STUDY MATERIAL UNIT II

THE CENTRAL EXCISE ACT, 1944.

Section 2 (f)

manufacture includes any process, -

i) incidental or ancillary to the completion of a manufactured product;

(ii) which is specified in relation to any goods in the Section or Chapter notes of the First
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture;
or

(iii) which, in relation to the goods specified in the Third Schedule, involves packing or
repacking of such goods in a unit container or labelling or re-labelling of containers including
the declaration or alteration of retail sale price on it or adoption of any other treatment on the
goods to render the product marketable to the consumer, and the word manufacturer shall
be construed accordingly and shall include not only a person who\ employs hired labour in
the production or manufacture of excisable goods, but also any person who engages in their
production or manufacture on his own account;

SECTION 2A.

References of certain expressions. In this Act, save as otherwise expressly

provided and unless the context otherwise requires, references to the expressions duty,
duties, duty of excise and duties of excise shall be construed to include a reference to
Central Value Added Tax (CENVAT).

SECTION 3.
Duties specified in First Schedule and the Second Schedule to the Central
Excise Tariff Act, 1985 to be levied.
(1) There shall be levied and collected in such manner as may be prescribed, -
(a) a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable
goods (excluding goods produced or manufactured in special economic zones) which are
produced or manufactured in India as, and at the rates, set forth in the First Schedule to the
Central Excise Tariff Act, 1985;
(b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on
excisable goods [(excluding goods produced or manufactured in special economic zones)]
specified in the Second Schedule to the Central Excise Tariff Act, 1985 , which are produced
or manufactured in India, as, and at the rates, set forth in the said Second Schedule.
Explanation .
(ii) hundred per cent export-oriented undertaking means an undertaking which has been
approved as a hundred per cent export-oriented undertaking by the Board appointed in this
behalf by the Central Government in exercise of the powers conferred by section 14 of the
Industries (Development and Regulation) Act, 1951,
(iii) Special Economic Zone has the meaning assigned to it in clause (za) of section 2 of the
Special Economic Zones Act, 2005 .

(3) Different tariff values may be fixed -

(a) for different classes or descriptions of the same excisable goods; or
(b) for excisable goods of the same class or description -
(i) produced or manufactured by different classes of producers or manufacturers;
or
(ii) sold to different classes of buyers :

SECTION 4. Valuation of goods for purposes of charging of duty of excise. -

(1) Where under this Act, the duty of excise is chargeable on any excisable goods with
reference to their value, then, on each removal of the goods, such value shall -
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the
removal, the assessee and the buyer of the goods are not related and the price is the sole
consideration for the sale, be the transaction value;

(b) in any other case, including the case where the goods are not sold, be the value
determined in such manner as may be prescribed.
Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the
excisable goods sold by the assessee shall be the price actually paid to him for the goods sold
and the money value of the additional consideration, if any, flowing directly or indirectly
from the buyer to the assessee in connection with the sale of such goods, and such price-cum-
duty,
excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty
payable on such goods.
(3) For the purpose of this section,-
(a) assessee means the person who is liable to pay the duty of excise under this Act and
includes his agent;
(b) persons shall be deemed to be related if -
(i) they are inter-connected undertakings;
(ii) they are relatives;
(iii) amongst them the buyer is a relative and a distributor of the assessee, or a subdistributor
of such distributor;
or
(iv) they are so associated that they have interest, directly or indirectly, in the
business of each other.
Explanation. In this clause
(i) inter-connected undertakings shall have the same meaning assigned to it in
clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act,
1969 ;
(ii) relative means the meaning assigned to it in clause (41) of section 2 of the Companies
Act, 1956 ;

(c) place of removal -

(i) factory or any other place or premises of production or manufacture of the
excisable goods;
(ii) warehouse or any other place or premises wherein the excisable goods have
been permitted to be deposited without [payment of duty;]
(iii) depot, premises of a consignment agent or any other place or premises from
where the excisable goods are to be sold after their clearance from the factory;
from where such goods are removed;
(cc) time of removal, in respect of the excisable goods removed from the place of removal
referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such
goods are cleared from the factory;
(d) transaction value means the price actually paid or payable for the goods, when sold, and
includes in addition to the amount charged as price, any amount that the buyer is liable to pay
to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable
at the time of the sale or at any other time, including, but not limited to, any amount charged
for, or to make provision for, advertising or publicity, marketing and selling organization
expenses, storage, outward handling, servicing, warranty, commission or any other matter;
but does not include the amount of duty of excise, sales tax and other taxes, if any, actually
paid or actually payable on such goods.

SECTION 4A. Valuation of excisable goods with reference to retail sale price. -
(1) The Central Government may, by notification in the Official Gazette, specify any goods,
in relation to which it is required, under the provisions of the Standards of Weights and
Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the
time being in force, to declare on the package thereof the retail sale price of such goods, to
which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable
to duty of excise with reference to value, then, notwithstanding anything contained in section
4, such value shall be deemed to be the retail sale price declared on such goods less such
amount of abatement, if any, from such retail sale price as the Central Government may allow
by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any abatement under sub-
section
(2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable
on such goods.
(4) Where any goods specified under sub-section (1) are excisable goods and the
manufacturer
-(a) removes such goods from the place of manufacture, without declaring the retail sale price
of such goods on the packages or declares a retail sale price which is not the retail sale price
as required to be declared under the provisions of the Act, rules or other law as referred to in
sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such
goods after their removal from the place of manufacture, then, such goods shall be liable to
confiscation and the retail sale price of such goods shall be ascertained in the prescribed
manner and such price shall be deemed to be the retail sale price for the purposes of this
section.
Explanation 1. For the purposes of this section, retail sale price means the maximum
price at which the excisable goods in packaged form may be sold to the ultimate consumer
and includes all taxes, local or otherwise, freight, transport charges, commission payable to
dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and
the price is
the sole consideration for such sale :
Provided that in case the provisions of the Act, rules or other law as referred to in subsection
(1) require to declare on the package, the retail sale price excluding any taxes, local or
otherwise, the retail sale price shall be construed accordingly.
Explanation 2. For the purposes of this section, -
(a) where on the package of any excisable goods more than one retail sale price is declared,
the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of
its clearance from the place of manufacture, is altered to increase the retail sale price, such
altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any
excisable goods in packaged form in different areas, each such retail sale price shall be the
retail sale price for the purposes of valuation of the excisable goods intended to be sold in the
area to which the retail sale price relates.]

Acer India Ltd. Vs CCE. 2004 (8) SCC 173 .

Summary

Levy of Excise duty-On operational Software loaded in hardware- Software exempted from
duty.

Held: Duty is not leviable on such software while it is not provided under Tariff Act-
Computer and Software both are distinct and separate both as a matter of commercial
parlance as also under the statute-

Despite being loaded in the hardware the software does not lose its character as is still
marketable as a separate commodity.

Facts.

Appellant Acer India Ltd. is a Company manufacturing computers, and accessories falling
under different headings of Chapter 84 of Central Excise Tariff Act, 1985. Upon a licence, it
also used to load operational softwares.

It used to deduct the value of the operational software from the total value of the Computer,
while calculating the amount of central excise payable thereupon.

Revenue issued show cause notices to it demanding a differential duty on the premise that
duty is payable on the entire value of the computer including the value of operational
softwares.

Revenue thereafter directed payment of differential duty.

In an appeal before the Supreme Court following contentions were raise.

Contentions of the Revenue.

An operational software implanted in a hardware becomes a part thereof and as such central
excise duty is leviable on the total value of the computer.

"Transaction Value" as contained in Section 4 (3) (d) of the Excise Act would include the
value of all manufactured goods charged as price including any amount that the buyer is
liable to pay by reason of or in connection with the sale together therewith any other amount
which adds to the value thereof.

As a software implanted is a part of the computer, excise duty would be payable on the total
value thereof.

Furthermore, the Company was also being under an obligation to preload a software on the
computer before clearing the same from the factory, the central excise duty would be
payable on the entire value thereof.

Contentions of Acer India Ltd.

The operational softwares which are implanted on specific orders would retain the
characteristics of software and would not lose its identity only because information contained
therein together with the right to use the same is implanted in the computer itself.

That hardwares and softwares are classified separately under different headings of the Tariff
Act.

That in respect of computers rate of duty is 16% and for softwares it is nil and thus assessee
was entitled to claim deduction of the value thereof from the total value of the computer.

That as both the hardware and software are assessed separately, in view of relevant chapter
note of the Tariff Act, the valuation of a computer and software cannot be clubbed together
for the purpose of assessment.

A computer which is a hardware is marketable as such containing a firm or etched software

being implanted therein, the valuation thereof also is taken into consideration for the
purpose of excise duty but the operational softwares which are implanted on specific orders
placed by the customers would retain the characteristics of software and would not lose its
identity only because the informations contained therein together with the right to use the
same is implanted in the computer itself.

RELEVANT STATUTORY PROVISIONS

Central Excise Act.

Section 2(d) "excisable goods" means goods specified in the First Schedule and the Second
Schedule to the Central Excise Tariff Act as being subject to a duty of excise ;
Section 3. Duties specified in the Schedule to the Central Excise Tariff Act, 1985 to be
levied.

(1) There shall be levied and collected in such manner as may be prescribed,-

(a) a duty of excise, to be called the Central Value Added Tax (CENVAT) on all excisable
goods which are produced or manufactured in India.

