Custom, Excise & Service Tax Tribunal
Shree Renga Polymers vs Commissioner Of Gst&Cce(Trichy) on 9 April, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Excise Appeal No. 41316 of 2019
(Arising out of order-in-original No. 12/2019 dated 31.05.2019 passed by the
Commissioner of Customs, Jaipur).
M/s. Shree Renga Polymers ...Appellant
Represented by its Managing Partner,
SF 638, KPR Thottan. Kalipalayam, Puliyur,
Karur - 639114
VERSUS
Commissioner of GST & Central Excise ...Respondent
Tiruchirappalli Commissionerate, Office of GST & Central Excise Commissionerate, Williams Road, Cantonment, Tiruchirappalli - 620001 WITH E/41317/2019 E/41318/2019 E/41319/2019 E/41320/2019 E/41321/2019 E/41322/2019 E/41323/2019 E/41324/2019 E/41325/2019 E/41326/2019 and E/41327/2019 APPEARANCE:
Shri Raghavan Ramabadran, Advocate for the Appellant Shri Anoop Singh, Authorized Representative for the Department CORAM:
HON‟BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON‟BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) DATE OF HEARING: 25.02.2026 DATE OF DECISION: 09.04.2026 FINAL ORDER NO‟s._40468-40479/2026 JUSTICE DILIP GUPTA:
M/s. Shree Renga Polymers1 has filed all these 12 appeals to assail the order dated 31.03.2019 passed by the Commissioner adjudicating the show cause notice dated 21.09.2010 for the period
1. the appellant 2 E/41316/2019 from March 2010 to April 2010 and the show cause notices/statements of demand issued for the subsequent period from May 2010 to September 2016. The Commissioner has ordered for classification of the final products manufactured by the appellant from waste Polyethylene Terephthalate Bottles2 under Central Excise Tariff Item3 3915 90 42 of the First Schedule to Central Excise Tariff Act, 19854 as „parings of PET Plastics‟. The Commissioner has, therefore, confirmed the demand of central excise duty with interest and penalty on the parings of PET plastics manufacture and cleared by the appellant.
2. The appellant is engaged in the activity of conversion of waste PET Bottles into Polyethylene Terephthalate Flakes5 which are obtained by the process of sorting, crushing, washing and rinsing of waste PET Bottles.
3. The two issues that arise for consideration in these appeals are:
(i) Whether the process of conversion of waste PET Bottles into PET Flakes qualifies as „manufacture‟ under section 2(f) of the Central Excise Act, 19446 for purpose of levy of excise duty?
(ii) Whether PET Flakes generated and cleared by the appellant are classifiable under CTI 3915 90 42 as alleged by the department?
4. According to the appellant, the following process is undertaken for conversion of waste PET Bottles into PET Flakes.
2. PET Bottles
3. CETI
4. the Tariff Act
5. PET Flakes
6. Central Excise Act 3 E/41316/2019
(i) Non-PET materials such as PVC, Aluminium, Paper, Iron & Stone are sorted from the used PET Bottles/waste PET Bottles;
(ii) The 'used/waste PET Bottles' are then crushed into smaller pieces, which are called Flakes;
(iii) The crushed Flakes are then washed to remove sand and dirt;
(iv) The Flakes are further washed with hot water. If required, caustic soda/ cleaning reagent is added to remove dirt;
(v) The Flakes are once again washed with fresh water;
(vi) Lastly, the Flakes are dried, packed and cleared from the factory.
5. The appellant further claims that after the process of sorting, crushing, washing and rinsing of waste PET Bottles is complete, the final product, namely, PET Flakes remain in PET form. The only difference from input goods i.e. waste PET Bottles is that the final product i.e. PET Flakes are only reduced to flake form. According to the appellant, a new product does not emerge nor the raw material/input in PET form ceases to exist.
6. The appellant had been classifying PET Flakes under Central Excise Tariff Heading7 CETH 3907 60 as Polyethylene Terephthalate and claimed exemption under Serial No. 78 of Notification No. 4/2006 dated 01.03.2006 from central excise duty. The appellant subsequently claimed exemption from central excise duty under Serial No. 147 of Notification No. 12/2012-CE dated 17.03.20128.
7. The appellant was issued show cause notices/statements of demand proposing to demand central excise duty on PET Flakes cleared by the appellant during the period from March 2010 to September 2016.
7. CETH
8. the Exemption Notifications 4 E/41316/2019 The details of the show cause notice/statement of demands, the period involved, the central excise duty demanded and the central excise duty paid under protest are as follows:
S.No. Show cause Period Central Excise Excise duty notice dated Duty demanded paid under (Rs.) protest (Rs.)
