine trees by following a well laid down scientific procedure; and it fulfills the test of marketability; natural oleo-resin has various uses including for the purposes of water proofing, for its application as an antibiotic, and as fuel along with wood and charcoal; extraction of oleo-resin is undertaken by a well laid down scientific procedure involving elaborate arrangements and human effort; and this activity would fall within the word "Produce", and the assessee categorized as a "Producer".

On the other hand Sri Sandeep Narain, learned counsel for the respondent- writ petitioners, would submit that oleo pine resin is collected by tapping and/or employing drill method from trees and its extraction does not involve any process, nor does any new product emerge; it is sold through auction to companies like the respondent-writ petitioners by imposing 16% duty of excise thereon; and collection of amounts by the Forest Department, from the respondent-writ petitioners, towards excise duty was illegal.

As extraction of Oleo Pine Resin, from pine trees by the Forest Department, evidently, and as admitted by the Central Excise Department itself, does not amount to “Manufacture”, the question which necessitates examination is whether it would amount to “production”. As noted hereinabove, the word “production” has also been construed as including securing products from natural elements by applying human endeavor. It is necessary for us, therefore, to examine whether human endeavor is applied in extraction of oleo pine resin from Pine trees. The Rill method of resin tapping is adopted by the Forest Department. In the “Manual of Rill Method of Resin Tapping from Pines”, Mr. D.C. Chaudhari, Non-Wood Forest Products Division of the Forest Research Institute, under the control of the Indian Council of Forestry Research and Education, Dehradun, has detailed the process of extraction of oleo resin from pine trees. The advantages of the Rill Method, considered more environment friendly, are

The steps required for crop setting in the first year tapping are Step 1. Bark shaving:- The loose and rough bark over a surface area of about 45 cm X 30cm above 15 cm from the ground is removed with the bark shaver, leaving 2 mm thick live bark which will facilitate easy and smooth freshening of the blaze. The surface should be very smooth and should look reddish in colour. Step 2.

The process of treatment of blaze with acid mixture involves a mixture of sulphuric and nitric acid which is used as a stimulant for treating the blazes. While it does not help in the production of resin, it keeps the resin ducts open facilitating the flow of resin for a longer duration. Freshly blazed rills are treated with acid mixtures by squeezing the plastic bottle sprayer keeping it at an angle

The mode of resin collection, and central groove cleaning, involves removal of the resin pots from the tree, and thereafter removal of resin from the pot with the help of a scraper and collected in the collection cans or tins. The central groove is also cleaned, after each collection, with a groove cleaner to facilitate smooth running of fresh resin in the resin pot. During the period April to July, when the resin yield is the maximum, the resin should be collected as early as possible to avoid overflow from the resin pot, but the freshening should be one only, at weekly intervals and not before. The manual also details the manner in which the tapping should be closed, and for crop setting for subsequent years. Since Oleo Pine Resin is extracted from Pine trees by human endeavor following an elaborate and well laid down procedure, we are satisfied that such activity would amount to “production” under Section 3(1)(a) of the Excise Act.

Mr. Shobhit Saharia, learned Standing Counsel for the Central Excise Department, would submit that oleo-resin, extracted and derived from pine trees, is a stable product which is commercially known in the market; it is an excisable good; and as it constitutes “goods”, it should, as it is included in the Tariff Entries in the First Schedule to the Tariff Act, be held to be excisable goods on which excise duty can be levied under Section 3(1)(a) of the Excise Act.

The word ‘goods’, before an explanation was inserted to Section 2(d) of the Excise Act by Act 18 of 2008 with effect from 10.05.2008, was not defined in the Excise Act. But it should be understood in the sense it has been used in Entry 84, List I of the VII Schedule to the Constitution. 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. (Union of

In Moti Laminates[49], the appellants contended that they were not liable to duty as the reacting mixtures were not only unstable having short life, but they were not marketable in the form they were obtained in the intermediate stage in a continuous process. It is in this context that the Supreme Court observed that the solution that was produced could not be used as such without any further processing or application of heat or pressure; it could not be considered as goods on which any excise duty could be levied; and since the test of marketability, or capable of being marketable, applies even to those goods which are mentioned in the tariff item, the intermediate resin produced by the appellants, which are mentioned as resols under tariff item No. 15A, were not exigible to duty.

For articles to be goods, they must not only be “moveable” but also be known in the market as such, and they must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in captive consumption is not determinative, but the articles must be capable of being sold in the market or known in the market as goods. (Bhor Industries Ltd. Vs. Collector of Central Excise[61]; Moti Laminates[49]). In order to become "goods" an article must be something which can ordinarily come to the market to be bought and sold. (Delhi Cloth & General Mills Co. Ltd. [53]; Moti Laminates[49]). The expression “produce or manufacture” means that the goods so produced must satisfy the test of marketability. (Moti Laminates[49]). In the present case, the oleo resin extracted from Pine trees are “moveable goods” which are put to auction by the Forest Department; and the respondent-writ petitioners have, in fact, purchased oleo resin from the Forest Department. Since Oleo Pine Resin has been bought by the respondent-writ petitioners, and has been sold to them by the Forest Department, it satisfies the test of “marketability”; and, since it is referred under Tariff Entry No. 13019049, it constitutes excisable goods on which excise duty can be levied under Section 3(1)(a) of the Excise Act.

Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would submit that merely because there is a tariff entry for a particular item in the Schedule to the Tariff Act, it does not become exigible to excise duty unless manufacture is involved, and a new and a different commodity / item which is distinct from the original commodity / item comes into being. Learned counsel would rely on CCE Vs. WIMCO Ltd.[62]; CCE Vs. Markfed Vanaspati[63]; UOI Vs. Ahmedabad Electricity[64]; and Moti Laminates[49], in this regard.

