M/S. SATNAM OVERSEAS LTD.versus. COMMNR. OF CENTRAL EXCISE, NEW DELHI.

                    [2015] 4 S.C.R. 437


             MIS. SATNAM OVERSEAS LTD.                         A

                             v.
     .COMMNR. OF CENTRAL EXCISE, NEW DELHI.

              (Civil Appeal No. 8958 of 2003)                  B

                     MARCH 18, 2015

          [A.K. SIKRI AND R. F. NARIMAN, JJ.]

     Central Excise Act, 1944 - s. 2(f) - Manufacture -        C
Assessee engaged in packing of mixture of raw rice,
dehydrated vegetables and spices in the name of rice and
spice - Said mixture in pre-determined proportion is
blended together and is heated, if required to sterilize the
                                                               0
product and the mixed product packed in pouches with
nitrogen flushing for a longer life - Said process, if
amounts to 'manufacture' - Held: Mere addition in the
value, after the original product has undergone certain
process, would not bring it within the definition of           E
'manufacture' unless its original identity also under goes
transformation and it becomes a distinctive and new
product - Thus, mere addition of dehydrated vegetables
and certain spices to the raw rice, would not make it a
different product - Activity undertaken by assessee does       F
not amount to manufacture and rate of duty would be nil -
It continues to be a product of milling industry and
classifiable under sub-heading 11.01 - Central Excise Tariff
Act, 1985.
                                                               G
    Allowing the appeal, the Court

   HELD: 1.1 The process would be treated as
"manufacture" only if new product known to the
                           437                                 H
438       SUPREME COURT REPORTS               [2015] 4 S.C.R.


A  market comes into existence with original product
   losing its original character. Mere addition in the value,
   after the original product has undergone certain
   process, would not bring it within the definition of
   'manufacture' unless its original identity also under
 B goes transformation and it becomes a distinctive and
   new product. Applying the said principle to the facts of
   the instant case, it is clear that mere addition of
   dehydrated vegetables and certain spices to the raw
   rice, would not make it a different product. Its primary
 C and essential character still remains the same as it is
   continued to be known in the market as rice and is
   sold as rice only. Further, this rice, again, remains in
   raw form and in order to make it edible, it has to be
   cooked like any other cereal. The process of cooking
 0
   is even mentioned on the pouch which contains
   cooking instructions. Reading thereof amply
   demonstrates that it is to be cooked in the same form
   as any other rice is to be cooked. Therefore, the order
 E passed by the CEGAT that there is a transformation
   into a new commodity, commercially known as distinct
   and separate commodity, cannot be accepted. [Paras 9,
   18, 19, 20] (444-8,C; 453-H, 454-A-D]
 F      1.2 Since the activity undertaken by the assessee
   does not amount to manufacture, Rate of duty on this
   product, is 'nil'. Even otherwise the classification of the
   product by the Revenue under sub- heading 21.08 may
   not be correct. Since it does not amount to
 G 'manufacture' as the essential characteristics of the
   product, still remains the same, namely, rice, a natural
   corollary would be that it continues to be the product
   of the milling industry and would be classifiable under
   sub-heading 11.01. Thus, the order of the CEGAT as
 H well as demand of excise duty by the Revenue is set
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 439
              EXCISE, N. DELHI.

aside. [Para 21, 22] [454-E-H; 455-A-B]                            A

    Crane Betel Nut Powder Works vs. Commissioner of
Customs, Central Excise, Tirupathi (2007 (210) ELT, 171
(S.C.) ; Commissioner of Centr_al Excise vs. Laljee Godhoo
& Co. (2007 (216) ELT 514 (S.C); Laljee Godhoo & Co. vs. B
Commissioner of Central Excise, Mumbai (2001 (132) ELT
287 (S.C.); Deputy Commissioner Sales Tax (Law), Board
of Revenue (Taxes), Emakulam Vs. PIO Food Packers
(1980 (6) ELT 343 (S.C.) - referred to.
                                                                   c
                   Case Law Reference•

  2007 (210) ELT, 171 (S.C.)·       referred to. Para 11

  2007 (216) ELT 514 (S.C)           referred to. Para 14
                                                                   D
  (2001 (132) ELT 287 (S.C.)        referred to. Para 14

  (1980 (6) ELT 343 (S.C.).         referred to. Para 16

    CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8958 of
2003.                                                              E

     From the Judgment and Order dated 10.10.2002 of the
Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi
in Appeal No. E/2510/01-0.
                                                                   F
   L. Charanaya, V. Lakshmikumaran, M. P. Devanath, Vivek
Sharma, Aditya BhatacharyaPrashanth S. Shivadass, R.
Ramachandran, Rajesh Kumar for the Appellant.

