Custom, Excise & Service Tax Tribunal
M/S. Associates Lumbers Pvt. Ltd vs Commissioner Of Central Excise, ... on 23 January, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No.E/89364/2013-Mum. & E/89365/2013-Mum. (Arising out of Order-in-Original No.03/ANS-03/Associate Lumbers/CPU/TH-I/2013 dated 14.8.2013 passed by the Commissioner of Central Excise, Thane-I For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K.Jain, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
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M/s. Associates Lumbers Pvt. Ltd.
:
Appellant
Sujeet Sunder Shetty
VS
Commissioner of Central Excise, Thane-I
:
Respondent
Appearance
Shri J.H. Motwani, Advocate with
Ms. Nehal Parekh, Advocate H.for Appellant
Shri Shobha Ram, Commissioner (A.R) for respondent
CORAM:
Mr. S.S. Kang, Vice President
Mr. P.K. Jain, Member (Technical)
Date of hearing : 23/01/2014
Date of decision : /2014
ORDER NO.
Per : P.K. Jain
The brief facts of the case are that the appellant viz.M/s. Associate Lumbers Pvt. Ltd. are importing plywood. At the time of import these are being classified under heading 44123110 and being cleared on payment of Customs duty including CVD. After import of the said goods these are subjected to a process of manually dipping them individually in a tank containing a solution of chemicals namely Sodium Bicarbonate, Boric Powder and Copper Sulphate mixed in water. The solution is heated to boiling point thereafter imported plywood is dipped, removed and kept for drying. The original plywood get coated with the chemicals. Thereafter appellants put labels, stickers on the plywood indicating it as Marine Plywood and sell in the market.
2. Revenues contention is that the imported goods are Decorative Plywood while the final product is marine plywood. Further marine plywood is classifiable under 44123140 if meeting ISI Specification. However, since the plywood in this case are not meeting the Indian Standards Specification, these are classifiable under 44123190. According to Revenue the final product is marine plywood and since a new commodity with different name, character and use has emerged, activity of the appellant amounts to manufacture and final product is chargeable to excise duty.
3. The appellants contention is that they have imported marine plywood and it is by mistake that the CHA has classified these under 44123110 instead of correct classification under 44123190. Learned Advocate for the appellant contended the goods imported by them are not decorative plywood. Decorative plywood is thinner in thickness and decorative on one side. What they have imported is marine plywood but since it is not confirming to Indian Standard Specifications IS 710-1976 these cannot be considered as marine plywood to be classifiable under 44123140, in view of the Supplementary Note 1 to Chapter 44 of the Central Excise Tariff. The imported goods are correctly classifiable under 44123190 and after undergoing the process continues to be under the same heading. Further, their contention is that the process undertaken by them does not amount to manufacture as the goods at the time of import and after the process continues to be plywood or specifically marine plywood. The process undertaken by them improves the quality of the plywood and the plywood become powder free, borer free, termite free. Plywood continues to be plywood only quality improves. Even applications of the product are also same.
4. Learned Advocate quoted the following case laws in support of his contention.
[i] Commissioner of Central Excise, Bangalore II Vs. Osnar Chemical Pvt. Ltd.
2012 (276) ELT 162 (SC) [ii] Union of India Vs. Alembic Glass Industries Ltd.
2010 (259) ELT 8 (SC) [iii] Shyam Oil Cake Ltd. Vs. Commissioner of Central Excise, Jaipur 2004 (174) ELT 145 (SC) [iv] Piyush Awasthi Vs. Commissioner of Central Excise, Delhi I 2013 (294) ELT 249 (Tri.-Del.) [v] Bharat Petroleum Corporation Ltd. Vs. Commissioner of Central Excise & Service Tax, Patna 2013 (295) ELT 106 (Tri-Kolkata) [vi] Tega India Ltd. Vs. Commissioner of Central Excise, Calcutta II 2004 (164) ELT 390 (SC)
5. Learned A.R. on the other hand argued that they have imported decorative plywood and after the process it becomes marine plywood. Two are commercially different products and usage are also different. Learned A.R. took us through the findings of the Commissioner in the order-in-original to support the contention that the process amounts to manufacture. Since a new commodity with different name, character and use has come into existence, process undertaken amounts to manufacture and hence new product is chargeable to duty. In support of this contention he quoted the following judgments [i] Commr. Of Income Tax-V, New Delhi Vs. Oracle Software India Ltd.