The Central Excise Tariff Act, 1985 is an Act to provide for tariff for Central duties of Excise. Section 2 thereof stipulates that the rates at which duties of excise shall be levied, under the Central Excise Act, are specified in the First and the Second Schedule. Section 5(1) stipulates that, where the Central Government is satisfied that it is necessary so to do in the public interest, it may, by notification in the Official Gazette, amend the First Schedule and the Second Schedule. The First Schedule to the Central Excise Tariff Act (the “Tariff Act” for short) is divided into twenty-one Sections. Section I relates to live animals and animal products, Section II to vegetable products, Section III to animal and vegetable fats and oils and their cleavage products, prepared edible fats, animal or vegetable waxes etc, Section IV to prepared foodstuffs, beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes, Section V to mineral products, Section VI to products of chemical or allied industries, and Section VII to plastics and articles thereof, and rubber and articles thereof. While Section I contains Chapters 1 to 3, Section II is from Chapters 4 to 14, Section III contains Chapter 15, Section IV is from Chapters 16 to 24, Section V is from Chapters 25 to 27 and Section VI is from Chapters 28 to 38.

Chapter I in Section I, which relates to live animals, covers all live animals except (a) fish and crustaceans, mollusks and other aquatic invertebrates, (b) cultures of micro-organisms and other products, and (c) animals of Heading 9508. Chapter 2 relates to meat and edible meat offal. Chapter 3 relates to fish and crustaceans etc.

Section II relates to vegetable products. Chapter 4 thereunder relates to dairy produce, birds’ eggs, natural honey, edible products of animal origin not elsewhere specified or included. Chapter 5 relates to products of animal origin, not elsewhere specified or included. Chapter 6 relates to live trees and other plants, bulbs, roots and the like. Chapter 7 relates to edible vegetables and certain roots and tubers. Chapter 8 lists edible fruits and nuts. Chapter 9 relates to coffee, tea and spices. Chapter 10 relates to cereals. Chapter 13 relates to lac, gums, resins and other vegetable saps and extracts. Under Tariff Item 1301 9040 are oleo-resins. While oleo-resin of seeds is classified under Tariff Item No. 1301 9041, Oleo-resin of fruits is specified under Tariff Item 1301 90 42, oleo- resin of leaves under Tariff Item No. 1301 90 43, oleo-resin of spices under Tariff Item No. 1301 90 44, oleo-resin of flowers under Tariff Item No. 1301 90 45, oleo-resin of roots under Tariff Item No. 1301 90 46, and other oleo-resins under Tariff Item No. 1301 90 49. As these oleo-resins are classified in Chapter 13, under Section II of the First schedule to the Tariff Act which relates to vegetable products, they are all natural produce, and may not involve a process of manufacture where a new commodity comes into existence.

Accepting the submission urged on behalf of the respondent-writ petitioner, that natural produce cannot be subjected to excise duty, as no new article emerges in the process, would require all the aforesaid entries, in various Chapters of the First schedule to the Tariff Act, redundant. Unlike oleo-resins referred to in Chapter 13 in Section II which are natural produce, resinoids in Chapter 33 of Section VI relate to products of chemical and allied industry. The oleo-resins referred to therein are apart from the natural oleo-resin referred to in Chapter 13. Note 1(a) to Chapter 33 stipulates that this Chapter does not cover natural oleoresins or vegetable extracts of heading 1301 or 1302. It is evident from the classification of oleoresins, under Chapter 13 and 33 of the Tariff Act, that, while Chapter 13 relates to natural oleoresins, Chapter 33 contains other resinoids.

The word 'excisable goods', has been defined by Clause (d) of Section 2 to mean, 'goods' specified in the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. The tariff schedule, by placing the goods in specific and general

As has been held in Markfed Vanaspati & Allied Industries[63]; B.P.L. Pharmaceuticals Ltd. Vs. Collector of Central Excise[66] and Wimco Ltd.[62]; Ahmedabad Electricity Co. Ltd. & others[64]; Hyderabad Industries Ltd.[4] and , simply because a particular item is mentioned in the First Schedule, it does not become exigible to excise duty. For being exigible to excise duty, excisable goods must satisfy the test of being produced or manufactured in India. Likewise, an article does not become liable to excise duty merely because of its specification in the schedule to the Central Excise Tariff Act unless it is salable and known to the market. [Commissioner of Central Excise, Chandigarh vs. Gurdaspur Distillery[67]].

We must, however, also bear in mind that the importance of Tariff entries in the First Schedule has been emphasized by Parliament when, in Section 2(f)(ii) of the Excise Act, it defines “manufacture” to include any process which is specified in relation to any goods in the section or chapter notes of the schedule to the Tariff Act as amounting to manufacture. Further the notification issued by the Central Government to amend the First Schedule, to include a particular good in a tariff heading under a particular chapter, is in the exercise of a statutory power. The statutory notification, issued under Section 5(1) of the Tariff Act, must be given due weight and cannot be readily ignored, unless a case of the

Unlike oleoresins from seeds, fruits, leaves, spices, flowers or roots, which are specifically enumerated under Chapter 13, the subject goods are oleoresins extracted from the bark of oleo pine trees and, therefore, fall under “other” oleo- resins under chapter heading 1301 90 49. Just as human effort is required for extraction of oleoresin from seeds, fruits, leaves, spices, flowers or roots, extraction of oleoresin from the bark of pine trees, as detailed hereinabove, also requires human effort and a prescribed procedure being followed. If as is contended, on behalf of the respondent-writ petitioners, oleo-resin extracted from seeds, flowers, leaves, roots etc. is a new commodity which emerges on the seeds, flowers, leaves, roots etc. being crushed, oleo resin extracted from the bark of a Pine tree is also a new commodity derived on its extraction from the stem or bark of a Pine tree. Suffice it to state that the oleo-resin extracted from all the aforesaid categories of plant-produce is a natural product which involves human effort involving employment of a scientific procedure of its extraction. The submission of Mr. Sandeep Narain, learned counsel for the respondent-writ petitioner, that oleo-resin extracted from seeds, fruits, leaves, spices, flowers and roots stand on a different footing, as a new commodity (i.e. oleo-resin) emerges on seeds, fruit, leaves, spices, flowers and roots being crushed, therefore necessitates rejection. The subject goods are also plant-produce extracted from the stem or the bark of a pine tree, and stand on a similar footing as oleo-resins from the aforesaid categories.

Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that oleo-resin is an excisable good as per Section 2

On the other hand Sri Sandeep Narain, learned counsel for the respondent- writ petitioners, would contend that the Oleo Resins mentioned in Chapter 13 are those which are extracted after subjecting the raw material to industrial processes; the resin enumerated in the said Chapter 13 are of seeds, fruits, leaves, spices, flowers and roots; oleo resin is extracted from such seeds, fruits, roots and flowers which, upon being crushed, result in the emergence of a new product called oleo resin; "Raw Oleo Pine Resin", or "Natural Oleo Pine Resin", is not mentioned in the said Chapter; and this is because raw oleo pine resin oozes out of the barks of the tree, and does not undergo any physical transformation while being collected and sold.

There is, in theory, nothing to prevent Parliament from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed, or given away. [Boddu Paidanna[14]; R.C. Jall Parsi[12]]. The duties of excise can also be imposed with reference to the source of the raw materials consumed in the production. (E.R. Jose and Ors. Vs. State[68]; Chirukandan[10]). Accepting the submission of Mr. Sandeep Narain, learned counsel for the respondent-writ petitioners, that natural produce can never be subjected to duty under the Excise Act, would obliterate the distinction between the words “production” and “manufacture”, and would also render several Chapter Notes and Entries, in the First Schedule to the Tariff Act, inapposite surplussage. As noted hereinabove Section I relates to live animals and animal products, and Section II to vegetable products. Chapter 13 in Section II relates to lac, gums, resins and other vegetable saps and extracts. All these goods are natural produce. Holding that these goods are not exigible to excise duty would render all the Entries, in the aforesaid Chapter Notes, redundant. If both these words were to be understood to carry the same meaning, we would also be required to ignore the disjunctive “or” between the words manufacture/produce in Entry 84 of List I of the Seventh Schedule, and in several provisions of the Central Excise Act.

“Agriculture production” is a common and widely recognized phrase. Illustrations of Agriculture production are many. For instance horticulture production where systematic activity is carried on to produce fruits for commercial purposes, such as apple orchards. Another instance is of rubber plantations. Even in meat processing industries, production of meat is from live animals, and no new substance comes into existence.

If Entries, in the three Lists of the Seventh Schedule to the Constitution of India, are to be given the widest possible meaning, there is no justification in reading the words “production” in a restricted sense and thereby exclude “natural produce” from its ambit. Reading the word “produced” in Entry 84 of List I in a wide manner to include “natural produce” would not result in its trenching upon any Entry in List II of the Seventh Schedule. We see no reason, therefore, to hold that “natural produce” would not amount to “production of goods”. This contention, urged on behalf of the respondent-writ petitioners, also necessitates rejection.

Mr. Sandeep Narain, learned counsel for the respondent-writ petitioners, would submit that “Raw Oleo Pine Resin”, sold to the respondents, does not fall under Tariff Item 1301.90.49 in Chapter 13 of Schedule I to the Tariff Act; and the term "Other" should be read ejusdemjuris with the other terms under the Head "Oleo Resins" i.e. it should be read and understood as other resins which have been subjected to some processes, and where oleo resin emanates from any other kinds of seeds, roots, flowers etc.

In ascertaining the meaning of words, occurring in an entry in the Schedules to a tax enactment, the Court should not only look at the words, but should also look at the context, the collection and the object of such words, relating to such a matter and interpret the meaning, according to what would appear to be the meaning intended to be conveyed by the use of the words under such circumstances. (Deputy Commissioner of Sales Tax (Law), Board of

The best rule of construction of a statutory provision, including an Entry in a Schedule to a Tax Statute, is that which takes the words to comprehend a subject that falls within their usual sense, unless there is something plain to the contrary. (Anderson Vs. Anderson[73]; Church Vs. Mundy[74]). Entries, which are descriptive of the category of goods, have certain characteristics. Therefore, when a question arises whether a particular good is covered in any category or not, we should examine whether if it satisfies the characteristic which go to make it a good of that category, whether in trade circles it is understood as such, and if it is a good of a technical nature then whether technically it falls in one or the other category. (Bombay Chemical Pvt. Ltd. Vs. Collector of Central Excise, Bombay I[75]). General words are to be taken in their larger sense, unless you can find that in the particular case the true construction requires you to conclude that they are intended to be used in a sense limited to things ejusdem generis with those which have been specifically mentioned before. (Anderson[73]; Church Vs. Mundy[74]). As noted hereinabove, oleo-resins are classified under Tariff Item No. 1301 9040 in Chapter 13, Section II of the First Schedule to the Tariff Act. Tariff Item No. 1301 9041 to Tariff Item No. 1301 9046 relate to oleo-resins of seeds, of fruits, of leaves, of spices, of flowers, and of roots respectively. The aforesaid species of oleo-resins are all plant produce, the genus of which are Plants.

In examining the question whether a Tariff Entry in the first Schedule to the Tariff Act should be read broadly or narrowly, the rules of Noscitur a sociisand ejusdem generis should be borne in mind. The Rule ‘Noscitur a sociis’, according to Maxwell, means that where two or more words which are susceptible of analogus meaning are coupled together they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. (State of Bombay Vs. Hospital Mazdoor Sabha[76]; Lokmat Newspapers Pvt. Ltd. Vs. Shankar Prasad[77]; Bharat Heavy Electricals Ltd. Vs. Globe Hi Fabs Ltd.[78]; Brindavan Bangles Stores Vs. Asst.

The Latin words “ejusdem generis” (of the same kind or nature) are attached to a principle of construction whereby wide words, associated in the text with more limited words, are taken to be restricted by implication to matters of the same limited character. The doctrine of ejusdem generis applies when (i) the statute contains an enumeration of specific words; (ii) the subjects of the enumeration constitute a class or category; (iii) that class or category is not exhausted by the enumeration; and (iv) there is no indication of a different legislative intent. General words must ordinarily bear their natural and larger meaning, and need not be confined "ejusdem generis" to things previously enumerated unless the language of the statute spells out an intention to that effect. (GMR Energy Limited Vs. Government of Karnataka[82]; M/s. Siddeshwari Cotton Mills (P) Ltd. Vs. Union of India[83]).