      A. K. Sanghi, Nisha Bagchi, Shweta Garg, B. Krishna Prasad   G
for the Respondent.

    The Judgment of the Court was delivered by

    A.K.SIKRl,J. 1. The appellant/assessee challenges the
                                                                   H
440       SUPREME COURT REPORTS                   [2015) 4 S.C.R.


A . correctness and validity of the final order dated 10.10.2002
    passed by the Customs, Excise and Gold (Control)
    Appellate Tribunal (CEGAT), New Delhi in the appeal
    which was preferred by the assessee against the order of
8 Commissioner (Appeals) who had upheld the Order-in-
    Original dated 17 .3.1999 passed by the Additional
    Commissioner pursuant to show cause notice dated
    4.8.1997 issued by him. In the said show cause notice the
    Additional Commissioner had proposed to classify the
C product of the appellant/assessee under Heading 2108 of
    the Central Excise Tariff Act, 1985, as Miscellaneous Edible
    preparation not elsewhere specified or included.

 D      2. It may be stated that assessee is engaged in the
   packing combination of mixture of raw rice, dehydrated
   vegetables and spices in the name of 'Rice and Spice'. The
   exact process which is taken note of by the Tribunal as
   explained by Cl. R.L. Mehta, Deputy General Manager of
 E the assessee is as follows:

                  "This product i.e. Rice Spice is a combination
          of Raw Rice, Dehydrated vegetables and certain spices
          and condiments mixed in a pre- determined proportion
 F       ·and that blended together in a mixer for uniformity and
          the blended mixer is heated, if required, to sterlize the
          product. The mixed product is the packed in pouches
          with Nitrogen flushing for a longer shelf life".
G
      3. The defence putforth by the assessee to the show
  cause notice issued by the Additional Commissioner was that
  the aforesaid process does not amount to 'manufacture' within
  the meaning of Section 2(f) of the Central ExciseAct, 1944.
H It was also argued that, in any case, the product was not
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 441
         EXCISE, N. DELHI. [A.K.SIKRl,J.]

classifiable under Heading 2108 of the Central Excise A
Tariff Act, 1985 as claimed by the Revenue but it should be
covered under Heading 11. 01. That Heading applies to
products of the milling industry, including flours, groats,
meal and grains of cereals, and flour, meal or flakes of 8
vegetables on which nil duty is payable. It was, thus, contended
that in no case the assessee was under any obligation to pay
the duty on the aforesaid process.

    4. The Adqitional Commissioner did not agree with the     c
contention of the assessee holding it to be a manufacturing
process, and opinion of the Additional Commissioner is
accepted by the Commissioner (Appeals) as well as by
CEGAT.
                                                              D
       5. Ms. Charanaya, the Learned counsel appearing for the
  appellant argued before us that the authorities committed
  serious error in holding the aforesaid process of the
  assessee as "manufacturing process". Her arguments was E
  that from the reading of the process described above, it
 would be manifest that it only involved mixing of raw rice,
  dehydrated vegetable with some spice and did not bring about
 any new product. It was submitted that the aforesaid mixture,
 which is sold in a packaged form, is raw food and still needs F
  to be cooked to make it edible. She pointed out that on the
  packing/pouch of the product even the cooking instructions
. are mentioned in the following manner:
                                                              G
      "All. cooking appliances vary in performance, these
      are guidelines only. Empty contents into 375 ml (2/3
      pints) of cold water, stir well. Add I tablespoon of
      butter or margarine. Bring to boil, uncovered, in a
      small saucepan. Reduce heat, cover the saucepan and H
442         SUPREME COURT REPORTS                  (2015] 4 S.C.R.


A          simmer gently for approximately 15 minutes or until all
           water is absorbed."

