R.M. Sahai, J. - (1.) U.P. Forest Corporation constituted by U.P. Forest Corporation Act, 1974 lor better preservation, supervision, development and exploitation of forest produce, has approached this Court for a direction to Union of India restraining it and its officials from enforcing provisions of Central Excises and Salt Act, 1944 and demanding excise duty on 'round' or 'sawn' timber obtained from standing trees sold to it by State Government. '
(2.) Dispute started when Assistant Collector, Central Excise sent a letter on 17th April, 1979 to the General Manager, Van Nigam, Lucknow intimating him that on, 12th and 13th February, 1979, Superintendent of Central Excise, Mori, Dehradun visited your unit at Gangheri which is 13 kms. ahead of Uttar Kashi, and found that the unit was converting timber logs into planks, slippers, beams etc. and the sawing was done with the aid power' therefore, it was liable to pay excise duty. In reply the Corporation claimed that it was not manufacturing any finished products nor was timber mentioned in Tariff Item No. 68 of the Central Excises and Salt Act. Correspondence went on between the two departments both reiterating their stand till the Superintendent, Central Excise, Nainital sent notice on 22.12.1980 under Section 14 of the Excise Act, founded on Government of India, Ministry of Finance (Department of Revenue and Insurance) F. No. 35/28/75-TRU dated 20th August, 1976 that sawn timber was in nature of finished product. In counter-affidavit the claim of Excise Department is that sawing of logs into rolling-slippers, sized timber and saw dust results into producing new and different article having a distinctive name, character and use, therefore, it was exigible to duty.
(3.) What appears undisputed is that the petitioner to whom the standing timber was allotted by the State Government fell the trees and obtained timber-logs and fuel wood from them. The timber-log is commercially described as round timber. The question is if the act of sawing the logs, producing beams, planks, slippers, chips, waste-wood etc. amount to manufacture. In State of Orissa v. Titaghur Paper Mills Ltd., A.I.R. 1985 S.C. 1293 the Hon'ble Court after discussing various decisions held that planks, rafters, and slippers were nothing but timber. This decision was followed by Karnataka High Court in Y. Moideen Kunhi and Ors. v. Collector of Central Excise, Bangalore and Ors. 1986 (23) ELT 293 Karnataka. It was held that the word manufacture is generally understood to mean coming into existence of a new substance. Sawing of timber did not amount to manufacture as the timber even after sawing continued to be timber and no new commodity came into existence. The conversion of logs into planks, beams etc. did not amount to manufacture as envisaged by Section 2(f) of the Central Excise Act. It is thus obvious that opposite parties were not justified in demanding excise duty on 'Round or sawed' timber.;