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PETITIONER: UNION OF INDIA & ORS. ETC.

       Vs.

RESPONDENT: J.G. GLASS INDUSTRIES LTD. ETC.

DATE OF JUDGMENT:       09/12/1997

BENCH: M.C. SEN, M. SRINIVASAN

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T SRINIVASAN, J. ‘      The common  question which arises for decision in these two appeals  and Special  Leave Petition is whether printing on glass  bottles amounts  to manufacture within the meaning of Section 2 (f) of the Central Excise Act 1944. 2.   It is  convenient to  set out  the facts  in each  case separately before consider the aforesaid question. 3.   The appellant  in Civil  Appeal No.  767 of 1991 have a factory for manufacturing glass and glasswares falling under 1.1. 23 of the Central Excise Tariff. Till 1983  they were manufacturing and supplying plain glass bottles to  customers.   In 1983  they filed  an application before the  Assistant Collector,  Central Excise, Saharanpur enclosing a revised layout of the factory in substitution of the existing  plan.  Under the revised plan, the premises in which the manufacturing operation of glass and glassware was undertaken was  segregated from  the premises  in which  the machinery for  printing of glass bottles with ceramic colour was to  be installed for carrying on the printing operation. The Superintendent, (Central Excise) approved of the revised plan.   The appellants  commenced the process of printing of bottles in  the separate demarcated Unit for which no Excise License was  taken.   The said  demarcated unit  is situated within   a shed  enclosed by  walls separate  from the  main factory  which  is  licensed  for  manufacturing  glass  and glassware.   The  Range  Superintendent  of  Central  Excise issued a  directive vide  letter dated  29.6.1983  that  the appellant shall  into remove  any  printed  bottles  without payment of  Central Excise  duty on the enhanced value after including the  expenditure incurred  on printing/decorating. That was  challenged by  appellants  on  appeal  before  the Collector (Appeals) who set aside the directive and directed the Assistant  Collector to  pass  a  speaking  order  after complying with  the principles  of natural justice.  After a show  cause  notice  and  a  reply  thereto,  the  Assistant Collector passed an order on 23.9.1983 that assessable value of glass  bottles should  include the cost of decorating the same with ceramic colours, On appeal the Collector confirmed

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the  same  by  his  order  dated  3.3.1984.    The  Tribunal dismissed the  appeal preferred  by the  appellants  by  its order dated  26.10.1990.   It is  that order  which is under challenge in this appeal. 4.   Though the Tribunal observed that the Superintendent of Central Excise  was not  competent to  approve  the  revised ground plan,  proceeded to  discuss the  question formulated above on the footing that the Unit wherein the decoration of glass bottles  in being  carried out  is separate  from  the factory manufacturing  the  said  bottles.    The  following passage in  the order  of the  Tribunal is  relevant in this regard:      "Admittedly,  the   ACL   Unit   is      located in  the enclosed space with      an opening  on the  main road apart      from  the   gate  of   the  factory      licensed  for  the  manufacture  of      glassware.   The shed  in which the      ACL  Unit   is  located,  was  also      excluded from  the lay  out of  the      factory.     From  the   above,  it      follows that  the ACL.  Unit, which      was carved  out of the old premises      is a  space covered by walls and is      adjunct to  the principal  premises      i.e. the licensed premises."      Again the Tribunal has observed in Para 20 of its order that "admittedly  the plain  bottles are manufactured in the main premises and the printing and decoration is done in the premises adjunct to it". 5.   It is  on the above factual premise the question stated above which  was formulated by the Tribunal itself has to be considered.    The  Tribunal  has  proceeded  to  hold  that printing and  decoration would  amount to manufacture within the meaning of Section 2 (f) of the Act. 6.   In Civil  Appeal No.  2882 of 1993 the appellant is the Union of India.  The respondent in that appeal is none other than the  appellant in  Civil Appeal  No. 767 of 1991.  That appeal arises  out  of  a  claim  for  refund  made  by  the respondents therein  on the ground that they had paid excise duty on  the charges  incurred for printing of glass bottles which  did  not  form  part  of  manufacturing  process  and therefore they were entitled to get refund of the said duty. They had  paid the  duty on  the price  of  the  bottles  as supplied to  the customers  as per  the approved  Price List No.37 which  included the  printing charges.   The claim for refund was  accepted by  the Assistant  Collector of Central Excise but  rejected by the Collector.  The assessee filed a writ petition in the High Court of Bombay to quash the order of the Collector.  A Division Bench of the High Court upheld the contention of the assessee and held that printing on the glass bottles cannot be included in the assessable value for the purpose  of levy of excise duty.  Aggrieved by the order of the Division Bench, the Union of India has preferred this appeal. 7.   In so  far as  the factual  position in  this appeal is concerned, there  is no  dispute  that  the  entire  process including the  printing on the bottles is carried out in one factory and the excisable goods supplied to the customers by the respondents are the printed bottles at the price set out in  the  approved  price  list  inclusive  of  the  printing charges. 8.   In Special  Leave Petition  No. 8316  of 1994 the first respondent is  a company  which undertakes  the  process  of decorating glass bottles at its factory at Chinehwad, Poona.

