Jharkhand High Court
Commissioner Of Central Excise vs M/S Casting India Inc & Anr on 22 August, 2016
Bench: D.N.Patel, Ratnaker Bhengra
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Tax Appeal No. 21 of 2007
with
Tax Appeal No. 22 of 2007
with
Tax Appeal No. 23 of 2007
THE COMMISSIONER OF CENTRAL EXCISE, 143, NEW BARADWARI,
JAMSHEDPUR831001 ........ .......... Appellant
Vs.
1. M/s CASTIINGS (INDIA) INC., PLOT NO.29, IVTH PHASE, ADITYAPUR INDUSTRIAL
AREA, GAMHARIA, JAMSHEDPUR.
2. M/s. TATA STEEL LIMITED, BISTUPUR, JAMSHEDPUR831001.
........... ......... Respondents
CORAM: HON'BLE MR. JUSTICE D.N.PATEL
: HON'BLE MR. JUSTICE RATNAKER BHENGRA
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For the Appellant :M/S Deepak Roshan,
Amit Kumar, Advocate
For the respondent no.1 : M/S Dr. Samir Chakravarty, Sr. Adv.
Sheela Prasad,Adv.
For the respondent no. 2 : M/S M.S. Mittal, Sr. Advocate
Manish Mishra, Adv.
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11/Dated: 22 nd
August, 2016
Per D.N.Patel,J.
(Oral Judgment)
1. These Tax Appeals have been preferred against a common judgment and order No. A-720-722/KOL/2006 dated 27 th July, , 2006/31st July, 2006 passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter to be referred to as 'CESTAT') in Appeal Nos. EDM- 01-03 of 2005 East Regional Bench, Kolkata which is the impugned order, whereby the appeals preferred by the respondents were allowed and order-in-original no. 9- 14/Commissioner/2005 passed by the Commissioner, Central Excise, Jamshedpur dated 29th September,2005 was quashed and set-aside. Being aggrieved and dissatisfied by the order passed by the CESTAT, the present Tax Appeals have been preferred by the department raising following substantial questions of law:
(i) Whether Hon'ble Tribunal has committed an error of law in holding that the activities for 2 processing TMT coils into TMT bars/rods after de-coiling, straightening and cutting into size is identical to the activity in the case of M/s Faridabad Iron & Steel Traders Association Vs. Union of India ?
(ii) Whether the activities for processing TMT coils into TMT bars / rods after de-coiling, straightening and cutting into size amounts to manufacturing process ?
ARGUMENTS ADVANCED ON BEHALF OF APPELLANT
2. Learned counsel for the appellant has submitted that in the facts of the present case, TMT coil has been processed further by CASTINGS (India) INC.-respondent no.1 and the same is converted into brand name of 'TISCON' TMT Bars. This manufactured item is classifiable under Sub-Heading No. 7214.90 of the Schedule to the Central Excise Tariff Act, 1985. TMT coil is falling within Sub-Heading No. 7213.90 of the Act, 1985. The activities undergone for conversion of TMT coils into TMT bars are de-coiling, straightening and cutting into desirable sizes with the help of energy and it converts TMT coils into TMT bars which are absolutely new, distinct and identifiable products. The TMT bar is a distinct commercial commodity which is a marketable commodity having even a value addition. In common parlance, persons of the same trade are also giving different name to this commodity i.e. TMT bars. Thus, there is manufacture of TMT bars from TMT coils. The total manufacturing process has been mentioned in the show- cause notices dated 7th May,2003, 30th May, 2003, 9th July, 2003, 16th March, 2004, 18th October, 2004 and 25th February, 2005, issued by the appellant to the respondents. Ad valorem duty at the rate of 16% has been prescribed under the Central Excise Tariff Act,1985 as leviable and, hence, there will be huge difference in the duty because there is substantial value addition on such TMT bars. Learned counsel for the appellant relied upon the following decisions:
3(a) Kartar Rolling Mills Vs. Commissioner of Central Excise, New Delhi reported in 2006 (197) ELT 151 (SC)
(b) Collector of Central Excise, Hyderabad Vs. M/s. Bakelite Hylam Ltd. reported in 1997 (91) ELT 13 (SC) On the basis of the aforesaid decisions, it is submitted by learned counsel for the appellant that the respondent no.1 is manufacturing TMT bars and TMT rods from TMT coils and the said items are falling under Sub-Heading 7214.90 of the Central Excise . TMT coil is an altogether different item falling within Sub-Heading 7213.90 of the Act, 1985 and this manufacturing process includes the process of de-coiling, straightening and cutting into size as per requirement. This aspect of the matter has not been properly appreciated by the CESTAT and, hence, order and judgment passed by the CESTAT dated 27th July,2006/31st July, 2006 in Appeal Nos. EDM-01-03 of 2005 deserves to be quashed and set-aside. It is further submitted that there is also sizable value addition in the product finally manufactured by the Respondent no.1. Counsel for the appellant has further submitted that the TMT coil cannot be used as it is and, therefore, further processing of TMT coil is must so as to manufacture TMT bars and TMT rods. It is also submitted by counsel for the appellant that TMT bars and TMT rods are manufactured by the CASTINGS (India) INC at 115 percentage of the cost of production and there is contravention of the provision of Section 4 and 6 of the Central Excise Act, 1944 and violation of Rules 4,6,8,9,10,11 and 12 of the Central Excise Rules, 2002 and as there was evasion of central excise duty for the different periods, the aforesaid show-cause notices were issued and they were held liable for payment of excise duty as well as the interest and penalty etc. It has further been submitted that TMT bars and TMT rods have been cleared from the factory of CASTINGS (India) Ltd. without payment of central excise duty. There is evasion of the duty by the CASTINGS (India) Ltd. and, hence, 4 the central excise duty of Rs. 57,54,29,470/- ( amount involved in Tax Appeal No. 21 of 2007 and Tax Appeal No. 23 of 2007 ) was confirmed and equal amount of penalty was imposed upon CASTINGS (India) Ltd. U/s 11 AC of the Central Excise Act,1944 to be read with Rule 26 of the Central Excise Rules, 2002. Penalty of Rs. 50,000/- was also imposed upon TISCO Ltd.-Respondent no.2. Interest at the appropriate rate has also been held as leviable by the respondent no.2. For Tax Appeal no. 22 of 2007 the excise duty assessed was Rs. 4,39,76,279/-
and equal amount of penalty had been imposed upon Tisco Ltd. Jamshedpur and interest at the appropriate rate has also been imposed. It is submitted by counsel for the appellant that both the items viz. TMT coils as well as TMT bars and TMT rods are absolutely different items and are also covered by different Sub-Headings. TMT bars and TMT rods are manufactured from TMT coils by manufacturing process as stated hereinabove. This aspect of the mater has not been properly appreciated by the CESTAT hence, the judgment and order passed by the CESTAT deserves to be quashed and set-aside. ARGUMENTS ADVANCED ON BEHALF OF RESPONDENTS
3. Learned counsel for the respondents has submitted that conversion of TMT coils into TMT bars and TMT rods is not manufacturing at all, even if, these two items are mentioned under different Sub-Headings of the Central Excise Tariff Act, 1985. It is further submitted that commercially no new article has been manufactured, even if, TMT coils has undergone some processes. It has further been submitted by counsel for the respondents, that in fact, there is no difference between TMT coils and TMT bars and rods. TMT coils are coiled for easy transportation etc. and nothing beyond that. For conversion of TMT coils into TMT bars and rods, the only processes undergone are:
* de-coiling;
* straightening and;
* cutting into sizes 5 By these processes, no change takes place which may result into commercially another item. It is submitted by counsel for the respondents that both CASTINGS India Ltd. and TATA RYERSON Ltd. are the conversion agents/external processing agents of TATA STEEL and they have been assigned with the job of conversion of TMT coils into TMT bars by undertaking, activities of de-coiling, straightening, and cutting or slitting into sizes, the said bars/steels and then they use to deliver the same to TATA STEEL's Stockyards and for the said work CASTINGS India and TATA RYERSON receive processing charges as per terms and conditions agreed. Thus, in fact, there is no manufacturing at all. This aspect of the matter has been properly appreciated by the CESTAT by passing order dated 27th July,2006/31st July, 2006 passed in Appeal Nos. EDM-01-03 of 2005.
