Agitating over wood

EXPERT EYE

It's a controversy about as simple a thing as wood that is going on for a century. What is wood? Should there be an excise duty on it?

Sawn timber was the subject of judgment in a recent case in the Karnataka High Court and the Supreme Court. The Karnataka High Court in the Commissioner of Central Excise vs Moideen Kunhi case, 2004 (163) ELT 299(Ker), ruled that sawn timbers were cut sizes of timber.

The question arose should there be an excise duty on it as manufactured goods. The court said no excise was leviable because it was not manufacture.

The issue has been dealt with in several cases. The Supreme Court in the Commissioner of Central Excise vs Kutty Flash Doors case, 1988 (35) ELT 6(SC), Commissioner of Central Excise vs Surma Valley Saw Mills case, 1995 (78) ELTA 31(SC), Collector vs MP Veneer case, 1997 (89) ELT A 104(SC), and the Collector vs Bizani Veneers case, 1999(113) ELT A62 (SC), held that sawn timber was not a manufactured article.

Even then the central government moved the Supreme Court against the Karnataka High Court order. The appeal was rejected, 2004 ELT vol 163 A208. Why such a frivolous appeal, which was doomed to fail, was filed. Probably, the lure of legal fees and non-application of mind lead to such fruitless filing of appeals.

Sawn timber is not a manufactured product. The Karnataka High Court and the Supreme Court have said even if a log is cut into pieces the timber does not become a different commodity.

Similarly, the process of conversion of logs into scantlings, treating them with preservative and drilling holes in them for fitment, while erecting a water cooling tower, was not manufacture. It was held in the Paharpur Cooling Towers vs Commissioner of Central Excise case, 1988 (36) ELT 364 (tribunal).

Also making wood waste and saw dust are not manufacture. It was stated by a tribunal, though there were judgments earlier to the contrary. When the cutting and processing go to the extent that wood becomes a furniture, it is manufacture.

In the Empire Industries case, 1985(20) ELT 179 (SC), the Supreme Court quoted from the Saccharin case (Mcnicol and another vs Pinch, (1906), 2 KB 52), "Take the case of a carpenter. A carpenter uses wood; he begins with wood; he makes wood into boxes. What would you say if you wanted to talk of his manufacturing? Even if it could be strictly said the carpenter manufactures wood, it could not be said that he makes wood." Relying on this judgment, the apex court said, "Transforming wood into box would certainly be a manufacturing process."

In the Hindustan Timber Depot vs State of Tamil Nadu case, (1984) 56 STC 69 (Mad-ras), the Madras High Court held that making of packaging cases from wood was manufacture. Thus making of sawn timber from logs, chemical treatment of wood and generating wood waste are not manufacture. But making a box or furniture from wood is manufacture.

Despite this being a settled issue, it keeps on coming before the Supreme Court. Some method has to be devised to ensure that the revenue department and the law ministry get stricture from the Supreme Court or from the media if such settled issues are agitated endlessly.

smukher2000@yahoo.com