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PETITIONER: ADlTYA MILLS LTD.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT29/08/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR 2237            1988 SCR  Supl. (2) 668  1988 SCC  (4) 315        JT 1988 (4)   151  1988 SCALE  (2)1068

ACT:     Central Excises and Salt Act, l944/Central Excise Rules, 1944:  Schedule I Tariff Item l8E/Rule l73B--PPRF  yarn-Levy of excise duty--Polyster spun yarn and Rayon filament  yarn- Difference  between-‘New  commodity’ distinct  and  separate coming  into cxistence-Necessity for it to  be  commercially known. %     Statutory   Construction_   Fiscal    entry-Ascertaining correct  meaning-Correct guide is the context and the  Trade meaning-Trade meaning always given preference.

HEADNOTE:     According  to the appellant company, PPRF yarn  consists of  two  varieties of yarn on which duty  has  already  been paid,  namely, two plies of polyster spun yarn (PP) and  one ply of Rayon Filament Yarn (RF), which are doubted  together and  the  resultant yarn is referred to as  PPRF  yarn.  The appellant  filed classification list under Rule l73B of  the Central Excise Rules stating: that it intended to clear PPRF yarn, on which duty has been paid. But it was rejected  with a  direction  to file a fresh classification  list  showing: PPRF yarn under Tariff Item 68.     Since the appellant was not permitted to clear PPRF yarn without  further  payment of duty under Tariff Item  68,  it started  making clearance on payment of duty under  protest. When it filed claim for refund of the same, it was issued  a show  cause  notice’  as  to why the  claim  should  not  be rejected.  Appellant filed its reply. The refund  claim  was rejected  by the Assistant Collector which was later  upheld by  the Appellate Collector. On appeal the Central Excise  & (Gold  Control Appellate Tribunal also held that  PPRF  yarn was taxable under Tariff Item 68 and that no refund was  due to the appellant.     This appeal, a statutory one, is against the  Tribunal’s Order.     Dismissing the appeal,     HELD:  1.  Excise duty is a duty on the  manufacture  of goods and not on  i sale. Manufacture is complete as soon as by the application of one or more process, the raw  material                                                   PG NO 668

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                                                 PG NO 669 undergoes  some change. If a new substance is  brought  into existence  or  if  a  new or  different  article  having   a distinct  name,  character or use  results  from  particular process or processes, such process or activity would  amount to  manufacture. The moment there is transformation  into  a new commodity commercially known as a separate and  distinct commodity  having  its own character and  use,  Manufacture, takes place. [671C-F]     Union  of India v. Delhi Cloth & General  Mills,  [l963] Suppl.  1 SCR 586;  union of India v. HUF Business known  as Ramlal  Man-sukhrai  Rowari  &  Anr.,  [1971]  1  SCR   936; Allenburry  Engineers P.Ltd. v. Ramakrishna Dalmia  &  Ors., [1973] 2 SCR 257; Deputy Commissioner, Sales Tax (Law) Board of  Revenue (Taxes) Ernakulam v, Pio Food Packers, [1980]  3 SCR 1271; Chowgule & Co. Pvt. Ltd. & Anr. v. Union of lndia, [1981] 1 SCC 653 and Empire Industries Ltd. & Ors. v.  Union oflndia & Ors., [l985] Suppl. 1 SCR 292, relied on     Hyderabad  Asbestos Cement Product Ltd. & Anr. v.  Union of  India  & Ors., [1980] ELT 735 and Piramal  Spg.  &  Wvg. Mills Ltd. v. Union oflndia & Ors., [1982] ELT 145, referred to.     2.1  The question is not whether it is a mixture of  two yarns, where as a process of mixing, a separate and distinct good  known  in them market as such, comes into  being.  For ascertaining the correct meaning of a fiscal entry reference to  a dictionary is apt to be a somewhat delusive guide,  as it  gives all the different shades of meaning.  The  correct guide  is  the  context and the  trade  meaning.  The  trade meaning is always to be given preference. 672C-D]     2.2 The Tribunal has found that indisputably a new  yarn has  come  into being which is known in the  market  on  the evidence  adduced  before  it,  and  that  PPRF  is  treated differently  from  Polyster Spun Yarn  and  Rayon.  Filament Yarn. The Tribunal rightly came to the conclusion that  this is a separate and distinct item. [l672E]     Commissioner  of Sales Tax, U.P.v. Sarin Textile  Mills, [1975]35 STC 634, referred to. The King v. Planters, [l951] CLR (Ex) l22, relied on.