Section 4 . Valuation of excisable goods for purposes of charging of duty of excise.

(1) Where under this Act, the duty of excise is chargeable on any excisable goods with
reference to their value, then, on each removal of the goods, such value shall-

(a) in a case where the goods are sold by the assessee, for delivery at the time and place of
the removal, the assessee and the buyer of goods are not related and the price is the sole
consideration for the sale, be the transaction value;

(3) for the purposes of this section, -

(d) "transaction value" means the price actually paid or payable for the goods, when sold,
and includes in addition to the amount charged as price, any amount that the buyer is liable
to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether
payable at the time of the sale or at any other time, including, but not limited to, any amount
charged for, or to make provision for, advertising or publicity, marketing and selling
organization expenses, storage, outward handling, servicing, warranty, commission or any
other matter; but does not include the amount of duty of excise, sales tax and other taxes, if
any, actually paid or actually payable on such goods."

Reasoning of the Court.

Interpreting Taxing/Fiscal Statute:

In Cape Brandy Syndicate Vs. Inland Revenue Commissioners, [(1921) 1 KB 64 ], it is

stated that :

"In a taxing Act one has to look merely at what is clearly said. There is no room for any
intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to
be read in, nothing is to be implied. One can only look fairly at the language used."

In W.M. Cory & Sons Ltd. Vs. Inland Revenue Commissioners, (1965) 1 All ER 917, it was
held that:

Imposition of tax is a constitutional function. A taxing or a fiscal statute demands strict

construction. It must never be stretched against a tax payer. So long natural meaning for the
charging section is adhered to and when the law is certain, then a strange meaning thereto
should not be given.

In Union of India Vs. Play Win Electronics Pvt. Ltd , (1989) 3 SCC 181] it was held that:
It is also well-settled rule of construction of a charging section that before taxing a person it
must be shown that he falls within the ambit thereof by clear words used as no one can be
taxed by implication.

It is further well-settled that a transaction in a fiscal legislation cannot be taxed only on any
doctrine of "the substance of the matter" as distinguished from its legal signification, for a
subject is not liable to tax on supposed "spirit of the law" or "by inference or by analogy".
The taxing authorities cannot ignore the legal character of the transaction and tax it on the
basis of what may be called 'substance of the matter'. One must find the true nature of the
transaction.

In Mathuram Agrawal Vs. State of Madhya Pradesh [(1999) 8 SCC 667. the law regarding
interpretation of taxing statute is stated in the following terms:

"The intention of the legislature in a taxation statute is to be gathered from the language of
the provisions particularly where the language is plain and unambiguous. In a taxing Act it
is not possible to assume any intention or governing purpose of the statute more than what is
stated in the plain language. It is not the economic results sought to be obtained by making
the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an
interpretation which does not follow from the plain, unambiguous language of the statute.

Words cannot be added to or substituted so as to give a meaning to the statute which will
serve the spirit and intention of the legislature. The statute should clearly and
unambiguously convey the three components of the tax law i.e. the subject of the tax, the
person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any
ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law.
Then it is for the legislature to do the needful in the matter."

Interpretation Of The Relevant Provisions:

Section 2(d) of Central Excise Act, 1944 defines the "excisable goods" to mean the goods
specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act as
being subject to a duty of excise.

It must, therefore, be 'goods' which would be subject to a duty of excise and not the 'goods'
which would not be.

Section 3 is the charging provision.

It not only lays down the mode and manner for levy and collection of central excise duty but
in no uncertain terms states that a duty of excise shall be levied on all excisable goods which
are produced or manufactured in India, as, and at the rates, set forth in the Tariff Act.

Section 4 provides for the manner in which an enquiry is required to be made for valuation
of goods for the purpose of levy of excise duty on "goods".
In terms of Section 4(1)(a) , when the duty of excise is chargeable on the concerned
excisable goods with reference to their value, the same shall be calculated in the manner laid
down therein.

It may be true that the definition of "Transaction Value" which is incorporated in Section
4(3) (d) for the purpose of said Section states that the price actually paid or payable for the
goods, when sold, would include in addition to the amount charged as price, any amount
that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection
with the sale.

Only because the expressions "by reason of, or in connection with the sale" have been used
in the definition of "Transaction Value", the same by itself would not take away the rigours
of Sub-section (1) of Section 4 as also the requirement of charging section as contained in
Section 3.

It must be borne in mind that central excise duty cannot be equated with sales tax. They
have different connotations and apply in different situations.

Central excise duty is chargeable on the excisable goods and not on the goods which are not
excisable. Thus, a 'goods' which is not excisable if transplanted into a goods which is
excisable would not together make the same excisable goods so as to make the assessee
liable to pay excise duty on the combined value of both.

Excise duty, in other words, would be leviable only on the goods which answer the definition
of "excisable goods" and satisfy the requirement of Section 3.

A machinery provision contained in Section 4 and that too the explanation contained therein
by way of definition of 'transaction value' can neither override the charging provision nor by
reason thereof a 'good' which is not excisable would become an excisable one only because
one is fitted into the other, unless the context otherwise requires.

It is not a case where the software is being supplied to the customer along with the computer
by way of incentive or gift.The Company is charging the price therefor.

Software along with a computer is being sold both in the form of the information loaded in
the computer as also in the form of a CD-ROM.

In the invoice, the composite price of the computer and software is being shown, and
therefrom, the price of the software is only being deducted.

The invoice price, thus, also shows the actual price of the computer as also the price of the
software together with the licence to use the same.

But invoice value is not always excisable value in respect of the goods. In the instant case,
the excisable value of the computer has been disclosed. The cost of loading the softwares
which would enhance the value of the goods had also been added.
There cannot, thus, be any doubt whatsoever that while computing such costs of
manufacturing expenses which would add to the value of the excisable goods must be taken
into consideration but not the value of any other goods which is not excisable.

Classification of Goods under Central Excise Tariff Act :

Computers are classified under 84 with 16% duty . Softwares, however, are classified
under Chapter 85; and the duty payable is 'Nil' .

Once a particular subject matter falls within the specified classification, the determination of
valuation for the purpose imposition of duty must be done according to the terms of the
heading.

The softwares, thus, whether they are cleared with the apparatus for which they are intended,
viz., with the computer or not they remain classified under the same heading.

Since 'no duty' is payable on softwares according to classification, a duty would not be
payable only because the informations contained therein are loaded in the hardware.

A software retains its character irrespective of the fact as to whether it is sold with the
apparatus, viz., the computer. Once it is held that the essential characteristic of a software is
not lost by reason of its being loaded in the hardware; having regard to the different sub-
headings contained in different chapters of the Tariff Act, the intent and purport of the
legislature, in our opinion, cannot be permitted to be withered away only because the
informations contained in a software are loaded in a hardware.

In other words, as the central excise duty is not leviable on a software in terms of the Act,
only because it is implanted in a hardware which can be subjected to the assessment of
central excise under different head, the same would not attract central excise duty.

While calculating the value of the computer the value of the hard disc, value of the firmware,
the cost of the motherboard as also the costs for loading operating softwares is included.

What is excluded from the total value of the computer is the value of the operating softwares
like Windows 2000, Windows XP which are secondary softwares.

Indisputably, when an operating software is loaded in the computer, its utility increases.

But does it mean that it is so essential for running the computer that exclusion thereof
would make a computer dead box?

The answer to the said question must be in the negative

It is not disputed that even without operational softwares a computer can be put to use
although by loading the same its utility is enhanced.

Computers loaded with different operational softwares cater to the specific needs of the
buyer where he is required to place definite orders on the manufacturer.
It is also accepted that the operating software despite being loaded on to the hard disc is
usually supplied separately to the customers.

It is also beyond any controversy that operating software can be updated keeping in view the
development in the technology and availability thereof in the market without effecting the
data contained in the hard disc.

Even in the case of hard disc crash the software contained in the CDs is capable of being
reloaded on to the hard disc and its utility by the users remain the same.

An operational software, therefore, does not form an essential part of the hardware.

In PSI Data Systems Ltd. the Supreme Court drew a distinction between a computer system
and a computer and held that :

A computer and its software are distinct and separate . A computer may not be capable of
effective functioning unless loaded with software such as discs, floppies and CD ROMs, but
that is not to say that these are part of the computer or to hold that, if they are sold along
with the computer, their value must form part of the assessable value of the computer for the
purposes of excise duty.

In O.R.G. Systems Vs. CCE [1998 (102) ELT 3 (SC)]. the principal issue in controversy was
:

Whether the value of peripheral devices and/ or computer systems along with computers are
includible in the assessable value of the Computer;

Referring to P.S.I. Data Systems Ltd. the supreme Court held that :

"The PSI judgment completely answers the principal issue in controversy in favour of the
appellant company. In the case on hand, it cannot be disputed that the computers
manufactured and supplied by the appellant were complete computers, which had a Central
Processing Unit, with "etched-in" or "burnt-in" software, a Key Board (input device) the
monitor (output device) and Disc drives.

The computers, as above, were cleared after complying with all requirements under the
Excise Law and proper duty as computed was paid.

The peripheral devices and other systems software were merely additional devices meant to
increase the memory or storage capacity of the computers and other facilities."