Counsel for the respondents relied upon the following decisions:
(a) Faridabad Iron & Steel Trader Association Vs. Union of India reported in 2004 (178) ELT 1099 (DEL)
(b) U.O.I. Vs. Faridabad Iron & Steel Trader Association reported in 2005 (181) ELT A 68 (SC)
(c) Commissioner of C. Ex. Mumbai Vs. Rajpurohit GMP India Ltd. reported in 2008 (231) ELT 577 (SC)
(d) Commissioner Vs. Bemcee Ltd. reported in 2010 (256) ELT A 16 (SC)
(e) Commr. Of C.Ex. Chandigarh-I Vs. Markfed Vanaspati & Allied Indus reported in 2003 (153) ELT 491 (SC)
(f) Prabhat Sound Studios Vs. Additional Collector of Central Excise reported in 1996 (88) ELT 635 (SC)
(g) Commissioner of C.Ex. Chennai-II Vs. Tarpaulin International reported in 2010 (256) ELT 481 (SC)
(h) Commissioner of Central Excise Vs. S.r. Tissues Pvt. Ltd.
reported in 2005 (186) ELT 385 (SC) (I) Servo-Med Industries Pvt. Ltd. Vs. Commissioner of C.Ex.
reported in 2015 (319) ELT 578 (SC) 6
(j) Commissioner of C.Ex. Vs. Tejo Engineering Services P.Ltd. reported in 2015 (322) ELT 418 (SC)
(k) Satnam Overseas Ltd. Vs. Commissioner of Central Excise reported in 2015 (318) ELT 538 (SC)
(l) Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC)
(m) Hindustan Poles Corporation Vs. Commissioner of C.Ex.
reported in 2006 (196) ELT 400 (SC)
(n) Metlex (I) Pvt. Ltd. Vs. Commissioner of C.Ex. reported in 2004 (165) ELT 129 (SC)
(o) Aman Marble Industries Pvt. Ltd. Vs. Collector of C.Ex.
reported in 2003 (157) ELT 393 (SC)
(p) Commissioner of C.Ex. & Cus. Vs. Pan Pipes Resplendents Ltd. reported in 2006 (193) ELT 129 (SC)
(q) Commissioner of C.Ex. Vs. Swastik Rayon Processors reported in 2007 (209) ELT 163 (SC) On the basis of aforesaid decisions, it is submitted by counsel for the respondents that merely because there is value addition, it does not mean that manufacture has taken place and, hence, there is no liability upon the respondents to make payment of central excise duty. It is also submitted that in view of the aforesaid decisions, even if there is cutting or sizing into proper shape, there is no manufacturing at all. In the facts of the present case also, there is only de- coiling, straightening and cutting into sizes of TMT coils giving shape of TMT bars and rods essentially there is no change at all and the commodity remains as it is. In fact, only for easy transportation, the TMT coils are brought into existence. Thus, it appears three processes of de-coiling, straightening and cutting into sizes, but, in fact, essentially, there is only one process of cutting of TMT coils for which TMT coils are bound to be de-coiled and are also bound to be straightened, otherwise cutting cannot be done. Thus, in fact, there is only one process 7 i.e. cutting involved in the process undertaken by the conversion agent namely viz. CASTINGS India Ltd. and hence, there is no "commercially different" item or commodity made by the CASTINGS India Ltd. This aspect of the matter has been properly appreciated by the CESTAT while quashing and setting aside the order-in-original passed by the Commissioner Central Excise, Jamshedpur. It is also submitted by counsel for the respondents that value addition in this case is not, because of manufacturing of commercially another item. The present case is like a case reported in 1980 (6) ELT 343 (SC) which is referred in paragraph no. 17 of the judgment reported in 2015 (318) ELT 538 (SC) pertaining to washing and skinning of pineapple and the slices of pineapple were ultimately packed in canes after adding sugar as preservative. In the facts of the present case, there is no addition of any item like preservative, sugar, etc. It is only basically cutting and nothing beyond that and for easy cutting of the TMT coils firstly de-coiling is must then straightening and thereafter cutting. In fact, there is no change in the original commodity. No new commodity has been manufactured and, hence, these Tax Appeals may not be entertained by this Court as there is no substantial question of law involved in these Tax appeals. It is also submitted that merely because the aforesaid two commodities might have been covered under two sub-headings of Central Excise Tariff Act, 1985 that does not mean that manufacturing process is undertaken by the CASTINGS India Ltd. unless there is Section note or Chapter note. Thus, what is to be appreciated is not the different Tariff entries,but, the manufacturing process, and by the said manufacturing process whether a "commercially different" item has been manufactured or not ? The test to be applied is: whether essential character of the product is changed or not ? In the facts of the present case, essential character of the TMT coil remain as it is. The issues which are raised in these Tax Appeals are no more res-integra as the same have already been decided in view of the aforesaid decisions of 8 the Hon'ble supreme Court. Hence, these Appeals may not be entertained by this court.