The general expression has to be read to comprehend things of the same kind as those referred to by the preceding specific things constituting a genus, unless of course from the language of the statute it can be inferred that the general words were not intended to be so limited and no absurdity or unintended and unforeseen complication is likely to result if they are allowed to take their natural meaning. Unless there is a genus which can be comprehended from the preceding words, there can be no question of invoking this rule. (Asstt. C.C.E. Vs. Ramdev Tobacco Company[84]; Tribhuban Parkash Nayyar Vs. Union of India[85]; GMR Energy Limited[82]). The preceding words or expressions of restricted meaning must be susceptible of the import that they represent a class. (GMR Energy Limited[82]; Statutory Interpretation Rupert Cross (p.116); Amar Chandra Chakraborty Vs. The Collector of Excise, Tripura[86]; UPSEB Vs. Hari Shankar[87]).

For the ejusdem generis principle to apply there must be sufficient indication of a category that can properly be described as a class or genus, even though not specified as such in the enactment. (Francis Bennion : Statutory Construction [pgs 830- 831). ‘Unless you can find a category' 'there is no room for the application of the ejusdem generis doctrine'. The only test is whether the specified things which precede the general words can be placed under some common category. This means that the specified things must possess some common and dominant feature. (S.S. Magnhild Vs. Mclntyre Bros. & Co. [88]).

To invoke the application of the ejusdem generis rule, there must be a distinct genus or category running through the bodies already named. The specific words must apply not to different objects of a widely differing character but to something which can be called a class or kind of objects. (Rajasthan State Electricity Board Vs. Mohan Lal[89]; Maxwell : ‘Interpretation of Statutes’; United Town Electric Co., Ltd. Vs. Attorney-General for Newfoundland[90]). The nature of the special words and the general words must be considered before the rule is applied. (Jagdish Chander Gupta Vs. Kajaria Traders (India) Ltd.[91]). It is a requisite that there must be a distinct genus, which must comprise more than one species, before this rule can be applied. (State of Bombay Vs. Ali Gulshan[92]).

The general words “other oleo resins” are broad enough to bring within its ambit all kinds of oleo resins, other than oleo resins from seeds, fruits, roots, flowers etc, and may not call for the application of the Ejusdem Generis test. Even if the ejusdem generis rule were to be applied, it would only require the general words “other oleo-resins” in Tariff Item No. 1301 9049 to take their colour from the earlier special words and, since the earlier special words are “oleo-resin extracted from different parts of a plant”, the general words “other oleo-resins” must, at best, be confined to plants alone. Consequently, applying the ejusdem generis rule, the words “other oleo-resins” in Item No. 1301 9049 would bring within its ambit oleo-resin extracted from the stem or the bark of trees (in the present case pine trees).

Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that levy and collection of excise duty on oleo-resin has been held, by the learned Single Judge, to be illegal solely on the ground that the product, on which excise duty is to be levied, has not emerged as a new product from out of a process which can either be called “manufacture” or “production”; this conclusion is in the teeth of the provisions of the Excise Act read with the Tariff Act, as well as Entry 84 of List-I of Schedule VII of the Constitution, which distinguishes between the words “Produce” / “Manufacture”, by separating both of them by the word "or"; excise duty is levied and collected on various natural products, though they are not subjected to any process which results in a new product coming into existence; every word, used in a Statute, should be given due importance, and cannot be ignored; the word “Produce” has been held to be synonymous with the word “Manufacture” in the order under appeal; and the distinction between these two words has been ignored. 84. On the other hand Sri Sandeep Narain, learned counsel for the respondent- writ petitioners, would submit that (i) "excise" is a duty leviable on "goods"; (ii) such "goods" should be produced or manufactured by the assessee; (iii) "goods" are produced or manufactured by the assessee only when there is a change in the form of the goods as a result of which a new commodity or new goods come into being; (iv) such new goods or commodities, produced or manufactured by the assessee, do not remain the same as the original goods, and the new product (goods) must have new features distinct from the original product; such new goods, if produced or manufactured, must have a distinct name, character and use which is different from the original goods/product/commodity; it is only then that a duty of excise can be levied on such new goods; collection of natural Oleo Resin, from the barks of Pine trees, by the Forest Department of Uttarakhand, by tapping and/or employing any other method for collection of this naturally oozing resin, does not result either in the "transformation" of oleo pine resin as a result of any human activity, nor does such tapped oleo pine resin differ in its form, character etc., after such collection so as to be called a different product with a different and distinct use in comparison to the natural resin oozing from out of the bark of Pine trees; tapping and collection of Oleo Pine Resin from Pine Trees

Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would further submit that activities, akin to those referred to by the appellant leading upto the collection of resin, have, on a correct understanding of the expression “produced or manufactured”, been held to be not exigible to tax. After referring to MRF Ltd. Vs. Union Of India[93]; and Venkateswara Hatcheries[59], learned counsel would submit that "goods" "produced or manufactured", within the meaning of Section 3(1)(a) of the Excise Act, have always been understood and held to be goods, which by any process (hand labour or mechanised) results in transformation of the original goods which undergo a change so that a new and different good, known to the market by a distinctive name, character and use, emerges, and it can no longer be regarded as the original good; and all activities or processes that may be carried out by hand labour or mechanised activity, which do not bring in a change in the nature of goods, have consistently been held by Courts to not involve "manufacture or production" and to, consequently, not be exigible to the duty of excise. Learned counsel would rely on Tarpaulin International[2]; M/s Kutty Flush Doors & Furniture Co.

It is no doubt true that goods are manufactured when there is a change in the form of the goods as a result of which a new commodity or a new good comes into being; such new goods should have a feature distinct from the original product; and it must have a distinct name, character or use which is different from the original goods. These tests may, however, not apply to “production” of goods. As noted hereinabove, while the word “produced” includes an activity of manufacturing material by applying human endeavor on some existing raw material, it would also bring within its ambit securing certain produce from natural elements by applying human endeavor or effort, for the word “production” has a wider connotation than the word “manufacture”; and while every “manufacture” can be characterized as “production”, every “production” need not amount to “manufacture”.

