Customs, Excise and Gold Tribunal - Delhi
Metro Tyres Ltd. vs Collector Of Central Excise on 23 August, 1995
Equivalent citations: 1995ECR355(TRI.-DELHI), 1996(84)ELT485(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. This appeal arise from order-inppeal dated 29-11-1994 passed by the Collector (Appeals), Chandigarh, who has allowed the appeal of that department filed under Section 35E(2) of the Central Excises & Salt Act, 1944, by a very brief order in the following words:
"On hearing learned counsel and on going through the memo of appeal I find that the department has case packing, binding of components, testing and affixing of labels does not by themselves bring out a product. All the activities are after the product has taken shape, however, when the goods are resold. They are with a new guarantee card and therefore a resale of a old item would amount to manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944.
With this in view I accept department appeal and set aside the impugned order.
Appeal is accordingly disposed off.
(PREM V.P.SINGH) COLLECTOR (APPEALS)"
2. These findings have been seriously assailed before us. The Additional Collector after a very detailed examination of the allegation made in the show cause notice dated 6-3-1992 had dropped the allegation made in the show cause notice as unsustainable and dropped the demand for duty for Rs. 1,92,713/- and also ordered for release of the seized "goods".
3. The appellants were engaged in the reconditioning/repair of the old and defective electric fans. The allegation against them was that:
(i) 25 electric fans valued at Rs. 12,700/- involving duty of Rs. 2095.50 and parts of electric fans valued at Rs. 9,33,308/ seized at their service centre situated at 55, Transport Nagar, Ludhiana, should not be confiscated under Rule 173Q of the Central Excise Rules, 1944 (hereinafter referred to as the Rules);
(ii) the fans and components valued at Rs. 11,67,960/- cleared from the service centre and seized from their godown situated at E-142, Focal Point, Ludhiana should not be confiscated under Rule 173Q of the Rules;
(iii) Central Excise duty amounting to Rs. 1,92,713.40 leviable on the fans and components cleared clandestinely from the said service centre to the said godown and put under seizure should not be recovered from them under Rule 9(2) of the Rules; and
(iv) Personal penalty should not be imposed on them under Rules 9(2),173Q and 226 of the Rules for the contravention of the provisions of Section 6 of the Central Excises & Salt Act, 1944 (hereinafter referred is as the Act) read with Rule 174, Rules 9(1), 52A, 53, 173B, 173C,173F, 173G and 226 of the Rules.
4. The Additional Collector had examined the statements recorded from the appellant's staff and also their explanation, that they are not manufacturing any new fans but were only repairing and reconditioning them and making them serviceable, by replacing parts or rewinding the fans. They were reaffixing the number Plates at random, in some cases old number Plats were not suitable for reuse, some rejected fans were not serviceable and as such these had been split up into components. The Additional Collector after detailed scrutiny of all the records upheld the appellants contention and dropped the proceedings, which has unfortunately been reversed, without discussion or application of mind. The Learned Collector has also not confirmed the duty demand but has merely set aside the order, thereby leaving the matter at that, without pronouncing any order on confirmation of the demand. Hence, this appeal.
5. We have heard Shri Harbans Singh, the Learned Advocate for the appellants and Shri Sanjeev Sachdeva, the Learned DR for the Revenue.
6. On a careful consideration of the matter and after a thorugh examination of the statements of witnesses and the evidence on record, we are clearly of the view that the Learned Collector has not at all applied his mind and has passed the order in a very casual and cursory manner. The Learned Additional Collector has passed a very detailed order and examined every piece of evidence to hold that there is no manufacture of any new goods except that even as per the allegation of the show cause notice, admittedly, the appellants were only repairing, and servicing the old fans and such an activity did not amount to manufacture and resulting in production of new goods. The Learned Collector has rightly held that packing, binding of components, testing and affixing of labels does not by themselves bring out a product but, however, has proceeded further to hold that resale of the old serviced goods with a new guarantee card would amount to manufacture of a new product under Section 2(f) of the Act. This finding is not supportive by any precedent or on a reading or the Section 2(f) of the Act. Section 2(f) reads:
"manufacture" includes any process -
(i) incidental or ancillary to the completion of a manufactured product, and
(ii) which is specified in relation of any goods in the Section or Chapter notes of the Schedule to the Central Excises and Salt Act, 1985 as amounting to manufacture, and the word "manufacturer" 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."
7. Therefore, the activity should result in completion of a manufactured product. A manufactured product has always to be construed in terms of any goods in the Section or Chapter Notes of the Schedule to the Central Excises and Salt Act, 1985 . Therefore, the activity of processing should result in manufacture and every manufacture should result in production of goods, which should be marketable or capable of marketing and should be specified in the Section or Chapter Notes of the Schedule to the Central Excises and Salt Act, 1985 . This aspect of the process resulting into manufacture and in production of the goods has been gone into, time and again by Hon'ble Supreme Court of India (See Union Carbide India Ltd. v. Unoin of India - 1986 (24) E.L.T. 169-171, which follows Union of India v. Delhi Cloth Mills Ltd. - 1977 (1) E.L.T. (J 199), 204. See also AIR 1963 SC 791: South Bihar Sugar Mills Ltd. v. Union of India - AIR 1968 SC 922; Collector of Central Excise v. Kutty Flush & Furniture Co. (P) Ltd. 1988(35) E.L.T. 6 (SC); Bhore Industries Ltd. v. Collector of Central Excise, Bombay - 1989 (40) E.L.T. 280 (SC). The Hon'ble Supreme Court again has gone into in great detail on the definition of "manufacture" as in the case of Collector of Central Excise, Bombay v. S.D. Fine Chemicals (P) Ltd. as reported in 1995 (77) E.L.T. 49 and after detailed discussion has held that: "manufacture should result in new and different article having a distinct name, character and use". Unfortunately, the Learned Collector has missed this fundamental aspect of the matter and has gone on to hold that repairing of old fans and resale by a new guarantee card, amounts to manufacture of a new goods. The Learned Collector has also ignored, catena of citations on the point relied by the Counsel and has failed to even refer to the same in the order. The Tribunal has time and again held the process of 1982 (10) E.L.T. 794 repairing . of transformers does amount to manufacture.
8. In Shriram Refrigeration Industries v. Collector of Central Excise, 1986 (26) E.L.T. 353, it has been held that repair/reconditioning/remaking does not amount to manufacture.
9. In Lathia Industries Supplies v. Collector of Central Excise - 1987 (29) E.L.T. 751, it has been held that rerubberising and relinking of old and used rollers does not amount to manufacture.
10. In Raman Electricals v. Union of India, it has been held that reprocessing and repair of transformers does not amount to manufacture.
11. In Collector of Central Excise v. Hindustan Tyres (P) Ltd. - 1988 (35) E.L.T. 409, held that rerubberisation of old and use M.S. Rims does not amount to manufacture.
12. In Collector of Central Excise v. Maize Products Ltd. - 1994 (73) E.L.T. 390, it has been held that reconditioning of duty paid Dextrons Powder into Glucose does not amount to manufacture.
13. In the result, the impugned order is unsustainable in law and the same is set said and the appeal is allowed.