REASONS:
4. Having heard counsel for both sides and looking to the facts and circumstances of the case, we see no reason to entertain these Tax Appeals for the following facts, reasons and judicial pronouncements.
(i) DEFINATION AND CONCEPT OF MANUFACTURE Section 2 (f) of The Central Excise Act, 1944 reads as under:-
"(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 First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or] [(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;]"
(Emphasis supplied) This definition is to be read with Section 3 of the Central Excise Act, 1944, to be read with the Central Excise Tariff Act, 1985. Several decisions have been cited by the counsel for the respondents wherein it has been held by the Hon'ble Supreme Court and by the High Courts that if no new, different and distinct article emerges having a distinct name, character and use, after the process applied upon the original product, there is no manufacturing at all and, the resultant product cannot be said to have emerged because of 9 manufacture. Commercially new and distinct articles ought to emerge out of the process applied. To ascertain as to whether the manufacturing process has taken place or not, a test is to be applied, whether change or series of changes take the commodity to a point where commercially it can no longer be regarded as the original commodity, but, instead is recognized as a new and distinct article that has emerged as a result of processes then a manufacture can be said to have taken place. This is the test to be applied for arriving at a conclusion whether the process applied upon the product amounts to manufacturing or not.
It has been held by the Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Trader Association Vs. Union of India reported in 2004 (178) ELT 1099 (Del) in paragraph no. 85,86 and 90 which are as under:
"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 recognized as a distinct and new article that has emerged as a result of processes.
86. Reverting to the facts of this case, Steel coil is basically sheet in running length. When it is produced by the manufacturer's at their end and when it is folded for the case of transportation, it has been named as coil but when it is unfolded either at the manufacturer's end or at any other end it remains as sheet. The sheets in running length cannot be brought to the destination without folding it and when it is folded by the manufacturer, it is sheet in coil form and unfolded it is sheet as such and accordingly there is no difference in the steel sheets in coil form or cut straight to the specific sizes. The coils in running length are produced to save transportation cost and to minimize the wastage as during the cutting of the steel coils.
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 10 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 792001 is wholly unsustainable and has to be quashed and we order accordingly."
(Emphasis supplied) It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise, New Delhi Vs. S.R. Tissues Pvt. Ltd. reported in 2005 (181) ELT page A 68 (S.C.) that as no new, different and distinct article having different name, character and use had emerged from the process, there was no manufacturing at all.
If the product, before and after slitting, remains flat and rolled and it has got no new and distinct identity then the activity does not amount to manufacture as has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Mumbai Vs. Rajpurohit GMP India Ltd. reported in 2008 (231) ELT 577 (SC) If the identity of the product remains unchanged even after the processes applied upon it, then also it will not tantamount to manufacture as reported in 2010 (256) ELT A 16 (SC) [Commissioner V. Bemcee Ltd.] If the resultant product maintains its original character then there is no manufacturing at all, even if some processes undergone like cutting, slitting/sawing etc. as held by the Hon'ble Gujrat High Court in the case of Commissioner of Customs Vs. Posco India Delhi Steel Processing Centre Pvt. Ltd. reported in 2014 (299) ELT 263 (Guj).
If no new substances emerge there is no
manufacturing at all. There may be addition of
11
sound in a compact disc (CD) or there may be addition of the sound in blank tapes, but, that process does not tantamount to manufacture as held by the Hon'ble Supreme Court in the case of Prabhat Sound Studios Vs. Additional Collector of Central Excise reported in 1996 (88) ELT 635 (SC).
Unless there is a distinct marketable commodity produced by the manufacturer, the commodity cannot be said to have been manufactured. Every change is not a manufacture. Stitching of Tarpaulin sheets and eyelets does not change the basic character of the raw material and the end product does not bring into existence the new and distinct product with total transformation in original commodity. The process involved may be cutting, slitting and fixing of eyelets, but, no new article is emerging out of the raw material - tarpaulin sheets. Manufacturing implies a change, but, every change is not a manufacture and yet every change in an article is the result of treatment, labour and manipulation. But, something more is necessary. There must be transformation, a new and different article must emerge having a distinct name, character or use. Paragraph nos. 13 and 15 and 23 of the decision rendered by the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Chennai Vs. Tarpaulin International reported 2010 (256) ELT 481 (SC) reads as under:
"13. The result of the definition contained in Section 2 (f) of the Act is that the word manufacture means production of an article for use from raw or prepared materials, by giving these materials new form, quality, properties or combinations whether by hand labour or machinery. The word includes any process incidental or ancillary to the process of manufactured product. This Court has in several 12 judgments starting from Tungabhadra Industries V. CTO, (1961) 2 SCR 14, Union of India v. Delhi Cloth & General Mills Co. Ltd., (1997) 5 SCC 767, South Bihar Sugar Mills V. Union of India, [(1968)3 SCR 21] and line of other judgments have explained the meaning of the expression 'Manufacture'. In all these judgments, this court has observed that "manufacture implies a change, but every change is not a manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary.... There must be transformation, a new and different article must emerge, having a distinctive name character or use."
15. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. However, this court in the case of India Cine Agencies v.
Commissioner of Income Tax, Madras, [2008 (233) E.L.T. 8 (SC)] observed, that, it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. This court in the case of Union of India v. Delhi Cloth and General Mills, [1977(1) E.L.T. (J199)] referring to the meaning of expression manufacture explained in the case of Anheuser-Busch Brewing Association v. United States, stated:
" 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."
23. Is there any manufacture when Tarpaulin sheets are stitched and eyelets are made ? In our view, it does not change basic characteristic of the raw material and end product. The process does not bring into existence a new and distinct product with total transformation in the original commodity. The original material used i.e. , the tarpaulin, is still called tarpaulin made-ups even after undergoing the said process. Hence, it cannot be said that the process is a manufacturing process. Therefore, there can be no levy of central Excise duty on the tarpaulin made-ups. The process of stitching and fixing eyelets would not amount to manufacturing process, since tarpaulin after stitching and eyeleting continues to be only cotton fabrics. The purpose of fixing eyelets is not to change the fabrics. Therefore, even if there is value addition the same is minimum. To attract duty there should be a manufacture to result in different Goods and the Goods sought to be subject to 13 duty should be known in the market as such."