1. 21.09.2010 March 2010 4,87,700 4,87,700 to April 2010
2. 21.09.2010 May 2010 4,27,328 4,27,328 to June 2010
3. 21.09.2010 July 2010 3,49,620 3,49,620 to August 2010
4. 08.06.2011 September 2010 16,68,224 16,68,224 to December 2010
5. 08.06.2012 January 2011 76,47,414 76,47,414 to October 8, 2011 6. 29.10.2012 October 2011 1,76,18,940 0 to May 2012 7. 12.06.2013 June 2012 2,54,01,481 0 to April 2013 8. 09.04.2014 April 2013 2,11,44,997 0 to January 2014 9. 19.01.2015 February 2014 96,64,741 0 to September 2014 10. 23.06.2015 October 2014 79,69,233 0 to March 2015 11. 15.12.2015 April 2015 58,23,789 0 to September 2015 12. 10.04.2017 October 2015 4,00,288 0 to September 2016 Total 9,86,03,755/- 1,05,80,286/-
8. The appellant filed detailed replies to the show cause notices/statement of demands primarily contending that the goods were not manufactured by the appellant and the goods were also correctly 5 E/41316/2019 classifiable under CETH 3907 60. The replies filed by the appellant did not find favour of the Commissioner in the impugned order dated 31.03.2019. The Commissioner held that the process of conversion of old use PET Bottles into parings of PET Flakes results in emergence of a new and distinct product and, therefore, would amount to „manufacture‟. Regarding classification, the Commissioner after placing reliance on the final order dated 25.09.2018 of the Tribunal in the case of the appellant held that PET Flakes are classifiable under CETI 3915 90
42.
9. The relevant findings of the Commissioner holding that the process undertaken by the appellant resulted in „manufacture‟ is:
"36. In the instant case, the old PET bottles are washed for removing impurities and converted into parings of PET flakes. These final products manufactured by the noticee is further processed and converted into powder form by other companies (buyers of parings of PET Flakes) before used by the recycling companies to manufacture PET bottles and PET Fibre. Thus, the final products emerging out of the process undertaken by the notcee have a distinct name in the market as „Parings of PET Bottles‟ as compared to the used PET Bottles from which the final products were obtained. Further, these parings of PET Bottles have also a distinct use in the market as inputs for manufacture of recycled PET Bottles.
37. According to Wikipedia, one of the most important characteristics of PET is referred to as intrinsic viscosity. Further, there is an ongoing modification of the following polymer characteristics during each recycling cycle, which are detectable by Chemical and physical laboratory analysis.
xxxxxxxxxxx 6 E/41316/2019 From the above, I find that apart from physical change in the shape (from waste pet bottles into parings of pet flakes), there is also lot of chemical changes/characteristics. The most important character viz. intrinsic viscosity is decreasing while converting pet bottles in to parings of flakes. In view of the above, noticee‟s claim that that there is no change is characteristics is not correct."
(emphasis supplied)
10. The Commissioner, thereafter, referred to the decisions of the Supreme Court in State of Maharashtra vs. Mahalaxmi Stores9, Union of India vs. Delhi Cloth and General Mills Co. Ltd.10 and Crane Betel Nut Powder Works vs. Commr. of Cus. & C. Ex., Tirupathi11 on which reliance had been placed by the appellant:
"38.5 In all the above cases, it was invariably held that no new substance was produced by virtue of the activities undertaken and hence the process undertaken was held as not amounting to manufacture. However, in the instant case, it is clearly seen that the process of conversion of old used PET bottles into parings of PET Flakes results in emergence of a new and distinct product which has a distinct name, character and use as compared to the inputs from which the same was manufactured. It is also not in dispute that the parings of PET Flakes were cleared for home consumption and were also exported [invoice No. E058 dated: 21.06.2012]. Therefore, the case laws cited by them are not applicable to the case at hand."
(emphasis supplied)
11. Regarding classification of PET Flakes, the Commissioner observed:
9. 2003 (152) E.L.T. 30 (S.C.)
10. 1977 (1) E.L.T. (J 199) (S.C.)
11. 2007 (210) E.L.T. 171 (S.C.) 7 E/41316/2019 "32. As regards classification, the issue to be decided is whether the final product manufactured by the noticee is Parings of PET Bottles which is commonly known in the trade as „PET Flakes Clear‟ which is classifiable under CETSH 3915.9042, or the same is „Poly Ethylene Terepthalate (PET) in primary form as contended by the noticee which is classifiable under 3907.60.