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The company  purchases plain  bottles from the manufacturers thereof including appellants in Civil Appeal No. 767 of 1991 and carries  out the decoration and printing on such bottles as per  the contracts  entered into with its customers.  The company had  not taken  any licence  for carrying  out  that process within  its premises on the ground that it was not a manufacturing process.  The Superintendent of Central Excise detained the  bottles and  issued a  shoe cause notice as to why excise  duty should  not be demanded, penalty should not be imposed  and goods should not be seized.  The respondents filed  a   writ  petition   in  the  High  Court  of  Bombay challenging the said proceedings.  The Division Bench of the High Court  followed the  judgment rendered  in the  earlier case of  J.G. Glass  Industries Ltd.  and allowed  the  writ petition.     Aggrieved  thereby  the  Union  of  India  has preferred the Petition for Special Leave.  In so far as this case is  concerned, there  is no  dispute regarding the fact the  respondents   are  only  carrying  on  the  process  of decoration and  printing and  have nothing  to do  with  the manufacture of bottled as such. 9.   The contention  of the  assessee is  that printing  and decorating bottles  will not  by any  stretch of imagination amount to manufacture.  It is argued that unless the process brings into  existence a  different commercial  product,  it cannot be  said to  be manufacturing  process.  In cannot be said to  be manufacturing process.  In short, the contention is that  the plain  bottles do  not cease  to be  bottles by some logos  or names  being printed  thereon.   Reliance  is placed on  a judgment of this Court in Union of India Versus Delhi Cloth  & General  Mils 1963 Supp. (1) S.C.R. 586.  Our attention is drawn to the following passage:      "On a  consideration of  all  these      materials we  have no  doubt  about      the correctness of the respondents’      case 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.    The      first  branch   of   Mr.   Pathak’s      argument    must    therefore    be      rejected.      The other  branch of  Mr.  Pathak’s      argument is 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, the  process of      neutralisation   by    alkali   and      bleaching by activated earth and/or      carbon.   According to  the learned      counsel "manufacture"  is  complete      as soon  as by  the application  of      one  or  more  processes,  the  raw      material undergoes some change.  To      say this  is to equate "processing"      to "manufacture"  and for  this  we      can find  no warrant  in law.   The      word "manufacture"  used as verb is      generally  understood  to  mean  as      "bringing  into   existence  a  new

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    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  brought      about in  a passage  thus quoted in      Vol.26,  from   American  judgment.      The passage runs thus:-      ’Manufacture’ implies a change, but      every change is not manufacture and      yet   every   change   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."      10. In Deputy Commissioner of Sales      Tax (Law)      Board of  Revenue (Taxes) Ernakulam      versus M/s.  Pio Food  Packers 1980      Supp. Supreme  Court Cases 174 this      Court observed:-      "....There are several criteria for      determining whether  a commodity is      consumed  in   the  manufacture  of      another.   The generally  prevelent      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      s  the   end  result  of  one  more      process through  which the original      commodity s  made  to  pass.    The      nature and  extent of  process  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      sufferred, 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      recognized 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".      11. In  Rollatainers Ltd.    Versus      Union of India 1994 (72) E.L.T. 793      (S.C.)  the   question  arose  with