(Emphasis supplied) It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt.Ltd. reported in 2005 (186)ELT 385 (SC) in paragraph no.12 as under:
"12. At the outset, we may point out that the assessee is one of the downstream producers. The assessee buys duty-paid jumbo rolls from M/s Ellora Paper Mills and M/s Padamjee Paper Mills. There are different types of papers namely, tissue paper, craft paper, thermal paper, writing paper, newsprints, filter paper etc. The tissue paper is the base paper which is not subjected to any treatment. The jumbo rolls of such tissue papers are bought by the assessee, which undergoes the process of unwinding , cutting/slitting and packing. It is important to note that the characteristics of the tissue paper are its texture, moisture absorption, feel etc. In other words, the characteristics of table napkins, facial tissues and toilet rolls in terms of texture, moisture absorption, capacity, feel etc. are the same as the tissue paper in the jumbo rolls. The said jumbo rolls cannot be conveniently used for household or for sanitary purposes. Therefore, for the sake of convenience, the said jumbo rolls are required to be cut into various shapes and sizes so that it can be conveniently used as table napkins, facial tissues, toilet rolls etc. However, the end -use of the tissue paper in the jumbo rolls and the end use of the toilet rolls, the table napkins and the facial tissues remains the same, namely, for household or sanitary use. The predominant test in such a case is whether the characteristics of the tissue paper in the jumbo roll enumerated above is different from the characteristics of the tissue paper in the form of table napkin, toilet roll and facial tissue. In the present case, the Tribunal was right in holding that the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper, after slitting and cutting, in the table napkins, in the toilet rolls and in the facial tissues."
(Emphasis supplied) In view of the aforesaid decisions if the characteristics of the raw material and final product remain as it is, there is no manufacture at all, even though, there is process of unwinding, cutting/slitting and packing.
The product emerging out of the process applied 14 upon the raw material must be commercially different and marketable product. To amount to manufacture, there must be transformation by which a new and different article emerges which has a distinctive name, character or use. Mere sterilizing process of removal of foreign material from goods complete in themselves, is not manufacturing at all, as has been held by the Hon'ble Supreme Court in the case of Servo-Med Industries Pvt. Ltd. Vs. Commissioner of C.Ex., Mumbai reported in 2015 (319) ELT 578 (S.C.) at paragraph nos. 9,10,20 and 27 which reads as under:
"Distinction between manufacture and marketability
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 gods that are marketable,that is goods capable of being sold in the market. On the other hand, manufacture is distinct from saleability. 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 morethere 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. 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) ELT 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.
20. In Brakes India Ltd. V Superintendent of Central Excise , (1997) 10 SCC 717= 1998(101) ELT 241 (S.C.) the commodity in question was brake lining blanks. It was held on facts that such blanks could not be used as brake linings by themselves without the processes of drilling, trimming and chamfering. It was in this situation that the test laid down was that if by adopting a particular process a transformation takes place which makes the product have a character and use of its own which it did not bear earlier, then such process would amount to manufacture irrespective 15 of whether there was a single process or several processes.
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."
(Emphasis supplied)
It has been held by the Hon'ble Supreme court in
the case of Satnam Overseas Ltd. Vs.
Commissioner of Central Excise, New Delhi
reported in 2015 (318) ELT 538 (SC) at paragraph no. 9 which reads as under:
"9. From the aforesaid arguments advanced by counsel on the either side, it is clear that there is no dispute about the legal proposition that the process would be treated as "manufacture" only if new product known to the market comes into existence with original product losing its original character."
(Emphasis supplied) Even after applying the process or treatment there is labour and manipulation upon the raw material, but, if no new product is emerging out, there is no manufacturing at all and the end product continues to remain in its original character. Process of drawing wires from wire rods does not amount to manufacture as both the products are wire 16 and the product is not considered as excisable as has been held by the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC). Decoration of ceramic glazed wall tiles printing does not change their basic character hence, it does not tantamount to manufacture because the original product and processed product remains the same and there is no change in their basic character as has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise & Custom, Gujarat Vs. Pan Pipes Resplendents Ltd. reported in 2006 (193) ELT 129 (SC) In view of the aforesaid decisions, the process applied upon the raw material if converts a raw material into a commercially different product which is marketable or if a new and distinct product is emerging out of the process applied or the characteristics of the new product and the raw- material are materially different, the process applied upon the raw material tantamounts to manufacture.
(ii).WHETHER DECOILING, STREIGHTENING AND CUTTING OF TMT COILS INTO TMT BARS AND RODS AMOUNT TO MANUFACTURING:
In the facts of the present case CASTINGS India- Respondent no.2 is a processing agent of Tata Steel. TMT coils are supplied by Tata Steel to the CASTINGS India for cutting the same and, in fact, there is no other processes involved at all in the facts of the present case. The major process is cutting the TMT coils into bars and rods and, for cutting. The process of de-coiling and straightening is must. Thus, the only process involved in the present case applicable upon the TMT coil is cutting,otherwise,there is no change 17 in the character of the TMT coil.
Thus, the question is to be decided whether the cutting of TMT coil is manufacturing or not ? Various decisions have been pointed out to this court which have discussed the process of cutting. It has been held that cutting per-se is not manufacturing at all. It is held by the Hon'ble Supreme Court in a case of The Deputy Commissioner, Sales Tax (Law), Board of Revenue (Tases), Ernakullam vs. Pio Food Packers reported in 1980 (6) ELT 343 (SC) that the process undertaken by the assessee was to wash the pineapple and then to remove its inedible portion. Thereafter, it was cut into slices and slices were filled in canes after adding sugar as preservative. Thereafter, canes would be sealed under temperature and then put in boiled water for sterilization. The question that arises in this decision is as to whether this process amounts to manufacture ? The answer given by the Hon'ble Supreme Court is in negative and it has been held that even if the original commodity experienced a change, such change would not amount to manufacture unless, it ceased to be the original commodity and a new and distinct article is produced therefrom.
It has been held by the Hon'ble Supreme Court in the case of Aman Marble Industries Pvt. Ltd. vs. Collector of Central Excise, Jaipur reported in 2003 (157) ELT 393 (SC) in paragraph nos. 2,3 and 4 which are as under:
"2. The contention put forth on behalf of the appellant is that the activity carried on by the appellant does not amount to manufacture at all. The case put forth by the learned counsel appearing on behalf of the appellant is that the cutting of blocks into marble slabs involves only sawing of the marble blocks and thereby does not bring into existence a distinct commodity so as to state that when such activity is completed a new substance has come into existence. The submission is that even after such 18 activity is completed the marble will remain marble and, therefore, this activity does not attract tax.