            7. ltwas further submitted thattherewas no new product
      which came into existence as that product was still known as
 8    rice which did not lose its essential character and therefore
      it could not be treated as 'manufacture'. In support the
      aforesaid submission Ms. Charanya referred to certain
      judgments which shall be discussed by us at the later stage.
 c        8. In support of her other submission viz. that the product
   would still be classified under Heading 11.01, the learned
   counsel referred to the 'Rule of Interpretation' contained in
   the Schedule of Excise Tariff known as "Rules for the
 D Interpretation of this Schedule". In this behalf Rule 3 and in
   particular clause (b) thereof was pressed into service.
   Therefore it would be apposite to take note of this clause as
   well which we reproduce below:
 E              "When by application of sub-rule (b) of rule 2 or for
          any other reason, goods are, prima facie, classifiable
          under two or more headings, classification shall be
          effected as follows:
 F
                (a) The heading which provides the most specific
            description shall be preferred to headings providing a
            more general description. However, when two or more
            headings each refer to part only of the materials or
 G          substances contained in mixed or composite goods or
            to part only of the items in a set, those headings are
            to be regarded as equally specific in relation to those
            goods, even if one of them gives a more complete
 H          or precise description of the goods.
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 443
         EXCISE, N. DELHI. [A.K.SIKRl,J.]

             (b) Mixtures, composite goods consisting of A
      different materials or made up of different components,
      and goods put up in sets, which cannot be classified
      by reference to (a), shall be classified as if they
      consisted of the material or component which gives 8
      them their essential character, insofar as this criterion
      is applicable.

      (c) When goods cannot be classified by reference to
      (a) or (b), they shall be classified under the heading   c
      which occurs last in the numerical order among those
      which equally merit consideration."

        8. Mr. A.K. Sanghi learned senior counsel appearing
on behalf of the Revenue, countered the aforesaid submission D
by pointing out that a specific finding was arrived at by the
Tribunal, affirming the finding of the quasi-judicial authorities
below to the effect that a new product had come into
existence as a result of the processes undertaken by the E
assessee. It was specifically held by the CEGAT that rice did
not remain rice at all as a mixed product containing rice,
vegetable and spices emerges after the specific process
was undertaken by the assessee. He also referred tG those
observations of the CEGAT where it has remarked that F
there is a transformation of a new commodity commercially
known as distinct and separate commodity having its own
character, use and name. Be it the result of one process or
several processes in fact' manufacture' had taken place. He, G
thus, argued that when a new commodity had come into
existence as held by CEGAT, this was the trigger point for the
levy of excise duty under the Excise Act. He further submitted
that in view of the aforesaid, viz. coming into existence a new H
444         SUPREME COURT REPORTS                      [2015] 4 S.C.R.


A     product, that particular edible product had to be fallen under
      Chapter 11 of the Tariff as it is not a product of milling industry
      not classifiable under Chapter 11 of the Tariff.

           9. From the aforesaid arguments advanced by counsel
 8    on the either side, it is clear that there is no dispute about the
      legal proposition that the process would be treated as
      "manufacture" only if new product known to the market comes
      into existence with original product losing its original
C     character.

       10. The only question is as to whether this test is satisfied
  on the facts of the present case. Before we embark on the
  discussion on this issue and answer the same, it would be
D advisable to take note of few judgments wherein legal
  position that prevails on this subject is stated with elaboration.

           11. The first judgment which we want to mention, which
      was cited by Ms. Charanya, is Crane Betel Nut Powder Works
 E    vs. Commissioner of Customs, Central Excise, Tirupathi (2007
      (210) ELT, 171 (S.C.). In the said case the assessee was
      engaged in the business of marketing betel nuts in different
      sizes after processing them by adding essential/non-
 F    essential oils, menthol, sweetening agent etc. Initially, the
      assessee cleared the goods under Chapter Sub-heading
      2107 of the Central Excise Tariff and was paying duty
      accordingly. However, the assessee filed a revised
      classification declaration under Rule 1738 of the Central
G
      Excise Rules, 1944, with effect from 17th July, 1997, claiming
      classification of its product under Chapter Sub-heading
      0801.00 of the Central Excise Tariff. It was contended by the
      assessee that the crushing of betel nuts into smaller pieces
 H    with the help of machines and passing them through different
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 445
         EXCISE, N. DELHI. [A.K.SIKRl,J.]

sizes of sieves to obtain goods of different sizes/grades           A
and sweetening the cut pieces did not amount to manufacture
in view of the fact that mere crushing of betel nuts into smaller
pieces did not bring into existence a different commodity
which had a distinct character of its own.                          B
    12. Though the authorities below had decided against the
assessee, this Court reversed the said view holding that the
said process would not amount to 'manufacture' as the
process involving manufacture does not always result in the         c
creation of a new product.           In the instant case
notwithstanding the manufacturing process, it could not be
said that a transformation had taken place resulting in the
formation of a new product. The relevant portion of the D
judgment is reproduced below:

     ".30. In our view, the process of manufacture employed
     by the appellant- company did not change the nature of
     the end product, which in the words of the Tribunal, was E
     that in the end product the 'betel nut remains a betel
     nut'. The said observation of the Tribunal depicts the
     status of the product prior to manufacture and thereafter.
     In those circumstances, the views expressed in the
     D.C.M. General Mills Ltd. (supra) and the passage F
     from the American Judgment (supra) become
     meaningful. The observation that manufacture implies
     a change, but every change of not manufacture and yet
     every change of an article is the result of treatment, G
     labour and manipulation is apposite to the situation at
     hand. The process involved in the manufacture of
     sweetened betel nut piece's does not result in the
     manufacture of a new product as the end product H
446         SUPREME COURT REPORTS                 [2015] 4 S.C.R.


