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1979 Supreme(AP) 350
Andhra Pradesh High Court
Judges : JEEVAN REDDY
Brooke Bond India Limited - Appellant
Versus
Union of India - Respondent
Decided On : 10-20-79
The process of roasting, powdering, and mixing chicory with coffee powder amounts to a manufacturing process, resulting in a new substance with a distinctive name, character, and use. Coffee-chicory blend is a beverage rather than a food product or preparation and is, therefore, not exempt from excise duty under the notification dated 1st March, 1975, which exempted "all kinds of food products and food preparations."
Headnote:
EXCISE DUTY - Coffee-chicory blend - Whether manufactured in a factory - Whether exempt from duty under notification dated 1st March, 1975, exempting "all kinds of food products and food preparations" - Held, coffee-chicory blend is manufactured in a factory and is not exempt from duty under the notification.
Fact of the Case:
The petitioner, Brooke Bond India Ltd., challenged the levy and collection of excise duty on coffee-chicory mixture, a product marketed and sold by it. The petitioner purchased coffee in the form of cured-seed at auctions conducted by the Indian Coffee Board, while chicory was procured directly from agriculturists. The Central Excise and Salt Act, 1944, levied excise duty on goods produced or manufactured in India. The duty was levied on the basis of value, weight, or number. The rates of excise duty were those mentioned in the Tariff Schedule appended to the Act. Item 2 of the Schedule dealt with coffee, with sub-items for cured coffee and instant coffee. With effect from 1st March, 1975, a residuary entry, Entry 68, was introduced in the Schedule, which levied a duty of one percent ad valorem on all other goods not elsewhere specified manufactured in a factory. From 1st March, 1975 onwards, the petitioner was paying duty on the coffee-chicory blend under Item 68 without any demur. However, in or about January 1978, the petitioner raised an objection to the levy, which was overruled by the department. The petitioner approached the High Court without exhausting the remedies of appeal and revision provided by the Act.
Finding of the Court:
The High Court held that the coffee-chicory blend was manufactured in a factory and was, therefore, subject to excise duty under Item 68 of the Tariff Schedule. The Court found that the process of roasting, powdering, and mixing chicory with coffee powder amounted to a manufacturing process, resulting in a new substance with a distinctive name, character, and use. The Court also held that the coffee-chicory blend was not exempt from duty under the exemption notification dated 1st March, 1975, which exempted "all kinds of food products and food preparations." The Court reasoned that coffee-chicory blend was a beverage rather than a food product or preparation.
Issues: 1. Whether the coffee-chicory blend was manufactured in a factory within the meaning of Item 68 of the First Schedule to the Central Excise and Salt Act, 1944? 2. Whether the coffee-chicory blend was exempt from duty under the notification dated 1st March, 1975, which exempted "all kinds of food products and food preparations"?
Ratio Decidendi: 1. The Court held that the coffee-chicory blend was manufactured in a factory within the meaning of Item 68 of the First Schedule to the Central Excise and Salt Act, 1944. The Court found that the process of roasting, powdering, and mixing chicory with coffee powder amounted to a manufacturing process, resulting in a new substance with a distinctive name, character, and use. The Court also noted that the coffee-chicory blend was sold under various trade-names, prominently mentioning that it was a blend of coffee and chicory, and that it was marketed as a beverage rather than a food product or preparation. 2. The Court held that the coffee-chicory blend was not exempt from duty under the notification dated 1st March, 1975, which exempted "all kinds of food products and food preparations." The Court reasoned that coffee-chicory blend was a beverage rather than a food product or preparation.
Final Decision: The writ petition was dismissed with costs.
( 2 ) THE petitioner, according to the averments in the writ petition, carries on business of packing and selling tea and coffee, under various brands and trade-marks, all over india and abroad. It sells pure coffee, as well as the blend of coffee and chicory. The petitioner says that it purchases coffee in the form of cured-seed at the auction conducted by the Indian Coffee Board, while chicory is procured directly from agriculturists.
( 3 ) THE Central Excise and Salt Act, 1944 (hereinafter referred to as "the Act"), levies a duty, called "excise Duty" on goods produced or manufactured in India. Duty is levied on the basis of value, or on the weight or number, as the case may be. The rates of excise duty are those mentioned in the Tariff schedule appended to the Act. Sixty-eight items are mentioned in the Schedule. Items 1 to 1-F, 2 and 3 are mentioned under the general heading "food and Beverages". Item 2 is "coffee". It would be appropriate to set out all the entries under item 2:"2. COFFEE (1) Coffee, cured one hundred rupees, per quintal. (2) Coffee commercially known as Instant Coffee"twenty per cent, ad valorem plus the duty for the time being leviable under sub-item (1) of this Item on coffee cured, used in the manufacture of such "instant coffee" if not already paid. Explanation: 1. For the purposes of sub-item (1), "coffee" means the seed of the coffee tree (Coffee) whether with or without husk, whether cured or uncured, but does not include the seed while still attached to the tree. Explantion II : For the purposes of sub-item (2), "instant Coffee" includes instant coffee containing any ingredient in addition to coffee"
( 4 ) WITH effect from 1st March, 1975, a duced in the Schedule, which Entry reads as residuary entry, being Entry 68, was intro- follows:"68. ALL OTHER GOODS, NOT ELSEWHERE SPECIFIED MANUFACTURED IN A FACTORY BUT EXCLUDING- one per cent ad valorem. (a) alcohol, all sorts including alcoholic liquors for human consumption. (b) Opium, Indian hemp and other narcotic drugs and narcotics; and (c) dutiable goods as defined in section 2 (c) of the Medicinal and Toilet Preparations (Excise Duties) Act (XVI of 1955 ). Explanation.- In this Item, the expression "factory" has the meaning assigned to it in section 2 (m) of the Factories Act (LXIII of 1948 ). . . . . . . . . . . . "
( 5 ) THE rate of duty, which was 1% ad valorem initially, has been revised upwards from time to time. I am told that at present it is 8%.-
( 6 ) HAVING introduced the residuary Item the central Government appears to have felt that certain goods ought to. be exempted therefrom. Accordingly, it issued Notification No. 55 of 1975, dated 1st March, 1975, under rule 8 (1) of the Central Excise Rules, 1944, which is to the following effect:"in exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise rules, 1944, the Central Government hereby exempts goods of the description specified in the schedule annexed hereto and falling under item No. 68 of the first schedule to the Central Excises and Salt Act (I of 1944), from the whole of the duty of excise leviable thereon. THE SCHEDULE: 1. All kinds of food products and food preparations, including- (i) meat and meat products; (ii) dairy products; (iii), fruit and vegetable products; (iv) fish and sea products; (v) bakery products; and (vi) grain mill products. 2. Electric light and power. . . . . . "
( 7 ) FROM 1st March, 1975 onwards, the petitioner was paying duty on the coffee-chicory blend, under item 68 without any demur. For the first time the petitioner raised an objection to the said levy, in or about January, 1978. The department, however overruled the objection; whereupon the petitioner approached t