Once it is held that the computer is complete without the operating softwares, the question of
adding the cost of software therewith would not arise since what is under assessment is only
the computer.

Computer and operative softwares are different marketable commodities. They are available
in the market separately. They are classified differently.

The rate of excise duty for computer is 16% whereas that of a software is nil.
Accessories of a machine promote the convenience and better utilization of the machine but
nevertheless they are not machine itself. The computer and software are distinct and
separate, both as a matter of commercial parlance as also under the statute.

Although a computer may not be capable of effective functioning unless loaded with
softwares, the same would not tantamount to bringing them within the purview of the part of
the computer so as to hold that if they are sold along with the computer their value must
form part of the assessable value thereof for the purpose of excise duty.

Both computer and software having being classified under different heading , must be
subject to corresponding rates of duties separately.

The informations contained in a software although are loaded in the hard disc, the
operational software does not lose its value and is still marketable as a separate commodity.

It does not lose its character as a tangible goods being of the nature of CD-ROM.

A licence to use the information contained in a software can be given irrespective of the fact
as to whether they are loaded in the computer or not.

The fact that the manufacturers put different prices for the computers loaded with different
types of operational softwares whether separately or not would not make any difference as
regard nature and character of the 'computer'.

Even if the company , in terms of the provisions of a licence were obliged to preload a
software on the computer before clearing the same from the factory, the characteristic of the
software cannot be said to have transformed into a hardware so as to make it subject to levy
of excise duty along with computer while it is not under the Tariff Act.

In other words, computers and softwares are different and distinct goods under the said Act
having been classified differently and in that view of the matter, no central excise duty would
be leviable upon determination of the value thereof by taking the total value of the computer
and software.

So far as, the valuation of goods in terms of 'transaction value' thereof, as defined in Section
4(3)(d) of the Act is concerned, suffice it to say that the said provision would be subject to
the charging provisions contained in Section 3 of the Act as also Sub-Section (1) of Section
4.

The expressions "by reason of sale" or "in connection with the sale" contained in the
definition of 'transaction value' refer to such goods which is excisable to excise duty and not
the one which is not so excisable.

Section 3 of the Act being the charging section, the definition of 'transaction value' must be
read in the text and context thereof and not without the same.
 When an exemption has been granted from levy of any excise duty on software whether it is
operating software or application software, no excise duty can be levied thereupon indirectly
as it was impermissible to levy a tax indirectly.

For these reasons aforementioned, appeal of the company are allowed accordingly.

Burn Standard Company Ltd. vs Union Of India

1991 SCR (2) 960

Facts
Appellant Burn Standard Company Limited, manufactured wagons for supply primarily to
the Railway Board.
The wagons are manufactured inaccordance with the specifications, terms and conditions
contained in the agreements entered between the appellant and the Railway Board from time
to time.
The Railway Board supplies wheel- sets, axle boxes and various other finished components
of wagons to the appellant which are termed as "free supply items".
These items are not manufactured by the appellant.
The readymade "free supply items" are made available to the appellant by the Railway Board
without charging any price.
There items are fitted in the wagons manufactured by the appellant and are ultimately
supplied to the Railway Board.
The invoice-value of the wagon charged by the appellant from the Railway Board does not
include the value of the "free supply items".
The central excise authorities issued various show cause notices in respect of different
transactions calling upon the appellant to show cause as to why the excise duty be not
computed and charged on the value of the completed wagon including that of the "Free
supply items".
The appellant challenged the show cause notices by way of writ petition before the Calcutta
High Court.
The Court allowed the writ petition and quashed the demand raised by the central excise
authorities.
The Court came to the conclusion that the excise duty could only be charged on the basis of
the invoice-value under the contract based on the following reasoning:
"There is no dispute that certain items of finished components are supplied by the Railway
Board to the petitioner. The value of these items is not taken into consideration in fixing the
price of the wagons sold by the petitioner to the Railway Board. The price of the completed
wagons is calculated on the basis of the manufacturing cost of the petitioner including the
price of components acquired by the petitioner for which the petitioner has actually to pay the
price.
But the components which are supplied free of cost by the Railway Board do not enter into
the pricing mechanism of the petitioner at all. Therefore, the excise value of the wagons
manufactured by the petitioner cannot be calculated after adding back the price of the
components supplied free of cost by the Railway Board."
However on appeal by the Union of India, a Division Bench of the High Court set aside
judgment of the single judge and allowed the appeal in the following words:
"Admittedly, in this case, the cost of wagon as a whole has not been mentioned in the
agreement .
But normal price should include cost of construction and furthermore, whenthe sale means
actual price of the goods viz. wagon as a whole, so the value of a wagon as a whole, will
form part of the relevant and necessary assessable value under section 4 of the Excise Act, as
the manufacturing cost of a complete wagon cannot be conceived of without taking into
account or consideration the cost of free supply items ......
Therefore the valuation cost of the free supply items should be included in the manufacturing
cost of wagons.
Section 4(1)(a) of the Excise Act applies in this case and as such, the valuation of excisable
goods will be charged or will take place when manufacture takes place.
While determining the valuation of wagons for charging the duty, the Revenue Authorities
had acted duly and with justification, in adding the cost of free supply items under the
provisions of the Act , the more so when, under the agreement in this case, the said
petitioners were and are required to manufacture and supply completed wagons, in which the
free supply items were and are required to be fixed at the time of manufacture.
There cannot be any doubt that without fixing the free supply items, the production and
manufacture of a wagon would not be effectively completed.
The manufacture of a complete wagon thus takes place as soon as or as and when the free
supply items are fitted and fixed by the said petitioners and with such manufacture, the
process of manufacture would be complete under section 2(f) of the Excise Act and the
liability to duty will also be attracted.
We hold that the value of the manufactured goods must be determined at the factory gate i.e.
at the stage when the manufactured goods here in this case wagons, leave the factory."
The Burn standard Company has come in appeal against the judgment of the high court.
On the basis of above facts, the question for determination is whether the excise duty under
Section 3 and 4 of the Central Excises and Salt Act, is to be charged on the invoice-value of
the wagon or on the value of completed wagon including that of the "free supply items".
Relevant statutory Provisions:
Section 3 of the Central Excise Act states that:
Duties specified in the First Schedule to be levied-
(1) There shall be levied and collected in such manner as may be prescribed duties of excise
on all excisable goods other than salt which are produced or manufactured in (India)
Section 4 states that:
Valuation of excisable goods for purposes of charging of duty of excise.-
(1) Where under this Act, the duty of excise is chargeable on any excisable goods with
reference to value, such value shall, subject to the other provisions of this section, be deemed
to be-
(a) the price at which such goods are ordinarily sold by the assessee to a buyer in the course
of trade for delivery at the time and place of removal, where the buyer is not a related person
and the price is the sole consideration for the sale:
Reasoning of the Court
Section 3 of the Act provides for levy of the duty of excise.
It is a levy on goods produced or manufactured in India.
Section 4 of the Act lays down the measure by reference to which the duty of excise is to be
assessed. The duty of excise is linked and chargeable with reference to the value of the
excisable goods and the value is further defined in express terms by the said section.
In every case the fundamental crite rion for computing the value of an excisable article is the
normal price at which the excisable article is sold or is capable of being sold by the
manufacturer..
It is not disputed that the appellants are manufacturers of wagons. What comes down from
the assembly-line of the appellant's factory is a complete wagon and as such the appellant
being manufacturer of wagons, is liable to pay duty of excise on the value of a complete
wagon.
The "free supply items" like wheel-sets etc. in the process of manufacturing become part of
the complete wagon and loose their identity.
It hardly matters how and in what manner the components of the wagon are procured by the
manufacturer, so long as the appellant is manufacturing and producing the goods called
"wagons" it is liable to pay duty of excise on the normal value of the wagon.
For the purpose of excise duty , ownership of the goods is irrelevant.
In Empire Industries Limited and Others v. Union of India and Others, [1985] 3 S.C.C. 314
while interpreting Sections 3 and 4 of the Act , the supreme Court held that:
"The fact that the petitioners are not the owners of the end product is irrelevant. Taxable event
is manufacture-not ownership.

In Ujagar Prints and Others v. Union of India and Others, [1989] 3 S.C.C. 488, it was held
that :"Duties of excise are imposed on the production or manufacture of goods and are levied
upon the manufacturer or the producer in respect of the commodity taxed. The question
whether the producer or the manufacturer is or is not the owner of the goods is not
determinative of the liability."
In the present case , though the ownership of free articles rests with the railway board but the
Burn Standard Company which uses these free supplies in manufacture of wagons becomes
liable to pay excise duty on total value of the wagon .
The position of law is clear in this regard that the excise duty is a duty on manufacture .The
fact that wagons are manufactured by the company with inputs of free supplies from the
railways , the total values of wagon is value on which tax will be calculated.
The reasoning and the findings reached by the Division Bench of the High Court therefore is
correct.
Appeal dismissed.
South Bihar Sugar Mills Ltd. Etc . vs Union Of India .
AIR 1968 SC 922.