As per Chapter Note 3 to Chapter 39, Headings 3901 to 3911 apply only to goods of a kind produced by chemical synthesis. Therefore, in the first place, it is to be seen as to whether the subject final products manufactured by the noticee are produced by chemical synthesis in order to qualify for classification under 3907.60 as claimed by them. Furthermore, as per Chapter Note 6, in order to be classified under CETH 39.07, the goods should be 'primary forms' of plastics. A conjoint reading of the above two Chapter Notes will clearly show that in order to get classified under CETH 39.07, the goods have to be in primary form of plastics and the same should have been produced by chemical synthesis. Further, PET is produced by the step- growth polymerization of ethylene glycol and telephthalic acid. In the instant case, the noticee are not doing any chemical synthesis or polymerization processes on the PET bottles used by them as raw material. On the other hand, the process involves only putting the used PET bottles into a crusher which makes them small pieces and subjecting the resultant goods to washing and packing after which they are cleared from the factory. Inasmuch as the product manufactured by the noticee is not of the kind produced by chemical synthesis, the same get excluded from classification under CETH 3907.60, as the condition stipulated in Chapter Note 3 of Chapter 39 is not fulfilled.
12. The Commissioner, therefore, held that parings of PET Flakes are classifiable under CETI 3915 90 42.
8
E/41316/2019
13. The Commissioner then placed reliance upon the final order dated 25.09.2018 in the matter of the appellant in Commissioner of Central Excise, Trichy vs. Sree Ranga Polymers12 and held:
"41. Owning to the above, I deny the exemption from payment of duty that is claimed by M/s. SRP on the pet flakes under Sl. No. 78 of Notification No. 4/2006-CE dated 1.3.2006 as amended and under Sl. No. 147 of Notification No. 12/2012-CE dated 17.03.2012 as amended, as the case may be, and therefore, I confirm the demand of Central Excise duty amounting to Rs. 9,86,03,755/- (Nine Crore Eighty Six Lakh Three Thousand Seven Hundred and Fifty Five only) along with interest due and payable thereon."
(emphasis supplied)
14. Shri Raghavan Ramabadran, learned counsel for the appellant made the following submissions:
(i) The process of conversion of waste PET Bottles to PET Flakes will not qualify as manufacture and, therefore, on this ground alone, the demand needs to be set aside. To support this contention learned counsel placed reliance upon the following decisions:
(a) Faridabad Iron & Steel Traders Association vs. Union of India13;
(b) Crane Betel Nut Powder Works;
(c) Mahalaxmi Stores;
(d) Commissioner of Central Excise, New Delhi-I vs. S.R. Tissues Pvt.
Ltd.14;
(e) M/s. Satnam Overseas Ltd. vs.
Commissioner of Central Excise,
New Delhi15;
12. Excise Appeal No. 82 of 2011 decided on 25.09.2018
13. 2004 (178) E.L.T. 1099 (Del.)
14. 2005 (186) E.L.T. 385 (S.C.) 9 E/41316/2019
(f) Sara Spices vs. Commissioner of C. Ex., Cus. & S.T., Cochin16;
(g) Commissioner of Sales Tax, U.P. vs. Lal Kunwa Stone Crusher (P) Ltd.17;
(h) Andhra Cements vs. Commissioner of Central Excise, Visakhapatnam18;
(i) Deputy Commissioner Sales Tax (Law), Board of Revenue (Taxes), Ernakulam vs. Pio Food Packers19;
(ii) Wikipedia is not an authentic source and cannot be relied upon. In support of this contention, learned counsel placed reliance upon the decision of the Supreme Court in HP India Sales Pvt. Ltd. vs. CC, Nhava Sheva20;
(iii) The onus to prove that the goods were manufactured is on the department. The department has not established that there is an emergence of a new product and PET form ceases to exist;
(iv) The final order dated 25.09.2018 of the Tribunal in the matter of the appellant did not decide the issue of manufacture;
(v) PET Flakes are not classifiable under CETI 3915 90 42; and
(vi) Penalty is not leviable and interest cannot be imposed if the demand itself is not sustainable.
15. Civil Appeal No. 8958 of 2003
16. 2018 (362) E.L.T. 151 (Tri.-Bang.)
17. 2000 (117) E.L.T. 279 (S.C.)
18. 2005 (188) E.L.T. 179 (Tri.- Bang.)
19. 1980 (6) E.L.T. 343 (S.C.)
