ADITYA MILLS LTD.versusUNION OF INDIA

A                           ADITYA MILLS LTD.
                                         v.
                              UNION OF INDIA

                               AUGUST 29, 1988

B     [SABYASACHIMUKHARJI AND S. RANGANATHAN, JJ.]

          Central Excises and Salt Act, 1944/Central Excise Rules, 1944:
     Schedule I Tariff Item ISE/Rule 173B-PPRF yarn-Levy of excise
     duty-Polyster spun yarn and Rayon filament yarn-Difference bet-
     ween-'New commodity' distinct and separate coming into existence-
     Necessity for it to be commercially known.
c
           Statutory Construction: Fiscal entry-Ascertaining correct mepn-
     ing-Correct guide is the context and the trade meaning-Trade mean-
     ing always given preference.

I)          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 doubled together and the resultant yarn is referred to as
     PJ>RF yarn. The appellant tiled classification list under Rule l73B of
     the Central Excise Rules stating that it intended to clear PPRF yarn, on
E    which duty has been paid. Hut 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 clea-
     rance on payment of duty under protest. When it filed claim for refund
F    of the same, it was issued a show cause notice as to why the claim should
     not be rejected. Appellant tiled its reply. The refund claim was rejected
     by the Assistant Collector which was later upheld by the Appellat<
     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
H    not onisale. Manufacture is complete as soon as by the application of
                                        668
                                   ADITY A MILLS v. U.0.1.                     669

          one or more process, the raw material undergoes some change. If a new A
          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 a~tivity 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 nse, 'manufacture' takes place. [671C-F]                                B

                Union of India v. Delhi Cloth & General Mills, [1963l·Suppl. l
          SCR 586; Union of India v. HUF Business known as Ramlal Man.
          sukhrai Rowari ~ Anr., [1971) l SCR 936; A/lenburry Engineers P.
          Ltd. v. Ramakrishna Da/mia & Ors., !1973] 2 SCR 257; Deputy Com·
          missioner, Sales Tax (Law) Board of Revenue (Taxes) Ernaku/am v.
          Pio Food Packers, [1980) 3 SCR 1271; Chowgule & Co. Pvt. Ltd. &
                                                                                     c
          Anr. v. Union of India, .[J981] l SCC 653 and Empire Industries Lta. &
          Ors. v. Union of India & Ors., U985] Suppl. I 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. D
          Union of India & Ors., [1982) ELT 145, referred to.

                2. l The question is not whether it is a mixture of two yarns,
          where as a process of mixing, a.separate an~ distinct good known in the
          market as such, comes into being. for ascertaining ·~he 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 tr,ade 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       F
          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. (672EJ

               Commissioner of Sales Tax, U.P. v.. Sarin Textile Mills, {1975] 35
          STC 634, referred to.                                                      G

                The King v. Planters, [1951] CLR1(Ex) 122, relied on.

.     .        CIVIL APPELLATE JURISDICTION: Civil Appeal Np. 2124
~-I 'of1984.
                                                                                     .H
     670         SUPREME COURT REPORTS               [1988] Supp, 2 S.C.R.

          From. the Order dated 4.6.1983 of the Customs Excise and Gold
A
     (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 ti\e decision of the Customs Excise & Gold (Control) Appel-
     late Tribunal (for short CEGAT). The appellant Company had filed a
<C   Classification List under Rule 173B of the Central Excise Rules stating
     that they 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 Yam-PP and one ply of Rayon Filament
     Yam-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
   . list showing PPRF yarn 11nder Tariff item 68 of the Central Excise
     Rules. The case of the appellant is that since it was not permitted to
·If clear PPRF Yarn without further payment of duty under Tariff Item 68
     of the said Rules, on or from 27th April, 1976, 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, 1978 for a sum of Rs.84,651.77
fF collected by the revenue as duty on PPRF Yarn uneler 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 18E of the 1st
0 Schedule to the Central Excises & Salt Act,. 1944, hereinafter called
     'the Act') and futher that the appellant was purchasing Rayon Fila-
     ment Yarn, on which duty had already been paid (under Tariff Item
     No. 18-II) 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 produci-·
H, . came into being.
                                 \

                    ADITYA MILLS v.U.0.1. (MUKHARJI, J.]              671

          On or about 3rd July, 1979, the Assistant Collector of Central
                                                                             A
    Excise rejected the refund claim of the appellant despite the fact that~
    repre.sen\ation was pending before the Collector of Centra\ 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 B
    against the order of the Appellate Collector was transferred to the
    CEGAT under Section 35P of the Act.

          By the judgment in appeal, the Tribunal 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.
                                                                            G
          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 good.s
    and not on sale. Manufacture is complete as soon as by the application D
    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 commer-
    cially known as a separate and distinct commodity havi/lg its own E
    character and use, 'manufacture' takes place. See the obseryations of
    this Court in Union of India x. Delhi Cloth & General Mills, [1963]
    Suppl 1 SCR 586; Union of India v. HUF Business known as Ramtal
    Mansukhrai, Rewari & Anr., [1971] 1 SCR 936; Allenburry Engineers
    P. Lt<;f. v. Ramakrishna Dalmia & Ors., [1973] 2 SCR 257; Deputy
    Commissioner, Sales Tax (Law) Board of Revenue (Taxes) Ernakulam F
    v. Pio Food Packers, (1980f3 SCR 1271, Chowgule & Co. Pvt. Ltd. &

l   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., [198~l-Suppl 1SCR292.

          In our opinion, the Tribunal was justified in the view it took. The G
    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., [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 H
    672          SUPREME COURT REPORTS                 [1988] Supp. 2 S.C.R.

A   the High Court held that merely by interctwinning 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 'yarn' in the Act or the Rules
    or the Notifications. According to the Oxford Dictionary 'yarn' means
    any spun thread specially of l<inds prepared by weaving, knitting or
B
    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, V.P. v. Sarin Textile
    Mills, [1975] 35 STC 634 held that the fibre in order to answer the
C   description of yarn must have two characteristics, firstly, it shoi.ild be a
    spun strand and secondly such $!rand 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
    disti11ct goods """'n 111 the market as such, comes into being. For
    ascertaining the correct meaning of a fiscal entry reference to a dictio-
0
    nary 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.
E         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 Polyes-
    ter 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
F   in mind a11d in the light of the facts and without ignoring any relevant
    or material fact, the Tribunal comes 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.
    In that view of the matter the appeal cannot be entertained and is,
    therefore, dismissed.
G
    G.N.                                                    Appeal dismissed.