Packing tea alone does not amount to manufacture and is not exigible to excise duty.

( 1 ) THIS is a petition for issue of a writ of Mandamus for directing the refund of excise duty for an amount of Rs. 7,79,584. 96 collected by the Central Excise authorities from April, 1981 to 29-1-1983 declaring that the collection of duty under Tariff Item 3 (2) mentioned in the first Schedule of the Central Excises and Salt Act, 1944 as illegal, unconstitutional and ultra vires.

( 2 ) THE essential averments in the affidavit in support of the writ petition may be stated : The petitioner gets tea from M/s. Duncans Tea Sales Limited, Calcutta and puts the same into printed card board boxes/soft paper packs/printed envelopes and the boxes/packs/envelopes contain tea varying from 3 grams to 500 grams. After packing the tea as stated above they are delivered to M/s. Duncans Tea Sales Limited or their agents for subsequent disposal by them. The petitioner is a packer of tea supplied by M/s. Duncans Tea Sales Limited and for the discharge of this function the petitioner is paid amount as service charges. It is stated that the package tea falling under Central Excise Tariff Item 3 (2) and duty is being realised at 0. 40 per kg + 10% special excise duty on each packet weighing 25 grams and upto 500 grams the charge is Rs. 1. 00 per kg + 10% special excise duty. Though package tea has been specified as Tariff Item 3 (2) in the First Schedule of the Central Excise Act, 1944, packing of tea specified in Item 3 (1) of Central Excises Tariff does not bring into existence of a new product other than the product mentioned in Central Excise Tariff Item 3 (1 ). In other words, packing cannot be considered as manufacture.

( 3 ) IN the counter affidavit filed by the Collector of Central Excise it is stated that the petitioner applied for and was issued licence to manufacture package tea and duty is being paid at the rates applicable thereto. The allegation that the manufacture is not involved in packing loose tea into packets and no new product emerges from loose tea classifiable under Tariff Item 3 (1) is not correct. Loose tea after package becomes package tea which is quite different from loose tea and it has distinctive in character and used in the market and is recognised as package tea in the commercial circles. Loose tea when packed into containers becomes package tea and is distinct and recognised as such in the market.

( 4 ) IN the additional affidavit the petitioner stated that they do not manufacture any tea and the petitioner is paid service charges for package and the process of blending is not done by the petitioner and they receive tea powder in big boxes and chests and re-packs the tea in small packets of 3 grams to 500 grams and such re-packing does not amount to manufacture.

( 5 ) IN the additional counter affidavit filed on behalf of the respondent it is stated that the petitioner packs the tea in various sizes of packing according to the weight to be assigned to each pack having received blended tea. It is stated that when once blended tea is received by the petitioner and put into boxes it becomes package tea and as package tea it has distinctive name, character and use in commercial circles. It is further stated that the activity of the petitioner of receiving blended tea, putting them into packs of various sizes after weighing and putting the label M/s. Duncons No. 1 Dust Tea amounts to manufacture of a new product of package tea known to commercial circles. The package tea is liable to a separate tariff entry carrying higher rate of duty than loose tea.

( 6 ) THE learned counsel for the petitioner contended that the petitioner is entrusted with the job of packing the tea manufactured by Duncan company and the manufacturing process is not involved and as such not leviable to levy of excise duty. The learned standing counsel for the Central Government contended that the package process is an integral part of manufacture and therefore the petitioner being the packer is liable to levy of excise duty on packag