SABARKANTHA DIST COOP MILK PRODUCERS UNION LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) . Sabarkantha District Cooperative Milk Producers Union Ltd. (hereinafter referred to as the Sabar Dairy) is the petitioner. It challenges in this petition the demand made by the central excise authorities for payment of excise duty on the whole milk powder produced by it from natural milk. It is not in dispute that the whole milk powder is subject to central excise duty under Tariff Item 1B in the First Schedule to the Central Excises and Salt Act 1944 Indisputably this whole milk powder is ordinarily intended for sale. Therefore the terms of Tariff Item 1 are fully satisfied.

(2.) . Sabar Dairy is not able to sell the entire quantity of whole milk powder which it produces. After the expiry of six months it cannot be sold in that form in the market. It becomes time-expired. Therefore such whole milk powder is regenerated into fluid milk by applying a mechanical process to it and skimmed milk powder and butter are produced out of it. It is not in dispute that Sabar Dairy has been paying central excise duty on the skimmed milk powder and butter under Tariff Item 1B or 1C as the case may be.

(3.) . Mr. Nanavaty has contented before us that Sabar Dairy is not liable to pay central excise duty on the whole milk powder under Tariff Item 1B because it pays central excise duty under Tariff Item 1B or 1C on the skimmed milk powder and butter (as the case may be) which are produced out of it. The contention which Mr. Nanavaty has raised is not wellfounded. Two mechanical processes are applied to produce two commodities at two different times. By one mechanical process whole milk powder is manufactured. Manufacture of whole milk powder is itself the manufacturing event. Therefore upon the whole milk powder the petitioner must pay central excise duty under Tariff Item 1B. The second manufacturing event takes place when the whole milk powder is ultimately converted into skimmed milk powder as well as butter. In view of the fact that two manufacturing processes are applied at two different times which bring into existence two different sets of products which are distinct in character and which are also known in the market by different names central excise duty is attracted to all of them under the re-levant Tariff Items. The petitioner therefore cannot argue that since it has been paying central excise duty on the skimmed milk powder and butter under Tariff Item 1 or 1C as the case may be it is not liable to pay central excise duty on the whole milk powder under Tariff Item 1B.