20. 2023 (383) E.L.T. 241 (S.C.) 10 E/41316/2019
15. Shri Anoop Singh, learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions:
(i) The process undertaken by the appellant leads to emergence of a new and identifiable product having a distinct name, character and use. The Commissioner, therefore, did not commit any illegality in holding that „manufacture‟ had taken place; and
(ii) The Commissioner did not commit any illegality in classifying the final goods under CETI 3915 90 42.
This conclusion is supported by the decision of the Tribunal in the own case of the appellant decided on 25.09.2018;
16. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered.
17. The first issue that requires to be examined is whether the process undertaken by the appellant for conversion of waste PET Bottles into PET Flakes will qualify as „manufacture‟.
18. Section 2(f) of the Central Excise Act defines „manufacture‟ in the following manner:
(f) "manufacture" includes any process--
(i) incidental or ancillary to the completion of a manufactured product;
(ii) which is specified in relation to any goods in the Section or Chapter Notes of the Fourth Schedule as amounting to manufacture; or 11 E/41316/2019
(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;
and the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account
19. In paragraph 6 of the impugned order, the Commissioner has noticed the process undertaken by the appellant in the following manner:
"(i) First, they are sorting out the used PET bottles and remove all non-PET materials like PVC, Aluminium, Paper, Iron & Stone materials, is any found;
(ii) Then the 'used PET bottles' are put into crusher and the bottles became small pieces;
(iii) Then the crushed material are washed so that the sand and the dirt particles are removed;
(iv) Then the materials are washed with „Hot water after adding required amount of Caustic/cleaning Reagents so that any sticky dirt is remove;
(v) Then the „dirt removed materials‟ are further washed and rinsed in two stages with fresh water; and
(vi) Then, the materials are dried, packed and cleared from the factory."
20. This is also what has been contended by the appellant. There is, therefore, no dispute on the process undertaken by the appellant. 12
E/41316/2019
21. It is clear that non-PET materials such as PVC, Aluminium, Paper, Iron & Stone are sorted from the used PET Bottles/waste PET Bottles. Thereafter, the used/waste PET Bottles are crushed into smaller pieces, which are called Flakes. The Flakes are then washed to remove sand and dirt. The Flakes are further washed with hot water and if required, caustic soda/ cleaning reagent is added to remove dirt. The Flakes are then again washed with fresh water and, thereafter, dried, packed and cleared from the factory.
22. According to the appellant, after the aforesaid process is undertaken the final product i.e. PET Flakes remain in PET form and the only difference from the input goods i.e. waste PET Bottle is that the final product i.e. PET Flakes is reduced to Flake form and there is no emergence of a new product nor the raw material/input in PET form ceases to exist.
23. The Commissioner has not accepted this submission of the appellant. The Commissioner has observed that the final product that emerges out of the process undertaken by the appellant has a distinct name in the market as „Parings of PET Bottles‟. The Commissioner has also observed that these „Parings of PET Bottles‟ have a distinct use in the market as inputs for manufacture of recycled PET Bottles. The Commissioner has thereafter placed reliance on Wikipedia and observed that one of the most important characteristics of PET is referred to as intrinsic viscosity. The Commissioner observed that after each recycling there is an ongoing modification of the polymer characteristics which are detectable by Chemical or Physical laboratory analysis. The Commissioner, therefore, concluded that apart from physical changes in the shape from waste PET Bottles into parings of PET Flakes, there is a 13 E/41316/2019 lot of chemical changes/characteristics in the sense that the intrinsic viscosity decrease while converting PET Bottles into paring of Flakes. The Commissioner, therefore, rejected the contention of the appellant that there was no change in the characteristics of the product. According to the Commissioner, the process of conversion of old used PET Bottles into paring of PET Flakes results in emergence of a new and distinct product which has a distinct name, character and use as compared to the inputs from which it was manufactured.
24. It is seen that the used/waste PET Bottles are crushed into smaller pieces called Flakes. Flake has been defined in concise Oxford Dictionary to mean „a small, flat, a very thin piece of something‟. Split or cause to split into flakes‟. The appellant contends that the final product is PET Flakes whereas according to the department they are „paring of PET Bottles‟. Paring has been defined in a Concise Oxford Dictionary‟ as „thin strips, pared off from something‟. Thus, there is a basically no difference between PET Flakes and parings of PET Bottles.
25. The issue that arises for consideration is whether the process of conversion of waste PET Bottles into PET Flakes qualifies as „manufacture‟ under section 2(f) of Central Excise Act. This aspect is relevant for the purpose of levy of excise duty because section 3 of the Central Excise Act provides that there shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax on all excisable goods which are produced or manufactured in India.