JUDGMENT:     CIVIL APPELLATE JUlRISDICTION: Civil Appeal No. 2124  of 1984.                                                   PG NO 670     From the Order dated 4.6. 1983 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in Ed (SB)  (T) A No. 312/80-D ’and Order No. D-395/1983.     Harish   N.  Salve,  Ravinder  Narain.  P.K.   Ram   and D.N.Mishra for the Appellant.     The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI,  J.  This is  a  statutory  appeal against the decision of the Customs Excise & Gold  (Control) Appel-late Tribunal (for short CEGAT). The appellant Company had  filed  a  Classification List under Rule  l73B  of  the Central Excise Rules stating intended to clear PPRF yarn, on which duty had already been paid.     According  to the appellant, the PPRF yarn  consists  of two  varieties of yarn on which duty has already been  paid, namely,  two plies of Polyester Spun Yarn-PP and one ply  of Rayon Filament      Yarn-RF, which are doubled together  and the  resultant  yarn  is  refer-red to  as  PPRF  Yarn.  The aforesaid  classification  list filed by the  appellant  was rejected and it was directed to file a fresh  classification

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list  showing PPRF yarn under Tariff item 68 of the  Central Excise  Rules. The case of the appellant is  that  since  it was not permitted to clear PPRF Yarn without further payment of  duty under Tariff Item 68 of the said Rules, on or  from 27th  April, l976, they started making clearance on  payment of duty on PPRF Yarn under protest.     Thereafter,  in  October,  1978,  the  appellant   filed refund  claim for the period from April to  September,  l978 for  a sum of Rs.84,65l.77 collected by the revenue as  duty on PPRF Yarn under Tariff Item NO.68. The appellant Company, thereafter,  received  a show cause notice requiring  it  to show  cause  as  to  why the  refund  claim  should  not  be rejected.  The  appellant Company filed  its  reply  stating therein  that the  duty had already been paid  on  Polyester Spun  Yarn,  which Was  manufactured by it  in  its  factory (under  Tariff Item I8E of the 1st Schedule to  the  Central Excises & Salt Act, 1994, hereinafter called ‘the Act’)  and futher  that  the appellant was purchasing  Rayon   Filament Yarn, on which duty had already been paid (under Tariff item No.  18-11)  and that the appellant was  only  doubling  two plies of duty paid Polyester Spun Yarn with one ply of Rayon Filament  Yarn and no  process of manufacture  was   carried out and further no new product came into being.                                                   PG NO 671     On  or about 3rd July, 1979, the Assistant Collector  of Central  Excise rejected the refund claim of  the  appellant despite  the fact that a representation was  pending  before the  Collector of Central Excise & Customs, Jaipur,  against the action  of the Inspector, Central’ Excise, in  rejecting the Classification list dated 10.4. 1978 and demanding  duty of  excise on the PPRF Yarn, on which duty has already  been paid.  In   February,  1980, the  appeal  filed  before  the Revisional  Authority  against the  order of  the  Appellate Collector was transferred to the  CEGAT under Section 35P of the Act.     By  the judgment in appeal, the Tribunai held  that  the goods  in  question,  namely, PPRF Yarn  was  taxable  under Tariff Item 68 and there was no question of any refund being due to the appellant.     Hence,  the short question involved in this appeal,  is: whether   the goods in question, namely, a special  type  of yarn  marked  as a  finished product known as  ‘PPRF  Yarn’, should  be treated as such and  taxed on that basis.  Excise duty is a duty on the manufacture of goods  and not on sale. Manufacture  is complete as soon as by the  application   of one  or  more  processes, the raw  material  undergoes  some change. If a new substance is brought into existence or if a new  or different article having a distinct name,  character or  use results from particular process  or processes,  such process or activity would amount to manufacture. The  moment there  is transformation into a new  commodity  commercially known  as a separate and distinct commodity having  its  own character  and  use,  ‘manufacture’. takes  place.  See  the observations  of   this  Court in Union of  India  v.  Delhi Cloth & General Mills, [1963]   Suppl 1 SCR 586;  Union   of India v. HUF Business known as Ramlal  Mansukhrai, Rewari  & Anr.,  [1197]  1 SCR 936; Allenburry Engineers  P.  Ltd.  v. Ramakrishna  Dalmia  &  Ors.,  [1973]  3  SCR  257;   Deputy Commissioner,  Sales Tax (Law) Board of of  Revenue  (taxes) Ernakulam  v. Pio Food Packers, (1980] 3  SCR 1271, Chowgule &  Co. Pvt. Ltd. & Anr. v. Union of India,  [1981] 1 SCC 653 and  the cases referred to in the decision of this Court  in Empire  Industries  Ltd. & Ors. v. Union of  India  &  Ors., [l985] Suppl ] SCR 292.      In our opinion, the Tribunal was justified in the  view

