1. Assessment of cess under Water (Prevention and Control of Pollution) Cess Act, 1977, regarding whether biscuit manufacture constitutes a processing of animal or vegetable products industry. (Para 1 )
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2000 Supreme(SC) 369
SUPREME COURT OF INDIA
Ruma Pal : S.N.Phukan : S.P.Bharucha
Britannia Industries Limited
Versus
Tamil Nadu Pollution Control Board
Case No. : 7237 , 7238 of 1997
Date of Decision : 2/15/00
The court distinguished 'processing' from 'manufacture,' ruling that processing changes a commodity's form without necessarily creating a new commercial article, whereas manufacture produces a commercially distinct product. Using ingredients to manufacture a new product does not constitute 'processing' of those ingredients.
Headnote:(A) Water (Prevention and Control of Pollution) Cess Act, 1977 - Schedule I, Entry 15 - Processing of animal or vegetable products industry - Distinction between 'processing' and 'manufacture' - Processing effectuates a change in form, contour, physical appearance or chemical combination without necessarily producing a commercially different article - Manufacture involves a series of processes resulting in a commodity that is commercially different from the original commodity and is recognized as a new and distinct article (Paras 3 and 6).
(B) Interpretation of 'vegetable' in fiscal enactments - To be understood in common parlance rather than botanical meaning - Wheat is not understood to be a vegetable in common parlance and therefore wheat flour is not a 'vegetable product' (Paras 3 and 4).
(C) Animal products - A product resulting from the processing of an animal product is not itself an animal product; thus, milk powder is not an animal product (Para 4).
Facts of the case:
An industry manufacturing biscuits, bread, and cake using wheat flour, milk powder, sugar, and hydrogenated vegetable oils was assessed to cess under the Water (Prevention and Control of Pollution) Cess Act, 1977, on the basis that it fell under the scope of "Processing of animal or vegetable products industry". The High Court had upheld the view that the ingredients were agricultural or animal products and their processing led to the manufacture of biscuits, thereby bringing the industry within the scope of the relevant entry.
Findings of Court:
Wheat flour is not a "vegetable product" in common parlance. Milk powder, being a result of processing milk, is not an animal product. The use of these ingredients to create biscuits, bread, and cake constitutes the manufacture of altogether different products rather than the processing of the ingredients themselves.
Issues: Whether the manufacture of biscuits, bread, and cake using wheat flour and milk powder falls within the scope of "Processing of animal or vegetable products industry" under Entry 15 of Schedule I of the Water (Prevention and Control of Pollution) Cess Act, 1977.
Ratio Decidendi: The court held that while processing changes the form or appearance of a commodity, manufacture creates a commercially different and distinct article. Since the final products are commercially distinct from the ingredients used, the activity is one of manufacture and not the processing of animal or vegetable products.
Result: Civil appeals allowed. Order under appeal set aside.
Act Referred
Legal Category Hierarchy
Table of Contents
2. Whether the use of wheat flour, sugar, vegetable oils, and milk powder in biscuit manufacture falls under the scope of processing animal or vegetable products. (Para 1 )
3. Wheat flour is not a vegetable product in common parlance, and milk powder is a processed product rather than an animal product. (Para 3 , 4 )
4. Utilizing ingredients to manufacture a commercially distinct product constitutes manufacture, not the processing of those ingredients as an animal or vegetable products industry. (Para 3 , 5 , 6 )
5. Appeals allowed and the order of the High Court set aside. (Para 7 )
6. What is the legal distinction between processing and manufacture?
Processing effectuates a change in form, contour, or physical appearance without necessarily producing a commercially different article, whereas manufacture creates a new and distinct commodity that is commercially different from the original ingredients. (Para 3 , 6 )
7. How should the term vegetable product be interpreted in a fiscal enactment?
The term should be understood in common parlance rather than by botanical meaning; consequently, agricultural products such as wheat are not considered vegetables. (Para 3 , 4 )
8. Does the use of processed ingredients in manufacturing a new product constitute processing of those ingredients?
No, the use of ingredients like wheat flour and milk powder to create biscuits, bread, and cake is the utilization of ingredients in manufacture, not the processing of animal or vegetable products. (Para 4 , 5 , 6 )
S.P.BHARUCHA, J.
(1) THE appellant challenges the correctness of an order of a Division Bench of the High Court at Madras dismissing a writ petition filed by it. The appellant manufactures biscuits, bread and cake. It uses as ingredients for the purpose wheat flour, milk powder, sugar and vanaspati. It was assessed to cess under the Water (Prevention and Control of Pollution) Cess Act, 1977 on the basis that it was a specified industry that fell under the scope of Entry 15 of Schedule I thereof. Entry 15, at the relevant time, read, "Processing of animal or vegetable products industry". Since the appellants appeal was not decided for about three years, it filed a writ petition. The writ petition directed the respondents to dispose of the appeal. Accordingly, the appeal was heard and dismissed, the Appellate Committee taking the view that wheat flour, sugar and hydrogenated vegetable oils were vegetable products and milk powder was an animal product, and these were further processed by the appellant for the manufacture of biscuits and bread. The appellant impugned the correctness of the order of the Appellate Committee by a writ petition filed in the High Court. The High Court took the view that wheat, sugar and hydrogenated vegetable oil were agricultural products, while milk powder was an animal product. By mixing and processing these, biscuits were manufactured. The word "process" denoted a continuous and regular action or succession of actions taking place or carried on in a definite manner and leading to the accomplishment of a result. The appellant, since it used milk powder and agricultural products and processed them, fell within the scope of the said Entry 15.
(2) WE think, in the first place, that the said Entry 15 needs to be analysed. "Processing of animal or vegetable products industry" must mean, in our view, an industry that processes animal/vegetable products. The question, therefore, is whether the appellant (a) processes, and (b) processes animal or vegetable products.
(3) THIS Court was concerned with the said Act in the case of Saraswati Sugar Mills v. Haryana State Board. It noted:
"THE essential point thus is that in manufacture something is brought into existence which is different from that which originally existed in the sense that the thing produced is by itself a commercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article. Processing essentially effectuates a change in form, contour, physical appearance or chemical combination or otherwise by artificial or natural means and in its more complicated form involves progressive action in performing, producing or making something."
This Court also said that the said Act was a fiscal enactment. In the context in which the word "vegetable" was used in the said Entry 15, a vegetable product meant a product of or made of or out of vegetables. Vegetables, as understood in common parlance, were not products of manufacture. Sugarcane was not, therefore, a vegetable, though it might be an agricultural product. The word "vegetable", in the context, did not attract a botanical meaning.
(4) IN our view, wheat flour, which the appellant uses as an ingredient in the manufacture of biscuits, bread and cake, is not, therefore, a "vegetable product". Wheat is not in common parlance understood to be a vegetable. Milk powder can be said to be the result of processing of an animal product, namely, milk, but it cannot be said to be an animal product.
(5) FURTHER, the manufacture of biscuits, bread and cake by the appellant using wheat flour and milk powder is not the processing of wheat flour or milk powder. It is the utilisation thereof as ingredients in the manufacture of biscuits, bread and cake, altogether different products.
(6) OUR attention was drawn by learned counsel for the respondents to the judgment of this Court in CCE v. Rajasthan State Ch