3. Learned counsel for the Department, however, submitted that the activity has been specifically brought into tariff item and when certain processes are applied to a commodity to make it marketable, it certainly amounts to manufacture and thereof attracts tax under the Central Excise Act.
4. In Rajasthan State Electricity Board v. Associated Stone Industries & anr JT 2000 (6) SC 522 such a question fell for consideration before this Court although in a different context, and this Court held as follows: (SCC p. 146, para 12) ".....This apart, excavation of stones from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. The word 'manufacture' generally and in the ordinary parlance in the absence of its definition in the Act should be understood to mean bringing to existence a new and different article having distinctive name, character or use after undergoing some transformation. When no new product as such comes into existence, there is no process of manufacture. Cutting and polishing stones into slabs is not a process of manufacture for obvious and simple reason that no new and distinct commercial product came into existence as the end product still remained stone and thus its original identity continued."
and this position was further reiterated as follows:
"........It is not possible to accept that excavation of stones and thereafter cutting and polishing them into slabs resulted in any manufacture of goods."
(Emphasis supplied) In view of aforesaid decisions, cutting of marble blocks into slabs is not manufacturing at all, as no new and distinct commercial product came out. The end product remains as it is. In the facts of the present case also original identity of the TMT coil remains as it is, even after converted into TMT bars and rods.
It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise MumbaiV Vs. Swastik Rayon Processors reported in 2007 (209) ELT 163 (S.C.) that the process of twisting and doubling of cellulosic filament yarn with a blended yarn comprising polyester and viscose does not amount to manufacture because no new commodity has emerged by doubling or multi folding of the yarn. As cutting perse does not tantamount to manufacture, 19 likewise, welding of stepped transmission poles/pipes or joining of three pipes, one with other, of different dimensions to obtain a desired length, can by no stretch of imagination be brought within category of manufacture as no new marketable product is produced as has been held by the Hon'ble Supreme Court in the case of Hindustan Poles Corporation Vs. Commissioner of C.Ex. Calcutta reported in 2006 (196) ELT 400 (SC) In the case reported in 2004 (178) ELT 1099 (Del H.C.) the question arose whether cutting or slitting of steel sheets amount to manufacture, and it has been held by the Hon'ble Delhi High Court that cutting of coils by using cutter machine into desired length does not amount to manufacture, as no new product is emerging out. It has been held in paragraph nos. 16,17,18 and 25 which are as under:
"16. In another case CCE V. Kutty Flush Doors & Furniture Co. Pvt. Limited reported as 1988 (35) E.L.T. 6 (S.C.) the Supreme Court held that conversion of timber logs into sawn timber is not "manufacture" as no new product emerges .
17. Reliance has also been placed on State of Orissa V. Titaghur Paper Mills Co. Limited reported as AIR 1985 SC 1293. In this case the Supreme Court held that mere change in form does not amount to manufacture. The court in para 127 (10) of the judgment observed that timber and seized or dressed logs are one and the same commercial commodity. Beams, rafters and planks would also be timber.
18. It has been canvassed that to constitute manufacture, a new and different article must emerge having a distinct name, character or use. Reliance has been placed on Collector of Central Excise, Chandigarh v. Steel Strips Ltd. reported as 1995 (77) E.L.T. 248 (S.C.) . In this case the court observed that coldrolled steel strips produced out of duty paid hotrolled steel strips do not undergo a process of manufacture hence, not liable to duty again.
25. The Hon'ble Supreme Court in Civil Appeal No. 3518/90 [1996 (83) E.L.T. A 109 (S.C.)] filed by Collector of Central Excise affirmed the findings of the Tribunal that cutting of the tanned leather to various sizes does not amount of manufacture. The Tribunal [1989 (44) E.L.T. 113 (Tribunal)] had taken the view that these straps cannot be considered to be a new and distinct product with any particular name and identity. Thus, no manufacturing process is involved.
(Emphasis supplied) 20 It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Mumbai Vs. Rajpurohit GMP India Ltd. reported in 2008 (231) ELT 577 (SC) in paragraph nos. 4 and 5 which are as under that cutting / slitting of steel sheet does not amount to manufacture since no new or distinct article is coming out:
"4 The later Circular dated 2nd March, 2005 accepts the judgment of the Delhi High Court and withdraws the earlier Circular dated 7th September, 2001. Thus, the position is now made clear that cutting and slitting of steel sheets and polyester films used for lamination purposes do not amount to manufacture according to Board which is binding on the Department. Shri Vikash Sharma learned counsel appearing on behalf of the Department, however, contended before us that in the present case the show cause notice alleges that sheets of various sizes which emerged after the slitting process were again diepunched on the press machine and the diepunched pieces were sealed by heat leaving three sides open which, according to the learned counsel, amounted to manufacture. It was urged that this aspect needs to be remitted by this Court to the Adjudicating Authority for fresh consideration. We find no merit in this argument for the simple reason that in these cases we are concerned with the period up to 2001. At that time the previous Circular dated 7th September, 2001 held the field. That Circular was applied for the past period. That Circular essentially proceeded on the basis of interpretation of the tariff items and not on examination of the entire process undertaken by the assessees. In these cases also show cause notice clearly indicates that the matter has proceeded before the Adjudicating Authority not on examination of the process undertaken by the assessee but on the basis of interpretation of the tariff items. In the show cause notice there is no allegation that the above process of diepunching amounts to manufacture, hence we are not inclined to remit the matter to the Adjudicating Authority."
(Emphasis supplied) It has been held by Hon'ble the Supreme Court in a case reported in [Commissioner V. Bemcee Ltd.] 2010 (256) ELT A 16 (SC) that slitting/shearing of steel coils does not tantamount to manufacture as the identity of the product remained unchanged.
It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt. Ltd.