2010 (250) E.L.T. 161 (S.C.) [ii] Empire Industries Ltd. Vs. Union of India 1985 (20) E.L.T. 179 (S.C.) [iii] Relax Safety Industries Vs.Commissioner of Cus. (Import), Mumbai 2007 (212) E.L.T. 289 (S.C.)
6. We have considered the rival submission. The short point to be decided is whether the process undertaken by the appellant amounts to manufacture. There is no dispute that the goods imported are plywood. The process undertaken is only dipping the imported plywood into a boiling hot chemical solution consisting of Sodium Bicarbonate, Boric Acid and Copper Sulphate mixed in water and thereafter drying. Undoubtedly, the quality of the imported plywood improves. Final Product thus obtained is being sold as marine plywood. We find that learned Advocate for the appellant has quoted the Honble Supreme Court judgement in the case of Commissioner of Central Excise, Bangalore-II Vs. Osnar Chemical Pvt. Ltd. reported in 2012 (276) E.L.T 162 (S.C.). In the said case polymers and additives were added to heated bitumen resulting in emergence of polymer modified bitumen and crumbled rubber modified bitumen. The resultant products have additional properties and make bitumen more suitable for road making. In this context, the Honble Supreme Court observed as under:
14.?Thus, the question which falls for consideration in all these appeals is whether the addition and mixing of polymers and additives to base bitumen results in the manufacture of a new marketable commodity and as such exigible to Excise duty?
15.?The expression manufacture defined in Section 2(f) of the Act, inter alia includes any process which is specified in relation to any goods in the Section or Chapter Notes of First Schedule to the Tariff Act. It is manifest that in order to bring a process in relation to any goods within the ambit of Section 2(f) of the Act, the same is required to be recognised by the legislature as manufacture in relation to such goods in the Section notes or Chapter notes of the First Schedule to the Tariff Act. Therefore, in order to bring petroleum bitumen, falling under CSH 27132000, within the extended or deemed meaning of the expression manufacture, so as to fall under CSH 271500900, the process of its treatment with polymers or additives or with any other compound is required to be recognised by the legislature as manufacture under the Chapter notes or Section notes to Chapter 27.
16.?Dealing with the aspect of extended or artificial meaning of the expression manufacture in Section 2(f) of the Act in Shyam Oil Cake Ltd. (supra), this Court had held as under :-
16.?Thus, the amended definition enlarges the scope of manufacture by roping in processes which may or may not strictly amount to manufacture provided those processes are specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. It is clear that the Legislature realised that it was not possible to put in an exhaustive list of various processes but that some methodology was required for declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods.
xxx xxx xxx xxx xxx xxx xxx xxx
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.
17.?Then again, in S.R. Tissues Pvt. Ltd. (supra), a question arose whether slitting and cutting of toilet tissue paper on aluminium foil amounted to manufacture under Section 2(f) of the Act. Answering the question in the negative, this Court had observed thus :-
15?In order to make Section 2(f) applicable, the process of cutting/slitting is required to be recognized by the legislature as a manufacture under the chapter note or the section note to Chapter 48. For example, the cutting and slitting of thermal paper is deemed to be manufacture under Note 13 to Chapter 48. Similarly, Note 3 to Chapter 37 refers to cutting and slitting as amounting to manufacture in the case of photographic goods. However, slitting and cutting of toilet tissue paper on aluminium foil has not been treated as a manufacture by the legislature. In the circumstance, Section 2(f) of the Act has no application.