A          continues to retain its original character though in a
           modified form."

        13. What is to be highlighted is that even after the betel
  nut which had been cut to different sizes and had undergone
8 the process, the Court did not treat it as 'manufacture' within
  the meaning of Sec.2(f) of the Act on the ground that the end
  product was still a betel nut and there was no change in the
  essential character to that article even when it was the result
C of treatment, labour and manipulation, inasmuch as even
  after employing the same it had not resulted in the manufacture
  of a new product as the end product continued to retain its
  original character.

D           14. Another judgment which was referred to by learned
      counsel for the appellant is Commissioner of Central Excise
      vs. Laljee Godhoo & Co. (2007 (216) ELT 514 (S.C).Vide
      this judgmentthe Court affirmea the view taken by the CEGAT,
E      holding that the process of subjecting raw asafetida (hing)
       resulting in formation of compounded asafoetida does not
      amount to manufacture, even when this process has
       undergone chemical change, because of the reason that the
      said chemical change had not brought even after it underwent
F     a process, any new product as the product remained the
      same at starting and terminal points of the process. Though
      the exact process undertaken is not discernible from the
      judgment, the learned counsel pointed out that this process
G     is described in the order passed by the CEGAT against which
      the appeal was preferred by the Department. The order of
      the CEGAT is reported in Laljee Godhoo & Co. vs.
      Commissioner of Central Excise, Mumbai (2001 (132) ELT
H     287(S.C.).The process noted in thejudgmentoftheCEGAT
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 447
         EXCISE, N. DELHI. [A.K.SIKRl,J.]

runs thus:                                                      A

     'The gum Arabic and wheat flour are blended in the sigma
     mixers. Filtered water mixed asafoetida is then poured
     slowly into the mixer over the gum and wheat flour.
     This gets the product ready. Further the resultant B
     product is given a heat treatment by suction in pipes
     through which a heater is attached and the moisture is
     sucked out. The powder is then passed through a
     hammer mill where it is crushed thoroughly. This powder c
     is then passed through a sieve, which contains magnet
     balls absorbing any fine iron particles. The compounded
     asafoetida in powder form is then packed in different
     grammage bottles. In case of lump form, the gum and D
     wheat flour along with filtered water mixed with asafoetida
     is poured into the sigma mixer. This process takes
     about 40 minutes. After this the mixture, which has by
     now made into lumps is extracted and put into the
     aluminium trays and dried for a day before it is packed E
     in cartons."

    15. We would like to reproduce para 5 of the order of the
CEGAT, since this judgment was upheld by this Court in the
said case. This para is to the following effect:                F

     "It is common ground that the processes to which the
     raw asafoetida is subjected, resulting in the lump or
     powder which is sold does not bring about any chemical G
     change in the asafoetida.The process, as we have
     seen, is nothing more than the addition to the asafoetida
     of wheat flour and gum arabic. It is stated that gum Arabic
     is added in order that the particles of the asafoetida
     and wheat flour adhere to each other. Neither the gum H
448      SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A        arabic nor the wheat flour reacts chemically with the
         asafoetida. The contention is that while the raw asafoetida
         itself is used in cases where its very strongly pungent
         flavour is required, for example, in the making of pickles
8        and papad, it is compounded in order to render it more
         suitable for use in day-to-day cooking where a lighter
         flavour is desired. The essential character of the product
         therefore does not change. It is used in both its
         concentrated and blended form only as an addition to
.c       food preparation, flavouring agent or for the medicinal
         properties that it is reputed to possess."

       16.Again the test which was applied was that essential
  character of the product did not change and, therefore, it
0
  would not amount to manufacture. It was so held even when
  gum arebic as well as wheat flour were mixed in the process.
  A pertinent aspect which was noted was that mixing of
  these articles did not result in chemical reaction with
E asafoetida.

