2002 (1) TMI 106 - AT - Central Excise

Summary

Issues:
Whether a new distinct impugned product has emerged as a result of the process of swaging undertaken by M/s. Prachi Industries on mild steel tubes so as to attract the levy of central excise duty.

Analysis:
In the present matter, the key issue revolves around determining whether the process of swaging undertaken by the appellants results in the emergence of a new and distinct product, justifying the imposition of central excise duty. The Revenue argues that the swaging process transforms mild steel tubes into decorative hollow profiles with different characteristics and uses, distinct from their original form. Citing the Explanatory Notes of HSN, the Revenue contends that the decorative profiles serve ornamental purposes and do not function as conduits for liquid or gas distribution. The Revenue relies on precedents such as Hindustan Poles Corpn. and M.J. Engineering Works to support their stance that such transformations constitute manufacture, emphasizing the emergence of new commercial commodities with unique identities and uses.

On the contrary, the respondents assert that the processed mild steel tubes retain their essential identity as tubes even after swaging. Referring to the Explanatory Notes, the respondents argue that tubes and pipes maintain uniform cross-sections with enclosed voids, characteristics preserved post-swaging. They emphasize that the processed tubes are still recognized as mild steel tubes in business parlance and continue to be utilized for similar purposes as unprocessed tubes. The respondents draw attention to findings by the Assistant Commissioner, highlighting that the inner and outer surfaces of the processed tubes align with the definition of tubes and pipes as per the Explanatory Notes. They stress that a mere change in name does not signify the creation of a new product, asserting that true manufacture entails the emergence of distinct commercial commodities with altered names, characters, or uses.

The Tribunal deliberates on the legal principles governing the imposition of central excise duty, citing the landmark judgment in Union of India v. Delhi Cloth and General Mills Co. Ltd. The Tribunal underscores that for a product to attract central excise duty, a transformation must occur, leading to the creation of a new article with a unique name, character, or use. Evaluating the facts at hand, the Tribunal notes that the swaging process imparts a decorative look to the mild steel tubes but does not result in the emergence of a fundamentally different product. Contrary to the Revenue's assertions, the Tribunal concurs with the lower authorities that the processed tubes align with the definition of tubes and pipes, as outlined in the Explanatory Notes of HSN. Drawing insights from precedents like CCE v. Shivaji Industries and M.J. Engineering Works, the Tribunal emphasizes that true manufacture involves the creation of distinct commercial commodities with altered identities and uses. Consequently, the Tribunal sets aside the impugned orders and rules in favor of the Revenue, allowing all appeals.

This comprehensive analysis delves into the core issue of whether the swaging process undertaken by M/s. Prachi Industries results in the manufacture of a new distinct product, shedding light on the legal principles, arguments presented by both parties, relevant precedents, and the Tribunal's ultimate decision.