21reported in 2005 (186) ELT 385 (SC) in paragraph nos. 12,14 and 16 which are as under:
"12. At the outset, we may point out that the assessee is one of the downstream producers. The assessee buys duty paid jumbo rolls from M/s Ellora Paper Mills and M/s Padamjee Paper Mills. There are different types of papers namely, tissue paper, craft paper, thermal paper, writing paper, newsprints, filter paper etc. The tissue paper is the base paper which is not subjected to any treatment. The jumbo rolls of such tissue papers are bought by the assessee, which undergoes the process of unwinding , cutting/slitting and packing. It is important to note that the characteristics of the tissue paper are its texture, moisture absorption, feel etc. In other words, the characteristics of table napkins, facial tissues and toilet rolls in terms of texture, moisture absorption, capacity, feel etc. are the same as the tissue paper in the jumbo rolls. The said jumbo rolls cannot be conveniently used for household or for sanitary purposes. Therefore, for the sake of convenience, the said jumbo rolls are required to be cut into various shapes and sizes so that it can be conveniently used as table napkins, facial tissues, toilet rolls etc. However, the end use of the tissue paper in the jumbo rolls and the end use of the toilet rolls, the table napkins and the facial tissues remains the same, namely, for household or sanitary use. The predominant test in such a case is whether the characteristics of the tissue paper in the jumbo roll enumerated above is different from the characteristics of the tissue paper in the form of table napkin, toilet roll and facial tissue. In the present case, the Tribunal was right in holding that the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper, after slitting and cutting, in the table napkins, in the toilet rolls and in the facial tissues."
14. Applying the above tests, we hold that no new product had emerged on winding, cutting/slitting and packing. The character and the enduse did not undergo any change on account of the above mentioned activities and, therefore, there was no manufacture on first principles.
16. In the case Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur reported in 2004 (174) E.L.T. 145, this Court held that if a process is indicated in a tariff entry without specifying that the same amounts to manufacture then indication of such process is merely for identifying the product. For a deeming provision to come into play, it must be specifically stated that a particular process amounts to manufacture and in its absence, the commodity would not become excisable merely because a separate tariff item exists in respect of that commodity. In that matter, the question which arose for determination was whether refining of edible vegetable oil, as a process, constituted "manufacture". It was held that the product even after refining continued to remain an edible vegetable oil. It was further held that neither in the section note nor in the chapter note, refining as a process was indicated as 22 amounting to manufacture. In the circumstances, it was held that refining of edible vegetable oil did not amount to "manufacture". In our view, the ratio of the said judgment is squarely applicable to the facts of the present case. As stated above, the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper in the toilet rolls, table napkins, facial tissues, etc. Moreover, cutting/slitting of tissue paper is not indicated in the section note or in the chapter note as amounting to "manufacture" and, therefore, Section 2(f) of the Act was also not applicable to the facts of this case. "
(Emphasis supplied) Issue involved in this case was whether process of unwinding , cutting and slitting of Jumbo rolls of Tissue Paper would tantamount to manufacture. The answer given by the Hon'ble Supreme Court is in negative because essentially the end product is the same. There is no change in the main characteristic of the raw material and final product. Thus, by the activity of decoiling, straightening and cutting into sizes of TMT coils into TMT bars and rods do not amount to manufacture as the ultimate final product is same.
(iii) VALUE ADDITION:
Learned counsel for the appellant has submitted that there is a value addition in the end product viz. TMT bars and rods when process of decoiling, straightening and cutting is applied upon TMT coils and therefore, it amounts to manufacture.
We are not in agreement with this contention raised by counsel for the appellant mainly for the reason that addition of the value is because of the labour put in the process of decoiling, straightening and cutting into desired sizes, but, the rawmaterial and end product after cutting remains the same. It has been held by the Hon'ble Supreme Court in the case of Satnam Overseas Ltd. Vs. Commissioner of Central Excise reported in 2015 (318) ELT 538 (SC) in paragraph nos. 12,13,17 and 18 as under.
"12. Though the authorities below had decided against the assessee, this Court reversed the said view holding that the said process would not amount to 'manufacture' as the process involving manufacture does not always result in 23 the creation of a new product. In the instant case notwithstanding the manufacturing process, it could not be said that a transformation had taken place resulting in the formation of a new product. The relevant portion of the judgment is reproduced below:
"30. In our view, the process of manufacture employed by the appellantcompany 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 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."
13. What is to be highlighted is that even after the betel nut which had been cut to different sizes and had undergone the process, the Court did not treat it as 'manufacture' within the meaning of Section 2(f) of the Act on the ground that the end product was still a betel nut and there was no change in the essential character to that article even when it was the result of treatment, labour and manipulation, inasmuch as even after employing the same it had not resulted in the manufacture of a new product as the end product continued to retain its original character.
17. Last judgment to which we would like to refer to is Deputy Commissioner Sales Tax (Law), Board of Revenue (Taxes), Ernakulam V. PIO Food Packers 1980 (6) E.L.T 343 (S.C.). In that case, the process undertaken by the assessee was to wash the pineapple, after purchase, and then remove inedible portion, the end crown as well as skin and inner core. After removing those inedible portions the pineapple fruit used to be sliced and the slices were filled in canes after adding sugar as preservative. Thereafter, canes would be sealed under temperature and then put in a boiled water for sterilization. Identical question was posed viz. whether this process amounted to 'manufacture'. Giving the answer in the negative, the Court held that even when with each process suffered, the original commodity experienced a change, such a change would not amount to 'manufacture' unless it seized to be the original commodity and a new and distinct article was produced therefrom. This is explained in detail in paras 4 and 5 of the said judgment and therefore, we would like to reproduce the same as under:
4. Section 5A (1) (a) of the Kerala General Sales Tax Act envisages the consumption of a 24 commodity in the manufacture of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture, and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity.
5. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied: Does the processing of the original commodity bring into existence a commercially different and distinct article ? Some of the cases where it was held by this Court that a different commercial article had come into existence include Anwarkhan Mehboob Co. v. The State of Bombay and Others (where raw tabacco was manufactured into bidi patti), A Hajee Abdul Shukoor and Co. v. The State of Madras (raw hides and skins constituted a different commodity from dressed hides and skins with different physical properties), The State of Madras v. Swasthik Tobacco Factory (raw tobacco manufactured into chewing tobacco) and Ganesh Trading Co. Karnal v.
State of Haryana and Another, (paddy dehusked into rice). On the other side, cases where this Court has held that although the original commodity has undergone a degree of processing it has not lost its original identity include Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool (where hydrogenated groundnut oil was regarded as groundnut oil) and Commissioner of Sales Tax, U.P. ,Lucknow v. Harbiles Rai and Sons (where bristles plucked from pigs, boiled, washed with soap and other chemicals and sorted out in bundles according to their size and colour were regarded as remaining the same commercial commodity, pigs 25 bristles)."