Let us now examine the judgments on which reliance has been placed on behalf of the respondent-writ petitioners. In Chirukandan[10], the petitioners were required to pay Excise Duty, on the copra consumed in their mills, under the Copra Cess Act, 1979 (for short the “Cess Act”). The legislative competence of Parliament to make the said Act was subjected to challenge by them before the Kerala High Court. While upholding the constitutional validity of the said Act, a Division Bench of the Kerala High Court observed that cess under the Act was imposed not on raw material purchased by the occupiers of the mills, but in relation to the goods produced or manufactured from such raw material; what had attracted cess, under Section 3 of the Cess Act, was not the purchase of raw material, but the production or manufacture of new material of a distinct and different commercial identity; the impost was not on goods but on consumption of copra which is an essential and integral part of the process of manufacture; and the word “consumed”, in Section 3 of the Cess Act, connotes a process of manufacture.

In M/s Kutty Flush Doors & Furniture Co. (P)[56], the assessee contended that timber logs were only sawn into sizes, and did not amount to manufacture. The Assistant Collector, Madras had, however, held that the conversion of timber logs into sawn timber satisfied the conditions of manufacture as it involved transformation whereby a new and different article with a distinct name, character or use emerged, which was different from timber

In Empire Industries Ltd.[36], the petitioner was a processing unit engaged in the job activities of dyeing, printing and finishing of cotton fabrics and man-made fabrics. The assessee contended that levy of additional duty under Tariff Items 19 and 22 on cotton fabrics and man-made fabrics was illegal. It is in this context that the Supreme Court observed that, whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be a part of ‘manufacture’; and any process creating something else having a distinctive name, character and use would be manufacture.

In Hyderabad Industries Ltd.[4], the dispute was regarding levy of excise duty on imported asbestos fibre. The assessee also mined asbestos in India, and was made liable to pay excise duty under Tariff Item 22-F. Both these levies were questioned by the assessee, and the Supreme Court held that all that the appellants do is to separate asbestos fibre, from the rock in which it is embedded, by manual and mechanical means; the asbestos fibre, that is so removed from the parent rock is, in every respect, the asbestos that was embedded in it; no process of manufacture can be said to have been employed by the appellants nor is it a new or a distinct commodity realised therefrom; assuming that Tariff item 22F, when it refers to "asbestos fibre and yarn", covers asbestos fibre that has been separated from its parent rock in the manner aforementioned, such asbestos fibre is not the result of a process of manufacture, it is not a new and commercially identifiable article; and it is, therefore, not liable to excise duty.

In Minerals & Metals Trading Corporation of India Ltd.[94], the appellant imported wolfram ore on which duty was levied under Article 87 of the Ist Schedule to the Customs and Tariff Act. While paying the amount charged, the assessee claimed refund on the ground that no duty was leviable on the goods imported. The Supreme Court observed that separating of wolfram ore from the

In Delhi Cloth and General Mills[57], the assessees were manufacturing vanaspati, and excise duty was sought to be levied on the ground that refined oil was being manufactured from raw oil. On the matter being carried in appeal, the Supreme Court observed that the fact that the substance, produced at an intermediate stage, is not put in the market would not make any difference; if, from the raw material, a new substance has been brought into existence by the application of processes, one or more of which are with the aid of power, and the substance is the same as "refined oil" as known to the market, excise duty may be leviable; the word "manufacture", when used as a verb, was generally understood to mean "bringing into existence a new substance", and did not mean merely "to produce some change in a substance", however minor in consequence the change may be; by inserting the definition of the word "manufacture" in Section 2(f), the legislature did not intend to equate "processing" to "manufacture"; it intended to make "processing" distinct from "manufacture", in the sense of bringing into existence a new substance, known to the market, liable to duty; the sole purpose of inserting this definition is to make it clear that, at certain places in the Act, the word 'manufacture' has been used to mean a process incidental to the manufacture of the article; and the legislature had inserted this definition of the word 'manufacture' in the definition Section not with a view to make the mere "processing" of goods liable to excise duty.

In Tarpulin International[2], the question which arose for consideration was whether tarpaulin made-ups, prepared after cutting and stitching tarpaulin fabric, and fixing the eyelets on them, fell within the definition of ‘manufacture’. The Supreme Court observed that when tarpaulin sheets are stitched, and eyelets are made, it does not change the basic characteristic of the raw material, and the end product; the process does not bring into existence a new and distinct product with a total transformation in the original commodity; the original material used, i.e., the tarpaulin, is still called tarpaulin made-ups even after undergoing the said process; hence, it cannot be said that the process is a manufacturing process; the process of stitching and fixing eyelets would not amount to a manufacturing process, since tarpaulin after stitching and eyeleting continues to be only cotton

In Moti Laminates[49], Resol, obtained in a fluid state at a particular stage, was a solution which could be retained only by the addition of some stabilizer or retarder. The assessee used it, in a semi-finished stage without any processing or adding any stabilizer or retarder, for manufacturing laminated sheets; its life was for two or three days and could survive only if it was regulated, and a controlled temperature was maintained, otherwise it got converted into a jelly which was incapable of any use. It is in this context that the Supreme Court observed that the article should be goods, and should be marketable and capable of being marketed; the subject product was neither marketable nor capable of being marketed; and, therefore, excise duty could not be levied on it.

As noted hereinabove, in M/s Kutty Flush Doors & Furniture Co. (P) Ltd.[56], timber logs sawn into sizes was held not to amount to manufacture. In Empire Industries Ltd.[36], the job activities of dyeing, printing and finishing of cotton fabrics were held not be a manufacturing activity. In Hyderabad Industries Ltd.[4], asbestos fibre, mined from rocks in which it was embedded, was held not to be a result of a process of manufacture. In Minerals & Metals Trading Corporation of India Ltd.[94], separation of wolfram ore from the rock, to make it useful ore, was held to be a process of selective mining, and not to be a manufacturing process. In Delhi Cloth and General Mills[57], the Supreme Court held that manufacturing of hydrogenated oil, known as vanaspati, from raw materials was the same as refined oil, and amounted to manufacture of goods. In Tarpulin International[2], tarpaulin made-ups, prepared after cutting and stitching tarpaulin fabric, and fixing eyelets on them, was held not to fall within the definition of “manufacture”. In Moti Laminates (P) Ltd.[49], resol, obtained in a fluid state at a particular stage, was held incapable of being marketed, and as not liable to excise duty.