The appellant companies manufacture sugar by carbonation process as against sulphitation

process employed by some other manufacturers of sugar and pay excise duty on the sugar
manufactured by them .
These manufacturers bum limestone with coke in a lime kiln with a regulated amount of air
and generate a mixture of gases consisting of carbon dioxide, nitrogen, oxygen and a small
quantity of carbon monoxide. Most of the oxygen from the air is used up by the coke in the
process of burning itself.
The coke so burnt supplies the heat which decomposes the limestone so as to generate carbon
dioxide. The gas thus produced is sucked,by a pump through a pipe which connects the kiln
with the inlet side of the pump. The gas enters the chamber of the pump and is then
immediately compressed by means of the compression stroke of the pump. At this stage the
gas is forced into a narrower space and as a result of the compression stroke it acquires
pressure exceeding the atmospheric pressure.
The gas so compressed is let into the delivery pipe, which connects the outlet side of the
pump with the tank containing the sugarcane juice and enters. the sugarcane juice with the
acquired pressure behind it.
But for the compression resulting in pressure the gas would not bubble in the sugarcane
juice. In the tank there, is besides the sugarcane juice milk of lime which is mixed so as to
remove the impurity in and refine the juice.
Thus, it is carbon dioxide which reacts on the lime and what is produced is an insoluble
content known as calcium carbonate. The other gases viz., nitrogen, 'oxygen, carbon
monoxide do not contribute in the process of clarification of the sugarcane juice.
These are innocuous so far as the process of clarification of sugarcane juice is concerned and
escape into the atmosphere by a vent provided in' the sugarcane juice tank. Along with these
gases a certain amount of carbon dioxide which remains unabsorbed also escapes.

The carbon dioxide content in the mixture of gases ranges from 27 to 36.5%. Thus, the
process involves the forcing of impure carbon dioxide into a narrower space within the
chamber of the pump where it is compressed and pushed first into the delivery pipe and then
into the, tank containing the juice.
The respondents' case therefore was that the process employed by the appellant companies
involves compressing carbon dioxide with the pressure achieved pushing it through
sugarcane juice.
The 'appellant companies therefore produced carbon dioxide through the lime kiln which was
taken first to the Co2 pump and there compressed and then pushed into the tank.
According to the Revenue the processes employed by the appellant companies thus involve
production of compressed carbon dioxide which is amenable to excise duty.

Contentions of the appellant companies .

(1) that the lime kiln is maintained to generate a mixture of gases and not carbon dioxide.
(2) that at no stage in the process of generating this mixture and sucking it into the sugarcane
juice for refining, carbon dioxide which forms one of the contents of the said mixture is either
compressed, liquidified or solidified;
(3) that the mixture of gases so generated is not carbon dioxide as known to the market;
(4) that according to the specifications laid down by the Indian Standards Institution carbon
dioxide content has to be at least 99%;
(5) that the mixture of gases so generated has no other use except for processing sugarcane
juice;
(6) that the said mixture is neither sold nor is marketable nor known to the trade;
(7) that these concerns are not manufacturers of carbon dioxide as carbon dioxide is not
separated from the said mixture of gases by any process nor is the carbon dioxide content in
the said mixture compressed, liquefied or solidified;
(8) that the mere fact that the said mixture of gases is passed through a conduit pipe by a
process of suction cannot mean that carbon dioxide becomes compressed carbon dioxide at
that or any other stage;
(9) that the term "compressed" under relevant provisions of the Excise Act contemplates the
form in which the article sought to be levied is manufactured. There is no separation of
carbon dioxide from the said mixture at any stage nor is it compressed or stored as carbon
dioxide in cylinders.
(10) that the duty being, on goods it can be charged only on goods known as carbon dioxide
in the trade and marketable as such.

Contentions of the Revenue.