18. Another important aspect which needs to be highlighted from this judgment is that the argument of the Revenue that the sale of pineapple slices after the aforesaid process, was at a higher price in the market than the original fruit and, therefore, it constituted a different commercial commodity. The Court negatived this contention as well by observing that the process undertaken by the assessee may have made value addition to the product but the essential character of the product did not undergo any change, which is the determinative factor, inasmuch as pineapple remained the pineapple ; albeit in slice form and continued to be known as pineapple in the market. For this proposition the Court decided to reply upon a foreign judgment where the U.S. Supreme Court had held that dressed and frozen chicken was not a commercially distinct article from the original chicken. Detailed discussion of the said judgment appears in para 7 which reads as follows:
7. While on the point, we may refer to East Taxes Motor Freight Lines v. Frosen Food Express, where the U.S. Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken. It was pointed out:
"Killing, dressed and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasteurising, homogenizing, adding vitamin concentrates, standardizing and bottling."
It was also observed:
"........ there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton seed, as well as the dressed chicken, have gone through a processing stage. But neither has been 'manufactured' in the normal sense of the word.
Referring to AnheuserBusch Brewing Association v. United States the Court said:
"Manufacture implies a change but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary .......... There must be transformation; a new and different article must emerge having distinctive name, character on use."
And further:
"At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been manufactured."
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 identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to 26 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 in to making the fruit more readily consumable and because of the cane 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 cane 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 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."
(Emphasis supplied) Thus, even if, the TMT Gars/Rods fetch more price in market than TMT coil, that does not mean that there is manufacturing because, essentially article is the same. Fetching of higher price may be due to several factors like:
(a) Labour put in for converting TMT coil into TMT Bars/Rods.
(b) Mind set or satisfaction of customers for TMT Bars/Rods.
(c) Demand in the market of TMT Bars/Rods in comparison with demand of TMT coils.
Unless the end product is different, distinct and separate marketable from raw material, there is no manufacture at all, even though the end product fetches higher price.
27 It has been held by the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC) in paragraph no. 7 which is as under:
"7. This Court was also taken through the processes, which are undergone by the manufacturer and which have been set out in some of the orders passed by the Commissioner. It was submitted that the raw material is a rod falling under tariff item 72.13 and /or 72.15 whereas after the process a distinct and separate marketable product falling under tariff item 72.17 has come into existence. It was submitted that the market price of both the products is also different inasmuch as the cost of the raw material was approximately Rs. 13,000/ per metric ton whereas for the final product the market price was approximately Rs. 15,000/ per metric ton. It was submitted that under these circumstances, the Court must now hold that the earlier decisions of the Tribunal are not correct and that the final product i.e. the Wire which is drawn by the cold drawing process is an excisable product."
(Emphasis supplied) In view of the aforesaid decisions it appears that when the duty paid wire rods were further processed and turned into a thinner gauge from the wire rods, it does not tantamount to manufacture, even though for the final product the market price was approximately Rs. 15,000/ per metric ton, whereas the raw material was having approximately Rs. 13,000/ per metric ton. Thus, value enhancement may be there with the final product, but, the article remained as it is and hence,there is no manufacture at all.
It has been held by the Hon'ble Supreme Court in the case of Prabhat Sound Studios Vs. Additional Collector of Central Excise reported in 1996 (88) ELT 635 (SC) in paragraph no. 5,7 and 8 which are as under:
"5. In the case of M. Basheer Ahammed V. Collector of Central Excise [1990 (48) ELT 591 (Tribunal)]. The same question arose before a two Member Bench of the Tribunal. It noted the judgments that are under appeal before us and preferred to follow the dissenting view. It held that the recording of sound on such tapes was not a process that fell within the ambit of the definition of 28 manufacture. Accordingly, the recoding of sound on duty paid tapes was not by itself manufacture. With reference to Tariff Item 59 it was said that the rationale of the categorization was that each of the categories was brought to duty at an identical rate ad valorem and it was not inconceivable that a manufacturer of tapes might also proceed to record sound on them and clear them as prerecorded tapes. In such a case, the value of the manufactured blank tapes was enhanced corresponding to the value of the matter recorded. The quantum of duty would vary with the added value of the tapes. Hence, an interference could not be drawn from the separate categorization that the recording of sound on duty paid tapes was manufacture.
7. The manufacturer of tapes may manufacture and sell blank tapes upon which the purchaser would be free to record such sound as he chose. The manufacturer may go one step forward and record sound itself and sell such tapes. It is to cover both eventualities that Tariff Item 59 is categorized as it is. But it is altogether different to say that by reason thereof the recording of sound on blank tapes, as done by the appellant on job work basis, is a manufacturing process. As the Tribunal in M. Basheer Ahammed's case has rightly pointed out, even such a prerecorded tape can have the sound erased from it and it can be used again for recording other sound.
8. We are in agreement with the view taken by the dissenting Member, and in M. Basheer Ahammed's case, that no process of manufacture is involved as afore stated. It is therefore, unnecessary to go into the alternative argument based on an exemption notification."
(Emphasis supplied) In view of the aforesaid decisions if on a job work basis, the assessee is recording sound in spool magnetic tapes, no process of manufacture is involved even though there may be value enhancement in the end product in comparison to the raw-material. It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt.Ltd. reported in 2005 (186)ELT 385 (SC) that value addition, without any change in the name, character or use, by mere cutting or slitting of jumbo rolls cannot constitute a criteria to decide what is manufacture. Though the value addition in the above reported decision was approximately 180 %, despite this fact it has been held by the Hon'ble 29 Supreme Court that there is no change in the essential characteristic of raw product and in the end product and, hence, merely there is value addition, it does not mean that the process undergone for cutting or slitting of jumbo rolls is a manufacture.
Thus, the contention raised by counsel for the appellant that as there is value addition for the end product TMT bars/ rods and, therefore, the process applied upon TMT coil amounts to manufacture, is not accepted by this court.
(iv) DIFFERENT TARIFF ENTRIES:
Learned counsel for the appellant has submitted that Entry no.72.13 and 72.14 are different as per schedule attached to the Central Excise Tariff Act, 1985. One is for TMT coils and another is for TMT bars/rods and, therefore, the process undertaken by the CASTINGS India Ltd. is a manufacture.