In all the aforesaid cases, the question which arose for consideration was whether excise duty could be levied on the goods referred to therein; and it was

In M.R.F. Ltd.[93], the liability of the assessee to pay customs duty on ‘natural rubber’, imported by them, was in issue; and a learned Single Judge of the Madras High Court observed that the fundamental postulate, for levy of excise duty, is that there should be manufacture of the goods in question; in the affidavits filed in support of the writ petitions, the uniform stand taken was that ‘natural rubber’ does not involve any element of manufacture, and hence it cannot attract the levy of excise duty; in the counter affidavits, filed by the respondents, there was no rebuttal of these specific averments made by the petitioners in their affidavits; and hence it was proper for the Court to accept the unrebutted case of the petitioners that obtaining natural rubber did not involve any element of manufacture to attract the levy of excise duty.

In Venkateswara Hatcheries[59], the assessees were running hatcheries where eggs were hatched on a large scale. They claimed that, since they were industrial undertakings engaged in the business of producing articles or things, they were entitled to investment allowance and other deductions under the Income-Tax Act. The Supreme Court opined that the provision, giving benefit to those who were engaged in running poultry farms, was separate and distinct from the provisions which provided an incentive to industrial undertakings engaged in the business of manufacturing or producing articles; thus if the expression industrial undertaking, for the purpose of manufacture or production of an article or thing, is read in the context of the provisions of the Income Tax Act, and with regard to the legislative history of the provisions of the Income Tax Act, it was clear that those engaged in the business of hatcheries were neither industrial undertakings nor engaged in the business of producing articles or things; the assessee did not contribute to the formation of chicks; formation of chicks was a natural and biological process over which the assessee has no hand or control; in

In M.R.F. Ltd.[93] the contention of the assessee, that natural rubber did not involve manufacture, was not disputed by the respondents in their counter affidavit; and the conclusion drawn by the Madras High Court was based on the ground that the specific case of the assessee was not disputed by the department. In Venkateswara Hatcheries[59] the word “production” and “manufacture” were examined in the context of the provisions of the Income Tax Act, and the Supreme Court, while noting that the assessee had relied upon several decisions under the Sales Tax Act, the Central Excise Act and the provisions of some other Statutes, held that the meaning assigned to a particular word in a Statute cannot be imported to a word used in a different Statute. Income Tax is a tax on income, unlike Central Excise Duty which is a tax on the activity of manufacture or production of goods. In Chirukandan[10], cess, under the Copra Cess Act, was levied on copra consumed in mills. While Copra (dry coconut) is, no doubt, a natural produce, levy of cess was not on the production of coconut or copra, but on its consumption in the mills, which the Supreme Court held was an essential and integral part of manufacture. Reliance placed by Mr. Sandeep Narain, learned counsel, on MRF Limited[93], Venkateswara Hatcheries[59] and Chirukandan[10], to contend that Oleo Resin, extracted from a pine tree, does not amount to production of goods on which excise duty can be levied, is misplaced.

Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would then contend that various taxing statutes have used the expression "produced or manufactured" just as in the Excise Act; the Supreme Court has consistently held that when the two words "produced" and "manufactured" are used in juxta-position with each other, they imply that a change / transformation of the original goods, resulting in a new article being brought into existence with

In Tara Agencies[5], the question before the Supreme Court was whether the assessee, which was engaged in purchase of different qualities of tea and was blending the same for the purpose of export, was entitled to claim deduction under Section 35(B)(1-A) of the Income Tax Act, 1961. The explanation to Section 35(B)(1-A) of the Income Tax Act, as it then stood, stipulated that, for the purpose of the sub-section, “small scale exporter” would mean a person who exports goods, manufactured or produced in any small scale industrial undertaking owned by him. It is in this context that the Supreme Court observed that, on a clear construction and interpretation of Section 35B(1A) of the Act, the respondent’s activity amounted to 'processing' only, and the activity did not amount to either 'production' or 'manufacture'; the term 'processing' had not been included in Section 35B(1A) of the Income-Tax Act; and, therefore, the respondent was not entitled for weighted deduction under Section 35B(1A) of the said Act.

In N.C. Budharaja & Company[1], the Supreme Court held that the word 'articles', is not defined in the Income-Tax Act or the Rules; the word "articles" is preceded by words "it has begun or begins to manufacture or produce"; it is difficult to hold that the word "articles", in the said clause, comprehends and takes within its ambit a dam, - a bridge, a building, a road, a canal and so on; no person, who has constructed a dam, would say that he has manufactured an article, or that he has produced an article; if a dam is an article, so would be a bridge, a road, an underground canal and a multi-storied building; it is equally difficult to say that the process of constructing a dam is a process of manufacture or a process of production; a dam is constructed, and it is not manufactured or produced; the expressions 'manufacture' and 'produce' are normally associated with movables - articles and goods, big and small- but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road or a building.

The respondent (assessee) before the Supreme Court, in Pio Food Packers[58], was carrying on business of canned fruits, besides other products. They contended that, by conversion of pineapple fruit into its products, no new commodity was created, and it could not therefore be said that there was consumption of pineapple fruit for the manufacture of those goods attracting levy of tax under Section 5A(1) of the Kerala General Sales Tax Act, 1963. In this context, the Supreme Court observed that, in the present case, there is no essential difference between pineapple fruit and the canned pineapple slices; the dealer and the consumer regard both as pineapple; the only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling; the additional sweetness in the canned pineapple arises from the sugar added as a preservative; the pineapple slices must be held to possess the same identity as the original pineapple fruit; and although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it.