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    reference to  the applicability  of      printing     industry.          The      Notification specified the goods as      "all products  of printing industry      including  newspapers  and  printed      periodicals".   The  contention  of      the  appellant   was  that  printed      cartons are  a product  of printing      industry and  as such  exempt  from      duty   under    the   Notification.      Rejecting that connection the Court      said:      "According to the appellant-company      printed  cartons   are  known   and      understood in the trade as products      of  the  Printing  Industry.    The      dominant    activity     in     the      manufacture of  a printed carton is      the  printing   activity  and   the      cutting, creasing  and  gluing,  if      any, are  only supplementary.    It      was  further   contended  that  the      printed  cartons   have  become   a      medium of  advertising the product.      It enhances  the sale  value of the      goods.     The  art  is  chosen  so      manufacturer are  highlighted.  The      appearance  carton  are  of  utmost      importance  and  occupy  the  major      time and expense in the manufacture      of the  carton.  It was, therefore,      finally contended  that the printed      carton  are   known  the   printing      industry.   Since that  is how  the      printed cartons  are understood  in      the common parlance, the appellant-      company is  entitled to the benefit      of the Exemption Notification.      ....The literature  referred to  by      the appellant  only shows  that the      printing industry  has advanced  to      such an  extent that  one can print      an almost  anything such  as glass,      metal or  synthetic base.   Earlier      the printing activity was primarily      confined  to   printing  of  books,      literature,      newspaper      and      periodicals  etc.     The  advanced      printing  industry  covers  a  much      wider field of activity than it did      in the  past.   Can we,  therefore,      say that  every material  on  which      printing work  is  done  becomes  a      product of  the  Printing  work  is      done  becomes   a  product  of  the      Printing Industry?   The answer has      to be in the negative.  An ordinary      carton without  any printing  on it      is   a    completed   product   and      undisputedly   the    product    of      Packaging Industry.      The question  for our consideration      is, does it cease to be the product      of Packaging  Industry as  and when      some printing  is done  on the said

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    carton?  We are of the view that to      a common  man in  the trade  and in      common parlance  a carton remains a      carton  whether  it  is    a  plain      carton or  a printed  carton.   The      extreme   contention    that    all      products, on which some printing is      done,  are   the  products  of  the      Printing   Industry    cannot    be      accepted.   The Division  Bench  of      the High Court has rightly rejected      the  contention  on  the  following      reasoning:      "In  our   view,  it  would  be  an      extreme proposition  to  hold  that      all products on which some printing      is  done   is  a   product  of  the      printing cloth  would be  a product      of the printing industry and not of      the textile  industry.  A metal can      with printed  material on  it  will      similarly  be   a  product  of  the      printing industry  and not  of  the      packaging industry.   The  same can      be said  of card-board  packet  and      even wooden  boxes over  which some      printing is  done to  identify  the      goods or  its manufacturer.  In our      view, the  mere fact that something      is printed  on a  product by itself      does not  make it  a product of the      printing industry.   A  carton is a      carton and has only one use, namely      of; packing a product to be sold in      the market.   The  more  fact  that      something is printed on it does not      change its essential nature or use.      The  learned  Judges  has  observed      that the  end use  of a  product is      immaterial.    In  the  case  of  a      carton the question does not arise,      because it  has only  one  use  and      therefore any  distinction  between      its intermediate  use and   end use      its unwarranted.   In our view, the      printed  cartons  are  designed  at      times   to    make   the    product      attractive for  the purchaser,  and      at times  to identify the goods and      highlight  its  qualities,  and  at      times to  identify the manufacturer      of the  goods.   All the  same, the      carton remains a carton and is used      for the purpose of packaging".      ....What  is   exempt   under   the      Notification is  the product of the      "printing Industry".  The "Product"      in this  case is  the carton.   The      carton into  existence.  Any amount      of fancy carton.  In the process of      manufacturing the  printed cartons,      the card  board has to be carton by      using paste or gum.  Simply because      there are  expensive prints  on the      carton such  a printed carton would