26. The Supreme Court in Delhi Cloth and General Mills held that „manufacture‟ means bringing into existence a new substance known to the market and not merely producing some change in a substance. In 14 E/41316/2019 this connection, the Supreme Court placed reliance upon the passage quoted in Permanent Edition of Words and Phrases Volume 26, which is reproduced below:
"Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use."
27. In Faridabad Iron & Steel Traders Association, the Delhi High Court, after examining various judgments of the Supreme Court, observed:
"85. In the light of ratio of various judgments the generally accepted test for imposing excise duty is to ascertain whether the manufacturing in fact had taken place or not? It is imperative to apply this test to ascertain whether the change or series of changes brought about by the application of processes take the commodity to the point where, commercially it can no longer be regarded as the original commodity but is instead recognised as a distinct and new article that has emerged as a result of processes."
(emphasis supplied)
28. It is in the light of the aforesaid principles that it has to be determined whether in the present case any „manufacture‟ took place in the conversion of waste PET Bottles into PET Flakes by the appellant.
29. What is seen from the process undertaken by the appellant is that from the used PET Bottles/waste PET Bottles, non-PET materials such as PVC, Aluminium, Paper, Iron & Stone are sorted out and then the used Bottles/waste PET Bottles are crushed into smaller pieces which are 15 E/41316/2019 called Flakes. The crushed Flakes are then washed to remove sand and dirt and then dried, packed and cleared from the factory.
30. The appellant contends that the final product i.e. PET Flakes is still in PET form only since the input goods are reduced to Flake form and there is no emergence of a new product nor the raw material in PET form ceases to exist.
31. Thus, according to the learned counsel for the appellant this process that has been undertaken by the appellant does not amount to „manufacture‟ and in support of this contention learned counsel placed reliance on certain decisions.
32. In Pio Food Packers, the Supreme Court observed that although a degree of processing is involved in preparing pineapple slices from the original pineapple fruit, but the commodity continues to possess its original identity. Thus, the processing does not bring existence a commercially different and distinct article. The relevant portions of the judgment of the Supreme Court are reproduced below:
"6. In the present case, there is no essential difference between pineapple fruit and the canned pineapple slices. The dealer and the consumer regard both as pineapple. The only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling. The additional sweetness in the canned pineapple arises from the sugar added as a preservative. On a total impression, it seems to us, the pineapple slices must be held to possess the same identity as the original pineapple fruit.
7. xxxxxxxxxxx. The comment applies fully in the case before us. Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original 16 E/41316/2019 identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the Revenue that pineapple slices have a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it. It is not as if the higher price is claimed because it is a different commercially commodity. It is said that pineapple slices appeal to a different sector of the trade and that when a customer asks for a can of pineapple slices he had in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the essential identity of the two, but is derived from the mere form in which the fruit is desired. Learned counsel for the Revenue contends that even if no manufacturing process is involved, the case still falls within Section 5(1)(a) of the Kerala General Sales Tax Act, because the statutory provision speaks not only of goods consumed in the manufacture of other goods for sale but also goods consumed otherwise. There is a fallacy in the submission. The clause, truly read, speaks of goods consumed in the manufacture of other goods for sale or goods consumed in the manufacture of other goods for purposes other than sale.
8. In the result, we hold that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture."
(emphasis supplied)
33. In Faridabad Iron & Steel Traders Association, the Supreme Court held that the process of cutting/slitting of steel sheet into coil form does not amount to „manufacture‟. The relevant portion of the judgment of the Supreme Court is reproduced below: 17
E/41316/2019 "90. While examining justifiability of Excise Duty we must clearly comprehend that Excise Duty can be imposed on the manufacture of goods produced in India and that also on the bringing into existence a new substances known to the market. In view of the settled position of law crystallized by the aforesaid judgments, we have no difficulty in clearly arriving at the conclusion that mere cutting or slitting of steel sheets does not amount to manufacture because the identity of the product remains unchanged. The steel folded in coil remains steel even after cutting. No new, different and distinct article emerges having distinct name, character and use. Therefore, mere cutting and slitting would not amount to manufacture. We are also clearly of the view that merely because of change in tariff item, the good does not become excisable. On the application of aforesaid test, our conclusion is clear that the impugned circular dated 7-9-2001 is wholly unsustainable and has to be quashed and we order accordingly."