We must bear in mind that observations of courts are not to be read as Euclid’s theorems nor as provisions of Statutes. The observations must be read in the context in which they appear to have been stated. To interpret words, phrases and provisions of a Statute, it may become necessary for Judges to embark upon lengthy discussions but the discussion is meant to explain, and not to define. Judges interpret Statutes, they do not interpret judgments. They interpret words of statutes, their words are not to be interpreted as statutes [Haryana Financial Corpn. Vs. Jagdamba Oil Mills[95]; London Graving Dock Co. Ltd. Vs. Horton[96]; Bharat Petroleum Corporation Ltd Vs. N.R. Vairamani[97]; Ashwani Kumar Singh Vs. U.P. Public Service Commission[98]; Union of India Vs. Amritlal Manchanda[99]; P Sridevi W/o P Murali Krishna Vs. Cherishma Housing Private Ltd. [100]; and Deepak Bajaj Vs. State of Maharashtra[101]). There is always peril in treating the words of a speech or a judgment as though they were words in a legislative enactment, and it should be remembered that judicial utterances are made in the setting of the facts of a particular case. (Herrington Vs. British Railways Board[102]; Ashwani Kumar Singh[98]; Amrit Lal Manchanda[99]; Collector of Central Excise,

Observations of Courts should not be taken out of context, and must be read in the setting in which they appear to have been stated. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. (N.R. Vairamani[97]; The State of A.P. Vs. M/s Seven Hills Constructions[106]). A word here, or a word there, should not be made the basis for inferring inconsistency or conflict of opinion. Law does not develop in a casual manner. It develops by conscious, considered steps. (Sri Konaseema Cooperative Central Bank Ltd Vs. N. Seetharama Raju[107]).

It would be wholly inappropriate, therefore, to place such a construction on the words “production” and “manufacture” as to obliterate its distinction. As noted hereinabove, every manufacture has been held to amount to production. The converse, however, has been held not to apply. Production not only includes manufacture, but other processes which may not amount to manufacture. Consequently, in situations where the manufacture of goods also amounts to production, the words ‘manufacture’ and ‘production’ when read in juxta- position may require the original product, after undergoing a process, to result in a new product coming into existence. However in cases, such as the present, where no process of manufacture is involved, and is only a case of production of goods, the test, of a new product having to come into existence, may not apply for the activity to fall within the ambit of “production of goods”.

Courts have adhered to the principle that effort should be made to give meaning to each and every word used by the legislature, and it is not a sound principle of construction to brush aside words in a Statute as being inapposite surplussage, if they can have a proper application in circumstances conceivable within the contemplation of the Statute. (Gurudevdatta VKSSS Maryadit, Manohar Lal Vs. Vinesh Anand[108]). When the legislative intent is found specific mention and expression in the provisions of the Act itself, the same

Accepting the construction that the word “production” when used in juxtaposition with the word “manufacture”, should, invariably and in all cases, result in the emergence of a new commodity or goods, would obliterate the distinction between the words “manufacture” and “production”, and would render one of the words “production” or “manufacture” redundant, if both these words are to be assigned the same meaning. It would also require the disjunctive word “or” to be read as the conjunctive word “and”. The aforesaid judgments, on which reliance is placed on behalf of the respondents-writ petitioners, cannot be read out of context, or a few sentences therein be read in isolation, to contend that, even in cases relating to production of goods, wherein no manufacturing process is involved, a new commodity or good should come into existence.

In Palampadam Plantations[60], the Supreme Court was called upon to examine whether a person owning and maintaining a private forest, and selling trees of spontaneous growth, was a 'dealer' within the meaning of Section 2(viii) of the Kerala General Sales Tax Act, 1963, and whether such a person was liable to levy of sales-tax in respect of the sale of his timber under the said Act. After taking note of the definition of the word ‘dealer’ to mean any person who carries on the business of buying, selling, supplying or distributing goods directly, or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, and to include a person who sells goods produced by him by manufacture, agriculture, horticulture or otherwise, the Supreme Court held that, in order to fall within the definition of ‘dealer’, a

While holding that the intention of the legislature, in employing the word “production”, was to introduce an element of volition and effort involving employment of some process of bringing into existence goods, the Supreme Court held that the assessee had not done anything towards production of the trees, and even the cutting had been done by the contractor. In the case on hand, an elaborate and well laid down process of extraction of Oleo Resin from pine trees is followed by the Forest Department. As volition and effort, involving employment of a scientific process to remove Oleo Resin from Pine trees, is involved, the Forest department must be held to have produced oleo-resin; and such production may be subjected to the levy of excise duty under Section 3(1)(a) of the Excise Act.

This appeal is preferred against the order passed by the learned Single Judge in Modification Application No.893 of 2011 in Writ Petition (M/S) No.446 of 2008 dated 19.03.2012, rejecting the said modification application. In the said Application, the petitioner stated that the application was filed by way of abundant caution seeking a specific direction to refund the principal amount of excise duty with interest; no such direction had been issued for refund of the illegally collected excise duty; and as the levy of excise duty was declared illegal, the petitioner was entitled for refund of the amount with interest from the date of deposit. After furnishing details of the Fixed Deposit Receipts/Demand Drafts submitted to the Uttarakhand Forest Department which, in turn, was taken by the Central Excise Department pursuant to their letter dated 28.03.2007, the petitioner stated that the Forest Department had earlier accepted bank guarantees from them with respect to the disputed amount of central excise on the raw pine resin purchased by way of auction; they had, subsequently, encashed and used the amount; the petitioner was claiming interest in terms of Section 11-B read with Section 11-BB of the Excise Act; in State of Madhya Pradesh Vs. Nathabhai Desaibhai Patel[114], the Supreme Court affirmed the position that, where an amount had been illegally withheld, awarding interest over the said amount was justified; and this Court should direct the respondents to refund the amount with interest @18% per annum.

