The key legal principle established is that the process of using bagasse as fuel constitutes 'manufacture' under the Central Excises and Salt Act, 1944, and bagasse does not qualify as an intermediate good or component part of any goods.

This writ petition coming on for hearing on this day upon perusing the petition and the affidavit filed in support thereof the order of the High Court, dated 16-4-1980 and made herein, and the counter and Reply affidavits filed herein and the records relating to the order in order No. 278/79, dated 11-4-1979 on the file of Additional Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi comprised in the return of respondents to the writ made by the High Court, and upon hearing the arguments of Mr. K.P. Jagadeesan, Advocate for the petitioner and of Mr. T. Somasundaram, Additional Central Government Standing Counsel, on behalf of the respondents the court made the following order :-

2.By order dated 10-2-1977, the third respondent demanded of the petitioner duty on certain quantity of bagasse used as fuel during the period between 1-3-1975 and 29-4-1975. The petitioner would contend that bagasse is not a manufactured product so as to be an excisable good under the Certral Excises and Salt Act, 1944 (Central Act 1 of 1944) hereinafter referred to as 'the Act'. The petitioner would also claim exemption under Notification No. 58 of 1975, dated 1-3-1975 as amended by Notification No. 77 of 1975, dated 6-3-1975, on the ground that bagasse must be characterised only as an intermediate good or component part of any goods. Both these contentions were not accepted by the third-respondent. The petitioner preferred an appeal to the second respondent and that was also not fruitful. There was a further revision to the first-respondent and that was rejected by the order dated 11-4-1979, impugned in this writ petition.

3.Mr. K.P. Jagadeesan, learned counsel for the petitioner, would press forth the very same two contentions which have not been countenanced by the respondents as stated above. The learned counsel would submit that bagasse is nothing but the refuse coming out by crushing the sugarcane, in the course of manufacture of sugar by the petitioner, that the petitioner by itself does not market the bagasse as a commercial product and that no process of manufacture within the meaning of Section 2(f) of the Act is involved in the case of bagasse and hence the demand of duty on the concerned quantity of bagasse is incompetent.

4.The main part of Section 2(f) reads as follows :

"In this Act, unless there is anything repugnant in the subject or context

(f) "manufacture" includes any process incidental or ancillary to the completion of a manufactured product........" *

The question as to when a manufacture of a product takes place is a mixed question of law and fact, depending on the construction of the expression 'manufacture' occurring in Section 2(f) of the Act and on what is known to the consumers and the commercial community as a commercial product.

It is not in dispute that bagasse could be used as a fuel and in fact the petitioner admittedly uses bagasse as a fuel in its own plant and further bagasse also has the characteristics of a commercial product in that it is being used in the manufacture of paper and paper boards. The question as to whether the petitioner itself markets bagasse is not germane for deciding whether the process of manufacture is involved or not. "Manufacture" implies a change or a series of changes, and when there is an essential difference in identity between the original commodity and the commodity, which comes out of the processing, certainly 'manufacture' is involved. It is not possible to say that bagassee is the same as the sugarcane, after the sugarcane has gone through the process of crushing, for getting the product of sugar out of it. Out of the crushing process, of the sugarcane, the ultimate product of sugar as well as bagasse come out, and bagasse, as stated above, is certainly a commercial product. As pointed out by the Supreme Court inEmpire Industries Ltd. and Othersv. Union of India and Others 1985 (2) ELT 179 (S.C.)], if by application of labour and skill an