(emphasis supplied)
34. In Crane Betel Nut Powder Works the Supreme Court observed that crushing of betel nuts into smaller pieces and adding sweetening agent does not amount to „manufacture‟. The relevant portions of the judgment of the Supreme Court are reproduced below:
"29. Despite the elaborate submissions made on behalf of the respective parties, the issue involved in this appeal boils down to the question as to whether by crushing betel nuts and processing them with spices and oils, a new product could be said to have come into being which attracted duty separately under the Schedule to the Tariff Act.
30. In our view, the process of manufacture employed by the appellant-company did not change the nature of the end product, which in the words of the Tribunal, was that in the end product the „betel nut remains a betel nut‟. The said observation of the Tribunal depicts the status of 18 E/41316/2019 the product prior to manufacture and thereafter. In those circumstances, the views expressed in the D.C.M. General Mills Ltd. (supra) and the passage from the American Judgment (supra) become meaningful. The observation that manufacture implies a change, but every change of not manufacture and yet every change of an article is the result of treatment, labour and manipulation is apposite to the situation at hand. The process involved in the manufacture of sweetened betel nut pieces does not result in the manufacture of a new product as the end product continues to retain its original character though in a modified form."
(emphasis supplied)
35. In Mahalaxmi Stores, the Supreme Court held that crushing of boulders into small sized stones does not amount to manufacture. The relevant portions of the judgment of the Supreme Court are reproduced below:
"3. The facts, insofar as they are relevant for our purpose, are as follows:
The assessee purchases big sized stones - boulders - from registered dealers and crushes them into small sizes, known as „Gitti‟. It approached the Commissioner of Sales Tax for determination of the question whether converting bigger size boulders into „gitti‟ would amount to manufacture. The Deputy Commissioner held that the process of conversion amounts to „manufacture‟ within the meaning of Section 2(17) of the Act. Against the order of the Deputy Commissioner, the assessee went in appeal before the Maharashtra Sales Tax Tribunal. The contention of the assessee that converting boulders into „gitti‟ does not involve any manufacturing process within the meaning of the Act, was accepted by the Tribunal. From that order, the afore-mentioned question was referred to the High Court at Bombay. Following the judgments of this Court in Deputy Commissioner of Sales Tax v. Pio Food 19 E/41316/2019 Packers (46 S.T.C. 63), Chowgule & Co. Pvt. Ltd. & Anr. v. Union of India & Ors. (47 S.T.C. 124) and Sterling Foods v. State of Karnataka & Ors. (63 S.T.C. 239), the High Court held that the conversion of boulders into „gitti‟ did not amount to „manufacture‟. It is this view of the High Court that is assailed in this appeal by the Revenue.
xxxxxxxxxxx
5. From a perusal of the definition, extracted above, it is clear that the processes of producing, making, extracting, alternating, ornamenting, finishing or otherwise processing, treating or adapting of any goods fall within the meaning of the term „manufacture‟. But it may be pointed out that every type of variation of the goods or finishing of goods would not amount to manufacture unless it results in emergence of new commercial commodity. In the instant case, the very nature of the activity does not result in manufacture because no new commercial commodity comes into existence.
6. This Court in Commissioner of Sales Tax, Uttar Pradesh v. Lal Kunwa Stone Crusher (P) Ltd. [2000 (3) S.C.C. 525], on an identical question, expressed the view that when stone boulders were crushed into stone chips, gitti and stone ballast, the process could not be termed as „manufacture‟. That case arose under the Uttar Pradesh Sales Tax Act, 1948 (for short, „the Act‟).
The definition of „manufacture‟ in Section 2(e-1) of the U.P. Act appears to be similar to the definition under consideration.
7. In view of the judgment of this Court in Lal Kunwa Stone Crusher (P) Ltd. (supra), with which we are in respectful agreement, we find no illegality in the impugned judgment of the High Court. In the view that we have taken, the judgment of the High Court of Madhya Pradesh in Kher Stone Crusher v. General Manager, District Industries Centre, Jabalpur & Anr. (79 S.T.C. 149) cannot be treated as good law."
(emphasis supplied) 20 E/41316/2019
36. Learned authorised representative appearing for the department has, however, placed reliance upon the earlier decision of the Tribunal rendered on 25.09.2018 to contend that the issue stood concluded against the appellant.
37. It is not possible to accept this contention of the learned authorised representative appearing for the department. A perusal of the final order dated 25.09.2018 of the Tribunal in the matter of the appellant shows it related to classification of the product and the issue of „manufacture‟ was not raised or examined by the Tribunal. The said decision, therefore, would not be applicable to the case of the appellant.
