BROOKE BOND INDIA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) . itioner No. 1 is the Brooke Bond India Limited which is a Company incorporated and registered under the Companies Act. Petitioner No. 2 is the Director and Shareholder of petitioner No. 1-Company. In this petition the petitioners have mainly prayed that Tariff Item 3(2) of the First Schedule to the Central Excise Act, 1944 ('the Act' for brief) which provides for rate of duty of excise on 'package tea', is illegal and ultra vires the Constitution of India as it is arbitrary, discriminatory and beyond the legislature competence, and for a direction to the respondents not to levy and collect duty of excise on the basis of Tariff Item 3(2) from the petitioners and to refund the amount which is recovered on the basis of Tariff Item 3(2) on 'package tea' sold by the petitioners.

(2.) . The learned Advocate for the petitioners vehemently submitted that : (i) Package tea is not a different product of the tea and there is no difference between package tea of all varieties. For having package tea no manufacturing process as defined under Sec. 2(f) of the Act is involved. (ii) As per charging Sec. 3, the excise duty can be levied on the goods which are manufactured in India but it cannot be levied only on the basis of packing because packing or blending of tea does not involve a manufacturing process. (iii) Duty of excise on process not amounting to manufacture is beyond the legislative competence of the Parliament and recourse cannot be taken to Entry 97 of List 1 of the Seventh Schedule to the Constitution of India to justify such a levy. (iv) In any set of circumstances, as there is no difference between the package tea and tea falling within the Tariff Item 3(1) the levy of higher rate of duty of excise on package tea is discriminatory and is violative of Art. 14 of the Constitution of India.

(3.) . As against this, in affidavit in reply, it has been pointed out and contended by the respondents as under : (i) The process of conversion of original tea into package tea is a manufacturing process within the meaning of Sec. 2(f) of the Act. From the stage of plucking of tea leaves from shrubs and thereafter till it is packed in packages so as to make it marketable, is a continuous process. After purchasing tea in bulk, the process undertaken by the petitioners as described by them involves removal of impurities such as iron filings, dust, sand, etc. Without removing the said impurities, tea cannot be marketed for human consumption. Not only this, after removing the impurities loose tea obtained from various bulks is blended by the petitioners by means of bulkers. Blending of tea in the context of tea trade occupies a very vital place. Blending determines the quality, strength, colour and flavour of ultimate tea which is packed for marketing with different brand names. Tea is not a product completely manufactured until it is purified, blended and packed. After purification, blending and packing, package tea as covered by Tariff Item 3(2) comes into existence. (ii) Apart from the fact that the process undertaken by the petitioners is part of the manufacturing process and even assuming that it does not involve manufacturing process, on package tea, different rate of duty of excise can be levied. (iii) There is no discrimination for a package tea which is packed in a container containing less than 27 kgs. of tea. All those packages containing not more than 27 kgs. of package tea are treated in equal manner. Classification between tea sold hi packages and loose tea is reasonable. Reliance is placed on the decision of the Supreme Court in the case of Dantuluri Ram Raju v. State of Andhra Pradcsh, reported in 1972 (1) SCC 421, wherein the Supreme Court has held that State is presumed to know the requirements of the situation and act accordingly and with regard to a taxing statute the power of the legislature to classify is of 'wide range and flexibility' so that it can adjust its system of taxation in proper and reasonable ways. It is also stated that so far as the package tea is concerned, generally larger consumers such as canteens, big hotels, buy blended tea in packages of limited quantity of their specific use and period. It is also contended that classification of package tea in a container containing less than 27 kgs. and container containing more than 27 kgs. is reasonable. The practice in the trade of packing of blended tea is normally below limited quantity of tea. Keeping in view the demand of the trade the packing upto 27 kgs. is considered as Package Tea. The petitioners themselves are enjoying facility of duty free removal of tea packed in container containing more than 27 kgs. of tea, (iv) Lastly, it has been stated that Fur a lung period of 30 years, that is, since 1953, the duty has been paid by the petitioners on the basis of Tariff Item 3(2) which indicates that Package Tea is known as different variety of tea in the market. For a long period of 30 years the petitioners have not raised the contention that Package Tea cannot be considered as different product of tea which indicates that it is known to the petitioners and in the market as different product of tea.