In his order in Special Appeal No.354 of 2013 dated 19.03.2012, the learned Single Judge, relying on the judgment of the Constitution Bench of the Supreme Court in Mafatlal Industries Ltd. Vs. Union of India[115], held that, even when a tax is declared to be illegal, refund of the tax cannot be made automatically as a matter of right, but it had to be done in accordance with law, and the procedure prescribed under the law; and the issue of unjust enrichment had to be examined. The learned Single Judge, thereafter, referred to Shree Digvijay Cement Co. Ltd. & another Vs. Union of India & another[116], and observed that reliance placed by the petitioner, on Automotive Tyre Manufactures Association Vs. Designated Authority and Others[117], was of no avail; it was, undoubtedly, true that an exception was where the applicant could plead and prove, and adduce evidence in this regard, that it had not passed on the burden of excise duty to other persons or consumers; this fact had neither been pleaded nor proved in the application which is presently before the Court;

Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would submit that the respondent-writ petitioner had successfully participated in various auctions of Oleo Pine Resin held by the Forest Department; on their being declared the successful bidder, and when they sought to lift the resin, the Forest Department had insisted that they should secure an amount equivalent to the excise duty that may be levied on such resin at a later date; the respondent- writ petitioner had secured the Forest Department with "Fixed Deposit Receipts" (FDRs) equivalent to Rs. 56,24,717/- for the period 23.05.2006 and 05.12.2006; the bills, that were raised by the Forest Department during such period, only mentioned the cost of resin supplied, and the element of Central Sales Tax that was to be levied thereon; these bills did not mention any amount of excise duty that may be levied on oleo pine resin; no excise duty was charged, from the respondents-writ petitioners, in any of the Bills that were raised by the Forest Department during the period 23.05.2006 and 05.12.2006; a perusal of the Invoices raised by the Forest Department, on the respondent-writ petitioner, would reveal that (a) no amount of excise duty, which was chargeable on resin, was mentioned in the Invoices in compliance with Section 12A of the Central Excise Act, 1944; (b) the Invoices did not contain any Registration Number of the Forest Department, or the name of the Excise Division with which the Forest Department was registered, for payment of excise duty and/or the address of the Excise Division as was required by Rule 11(2) of the Central Excise Rules, 2002;

Sri Sandeep Narain, learned counsel for the respondent-writ petitioners, would submit that, since none of the Bills raised by the Forest Department mentioned any rate of excise duty, or the amount of excise duty that was payable on the purchase of Raw Oleo Pine Resin, the respondents-writ petitioners cannot be said to have paid "Excise Duty" to the Forest Department; as the respondents- writ petitioners have not paid any "duty of excise" to the department, no

On the other hand Sri Shobhit Saharia, learned Standing Counsel for the Central Excise department, would submit that the assessee, on whom excise duty was levied, is the Forest Department, which got itself duly registered under the Central Excise Rules and which, after due assessment, had paid the levied duty also to the revenue without any protest whatsoever; the respondent auction- purchasers, who were specifically put on notice by the Forest Department, have no legal right to seek refund of duty directly from the department; under Section 12B of the Central Excise Act, there is a presumption that every person, who has paid Excise duty on any goods, shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods; and this issue cannot be agitated by preferring a writ petition under Article 226 of the Constitution of India, more so as no material has been brought on record to show that the excise duty paid to the Forest Department has not been

In the light of our conclusion that the appellants have the power to levy excise duty on the Forest department, since extraction of resin from the stem or the bark of pine trees following a scientific method amounts to “production”, the question of refund of the amount collected by the Forest department from the respondents-writ petitioners, and which was paid thereafter to the Excise Department, does not arise. We shall, nonetheless, examine the respondents-writ petitioners’ claim for refund since the learned Single Judge has, in the order under appeal, held that the respondents-writ petitioners could only seek refund in accordance with the procedure prescribed under the Excise Act, and the issue of unjust enrichment was required to be examined therein.

The claim of unjust enrichment would apply to a person who is liable to, and has in fact paid central excise duty. As noted hereinabove, under Section 3(1)(a) of the Excise Act, excise duty is levied on all excisable goods which are produced and manufactured in India at the rates set forth in the First Schedule to the Tariff Act. Section 11 of the Excise Act enables the authorized officer to recover sums due, to the Central Government, with respect to Central Excise Duty. Section 11(A) confers power on a Central Excise Officer to serve a notice on the person chargeable with duty, which has not been levied or paid, asking him to show-cause why he should not be required to pay the amount specified in the notice. Section 11(A)(2) enables the Central Excise Officer, after considering the representation of a person on whom notice is served under sub-section (1), to determine the amount of excise duty due from such person and, thereupon, such person shall pay the amount so determined.

Any action, for recovery of excise duty dues, can be taken by the Central Excise Officer, under Sections 11 and 11(A) of the Excise Act, only against the person on whom excise duty can be levied. Section 11(B) relates to claim for refund of duty and, under sub-section (1) thereof, any person, claiming refund of any duty of excise, may make an application for refund of such duty within the time stipulated therein. Since refund, which can be claimed under Section 11(B), is of the duty of excise paid by the person, such a claim for refund can only be

Elaborate submissions were put forth on the failure of the Forest department to comply with the provisions of Section 12(A) of the Excise Act which requires the price of goods to include the amount of duty paid thereon, and of Rule 11(2) of the Central Excise Rules, 2002 which obligates the invoices to be serially numbered, and to contain the registration number, address of the concerned Central Excise Division etc. Even assuming that the Forest department had failed to comply with the aforesaid statutory provisions, that would not confer any right on the respondents-writ petitioners to claim refund of the excise duty, (paid by the Forest department to the appellants), by the appellants to them. The claim, if any, for recovery of the amount paid, can be made by the respondents-writ petitioners against the Forest department, only in terms of the contract of sale of resin to them by the Forest Department. Disputes in the contractual realm, more so those relating to non-statutory contracts, would ordinarily not be entertained by the High Court in the exercise of its discretionary jurisdiction under Article 226 of the Constitution of India. The remedy available to the respondents-writ petitioners, for resolution of such non-statutory contractual disputes, is by way of a Suit before the competent Civil Court. While the respondents-writ petitioners may be justified in their submission that the