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it  took.  The  Tribunal’s view is corroborated by  its  own view  as  expressed in its decision in  Hyderabad   Asbestos Cement  Product  Ltd. & Anr. v. Union  of India  &  Ors.,  1 1980]  ELT  735. Our attention was, however, drawn   to  the observations of the Bombay High Court in the case of Piramal SPg.  & Wvg. Mills Ltd. v. Union of India & Ors.,  [1982]ELT 145, where the facts were slightly different but the learned Single  Judge of the High Court held that merely  by  inter-                                                   PG NO 672 twinning  strings   of cotton yarn  and nylon yarn,  no  new product comes into being. Whether by a certain process a new product  comes  into being or not, is a  question  of  fact. There  is no particular definition of Lyarn, in the  Act  or the  Rutes   or the Notifications. According to  the  Oxford Dictionary  ’yarn’  means     any spun thread  specially  of kinds  prepared  by  weaving,  knitting  or   rope   making. According  to  the  Webster’s new World  Dictionary,  it  is defined  as any fibre, as wool, silk, flax,  cotton,  nylon, etc.,  spun  into  strands for weaving, knitting  or  making thread.     This  Court in Commissioner of Sales Tax, U.P. v.  Sarin Textile   Mills,  [l975] 35 STC 634 held that the  fibre  in order  to  answer  the description of  yarn  must  have  two characteristics,  firstly,  it should be a spun  strand  and secondly  such Strand should be primarily meant for  use  in weaving,  knitting  or  rope-making.  The  question  is  not whether  it is a mixture of two yarns where as a process  of mixing a separate and distinct goods known in  the market as such,  comes  into  being.  For   ascertaining  the  correct meaning  of a fiscal entry reference to a dictionary is  apt to  be  a  somewhat  delusive guide, as  it  gives  all  the different  shades  of  meaning. The  correct  guide  is  the context  and the trade meaning. The trade meaning is  always to  be  given  preference.  See  in   this  connection   the observations  in  the famous Canadian case of The   King  v. Planters, [1951] CLR (Ex) 122.     The Tribunal has found that indisputably a new yarn  has come into being which is known In the market on the evidence adduced   before  the Tribunal, and that   PPRF  is  treated differently  from  Polyester Spun Yarn  and  Rayon  Filament Yarn.  We  are, therefore, of the  view  that  the  Tribunal rightly came to the conclusion that this is a  separate  and distinct item. If having borne the correct legal  principles in  mind and in the light of the facts and without  ignoring any    relevant  or material fact, the Tribunal cornes to  a conclusion  on a question of classification of an  item  for tariff  purpose,  in our opinion, that finding   cannot  and should  not be interfered with in appeal before this  Court. ln that view of the matter the appeal cannot be  entertained and is, therefore, dismissed. G.N.                                    Appeal dismissed.