(1) that the mixture of gases generated as aforesaid is nothing but impure carbon dioxide in
the sense that during the process of burning limestone with coke a small quantity of carbon
monoxide is released by the burning of coke, the other gases in the mixture being nitrogen
and oxygen derived from the' air which is let into the kiln to aid combustion;
(2) that these concerns require carbon dioxide for refining sugarcane juice and manufacture it
out of limestone and coke. The other gases which get mixed up are unavoidable on account of
the process employed by them;
(3) that these extraneous gases can be separated and the manufacturers would separate them if
what they require is pure carbon dioxide. They do not do so because carbon dioxide mixed
with other gases produces the same effect in the process of refining as without them;
(4) that the fact that in the process Of its manufacture carbon dioxide gets mixed up with
other gases does not mean that carbon dioxide which is intended to be and is in fact produced
loses its characteristics as such. The gas thus produced contains 30 to 35% carbon dioxide.
(5) that the specifications laid down by the Indian Standards Institution are not relevant as
they are for cylindered carbon dioxide bought and sold in the market as pure carbon dioxide;
(6) that carbon dioxide produced by these concerns can be sold in the condition in which it is
produced and used by other sugar mills .
In support of their contentions the appellant companies relied on the specifications laid down
by the Indian Standards Institution and the several affidavits made by concerns using carbon
dioxide for the manufacture of their respective goods.
Carbon dioxide used in manufacturing aerated waters contains 99.5% of pure carbon
dioxide,.
The compressed liquidified or solidified carbon dioxide as known to the trade or sold in the
market contains a minimum of 99% carbon dioxide conforming to the specifications of the
Indian Standards Institution, that such carbon dioxide is contained in steel cylinders and that
kiln or calciner gas is not known to the trade as carbon dioxide nor is it marketed as such.
To obtain marketable carbon dioxide from kiln gas an elaborate plant would be required for
separation and purification and it is such carbon dioxide which becomes marketable after it is
compressed.
Question for consideration.
It is clear and that is that in the case of both sugar and soda ash, the manufacturer does
require carbon dioxide for the purpose of producing the two articles and sets up lime kiln for
that purpose.
The question is whether what he actually produces by combusting limestone with coke is
compressed carbon dioxide amenable to excise duty.
Reasoning of the Court.
The commercial carbon dioxide is divided into two grades, both of them having at least 99%
carbon dioxide. Such carbon dioxide when solidified is packed in insulated boxes .
When liquified it is packed in steel cylinders. The uses of solidified or liquefied carbon
dioxide are refrigeration of foods, carbonated beverages, industrial refrigeration, fire
extinguishers, welding etc.
Therefore commercial carbon dioxide as brought to the market for being bought or sold and
used for the purposes enumerated above has content of at least 99% of carbon dioxide and is
either compressed and packed in steel cylinders or liquefied or solidified.
According to Revenue , sugar mills and soda ash plants require carbon dioxide in the
processes employed by them while manufacturing sugar and soda ash and to meet, their
requirement they have set up lime kilns by which they produce kiln gas which includes
carbon dioxide to the extent of about 30 to 35%, which they in fact use after compressing it
through a pump or otherwise, at one stage or the other in their manufacturing processes.
But is it possible to say that the lime kilns set up for the aforesaid purpose produce carbon
dioxide and even if it be so, that at one stage or the other, through the pump or otherwise, the
carbon dioxide so produced becomes compressed carbon dioxide as envisaged by the
legislature when it decided to impose excise duty on it.
It is true that by burning limestone with coke in the kiln the manufacturer actually produces
kiln gas of which one of the constituents undoubtedly is carbon dioxide and which he utilises
while producing his ultimate excisable goods.
But if it is possible to say that what he produces is carbon dioxide as an integrated and
continuous manufacturing process or separately as the Revenue insisted, it is equally possible
to say that the combustion of limestone with coke results in the manufacture of nitrogen,
whose content in the kiln gas is about 53%.
The correct picture is that what is produced is kiln gas which consists of several gases, viz.,
carbon dioxide, carbon monoxide, oxygen and nitrogen, the last one being in a larger quantity
than carbon dioxide.
The mixture of gases so generated is known as kiln gas in the trade, i.e. to those who
manufacture sugar and soda ash.
The concerns which use carbon dioxide definitely assert that kiln gas is never known in the
market as carbon dioxide nor is it a marketable article in the sense that it is loose and is not
transportable nor is it brought to the market for being bought and sold unless carbon dioxide
is extracted out of it. Such extraction requires an elaborate plant.
After extraction it would have to be compressed in cylinders of certain specifications or
liquefied or solidified before it can become a marketable article.
It is true as the Revenue contended, that the gas produce through the kiln can be made
marketable in the sense that it car be sold in the very same condition in which it is produced
to concerns interested in the carbonation process through" for example, pipes.
But, apart from such a method of disposal being uneconomic and hardly likely to be
employed by the trade, what would be transported is that which is produced through the kiln,
viz., the kiln gas containing among other things a certain quantity of carbon dioxide.
The fact is that in employing carbonation process the manufacturer who requires carbon
dioxide produces kiln gas and as that mixture of gases contains carbon dioxide he pumps
through a pipe that mixture of gases and not carbon dioxide alone extracted from it.
Therefore, in truth and in fact what he uses is the kiln gas produced by him in the lime kiln.
 Even assuming that this gas is compressed either through a narrow pipe what is compressed
is the kiln gas and it is that kiln gas containing no doubt a certain percentage of carbon
dioxide which is inducted in the sugarcane juice for refining.
The Act charges duty on manufacture of goods.
The word "manufacture" implies a change but every change in the raw material is not
manufacture.
There must be such a transformation that a new and different article must emerge having a
distinctive name, character or use. The duty is levied on goods.
As the Act does not define goods, the legislature must be taken ,to have used that word in its
ordinary, dictionary meaning.
The dictionary meaning is that to become goods it must be something which can ordinarily
come to the market to be bought and sold and is known to the market.
That it would be such an article which would attract duty under the Excise Act.
The evidence produced by the appellant companies cases and the scientific works show that
the mixture of gases produced from the kiln is known both in trade and in science as kiln gas
and not as carbon dioxide.
The Revenue on the other hand has not produced any affidavit of persons dealing in carbon
dioxide to show that kiln gas is known to the market as carbon dioxide.
The carbon dioxide known to and brought in the market for being bought and sold for its
diverse uses is carbon dioxide compressed, liquefied or solidified .
The analogy given by the Revenue of a manufacturer of cotton cloth also producing at an
intermediate stage cotton yarn and such cotton yarn being liable to excise duty would not
help the Revenue as cotton yarn obtained by such a manufacturer is known as such in the
commercial community and brought to the market for being bought and sold.
That cannot be said of kiln gas.
If kiln gas were to be offered in discharge of a contract to supply carbon dioxide it would
certainly be rejected on the ground that it is not carbon dioxide but is kiln gas.
It is also not correct to say that because the sugar manufacturer wants carbon dioxide for
carbonation purpose and sets up a kiln for it that he produces carbon dioxide and not kiln gas.
In fact what he produces is a mixture known both to trade and,, science as kiln gas, one of the
constituents of which is, no doubt, carbon dioxide.
The kiln gas which is generated in these cases is admittedly never liquefied nor solidified and
is therefore neither liquefied nor solidified carbon dioxide, assuming that it can be termed
carbon dioxide.
It cannot be called compressed carbon dioxide as understood in the market among those who
deal in compressed carbon dioxide.
Compressed carbon dioxide is understood generally as carbon dioxide compressed in
cylinders with high pressure .
The mere fact that at one stage or the other kiln gas is subjected to some pressure by a pump
or otherwise cannot mean that it is compressed carbon dioxide.
At the same time the duty being on manufacture and not on sale the mere fact that kiln gas
generated by these concerns is not actually sold would not make any difference if what they
generate and use in their manufacturing processes is carbon dioxide.
The fact that the gas so generated has carbon dioxide below 99% and does not conform to the
specifications of the Indian Standards Institution also would not matter for the gas may be
sub-standard, provided what is produced is carbon dioxide.The gas generated by these
concerns is kiln gas and not carbon dioxide as known to the trade i.e., to those who deal in 'it
or who use it.
The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide
known as such to the commercial community and therefore cannot attract duty under the
provisions of the Excise Act.
In the result the appeal is allowed.
The Tata Iron & Steel Co. vs CCE. AIR 2003 SC 144
Facts :
Under the Essential Commodities Act the Government of India set up a Joint Plant
Committee (JPA) and a Steel Priority Committee (SPC) for determining , prices (base prices
as well as extras) from time to time of all categories of iron or steel as ex-works prices.
The Committee added an element to the ex- works prices for constituting a fund for
modernisation, research and development with the object of ensuring the production of iron
and steel in the desired categories and grades by the main steel plants.
Pursuant to the orders of the committee , the steel companies started adding element to
their ex-works price for the fund.
However while declaring value of their goods, the steel companies did not add these ex-
works elements for the purpose of asessment of excise duty.
The revenue claimed that excise is payable even on this component as total value of goods
is relevant for assessment of excise duty an whatever is added to ex- works prices will the
value for calculation of excise duties.
The questions for consideration .
(i) Whether the elements required to be added by the members steel plants, as per the decision
of the Committee , are admissible deductions under Section 4(4)(d)(ii) of the Central Excise
Act i.e. whether they fall within the definition of the term "other taxes" and
(ii) whether such addition, which is a compulsory impost, can be considered and be price on
which excise duty is payable by the parties.
Contention of TISCO
(i) Iron or Steel Companies have to compulsory add this element to the ex-works price and
as such it is a compulsory exaction.
 Such compulsory exaction is in the nature of "tax" and is covered by the words "other taxes"
in Section 4(4)(d)(ii) of the Central Excise Act
Reasoning of the Court:
In order to understand the submission made by the Tisco and other steel companies , the
provisions of Section 4 of the said Act need to be look at.
Section 4 of the Central Excise Act states that where the duty of excise is chargeable on any
excisable goods with reference to value, such value shall, subject to the other provisions of
this section, be deemed to be
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold
by the assessee to a buyer in the course of trade for delivery at the time and place of removal,
where the buyer is not a related person and the price is the sole consideration for the sale:
(d) "value" in relation to any excisable goods,-
(ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, paid or
payable on such goods
Thus excise duty is chargeable on the value of the goods. The value is the normal price i.e.
the price at which such goods are ordinarily sold by the assessee to a buyer, where the buyer
is not a related person and the price is the sole consideration for sale.
From the price at which the assessee sells to the buyer the only deductions permissible are
those under sub-clause 4(d)(ii) i.e. excise, sales tax and other taxes .
It is clear that extra elements added to ex- works price of steel is not an excise duty or a
sales tax .
The only question is whether it would fall within the meaning of the term "other taxes".
Case laws
In D. G. Guose and Co. v. State of Kerala (1980) 2 SCC 410. the question was regarding the
validity of tax imposed by the Kerala State on buildings by virtue of the Kerala Building Tax
Act.
The validity of this Act was challenged, inter alia, on the ground that this was the tax on the
capital value and assessee of an individual or a Company and therefore fell within the scope
of Entry 86 of the Union List and not under Entry 49 of the State List.
Therefore the State did not have the statutory authority to impose such a tax.
The Court held as follows:
" The word 'tax' in its widest sense includes all money raised by taxation. It therefore includes
taxes levied by the Central and the State legislatures, and also those known as 'rates", or other
charges, levied by local authorities under statutory powers.
Taxation" has therefore been defined in clause (28) of Article 366 of the Constitution to
include "the imposition of any tax or impost, whether general or local or special", and it has
been directed that "tax" shall be "construed accordingly"."
Thus it is to be seen that even though the term "tax" has been given a wide interpretation to
include all monies raised, the levy still has to be by the Central or State legislatures or by
some statutory authority.
In CCE v. Kisan Sahkari Chinni Mills Ltd. 2001 (132) ELT 523 (S.C.).
State of Uttar Pradesh enacted a legislation called Uttar Pradesh Sheera Niyantaran
Adhiniyam .
This Act regulated storage, gradation, price, supply and distribution, in Uttar Pradesh, of
molasses produced by the sugar factories.
The Act provided that sugar factories would be liable to pay to the State Government
administrative charges . These administrative charges were based on the quantity of molasses
sold and supplied by the sugar factories.
The Act enabled the factories to recover these charges from the person to whom the molasses
were sold.
The question before the Court was whether this compulsory exaction fell within the term
"other taxes" in Section 4(4)(d)(ii) of the Central Excise Act.
It was held as follows:
"Under Section 4(4)(d)(ii) of the Central Excise Act what is to be excluded from the
assessable value is the amount of duty of excise, sales tax and "other taxes". Taxes, as such,
are not defined in the Central Excise Act. If the expression "tax" is to be understood in the
absence of any definition, it would certainly cover any levy.
Since the imposition was under a statute enacted by the State of Uttar Pradesh the levy was
by the State.
It was thus held that that levy fell within the definition of the term "other taxes".
In the present case there is no backing of any statutory provision for the creation of these
funds.
Further the levy was only on main steel plants and the fund was created for the utilization
by these member steel plants only.
Also to be noted that even though the Essential Commodities Act empowers regulation of
price, it does not empower imposition of any taxes. The addition of an element to the ex-
works price has no statutory backing or force.
It is not by the Central Government or the State Government or any local authority. It is a
levy by a Committee majority of whose members are representatives of the steel plants. The
purpose of creating funds is for the benefit of these member steel plants.Such a levy, even
though, it may be compulsory can never be "tax".
In C.I.T. v. Tollygunge Club Ltd. (1977) 2 SCC 790.
the question was whether a surcharge collected by the assessee Club from all race goers but
which had been earmarked for charity could be deemed to be an income of the assessee and
therefore includible in the taxable income of the assessee.
It was held that income tax was a tax on income. It was held that "income" is what reaches
the assessee and that it is that income which is intended to be charged to tax under the Income
Tax Act.
Every receipt by the assessee is not necessarily income in his hands.
The surcharge collected by the assessee was for the purposes of being paid over to local
charities.
This surcharge was clearly impressed with an obligation in the nature of trust for being
applied for the benefit of charities.
Therefore it was held that this surcharge was diverted before it reached the hands of the
assessee and did not become part of the income of the assessee and such a surcharge would
therefore not be regarded as income assessable to tax.
In C.I.T. v. Bijli Cotton Mills (1979) 1 SCC 496.
The question was whether certain amounts realized by the assessee on account of Charity in
addition to the price from his customers could be stated to be income in the hands of the
assessee which were assessable to income tax.
It was held that the amount was being collected for purposes of giving to charities and were
held by the assessee under an obligation to spend them for charitable purposes.Therefore it
did not form income of the assessee.
These amounts were not part of the price of the goods but were payments for specific purpose
of being spent on charitable purposes.
It was submitted by TISCO that all the abovementioned cases clearly show that when there
is a compulsory impost or exaction, the assessee has to collect but the assessee cannot retain
for himself and he has to pass on the same, then such a compulsory exaction cannot be
included in the value for purposes of assessing excise duty. Such imposts cannot be deemed
to be price.
What was being levied was an element to the ex-works price and the price for purpose of
assessment of duty remained the ex-works price. The Companies sold to the customers at the
ex-works price.
The additional amount was merely collected by the Companies for and on behalf of JPC and
the companies did not retain this amount. Therefore this element could not be considered to
be price.
Therefore the price which the buyer pays is the price on which excise duty is leviable. From
the price that the buyer pays, the only deductions allowed are taxes paid or payable on such
goods. The levy in the present case is not a "tax" and does not fall within the meaning of the
term "other taxes". This element cannot be deducted from the assessable value of the goods.
Countering this the revenue submitted that the principles under the Income Tax Act cannot be
made applicable to the Central Excise Act. Under the Income Tax Act what is taxable is the
actual income received by the assessee for his own benefit. Under the Central Excise Act
excise duty is chargeable on the value of the goods.
This value is the price at which the goods are ordinarily sold by the assessee to the buyer.
The element which has been added is an "element of price".
This element could only have been added as price because the JPC is established by virtue of
the order based on the Essential Commodities Act and under that Act there was no power to
make any levy or impose any tax on a purchaser.
The addition being an element of price it has to be included in the assessable value for
purposes of excise duty.
Reasoning of the Court.
Principles on which "income" is to be determined under the Income Tax Act cannot apply
when determining "value" for purposes of Excise Duty.
Under the Income Tax Act, tax is payable on income which reaches the assessee. On the
other hand, Section 4 of the Excise Act shows that excise is payable on the price at which
goods are ordinarily sold to the buyer.
Thus the principles on which Bijli Cottons Mills' case and Tollygunge Club's case were
decided would not be appropriate and would not apply for deciding "value" for the purposes
of the Excise Act.
In Hindustan Sugar Mills v. State of Rajasthan. (1978) 4 SCC 271.
The question was whether the assessee was liable to pay Sales Tax on the amount of railway
freight collected by them from the purchaser.
It was held that the assessee was bound to pay Sales Tax on such amounts.
In E.I.D. Parry (I) Ltd. v. Asst. Commissioner of Commercial Taxes (2000) 2 SCC 321. it
was held that the purchase price is the total amount of consideration for the purchase of
goods. This would include price and also other amounts payable by the purchaser.
These cases have been decided under the Sales Tax Act,but the principles for computing
value for purposes of Sales Tax are similar to those of computing value for purposes of
Excise Duty. It is these principles which would apply. What has been added is an "element of
price".
The JPC could not have made any compulsory exaction from the purchaser. They could only
regulate prices by adding elements to the ex-works price. In other words the ex-works price
could be increased by adding an element to it. Thus what was being added was to the price.
Another aspect to be kept in mind is ultimate beneficiaries of these amounts are the steel
plants themselves.Therefore while assessing excise duty,such levy cannot be exempted as
taxes .
In this view of the matter the appeal of TISCO is dismissed.
Ujagar Prints Etc vs Union Of India & Ors. 1989 AIR 516.
Through an amendment called the Central Excises and Salt and Additional Duties of Excise
(Amendment) Act, 1980. , Section 2 (f) of the Excise Act was amended by adding three sub-
items in the definition of `manufacture' so as to include activities like bleaching, dyeing,
printing etc. The amendment was applied retrospectively.
Against this, a batch of writ petitions under Article 32 of the Constitution of India were filed
, involving common questions of law concerning the validity of the levy of duties of excise
by treating as `manufacture' the process of bleaching, dyeing, printing, sizing, mercerising,
water-proofing, rubberising, shrink-proofing, etc. done by the processors who carry out these
operations in their factories on job-work basis in respect of `cotton-fabric' and `Man-made
fabric' belonging to their customers. The correctness of the judgement in Empire Industries
case which held that printing, dyeing , etc. amounts to manufacture also came up for
consideration.
Facts.
The petitioners carry out the operations of bleaching dyeing, printing sizing, finishing etc. of
grey fabric on job-work against payment of processing charges to it by the customers who are
the owners of the grey-fabric. The man-made grey-fabricis manufactured in mills and on
power looms and that latter is exempt from excise duty on its manufacture.
Contention of the Petitioners.
That the processing of the grey-fabric is not a part, a continuation, of the process of
manufacture in the manufacturing-stream, but is an independent and distinct operation carried
out in respect of the Grey-fabric, after it has left manufacturing-stage and has become part of
the common-stock of goods in the market.
That processing operations do not amount to "manufacture" as the petitioners do not carry
out any spinning or weaving operations; that what they receive from their customers for
processing is otherwise fully manufactured man-made fabric and that what is returned to the
customers after processing continues to remain man-made fabric.
The imposition of excise duty on the processor on the basis of the full-value of the processed
material, which reflects the value of grey-fabrics, the processing-charges, as well as the
selling profits of the customers is, at once unfair and anamolous, for, in conceivable cases the
duty itself might far exceed the processing-charges that the processors stipulate and get.
Questions for consideration.

