COLLECTOR OF CENTRAL EXCISE, BARODA versus AMBALAL SARABHAI ENTERPRISES

Citation: [1989] 3 S.C.R. 784 · Decided: 10-08-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

COLLECTOR OF CENTRAL EXCISE, BARODA 
)., 
A 
v. 
AMBALAL SARABHAI ENTERPRISES 
AUGUST 10, 1989 
i:i 
[SABYASACHI MUKHARJI AND B.C. RAY, JJ.) 
B 
·~ 
Central Excises And Salt Act, 1944/Central Excise Rules, 1944: 
Sections 3, 4, 11-A and 35L-'Goods'-Starch hydrolysate-Whether 
'goods-Whether duty leviabfe. 
', 
The respondent was engaged in the manufacture of sorbitol,'7) 
" 
c which fell under items 68 of the Central Excise Tariff. During a visit to 
the factory premises by the Central Excise Officers it was found that the 
.~ 
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respondent also manufactured and captively consumed starch bydroly-
)~ 
sate which, according to the appellant, was glucose and fell under Item 
~~ 
l·E of the Central Excise Tariff. In reply to the show-aiuse notice issued 
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by the appellant, the respondent contended that starch bydrolysate was 
not 'goods' since the same was not marketable and therefore no excise 
duty was payable l?n it; and that even if the same was liable for duty it 
would not be under Item l-E. There were adjudication proceedings 
thereafter, and the adjudicator held that starch bydrolysate was glucose 'j 
and fell under item l-E, and that the respondent bad suppressed the fact 
of manufacture thereof. In the premises, the adjudicator ordered pay-
·~ ment of excise duty and further imposed a penalty. 
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The Tribunal, however, allowed the respondent's appeal and held 
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that starch hydrolysate manufactured by the respondent was not, and 
never was, a marketable commodity, and hence that would not be 
•goods' on which excise duty could be charged. 
_f • 
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The Revenue appealed to this Court. Before this Court, it was 
inter alia contended on behalf of the appellant: (i) that the Tribunal 
misdirected itself in applying the proper test for the determination of 
the question, and that the true test to determine in a matter of this 
nature was to consider not only whether starch hydrolysate was actually 
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marketable but also to consider whether conceptually the said goods 
were capable of being marketed, and the Tribunal should have 
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examined or called for fresh evidence to determine that question; and 
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(ii) even transient items of articles could be 'goods', provided these were 
known in the market as distinct and separate articles having distinct 
and separate uses, and if these .. ere capable of being marketed even 
H 
during short period. 
784 
"''; 
COLLECTOR OF_C.E. v. A.S .. ENTERPRISES 
785 
. 
On behalf of the respondent it was contended that; (i) starch; • A 
hydrolfsate which was utilised in the manufacture of sorbitol, was not 
befog marketed and was not capable of being marketed in view of its 
liighly unstable character resulting in fragmentation even if kept for a 
day or two; and (ii) starch hydrolysate was not ..;;,rketable product and 
would not therefore .be "goods" on the manufacture of which excise 
duty could.have been demanileci or would have been payable and there-
B 
fore for non-payment of duty, there had been no negligence or failure. 
Dismissing the appeal, this Court, 
\~ .: · HELD: (I) If the process ~r activity of the assessee brings into 
e~i;tenc_e an article different and distinct from wh11t it w..S before the 
process and a new identifiable _article known in the market as such 
comes intii being, then the use of such article-in the instant case star~h 
hydrolysate-would attract duty on the part of the assessee even in 
captive consumption. [788G] ' · 
· 
c 
South Bihar Sugar Mills ltd., etc. v. Union of India & Ors., 
D 
[1968] 3 SCR 21, referred to. 
(2) The word "manufacture" implies a change but every change 
in the raw material is not ,manufacture. There must be such a transfor-
mation thai a new and different article emerges having a distinct name, 
characteror use. [790D] 
, 
· Union of India v~ Delhi Cloth & General Mills ltd., [1963] Supp.· 
I SCR586. 
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(3) Duty is levied on goods. As the Central Excises and Salt Act, 
· ~~ 1944 does not define "goods"• the legislature must be taken to have 
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used that word in its ordinary, dictionary meaning. The dictionary 
meaning of the expression is that to become goods it must be something 
which can ordinarily come to the market to be bought and sold and is 
· known to the market. It would be such an article which would attract 
'duty' under the Act. [790E] 
Union Carbide India ltd. v. Union of India & Ors., I 1986] 24 
ELT 169. 
E 
F 
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( 4) It is true that the goods with unstable character can be 
theoretically 

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