38. Learned authorised representative appearing for the department has also placed reliance upon the judgment of the Supreme Court in M/s. Servo-Med Industries Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai21. It is seen that a show cause notice was issued to the appellant alleging that sterilization of disposable syringes and needles brings into existence a new commodity having a different character. The assessee, however, alleged that the activity of sterilization does not amount to „manufacture‟ as a new product did not come into existence by mere sterilization of disposable syringes and needles as they continue to be disposable syringes and needles post sterilization. It is in this context that the Supreme Court observed:
"9. A duty of excise is levied on the manufacture of excisable goods. "Excisable goods"
are those goods which are included in the schedules of the Central Excise Tariff Act, 1985. "Excisable goods"
brings in the concept of goods that are marketable, that is goods capable of being sold in
21. 2015 (319) E.L.T. 578 (S.C.) 21 E/41316/2019 the market. On the other hand, manufacture is distinct from sale-ability. Manufacture takes place on the application of one or more processes. Each process may lead to a change in the goods, but every change does not amount to manufacture. There must be something more - there must be a transformation by which something new and different comes into being, that is, there must now emerge an article which has a distinctive name, character or use."
(emphasis supplied)
39. The Supreme Court then examined when transformation does not takes place and in this context observed as follows:
"10. When a finished product cannot conveniently be used in the form in which it happens to be, and it is required to be changed into various shapes and sizes so that it can conveniently be used, no transformation takes place if the character and the end use of the first product continue to be the same. An illustration of this principle is brought out by the judgment in CCE, New Delhi v. S.R. Tissues, 2005 (186) E.L.T. 385 (S.C.). On facts, in the said case, jumbo rolls of tissue paper were cut into various shapes and sizes so that they could be used as table napkins, facial tissues and toilet rolls. This Court held that there was no manufacture as the character and the end use of the tissue paper in the jumbo roll and the tissue paper in the table napkin, facial tissue and toilet roll remains the same.
11. Another example of when transformation does not take place is when foreign matter is removed from an article or additions are made to the article to preserve it or increase its shelf life.
12. In MMTC v. Union of India, 1983 (13) E.L.T. 1542 (S.C.), this Court dealt with the separating of wolfram ore from rock to make it usable. It was held that the process of separation and sorting out pieces of wolfram or by washing or 22 E/41316/2019 magnetic separation would not amount to a manufacturing process. Wolfram ore does not cease to be an ore even though by the aforesaid processes it may become concentrated wolfram ore.
13. In Mineral Oil Corporation v. CCE, Kanpur, 1999 (114) E.L.T. 166 (Tribunal), the facts were that used transformer oil, which by applying processes for removal of impurities therefrom, is again made usable as transformer oil. Both before and after the said processes, transformer oil remained as transformer oil. That being so, it was held that no new and distinct commodity has come into existence consequent to the process undertaken. The test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognized by the trade as a new and distinct commodity. This Court dismissed the civil appeal from the aforesaid judgment. This case is instructive in that it is clear that transformer oil, in its used stage, could not be used owing to the impurities therein. Any process of rendering such article usable would not be a manufacturing process, as there is no change in the essential character of the goods which remain as transformer oil which now becomes usable.
14. In Dunlop India Ltd. v. Union of India, 1995 (75) E.L.T. 35 (S.C.), soap treatment of grey cotton duck/canvas was held not to be a process which amounted to manufacture. The judgment states:
"3. The process has been described in the impugned order in the following words - For processing on soap treatment the party uses soaps/soap flakes which are diluted in plain water in a tank. This solution is transferred to a Soaping Machine operated by power where different colours are added. The fabrics are then dipped in the solution which is heated with steam. After the colouring 23 E/41316/2019 treatment and soap impregnation the wet fabrics are dried up with the aid of steam on passing the fabrics through rollers fitted with the aforesaid Soaping Machine.
4. In our opinion the said process cannot be said to be one which results in changing the identity of the cloth which is subject to the said treatment and the said process does not give rise to a new product which is marketable. The said process cannot, therefore, be regarded as a manufacturing process. We find that the Central Government itself, in another matter relating to M/s. Premier Tyres Ltd. has passed an Order on 17-5-1977 (page 83 of Paper Book) wherein, it has been held that the transformation brought about the dipping of cotton fabrics in a soap solution is not a permanent one; it is not an operation which results in the production of a new article which could be bought and sold as such in the market."
