1986 (12) TMI 177 - AT - Central Excise

Issues Involved:
1. Classification of machined steel castings under the Central Excise Tariff.
2. Applicability of excise duty under Tariff Item 68.
3. Concept of "manufacture" and whether machining constitutes manufacture.
4. Double taxation on the same article.

Detailed Analysis:

1. Classification of Machined Steel Castings:
The appellant, Burn Standard Company Limited, holds an L-4 Central Excise Licence and manufactures excisable goods under Tariff Item 68 of the Central Excises and Salt Act, 1944. The company produced and cleared identifiable machine parts made from steel castings. The Revenue authorities contended that these products should be classified under Item 68 of the Central Excise Tariff, as they were not covered under Items 1 to 67. The Assistant Collector and the Appellate Collector both upheld this classification, asserting that the machining process transformed the castings into new commodities with distinct trade names and uses, thus falling under Tariff Item 68.

2. Applicability of Excise Duty Under Tariff Item 68:
The appellant argued that the machined steel castings should not attract excise duty under Tariff Item 68, as they had already been assessed under Tariff Item 26AA(V). The appellant cited a previous clarification from the Revenue authorities, which stated that machined steel castings should not be subject to excise duty a second time. However, the authorities maintained that the machining process resulted in new products with distinct identities, making them liable for duty under Item 68.

3. Concept of "Manufacture" and Whether Machining Constitutes Manufacture:
The appellant argued that machining did not constitute "manufacture" as defined by the Supreme Court in various judgments, including Union of India v. Delhi Cloth and General Mills (AIR 1963 SC 791) and Allenbery Engineers Pvt. Ltd. v. Shri Ram Krishna Dalmia (AIR 1973 SC 425). They contended that "manufacture" implies a transformation into a new substance, which did not occur in this case. The Revenue authorities, however, cited the definition of "manufacture" in Section 2(f) of the Central Excises and Salt Act, 1944, which includes any process incidental or ancillary to the completion of the manufactured product. They argued that machining transformed the steel castings into new products with distinct commercial identities, thus constituting manufacture.

4. Double Taxation on the Same Article:
The appellant also argued against double taxation, citing the Supreme Court judgment in Union of India & Others v. Tata Iron and Steel Company Limited (1976 SC 599), which held that there cannot be double taxation on the same article. The Revenue authorities countered this by arguing that different stages of manufacturing resulting in new products could each attract excise duty. They cited several judgments, including Empire Industries Ltd. v. Union of India (1985(20) E.L.T. 179), which supported the view that transformation into a new commodity through machining constitutes manufacture and is subject to duty under a different tariff item.

Conclusion:
The Tribunal concluded that the machining and polishing of steel castings resulted in new, distinct commodities identifiable by specific names and uses, thus falling under Tariff Item 68. The Tribunal referenced the Supreme Court's judgment in Empire Industries Ltd., which held that any process transforming a commodity into something with a distinct commercial identity constitutes manufacture. The Tribunal dismissed the appeal, holding that the machined steel castings were correctly classified under Tariff Item 68 and subject to excise duty. The argument against double taxation was also dismissed, as the different processes resulted in new products each liable for duty under different tariff items.

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