We are not in agreement with this contention. For ready reference 72.13 and 72.14 of Chapter-72 of the first schedule of Central Excise Tariff Act, 1985 reads as under:
"Chapter 72 Iron and Steel 72.13 72.13 Bars and rods, hot rolled, in irregularly wound coils, of iron or nonalloy steel 7213.10 Of freecutting steel 16.00% 7213.90 Other 16.00% 72.14 72.14 Other bars and rods of iron of non-alloy steel, not further worked than forged, hot-
rolled, hot-drawn or hot-
extruded but including those
twisted after rolling
7214.10 Forged 16.00%
7214.20 Of freecutting steel 16.00%
7214.90 Other 16.00%
(Emphasis supplied)
30
Merely because TMT coil is classified under Entry no. 72.13 and TMT bars/rods are classified under Entry no. 72.14 it does not mean that process applied upon TMT coil i.e. de-coiling, straightening and cutting into desirable sizes, tantamount to manufacturing of TMT bars and rods. Time and again, this issue has been raised before the Hon'ble Supreme Court about different tariff entries for the raw material and for the end product, and always this contention has been negatived by the Hon'ble Supreme Court in several decisions. It has been held by the Hon'ble Supreme Court in a case reported in 2003 (153) ELT 491 (SC) at paragraph no. 6 that merely because there is change in the tariff item for the end product it does not become excisable. To become excisable goods, there should be manufacturing and the goods must be marketable. It has been held by Hon'ble Supreme Court in a case reported in 1996 (88) ELT 635 (SC) at paragraph no. 5 that after recording of the sound of magnetic cassettes or tapes or spool magnetic tapes, the end product may be covered by another tariff entry, but, the process of recording of sound of such tapes does not tantamount to manufacturing. It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt. Ltd. reported in 2005 (186) ELT 385 (SC) in paragraph no. 19 which is as under:
"19. Applying the above tests to the facts of the present case, we hold that mere mention of a product in a tariff heading does not necessarily imply that the said product was obtained by the process of manufacturing. That, just because the raw material and the finished product came under two different headings, it cannot be presumed that the process of obtaining the finished product from such raw material automatically constituted manufacture. In the present case, merely because tissue paper in the jumbo roll of the size 31 exceeding 36 cms. Fell in one entry and the toilet roll of a width not exceeding 36 cms fell in a different entry, it cannot be presumed that the process of slitting and cutting of jumbo rolls of toilet tissue paper into various shapes and sizes amounted to manufacture."
(Emphasis supplied) Thus, even if the end product is falling in a different tariff entry, it does not mean that there is manufacturing. If no commercially another item which is marketable is emerging out of the said process and just because raw-material and final product comes under two different heading it cannot be presumed that the process of obtaining the final product from such raw-material, automatically constitutes manufacturing. In the facts of the present case, TMT coils are cut into TMT bars and rods which requires firstly de-coiling then straightening and thereafter cutting. Thus, the process involved is cutting the TMT coils, but, no new product is emerging out, after such process.
In fact, the burden of proof is upon the department-appellant that the process undergone, is a manufacture, but, no material has been adduced by the counsel for the appellant to show that the process of de-coiling, straightening and cutting has transformed TMT coils into a new marketable product. It has been held by the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC) at paragraph no. 7 that the raw material is falling under tariff item 72.13 and /or 72.15 whereas after the process a distinct and separate marketable end product was falling under tariff item 72.17 and also there was value enhancement, yet it has been held by the Hon'ble Supreme Court that the process involved for drawing of thinner guage wire, from wire 32 rods is not manufacturing at all because essentially the article remains as it is. No new product is manufactured. In paragraph no.8 of the said judgment it has been held as under:
"8. We are unable to agree with the submission. It is to be seen that the initial product was a wire rod. The ultimately product is also a wire. All that is done is that the gauge of the rod is made thinner and the product is finished a little better. In our view the earlier decisions of the Tribunal are correct. There is no manufacture of a new product. Merely because there are two separate entries does not mean that the product becomes excisable. The product becomes excisable only if there is manufacture."
(Emphasis supplied) Thus, merely because there are two separate entries for the raw material and the end product that does not mean that the end product becomes excisable. The end product becomes excisable only if there is manufacture. It has been held by the Hon'ble Supreme Court in the case of Hindustan Poles Corporation Vs. Commissioner of Central Excise reported in 2006 (196) ELT 400 (SC) at para 37 which is as under:
" 37. We have heard learned counsel for the parties at length. We have also carefully perused the pleadings and examined a series of cases decided by this Court. The following conclusions are irresistible.
(1) The process carried out by the appellants do not change the basic identity of original character of M.S. Welded Pipes to make it a new marketable product leading to manufacture as defined under Section 2 (f) of the Central Excises Act, 1944.
(2) The burden to prove manufacture is always on the Revenue. In the instance case the Revenue has completely failed to prove that the activity carried out by the appellant amounts to manufacturing. It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to residuary entry.
(3) The residuary entry is meant only for those categories of goods which clearly fall outside the ambit of specified entries. Unless the Department can establish that the goods in 33 question can by no conceivable process of welding be brought under any of the tariff items, resort cannot be had to the residuary item."
(Emphasis supplied) Even if there is change in the tariff entry for the end product, may be falling within residuary entry, it does not mean that process of manufacture has taken place. There is neither section note nor chapter note. Thus, in the facts of the present case, neither in the section note nor in the chapter note and also not in the tariff item, there is any indication that de-coiling, straightening and cutting into desirable sizes of TMT coil tantamounts to manufacture. It has been held by the Hon'ble Supreme Court in the case of Shyam Oil Cake Ltd. Vs. Collector of Central Excise, Jaipur reported in 2004 (174) ELT 145 (SC) at paragraph no. 24 which reads as under:
"24. In this case, neither in the Section Note nor in the Chapter Note nor in the Tariff Item do we find any indication that the process indicated is to amount to manufacture. To start with the product was edible vegetable oil. Even after the refining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision cannot, be brought into play in the absence of it being specifically stated that the process amounts to manufacture."
(Emphasis supplied)
5. In view of the aforesaid facts, reasons and judicial pronouncements, no error has been committed by the Customs, Excise and Service Tax Appellate Tribunal in deciding Appeal Nos. EMD 01-03 of 2005 dated 27th July, 2006/31st July, 2006, and we are in full agreement with the decision of the Customs, Excise and Service Tax Appellate Tribunal, Eastern Regional Bench, Kolkata as substantial question of law no.1 that an error has been committed by Tribunal by holding that the activities for processing TMT coils into TMT bars/ rods after de-coiling, straightening and cutting into size is identical to the activity in the case of M/s Faridabad Iron and Steel Traders Association Vs. 34 Union of India, is sufficiently answered. Answer of substantial question of law no.2 is in negative.
6. Thus, there is no substance in these appeals and hence, the same are hereby dismissed.
(D.N.Patel, J.) Nibha/ (Ratnaker Bhengra, J.)