       17. Last judgment to which we would like to refer to is
  Deputy Commissioner Sales.Tax (Law), Board of Revenue
  (Taxes), Ernakulam Vs. PIO Food Packers (1980 (6) ELT
F 343 (S.C.). In that case, the process undertaken by the
  assessee was to wash the pineapple, after purchase, and
  then remove inedible portion, the end crown as well as skin
  and inner core. After removing those inedible portions the
G pineapple fruit used to be sliced and the slices were filled
  in canes after adding sugar as preservative. Thereafter,
  canes would be sealed under tempe~ature and then put in a
  boiled water for sterlisation. Identical question was posed
H viz. whether this process amounted to 'manufacture'. Giving
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 449
         EXCISE, N. DELHI. [A.K.SIKRl,J.]

the answer in the negative, the Court held that even when A
with each process suffered, the original commodity
experienced a change, such a change would not amount to
'manufacture' unless it seized to be the original commodity
and a new and distinct article was produced therefrom. This B
is explained in detail in paras 4 and 5 of the said judgment
and therefore we would like to reproduce the same as
under:

     4. Section 5-A(1)(a) of the Kerala General Sales Tax             c
     Act envisages the consumption of a commodity in the
     manufacture of another commodity. The goods
     purchased should be consumed, the consumption
     should be in the process of manufacture, and the result          D
     must be the manufacture of other goods. 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   E
     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                 F
     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,          G
     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              H
450    SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A     there is no essential difference iJ1 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
B     undergone a degree of processing, it must be
      regarded as still retaining its original identity.

      5. A large number of cases has been placed before us
      by the parties, and in each of them the same principle
c     has been applied: Does the processing of the original
      commodity bring into existence a commercially different
      and distinct article ? Some of the cases where it was
      held by this Court that a different commercial article had
      come into existence include Anwarkhan Mehboob Co.
D
      v. The State of Bombay and Others (where raw
      tobacco was manufactured into bidi patti),AHajeeAbdul
      Shukoor and Co. v. The State of Madras (raw hides
      and skins constituted a different commodity from
E     dressed hides and skins with different physical
      properties), The State of Madras v. Swasthik Tobacco
      Factory (raw tobacco manufactured into chewing
      tobacco) and Ganesh Trading Co. Kamal v. State of
F     Haryana and Another, (paddy dehusked into rice). On
      the other side, cases where this Court has held that
      although the original commodity has undergone a
      degree of processing it has not lost its original identity
      include Tungabhadra Industries Ltd., Kurnool v.
G     Commercial Tax Officer, Kurnool (where hydrogenated
      groundnut oil was regarded as groundnut oil) and
      CommissionerofSalesTax, U.P., Lucknow v. Harbiles
      Rai and sons (where bristles plucked from pigs, boiled,
H     washed with soap and other chemicals and sorted out
 SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 451
         EXCISE, N. DELHI. [A.K.SIKRl,J.]

     in bundles according to their size and colour were     A
     regarded as remaining the same commercial
     commodity, pigs bristles)."

      18. Another important aspect which needs to be
highlighted from this judgment is that the argument of the 8
Revenue that the sale of pineapple slices after the aforesaid
process, was at a higher price in the market than the original
fruit and, therefore, it constituted a different commercial
commodity. The Court negatived this contention as well by   c
observing that the process undertaken by the assessee may
have made value addition to the product but the essential
character of the product did not undergo any change, which
is the determinative factor, inasmuch as pineapple remained D
the pineapple; albeit in slice form and continued to be known
as pineapple in the market. For this proposition the Court
decided to rely upon a foreign judgment where the U.S.
Supreme Court had held that dressed and frozen chicken
was not a commercially distinct article from the original E
chicken. Detailed discussion of the said judgment appears in
para 7 which reads as follows:

     7. While on the point, we may refer to East Taxes Motor
     Freight Lines vs. Frosen Food Express, where the U.S. F
     Supreme Court held that dressed and frozen chicken
     was not a commercially distinct article from the original
     chicken. It was pointed out:
                                                             G
     "killing, dressed and freezing a chicken is certainly a
     change in the commodity. But it is no more drastic a
     change than the change which takes place in milk from
     pasteurising, homogenizing, adding vitamin
     concentrates, standardizing and bottling".              H
452   SUPREME COURT REPORTS                        [2015] 4 S.C.R.


A     It was also observed:

      "........................ there is hardly less difference between
      cotton in the

 B        field and cotton at the gin or in the bale or between
      cotton seed in the field and cotton seed at the gin, than
      between a chicken in the pen and one that is dressed.
      The ginned and baled cotton and the cotton seed, as
      well as the dressed chicken, have gone through a
c
      processing stage. But neither has been 'manufactured'
      in the normal sense of the word.