(A) Whether the process of bleaching, dyeing, printing, sizing, shrink-proofing etc. carried
on in respect of cotton or man-made `grey-fabric' amount to `manufacture' for purposes, and
within the meaning of Section 2(f) of the Central Excises and Salt Act 1944 prior to the
amendment of the said Section 2(f) by the Amending Act of 1980.

(B) Whether the amendment brought about by the Act of 1980 of Section 2(f) and of the
Central Excise Act is ultra-vires Entry 84 List 1 and, therefore, beyond the competence of the
Union Parliament.
(C) Whether the retrospective operation of the Amending Act is an unreasonable restriction
on the fundamental right of the `processors' under Article 19(1)(g) of the Constitution.
Question A. Whether "processing" of the kind concerned in these cases amounts to
manufacture",

Contention of the Petitioners.

When the said fabrics are received in the factory of the petitioner company the same are fully
manufactured and are in a saleable condition and are commercially known as grey fabrics i.e.
unprocessed fabrics which are cleared after payment of the excise duty under.

The grey fabrics i.e. unprocessed, undergo various processes in the factory . The grey fabrics
are boiled in water mixed with various chemicals and the grey fabric is washed and thereafter
the material is taken for the dyeing process, that is imparting of required shades of colours.

The next stage is printing process, i.e. putting the required designs on the said fabrics by way
of screen printing on hot tables. The final stages the finishing process, that is to give a final
touch for better appearance.

The petitioners mills , do not carry out any spinning or weaving of the said fabrics.

The petitioners case is that the petitioner company begins with man-made or cotton fabrics
before it starts the said processes and also ends with man-made or cotton fabrics after
subjecting the fabrics to the various processes.

The petitioners company receives fully manufactured man-made fabrics and cotton fabrics
from its customers only for the purpose of carrying out one or more of the aforesaid processes
thereon as per the requirement and instructions of the customers and after the necessary
processes are carried out, the same are returned to the customers.

The petitioners company states that it has no discretion or choice of shades or colours or
designs and the same are nominated or prescribed by the customers. The finally processed
fabric is not and cannot be sold by the petitioners in the market as the petitioner company's
product. The petitioner company merely collects from its customers charges only for job
work of processing done by it.

The petitioner company further states that it has no proprietary interest in the fabrics either
before or after the same is processed. The manufacture of the fabrics and sale in the market of
the processed fabrics are effected by the petitioner company's customers and not by the
petitioners. Further the processed as well as the unprocessed fabric, whether cotton or man-
made, can be put to the same use.

Reasoning of the Court.

Before its amendment , Section 2(f) of the Central Excise Act, defined 'manufacture' in its
well accepted legal sense .
Section "2(f) ' defines manufacture as ' including any process, incidental or ancillary to the
completion of a manufactured product;
The essential condition to be satisfied to justify the levies, is that there should be
'manufacture' of goods and in order that the concept of 'manufacture' in Entry 84 List I is
satisfied there should come into existence a new article with a distinctive character and use,
as a result of the processing.
It is contended that nothing of the kind happens when 'Grey fabric' is processed; it remains
'grey fabric'; no new article with any distinctive character emerges
The prevalent and generally accepted test to ascertain that there is 'manufacture' is whether
the change or the series of changes brought about by the application of processes take the
commodity to the point where, commercially, it can no longer be regarded as the original
commodity but is, instead, recognised as a distinct and new article that has emerged as a
result of the processes.
The principles are clear. But difficulties arise in their application in individual cases. There
might be border-line case where either conclusion with equal justification be reached.
Insistence on any sharp or intrinsic distinction between processing' and 'manufacture, results
in an over simplification of both and tends to blur their interdependence in cases such as the
present one.

The correctness of decision in Empire Industries Limited & Ors. ... vs Union Of India
1986 AIR 662.

The Empire Industries case was correctly decided for following reasons and the decision will
apply in the present case also.

Reasoning of the Court.

In the case of Hiralal Jitmal v. Commissioner of Sales Tax, the Madhya Pradesh High Court,
in considering the meaning of the expression `manufacture' for the purpose of the Madhya
Bharat Sales Tax Act, 1950, was of the view that it was not necessary that there must be a
transformation in the materials and that the transformation must have progressed so far that
the manufactured article became commercially known as a different article from the raw
materials and all that was required was that the material should have been changed or
modified by man's art or industry so as to make it capable of being sold in an acceptable form
to satisfy some want, or desire, or fancy or taste of man.