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    not  become   the  product  of  the      Printing Industry.  It shall remain      the  product   of   the   Packaging      Industry. 12.  The above  ruling was  followed in Collector of Central Excise, Bombay  Versus Paper & Products Co. 1996 (88) E.L.T. 317 (S.C.)  in which  it was held that unwaxed printed paper cut into  sheets and  reels according  to the  needs of  the customer for  the purpose  of  being  used  as  wrappers  in packaging cannot  be  said  to  be  a  product  of  printing industry so as to attract the exemption Notification. 13.  In Metagraphs  Pvt. Ltd.  Versus Collector  of  Central Excise,  Bombay   (1997)  1   S.C.C.   262   the   appellant manufactured  printed   aluminium  labels  were  printed  on flatbed offset printing press and the printing was done on a deep offset  printing plate.   The  labels were  meant to be fixed to  refrigerators, radios, air conditioners telephones etc.   The Tribunal  held that  the printed aluminium labels were not  products of  printing industry  and  rejected  the claim for  exemption.   The Division  Bench  of  this  Court reversed the  decision of  the  Tribunal  and  followed  the reasoning  in   Rollatainers  Ltd.’s   case  (supra).  After referring to  the above  case, the Bench said "...There this Court approved  the test  based on  understanding  of  trade parlance/common parlance  of a  particular product.   In the case on hand but for  the printing, the aluminum label would serve no  purpose and  as seen  above, it is the printing on the aluminium  sheet, which  communicates the message to the buyer that  makes the  sheet as  a label,  unlike  a  carton printed or  plain which  always remains a carton.  The label announces to  the customer  that the product is or is not of his choice  and his  purchase  of  the  commodity  would  be decided by the printed matter on the label.  The printing of the label  is not incidental to its use but primarily in the sense that it communicates to the customer about the product and  this   serves  a  definite  purpose.    This  Court  in Rollatainers case  held  that  "what  is  exempt  under  the notification is  the product" of the printing industry.  The ’product’ in this case is the carton.  the printing industry by itself  cannot bring  the carton into existence".  Let us apply this  above formula  to the  facts of  this case.  The product in  this case  is the  aluminium printed  label. The printing industry  has brought  the  label  into  existence. That being the position and further the test of trade having understood this  label as  the product of printing industry, there is no difficulty in holding that the label in question are the  products of printing industry.  It is true that all product on which some printing is done, are not the products of printing  industry.    It  depends  upon  the  nature  of products an other circumstances.  Therefore the issue has to be decided  with reference to facts of each case.  A general best  is   neither  advisable  nor  practicable.    We  are, therefore, of  the opinion that there Tribunal was not right in concluding  that the printed aluminium labels in question are not "products of printing industry". 14.  With respect,  we agree with the test formulated by the Division Bench.   The question is, whether the product would serve any  purpose but  for the  printing.   If the  product could serve  a purpose even without printing and there is no change in  the commercial  product  after  the  printing  is carried out,  the process  cannot  be  said  to  be  one  of "manufacture". 15.  In Collector of Customs, Bangalore Versus Indian Coated Cartons (P)  Ltd. 1997 (92) E.L.T. 459 (S.C.) Division Bench of this  Court to  which one  of us  (S.C. Sen)  was a party

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reiterated the  principle laid  down in  Rollatiners  Ltd.’s case (supra).   That  case also  related to  printed cartons manufactured  by   the  respondents   therein.    The  Bench distinguished the ruling the Metagraphs Pvt. Ltd.’s case. 16.  On an analysis of the aforesaid rulings, a two-old test emerges  for   deciding  whether  the  process  is  that  of "manufacture".    First,  whether  by  the  said  process  a different  commercial  commodity  comes  into  existence  or whether the  identity of  the original  commodity ceases  to exist; secondly,  whether the commodity which was already in existence will  serve no  purpose but  for the said process. In other  words whether  the commodity  already in existence will be  of no  commercial use but for the said process.  In the  present   case,  the   plain  bottles   are  themselves commercial commodities and can be sold and used as such.  By the process  of printing  names or logos on the bottles, the basic character  of the  commodity does  not change.    They continue to  be bottles.  It cannot be said that but for the process of  printing, the  bottles will  serve no purpose or are of no commercial use. 17.  Learned  counsel   for  the   Revenue  has   strenously contended that  the printing on the bottles will make them a different commodity  known as printed bottles.  According to him such printed bottles cannot be of any general commercial use but  they will  be useful  only for the persons on whose behalf and  for whose  benefit such  printing has been done. Therefore, according  to him  the  process  of  printing  on bottles is a "manufacturing" process.  Reliance is placed by him on  the judgment of this court in empire Industries Ltd. & Ors.  Versus Union of India & ors. (1985) 3 S.C.C. 314 The question which  arose for  consideration in  that  case  was whether introduction  of sub-clauses  (v) (vi)  and (vii) is Section 2  (f) of  Central Excise  Act by  Act 6 of 1980 was valid.  While upholding the validity of the amendment of the Section by which the definition of "manufacture" was widened so as to include the process of bleaching, dyeing, printing, finishing etc. with reference to cotton fabrics and man-made fabrics,   the    Court    considered    what    constituted "manufacture".  In the connection the Court observed:      "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".      The court referred to various earlier decisions dealing with  the  expression  "manufacture".    We  are  unable  to appreciate as  to how  the ruling  helps the  Revenue in the present case.  We have already pointed out that the printing on  the   bottles  does  not  bring  into  existence  a  new commercial commodity  which is  distinct and separate in its character, use and name from the original commodity.  Hence, we are  unable to accepted the contention of Revenue in this case  that   printing  on  bottles  involved  a  process  of ’manufacture’. 18.  Learned counsel for the assessee has also placed before us a  copy of Trade Notice No.28/1980 issued by Pune Central Excise and  Customs Collectorate  with reference  to  Tariff Item No.23A(4).  It reads thus:      "Attention of  the Trade is invited      to the  Item No.23-A of the Central