18.?In the present case, a plain reading of the Schedule to the Act makes it clear that no such process or processes have been specified in the Section notes or Chapter notes in respect of petroleum bitumen falling under Tariff Item 27132000 or even in respect of bituminous mixtures falling under Tariff Item 27150090 to indicate that the said process amounts to manufacture. Thus, it is evident that the said process of adding polymers and additives to the heated bitumen to get a better quality bitumen, viz. PMB or CRMB, cannot be given an extended meaning under the expression manufacture in terms of Section 2(f)(ii) of the Act.
19.?We may now examine whether the process in question, otherwise amounts to manufacture under the expansive Section 2(f) of the Act. It is trite to state that manufacture can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use. It is well settled that mere improvement in quality does not amount to manufacture. It is only when the change or a series of changes take the commodity to a point where commercially it can no longer be regarded as the original commodity but is instead recognized as a new and distinct article that manufacture can be said to have taken place. In this behalf the following observations by the Constitution Bench of this Court in Tungabhadra Industries (supra) are quite apposite :
In our opinion, the learned Judges of the High Court laid an undue emphasis on the addition by way of the absorption of the hydrogen atoms in the process of hardening and on the consequent inter-molecular changes in the oil. The addition of the hydrogen atoms was effected in order to saturate a portion of the oleic and linoleic constituents of the oil and render the oil more stable thus improving its quality and utility. But neither mere absorption of other matter, nor inter-molecular changes necessarily affect the identity of a substance as ordinarily understood The change here is both additive and inter- molecular, but yet it could hardly be said that rancid groundnut oil is not groundnut oil. It would undoubtedly be very bad groundnut oil but still it would be groundnut oil and if so it does not seem to accord with logic that when the quality of the oil is improved in that its resistance to the natural processes of deterioration through oxidation is increased, it should be held not to be oil. ?????????????????????(Emphasis supplied by us)
20.?In Delhi Cloth & General Mills Co. Ltd. (supra), yet another Constitution Bench, exploring the concept of manufacture echoed the following views :
14 ......The word manufacture used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance, however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American judgment. The passage runs thus :-
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. ??????????????????(Emphasis supplied by us)
21.?In S.R. Tissues Pvt. Ltd. (supra), the issue for consideration was whether the process of unwinding, cutting and slitting to sizes of jumbo rolls into toilet rolls, napkins and facial tissue papers amounted to manufacture. While holding that the said process did not amount to manufacture this Court inter alia, held as under :
12.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 by us)
22.?In Deputy Commissioner Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers, 1980 (6) E.L.T. 343 (S.C.), a three Judge Bench of this Court, while deciding whether conversion of pineapple fruit into pineapple slices for sale in sealed cans amounted to manufacture, observed as follows :-
4Commonly, 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.
??????????????????(Emphasis supplied by us)
23.?Having considered the matter on the touchstone of the aforesaid legal position, we are of the view that the process of mixing polymers and additives with bitumen does not amount to manufacture. Both the lower authorities have found as a fact that the said process merely resulted in the improvement of quality of bitumen. Bitumen remained bitumen. There was no change in the characteristics or identity of bitumen and only its grade or quality was improved. The said process did not result in transformation of bitumen into a new product having a different identity, characteristic and use. The end use also remained the same, namely for mixing of aggregates for constructing the roads.
7. In our view the present case squarely falls within the scope of above mentioned Honble Supreme Court decision. Here initial as well as final product are both plywood. The process only improves that quality of plywood. By coating of chemical it becomes termite free etc. We do not consider it necessary to go into the other decisions quoted by the learned Advocate for the appellant. We have also gone through the three case laws quoted by the Learned A.R. The first case is in respect of recording of the software on the CD amounts to manufacture. The question of manufacture has to be examined in the facts and circumstances of the each case and the said case does not help the cause of Revenue in the present facts and circumstances. Similar is the position relating to remaining two cases quoted by the Learned A.R.
8. In the result, we hold that the process undertaken by the appellant does not amount to manufacture and hence the demands and penalties are set aside and both the appeals are allowed.
(Pronounced in court on.) (S.S. Kang) Vice President (P.K. Jain) Member (Technical) Sm ??
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