1995 (12) TMI 129 - AT - Central Excise

Summary

Issues Involved:
1. Whether galvanisation amounts to "manufacture" under the Central Excises and Salt Act, 1944.
2. Whether galvanisation charges should be included in the assessable value of galvanised M.S. pipes.

Issue-wise Detailed Analysis:

1. Whether Galvanisation Amounts to "Manufacture" under the Central Excises and Salt Act, 1944:
The appellants argued that galvanisation does not amount to manufacture, relying on the Supreme Court decision in Gujarat Steel Tubes Ltd. v. State of Kerala, 1989 (42) E.L.T. 513 (SC). The Collector of Central Excise and Customs, Indore, agreed with this view, stating that galvanisation does not constitute manufacture. This interpretation was supported by the Tribunal in Collector of Central Excise v. Kamani Engineering Corporation Ltd., 1989 (39) E.L.T. 437, and the Central Board of Excise and Customs in its circular dated 9-12-1994. Therefore, the process of galvanisation does not attract excise duty as it does not qualify as "manufacture" under the Act.

2. Whether Galvanisation Charges Should Be Included in the Assessable Value of Galvanised M.S. Pipes:
The core issue is whether the cost incurred for galvanisation should be included in the assessable value of the galvanised M.S. pipes. The Collector held that even though galvanisation is not manufacture, the charges for galvanisation should form part of the assessable value of the galvanised pipes. This view was based on the Supreme Court's judgment in Bombay Tyre International, 1983 (14) E.L.T. 1986, which stated that expenses contributing to the value of excisable goods up to the date of sale should be included in the assessable value.

The appellants contended that since ungalvanised black pipes are fully marketable and duty-paid under Tariff Heading 73.06, no further duty should be levied post-galvanisation. They cited the Supreme Court decision in J.K. Spinning & Weaving Mills Ltd. v. Union of India, 1987 (32) E.L.T. 234 (S.C.), which held that intermediate products used in further manufacturing processes should not attract additional duty if duty has already been paid at an earlier stage.

However, the Tribunal noted that the final product sold by the appellants is the galvanised M.S. pipes, which command a higher market price due to the added value from galvanisation. The Supreme Court's decision in Texmaco Ltd. v. Collector of Central Excise, 1995 (77) E.L.T. 501, was also relevant. It held that the full commercial value, including components supplied free by the customer, should be considered for assessable value.

The Tribunal concluded that the cost of galvanisation enriches the value of the pipes, making them more marketable. Therefore, the expenses incurred for galvanisation should be included in the assessable value, consistent with the Supreme Court's principles in Bombay Tyre International and Ujagar Prints, 1988 (38) E.L.T. 535 (S.C.).

Conclusion:
The appeal was dismissed, and the Tribunal upheld the Collector's order to include galvanisation charges in the assessable value of the galvanised M.S. pipes. The Tribunal emphasized that the process of galvanisation, while not amounting to manufacture, adds intrinsic value to the product, justifying its inclusion in the assessable value for excise duty purposes.