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16. Examples of additions made to the article to preserve it or increase its shelf life are to be found in Tungabhadra Industries Ltd. v. CTO, (1961) 2 SCR 14 and M/s. Maruti Suzuki India Ltd. v. CCE, 2015 (318) E.L.T. 353 (S.C.). In the Tungabhadra case, it was held that hydrogenated oil continued to be groundnut oil despite there being an intermolecular change in the content of the substance of the oil due to hydrogenation. It was held that oil made from groundnut continued as such despite the hardening process of hydrogenation. In its essential character, it was held that such hydrogenated oil continued to be groundnut oil. The process of hydrogenation only increased the shelf life of the said oil."
(emphasis supplied)
40. The Supreme Court ultimately held:
24
E/41316/2019 "27. The case law discussed above falls into four neat categories.
(1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category.
(2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process.
(3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable.
Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place. (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place.
28. The instant case falls within the first category aforementioned. This is a case of manufacture of disposable syringes and needles which are used for medical purposes. These syringes and needles, like in the J.G. Glass case and unlike the Brakes India case, are finished or complete in themselves. They can be used or sold for medical purposes in the form in which they are. The fact that medically speaking they are only used after sterilization would not bring this case within the ratio of the Brakes India case. All articles used medically in, let us say, surgical operations, must of necessity first be sterilized."
(emphasis supplied) 25 E/41316/2019
41. The aforesaid decisions hold that each process may lead to a change in the goods, but every change does not amount to „manufacture‟ and for „manufacture‟ to take place there should be a transformation by which something new and different comes into being. In other words, a new article must emerge which has a distinctive name, character or use. In a case where the finished product cannot conveniently be used in the form in which it happens to be, and it is required to be changed into various shapes and sizes, no transformation takes place if the character and the end use of the first product continues to be the same. When a foreign matter is removed from an article or additions are made to the article to preserve it, transformation does not takes place. The test for determining whether „manufacture‟ can be said to have taken place is to see whether the commodity which has been subjected to the process of „manufacture‟ is no longer regarded as the original commodity and is regarded by the trade as a new and distinct commodity.
42. The facts of the present case have to be examined in the light of the law laid down in the aforesaid decisions.
43. „Manufacture‟ in the present case, cannot be said to have taken place as non-PET materials had been sorted out from the used PET Bottles which were, thereafter, crushed into smaller pieces called Flakes. Flakes are then dried, packed and cleared from the factory. The final product remains the same as PET Flakes; the only difference is that the waste PET Bottles are now in Flake forms. It cannot, therefore, be said that a new product emerged or that the PET form ceases to exist.
44. The Commissioner could not have placed reliance on the Wikipedia to hold that chemical changes/characteristics had changed. The 26 E/41316/2019 Supreme Court in Hewlett Packard India Sales Pvt. Ltd. (Now HP India Sales Pvt. Ltd.) vs. Commissioner of Customs (Import), Nhava Sheva and others22 held that Wikipedia cannot be utilized for legal dispute resolution and the relevant paragraph is reproduced below:
"14. At the outset, we must note that the adjudicating authorities while coming to their respective conclusions, especially the Commissioner of Customs (Appeals) have extensively referred to online sources such as Wikipedia to support their conclusion. While we expressly acknowledge the utility of these platforms which provide free access to knowledge across the globe, but we must also sound a note of caution against using such sources for legal dispute resolution. We say so for the reason that these sources, despite being a treasure trove of knowledge, are based on a crowd-sourced and user- generated editing model that is not completely dependable in terms of academic veracity and can promote misleading information as has been noted by this court on previous occasions also [Commissioner of Customs, Bangalore v. Acer India (P) Ltd. - (2008) 1 SCC 382, para 17 = 2007 (218) E.L.T. 17 (S.C.) = 2007 taxmann.com 219]. The courts and adjudicating authorities should rather make an endeavour to persuade the Counsels to place reliance on more reliable and authentic sources."
45. The Commissioner, therefore, committed an error in holding that merely because the final product is known as „paring of PET Bottles‟ which is the same as PET Flakes, „manufacture‟ had taken place.
46. It would, therefore, not be necessary to examine the classification dispute as central excise duty could not have been charged from the appellant under section 3 of the Central Excise Act.
22. 2023 (383) E.L.T. 241 (S.C.) 27 E/41316/2019
47. The impugned order dated 31.03.2019 is, accordingly, set aside and all the twelve appeals are allowed.
(Order pronounced on 09.04.2026) (JUSTICE DILIP GUPTA) PRESIDENT (VASA SESHAGIRI RAO) MEMBER (TECHNICAL) Jyoti