In Deputy Commissioner, Sales Tax v. Pio Food Packers the principles enunciated by the
Supreme Court are in the following terms:
"There are several criteria for determining whether a commodity is consumed in the
manufacture of another The generally prevalent test is whether the article produced is
regarded in the trade, by those who deal in it, as distinct in identity from the commodity
involved in its manufacture. Commonly, manufacture is the end result of one or more
processes, through which the original commodity is made to pass. The nature and extent of
processing may vary from one case to another, and indeed there may be several stages of
processing and perhaps a different kind of processing at each stage. With each process
suffered, the original commodity experiences a change. But it is only when the change or a
series of changes, take the commodity to the point where commercially it can no longer be
regarded as the original commodity but instead is recognised as a new and distinct article that
a manufacture can be said to take place. Where there is no essential difference in identity
between the original commodity and the processed article it is not possible to say that one
commodity has been consumed in the manufacture of another. Although it has undergone a
degree of processing, it must be regarded as still retaining its original identity."

The taxable event under the Excise Law is 'manufacture'. The moment there is transformation
into a new commodity commercially known as a distinct and separate commodity having its
own character, use and name, whether be it the result of one process or several processes
'manufacture' takes place and liability to duty is attracted.

In Mc Nicol and Another v. Pinch, [1906] 2 K.B 352, it was laid down that:

It is well-settled that one cannot absolutely make a thing by hand in the sense that nobody
can create matter by hand, it is the transformation of a matter into something else and that
something else is a question of degree, whether that something else is a different commercial
commodity having its distinct character, use and name and commercially known as such from
that point of view is a question depending upon the facts and circumstances of the case. Plain
wood is certainly different from 'box' made of wood.

Take the case of the manufacture of steel; and let it be steel before it goes into works: apply
some process to it and it become a particular sort of steel. But it is steel both before and after,
although steel of different qualities. Is not that the manufacture of steel? . Take the
manufacture of wool, it is wool when it is on the sheep's back; it is wool when it has passed
through the process of sorting and picking which it has to go through in the mill. Is not that
the manufacture of wool ? I should have thought it most certainly was, although the name
"wool" is applied to it both before the process begins and after it has ended"

Therefore the processes applied to grey fabric by mills in the present case indubitably fill
within the expression "manufacture" .
Question (B). Whether the amendment brought about by the Act of 1980 of Section 2(f) and
of the Central Excise Act is ultra-vires Entry 84 List 1 and, therefore, beyond the competence
of the Union Parliament.
Contention of the petitoners.
The concept of manufacture' embodied in Entry 84 of List I, it is urged, should be construed
not in an artificial sense, but in its recognised legal sense and so construed artificial
dimensions sought to be imparted to it by the amendment would be impermissible.
In support of the contention , observations of the Supreme Court in Diamond Sugar Mills v.
State of UP, [1961] 3 SCR 242 , was cited. "we have, on the one hand, to bear in mind the
salutary rule that words conferring the right of legislation should be interpreted liberally and
the powers conferred should be given the widest amplitude; on the other hand we have to
guard ourselves against extending the meaning of the words beyond their reasonable
connotation, in an anxiety to preserve the power of the legislature.
It was further contended that though entries in the legislative lists are to be construed liberally
and the widest possible amplitude given to them, however, no artificial or arbitrary extensions
of the meaning of the words in the entry are permissible.
That the concept manufacture in Entry 84 List I has a well accepted legal connotation and in
construing the entry the precise connotation which it possesses and conveys in law must be
kept in mind. There is in law no 'manufacture' unless as a result of the process a new and
commercially distinct product with distinct use emerges. The idea of manufacture might
imply change, but every change is not necessarily manufacture. It is. accordingly, contended
that the amendment which seeks to equate "processing "with "manufacture" is beyond the
scope of Entry 84 List I.
Reasoning of the Court.
Entries to the legislative lists, are not sources of the legislative power but are merely topics or
fields of legislation and must receive a liberal construction inspired by a broad and generous
spirit and not in a narrow pedantic sense.
The expression "with respect to" in Article 246 brings-in the doctrine of "Pith and
Substance" in the understanding of the exertion of the legislative power and wherever the
question of legislative- competence is raised the test is whether the legislation, looked at as a
whole, is substantially 'with respect to' the particular topic of legislation. If the legislation has
a substantial and not merely a remote connection with the entry, the matter may well be taken
to be legislation on the topic.
In Empire Industries case, it was held that :
"Processes of the type which have been incorporated by the amendment were not so alien or
foreign to the concept of "manufacture ' that these could not come within that concept."
At all events, even if the levy on process is not one under Entry 84, list l, but is an impost on
'processing' distinct from "manufacture" the levy could yet be supported by Entry '97. List l.
It was, however, contended that the levy of tax on an activity which cannot reasonably be
regarded as an activity of 'manufacture' cannot be described as a levy of duties of excise
under Entry 84, List I. If it is a non- descript tax under Entry 97, the Parliament has not
chosen to enact any such law in this case. The charging section does not, bring such a
taxable-event to charge.
This argument proceeds on an entire misconception and must be rejected . The charging
section is the charging section 3 of the Central Excise Act. It stipulates the levy and charge of
duty of excise on all excisable goods produced or manufactured. "Manufactured" under the
Act after the amendment would be the 'manufacture' as amended in section 2(f) and the
charge would be on that basis. Therefore it is difficult to appreciate the argument that the levy
would fail as there will be no appropriate charging section or machinery for effectuating the
levy on the activity like the method of processing even if such an activity can be justified
under Entry 97 of List l of Seventh Schedule.
If a legislation purporting to be under a particular legislative entry is assailed for lack of
legislative- competence, the State can seek to support it on the basis of any other entry within
the legislative competence of the legislature. It is not necessary for the State to show that the
legislature, in enacting the law, consciously applied its mind to the source of its own
competence.
Competence to legislate flows from Article 245, 246, and the other Articles following, in Part
XI of the Constitution. In defending the validity of a law questioned on ground of legislative-
incompetence, the State can always show that the law was supportable under any othe entry
within the competence of the legislature. Indeed in supporting a legislation sustenance could
be drawn and had from a number of entries. The legislation could be a composite legislation
drawing upon several entries. Such a "rag-bag" legislation is particularly familiar in taxation.
Bennion in his "Statutory Interpretation" refers such a composite legislation,
" 'Ragbag' Acts: Some Acts are 'rag bag' Acts, covering many areas. The annual Finance Act
is an extreme example. It is divided into Parts, dealing respectively with customs and excise
duty, value added tax, income tax, capital gains tax, stamp duty, capital transfer tax and so
on"
In Hari Krishna Bhargav v. Union of India and Anr., [1966] 2 SCR 22 , it was laid down that :
"There is no prohibition against the Parliament enacting in a single statute, matters which call
for the exercise of power under two or more entries in List I of the Seventh Schedule.
Illustrations of such legislation are not wanting in our statute book, and the fact that one of
such entries is the residuary entry does not also attract any disability .. .."
So far as, the exclusive competence of the Union Parliament to legislate is concerned all that
is necessary is to find out whether the particular topic of legislation is in List II or List III. If
it is not, it is not necessary to go any further or search for the field in List I. Union Parliament
has exclusive power to legislate upon that topic or field.
Therefore there is no substance in this contention and is rejected.
Question C. Whether the retrospective operation of the Amending Act is an unreasonable
restriction on the fundamental right of the `processors' under Article 19(1)(g) of the
Constitution.
Reasoning of the Court.
There is really no substance in the grievance that the retroactivity imparted to the
amendments is violative of Article 19 [l] (g).
A Competent legislature can always validate a law which has been declared by courts to be
invalid, provided the infirmities and vitiating factors noticed in the declaratory-judgment are
removed or cured.
Such a validating law can also be made retrospective. If in the light of such validating and
curative exercise made by the Legislature-granting legislative competence--the earlier
judgment becomes irrelevant and unenforceable, that cannot be called an impermissible
legislative overruling of the judicial decision. All that the legislature does is to usher in a
valid law with retrospective effect in the light of which earlier judgment becomes irrelevant.
Such legislative expedience of validation of laws is of particular significance and utility and
is quite often applied, in taxing statutes. It is necessary that the legislature should be able to
cure defects in statutes. No individual can acquire a vested right from a defect in a statute and
seek a windfall from the legislature's mistakes. Validity of legislations retroactively curing
defects in taxing statutes is well recognised and courts, except under extraordinary
circumstances, would be reluctant to override the legislative judgment as to the need for and
wisdom of the retrospective legislation.
In Empire Industries Limited & Ors. Etc. v.Union of India it was laid down that :" not only
because of the paramount governmental interest in obtaining adequate revenues, but also
because taxes are not in the nature of a penalty or a contractual obligation but rather a means
of apportioning the costs of government amongst those who benefit from it".
In testing whether a retrospective imposition of a tax operates so harshly as to violate
fundamental rights under Article l9(1)(g), the factors considered relevant include the context
in which retroactivity was contemplated such as whether the law is one of validation of
taxing statute struck-down by courts for certain defects; the period of such retroactivity, and
the degree and extent of any unforeseen or unforseable financial burden imposed for the past
period etc.
Having regard to all the circumstances of the present case , the retroactivity of the Amending
provisions was not such as to incur any infirmity under Article 19( l)(g).
There is no merit in this contention and is rejected.
Union Of India vs Delhi Cloth & General Mills 1963 SCR Supl. (1) 586
Facts.
Petitions have been filed by three different companies manufacturing vegetable products
known as Vanaspati and they challenge the legality of the imposition of Excise duty on, what
was called by the taxing authorities as the manufacture of "refined" from raw oil.
The question of law raised is the liability to excise duty .
The facts alleged in the petitions filed by the the manufacturers of Vanaspati states that for
the purpose of manufacturing Vanaspati the petitioners purchased groundnut and til oil from
the open market or directly from the manufacturers of such oil. The oils thus purchased are
subjected to different processes in order to turn them into Vanaspati.
 The respondents (oil companies ) claimed that the only finished product they manufacture
from the raw materials thus purchased is Vanaspati which is liable to excise duty as a
vegetable product.
They contend that at no stage do they produce any new product which can come within the
item described in the Schedule as " vegetable non essential,oils. Accordingly, it is, said, the
demand for excise duty on the ground that they produce from the raw oils purchased a
product which is liable to duty is illegal.
Contention of Union Of India.
The Union of India contended that in the course of the manufacture of Vanaspati, the
vegetable product form raw groundnut and til oil, the petitioners bring into to existence at one
stage, after carrying out some 'process" with the aid of power, what is known to market as
"'refined oil".
This "refined oil" falls within the description of "vegetable non-essential oils, and so is liable
to excise duty.
The Union of India in support of this contention relied on report of Chief Chemist of Central
Revenue Laboratory .
The report describes the process by which raw oil is manufactured into Vanaspati :-
"The manufacture of vegetable product consists in hydrogenating oils using a catalyst. The
catalyst is a sensitive material and is liable to be poisoned and made ineffective if certain
impurities are present.
In order therefore, to successfully manufacture vegetable product the hydrogenation has to
be done on a refined vegetable non-essential oil. 'The refined vegetable non-essential oil (an
oil free from major impurities ) is the penultimate raw material for the manufacture of
vegetable product.
The vegetable non-essential oils as obtained by crushing containing the impurities are raw
vegetable nonessential oils.
The process of refining them consists in adding. an aqueous solution of an alkali which will
combine with the free fatty acids to form a soap and settle down with it a large amount of
suspended matter; after settling the clear layer is drawn off and treated with bleaching earth
and carbon is then filtered.
In this process the colouring matter is removed and the moisture that was originally present in
the neutralised oil will also be removed.
At this stage the oil is a refined oil and is suitable for hydrogenation into vegetable product.
This process of refining generally involves the use of power and machinery.
Depending upon the quality of the seed used for crushing and that of the original raw oil this
refined oil will now generally be suitable for edible purposes of discriminating users and for
the manufacture of toilet goods like hair oils and high class soaps.
For certain users who are even more discriminating this oil may be subjected 'to a further
process of deodorisation.
The difference between raw vegetable non- essential oils and refined vegetable oils will
clearly be seen on examination of the two 'products.
The refined oil will generally be colourless or only slightly coloured. ' It will be perfectly
clear and in many cases it may have no odour.
The raw oil, on the other hand, will have a certain amount of turbidity or sediment at the
bottom and will also be somewhat deep in colour.
Sometimes refined oil obtained above is subjected to a process of further deodorization. Such
oil can be correctly described as refined and deodorised oil.
The two grades of oils are separately marketed in the country; as for' example, groundnut' oil'
and 'refined groundnut oil' the latter generally with a distinctive label .
The experts generally agree with the Report that common oils, like groundnut, sesame,
mustard cottonseed, etc. in their raw stage always contain varying amounts of impurities and
these impurities have to be removed by different processes before hydrogenation for the
purpose of producing Vanaspati can be applied.
On the other hand , the respondent oil mills state though the raw oil which has been freed
from impurities but not deodorised is sold in the market as refined oil but refined oil for
edible purposes, as understood by the manufacturers as well as by the trade, is oil to which all
the three processes, viz., neutralization, bleaching and deodorisation have been applied.
Any oil cannot be regarded as refined oil unless it was also deodorised, since the failure to
deodorise oil leaves behind in the oil certain impurities in the shape of compounds .
The High Court accepted the oil mills contention that the oil in their hands after some
amount of refinement in the course of being converted into Vanaspati was not liable to excise
duty and allowed the petitions.
The Union of India states that the oil mills after they buy the raw oil with all its impurities,
manufacture a refined oil by the application of certain processes of refinement, which is the
same as the refined oil available in the market.
The refined oil thus produced becomes after further processes "vegetable product".
When the vegetable product comes into existence it becomes liable to excise duty as
vegetable product . The fact that they do not put this "refined Oil" on the market but use it to
produce a finished product known as vanaspati product cannot affect this liability.