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    Excise Tariff.      2.  It   is   clarified   for   the      information  of   the  Trade   that      Glassware decorated  in a different      factory after  the receipt  of duty      paid plain  glassware would  not be      again liable  to  duty/differential      duty under  Tariff Item 23-A (4) of      the Central  Excise  Tariff.    All      members constituents  may please be      informed accordingly". 19.  Learned counsel  submits that  it is  not open  to  the Revenue to raise any contention contrary to the notice.  Our attention  is  drawn  to  the  judgment  of  this  Court  in Collector  of  Central  Excise,  Patna  Versus  Usha  Martin Industries 1997  (94) E.L.T.  460 (S.C.)  to which one of us (S.C. Sen)  was party.   It  has been held in that case that Revenue cannot  be permitted to take a stand contrary to the instructions issued  by the Board and Departmental Circulars issued before enactment of Section 37B of Central Excise Act or thereafter,  are equally binding on Revenue as the object on either case was the same namely, to achieve uniformity in the classification.   Learned  counsel contends that even if the trade notice is held to be not binding on the Revenue as such, it  can be  used by  the assessee  to  show  that  the Department  has  also  understood  the  relevant  expression ’manufacture’ in  the same  manner.   In the present case it may not  be necessary  for us to rely upon the trade notice. We have  already pointed  out that  printing on bottles will not amount  to manufacture’  within the  meaning of  Section 2(f) of Act. 20.  It is useful to refer to the tariff description in Item No.23-A  of   the  Central   Excise  Tariff.    The  general description of  the item  is ’glass’ and ’glassware’.  There are four  categories namely,  (i) flat-glass  (2) Laboratory glassware (3)  glass shells,  glass globes  and chimneys for lamps and  lanterns  and  (4)  other  glass  and  glasswares including  tableware.     Admittedly,  the  bottles  whether printed of  not fall under category (4) mentioned above.  If the contention  of the  Revenue is accepted it would lead to double taxation  under the  same tariff  item.  While at the gate of  the main  factory duty  is leviable  on  the  plain bottles under  23A (4),  once again duty will be leviable on the printed bottled after the process of printing is over in the premises  where such printing is carried out.  Such duty will undoubtedly  be on  the value  of the  printed  bottles which will  include not  only the cost of manufacture of the bottles but  also the  cost of printing charges. The Revenue cannot be permitted to levy duty twice on the same item when there is  no warrant therefore in the relevant provisions of the Act. 21.  In the  circumstances there is no difficulty in holding that the  view taken  by the  Appellate Tribunal  in  Appeal No.ED/SB 682/84-A  is erroneous  inasmuch as  the process of printing is  being carried  out in  a separate  premises  as found by  the Tribunal and such process is not ’manufacture’ within the  meaning of  the Act.  Consequently, Civil Appeal No. 757  of 1991 has to be and is hereby allowed.  the order of the  Tribunal as  well as  those  of  the  Collector  and Assistant Collector  are set  aside.   The show cause notice issued by  the Revenue  to the appellant in Civil Appeal No. 767 of 1991 is quashed. 22.  It follows  that the Special Leave Petition (Civil) No. 8316 of  1994 filed  by the  Union of India has to be and is hereby dismissed.

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23.  In  so  far  as  Civil  Appeal  No.  2882  of  1993  is concerned,  the  contention  of  the  appellant  has  to  be accepted on  the facts  of the  case.   It is not in dispute that the  printing on the bottles is also carried out in the same factory  where the  bottles are  manufactured  and  the ultimate product  which happens  to be the excisable item at the gate  of the  factory is  the printed  bottle  as  such. Hence, the  value  of  printed  bottles  including  printing charges is  the assessable  value of the excisable goods and duty is chargeable thereon.  The excisable of the High Court is erroneous  inasmuch as it has failed to  take note of the fact that  the printing  on the  bottles is  also  completed within the  same factory  premises.  Hence,  the  appeal  is allowed.   The judgment of the High Court is set aside.  The order of  the Collector dated 7.7.1983 in P. No.RO-943/83 is restored. 24.  In both  appeals and  the Special  Leave  Petition  the parties will bear their own costs.