      Referring to Anheuser-Busch Brewing-Association v.
 D    United States the Court said:

         "Manufacture implies a change but every change is
      not manufacture and yet every change in an article is
      the result of treatment, labour and manipulation. But
 E    something more is necessary..... There must be
      transformation; a new and different article must emerge
      having distinctive name, character on use."

      And further:
 F
         "At some point processing and manufacturing will
      merge. But where the commodity retains a continuing
      substantial identity through the processing stage we
      cannot say that it has been manufactured."
G
            The comment applies fully in the case before us.
      Although a degree of processing is involved in preparing
      pineapple slices from the original fruit, the commodity
      continues to possess its original identity,
 H
SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 453
        EXCISE, N. DELHI. [A.K.SIKRl,J.]

     notwithstanding the removal of inedible portions, the            A
     slicing and thereafter canning it on adding sugar to
     preserve it. It is contended for the Revenue that
     pineapple slices have a higher price in the market than
     the original fruit and that implies that the slices constitute   B
     a different commercial commodity. The higher price, it
     seems to us, is occasioned only because of the labour
     put into making the fruit more readily consumable and
     because of the cane employed to contain it. It is not as
     if the higher price is claimed because it is a different         C
     commercially commodity. It is said that pineapple slices
     appeal to a different sector of the trade and that when
     a customer asks for a cane of pineapple slices he had
     in mind something very different from fresh pineapple            D
     fruit. Here again, the distinction in the mind of the
     consumer arises not from any difference in the essential
     identity of the two, but is derived from the mere form in
     Which the fruit is desired. Learned counsel for the
                                                                      E
     Revenue contends that even if no manufacturing process
     involved, the case still falls within Section 5(1 )(a) of
     the Kerala General Sales TaxAct, because the statutory
     provision speaks not only of goods consumed in the
     manufacture of other goods for sale but also goods               F
     consumed otherwise. There is a fallacy in the
     submission. The clause, truly read, speaks of goods
     consumed in the manufacture of other goods for sale or
     goods consumed in the manufacture of other goods for             G
     purposes other than sale."

     19. It follows from the above that mere addition in the
value, after the original product has undergone certain process,
would not bring it within the definition of 'manufacture' unless      H
454         SUPREME COURT REPORTS                [2015] 4 S.C.R.


A     its original identity also under goes transformation and it
      becomes a distinctive and new product.

       20. When we apply the aforesaid principle to the facts
  of this case, it is clear that mere addition of dehydrated
8 vegetables and certain spices to the raw rice, would not
  make it a different product. Its primary and essential
  character still remains the same as it is continued to be
  known in the market as rice and is sold as rice only. Further,
c this price, again, remains in raw form and in order to make it
  edible, it has to be cooked like any other cereal. The process
  of cooking is even mentioned on the pouch which contains
  cooking instructions. Reading thereof amply demonstrates
D that it is to be cooked in the same form as any other rice is to
  be cooked. Therefore, we do not agree with the CEGAT that
  there is a transformation into a new commodity, commercially
  known as distinct and separate commodity.

E      21. Since we are holding that the activity undertaken
  by the assessee does not amount to manufacture, this appeal
  is liable to succeed on this ground itself inasmuch in the
  absence of any manufacture there is no question of payment
  of any excise duty. We may, however, remark that even
F otherwise the classification of the product by the Revenue under
  sub- heading 21.08 may not be correct. In fact, the CEGAT
  has accepted that classification only on the ground that the
  product after mixing of raw rice with dehydrated vegetable
G and spice, has become a new product as it amounts to
  'manufacture' and on that basis it has held that it no longer
  remains product of milling industry. As we have held that it
  does not amount to 'manufacture' as the essential
H characteristics of the product, still remains the same, namely,
SATNAM OVERSEAS LTD. v.. COMMNR. OF CENTRAL 455
        EXCISE, N. DELHI. [A.K.SIKRl,J.]

rice, a natural corollary would be that it continues to be the A
product of the milling industry and would be classifiable
under sub-heading 11.01. Rate of duty on this product, in any
case, is 'nil'.

    22. This appeal, accordingly, succeeds and is allowed.      8
The order of the CEGAT as well as demand of excise duty by
the Revenue are hereby set aside.

    23. No costs.
                                                                c
NidhiJain                                     Appeal allowed.




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