Excise duty is on the manufacture of goods and not on the sale.

The fact that the substance produced by them at an intermediate stage is not put in the market
would not make any differences
If from the raw material , a new substance has been brought into existence by the application
of processes and that substance is the same as "refined oil" as known to the market an excise
duty may be leviable .
Reasoning of the Court.
To levy excise , it has to be shown that the substance produced is at any intermediate stage
before final product ( vanaspati) comes into existence, is refined oil" as known to the market.
It does not appear to be disputed that the process of deodorisation is applied in the factory
after hydrogenation is complete.
The appellant's case is that before hydrogenation has started the substance in the hands of
these oil mills is "refined oil" as known to the market.
That raises the important question whether any oil is known as "refined oil' in the market
before deodorization has taken place.
The appellant's case is that deodorization is not necessary for "refined oil" to come into
existence; the respondents' case on the other hand is that without deodorisation the substance
is not "refined oil".
The specification of "refined oil" by the Indian Standards-Institution states that:
"Refined groundnut oil:-Groundnut oil which has been refined by neutralisation with alkali
and deodorised with steam."
This specification by the Indian Standards Institution furnishes very strong support for
respondents' contention that without deodorisation the Oil is not "'refined oil" as is known to
the consumers and the commercial community.
Further support is found in the several affidavits of several concerns who market refined
groundnut oil under different brand names asserting that the oil is always deodorised before
it is marketed as refined oil.
On the contrary the appellant could not produce evidence of one single case of marketing of
refined oil without deodorisation.
Therefore the respondents contention that the raw oil purchased by the respondents for the
purpose of manufacture of Vanaspati does not become at any stage "refined oil" as is known
to the consumers and the commercial community , must be accepted.
The other contention of the appellant that even if it be held that the respondents do not
manufacture "refined oil" as is known to the market they must be held to manufacture some
kind of "non,essential vegetable oil" by applying to the raw material purchased by them,
certain processes of neutralisation and bleaching .
The "manufacture" is complete as soon as by the application of one or more processes, the
raw material undergoes some change. To accept this contention would amount to equating
"'processing" to "manufacture" .
The word "manufacture" used as a verb is generally understood to mean as "bringing into
existence a new substance" and does not mean merely "to produce some change in a
substance", however minor in consequence the change may be.
This distinction is well stated in Permanent Edition of Words and Phrases .
It sates that :-
Manufacture' implies a change, but every change is not manufacture and yet every change of
an article is the result of treatment, labour and manipulation. But something more is
necessary and there must be transformation; a new and different article must emerge having a
distinctive name, character or use."
The excise duty is leviable on "'goods but the Excise Act itself does not define "goods" but
defines "excisable goods" as meaning "goods specified in 'the First Schedule as being, subject
to a duty of excise ."
Therefore the ordinary meaning of goods must be considered to determine whether excise
can be levied .
The Permanent Edition, Words and Phrases, on meaning of the word "goods" states that:
The word 'goods' in Bailey's Large Dictionary is defined as 'Merchandise'-, and in
Johnsons , it is defined to be movables in a house; personal or immovable estates; freight;
merchandise,,"
Webster defines the word "'goods" as
(1) movables; household, furniture;
(2) Personal or movable estate, as horses, cattle, utensils, etc.,
(3) Wares; merchandise; commodities bought and sold by merchants and traders.
These definitions make it clear that to become "goods" an article must be something which
can ordinarily come to the market to be bought and Sold.
This consideration of the meaning of the word "goods" an provides strong support for the
view that "manufacture" which is liable to excise duty under the Central, Excises Act must
be the "bringing into existence of a new substance known, to the market."
The appellants also cited Section 2(f) of the Excise Act which defines 'manufacture' as :
'Manufacture' includes any process incidental or ancillary to the completion of a
manufactured product ".
However this contention of the appellant must also be rejected.
Merely by inserting this definition of the word ',manufacture,, in s. 2 (f) the legislature did
not intend to equate "processing" to "manufacture" and intended 'to make mere "Processing"
as distinct from "manufacture" in the same, sense of bringing into existence of 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.
It is only with this limited purpose that the legislature inserted this definition of the word
'manufacture' in the definition section and not with a view to make the 'mere "processing" of
goods as liable to excise duty.
 The duty is on the manufacture of goods, that is, on the bringing into existence a new
substance known to the market, the raw oil or the refined oil must be some substance known
to the, market before it can be subjected to duty.
Therefore there can be no legal basis for the demands of excise duty which were made from
the oil mills . The excise authorities are directed withdraw these demands.
The appeals are accordingly dismissed .