2015 (7) TMI 1035 - SC - Central Excise

Manufacturing activity - Whether the activity of mounting of Water Purification and Filteration System (WPFS) on a base frame carried out by M/s Poonam Spark (P) Ltd. amounts to manufacture or not - Held that - Filter Housing and Cartridges are imported by PDL through M/s Cuno Asia Pte Ltd, Singapore and UV based Filteration and Purification unit from Rathi Brothers/ IWT Poona. The choice of cartridge depends upon the basis of filteration, the operating conditions and the customer s ability to afford the particular type of cartridge, etc. The appellants undertake the job of assembling all the items received from M/s. Perfect Drug Ltd. on a base plate and thus brings into existence a new and commercially different commodity known as Water Purification & Filteration System. Finding of fact is arrived at by all the three Authorities that the activity undertaken by the appellant amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944, since the end result of the process or activity resulted in new and different commercial product. We, thus, are of the opinion that on the basis of the aforesaid findings which are concurrent findings of all the Courts below, the correct legal principle has been applied. - No merit found in appeal - Decided against assessee.

Summary

Issues:
Whether the activity of mounting Water Purification and Filteration System (WPFS) on a base frame amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis:

Issue 1: Activity of Mounting WPFS on a Base Frame

The case involved the question of whether the assembly of WPFS components by the appellant constituted manufacturing. The appellant argued that they were merely carrying out job work and not creating a new product. The Department of Revenue contended that the assembly resulted in a new product, making the appellant liable for excise duty. The appellant received various components from Perfect Drug Limited (PDL) and assembled them into different types of WPFS. The Authorities held that the appellant's activity amounted to manufacturing as it resulted in a new and commercially different product, WPFS.

Issue 2: Interpretation of 'Manufacture' under Central Excise Act

The appellant argued that the WPFS assembled by them retained the same characteristics as the imported components and did not undergo a significant transformation to qualify as manufacturing. They referred to relevant legal precedents and definitions of 'manufacture' under the Central Excise Act. The Tribunal and lower authorities found that the assembly process led to the creation of a new product with distinct commercial value, meeting the criteria of 'manufacture' as per Section 2(f) of the Central Excise Act. The Courts upheld this interpretation, emphasizing that the end result of the assembly process was a new and commercially different commodity.

Conclusion:

The Supreme Court dismissed the appeal, affirming the lower courts' decisions that the appellant's activity of assembling WPFS components on a base frame constituted manufacturing under the Central Excise Act. The Court found that the assembly process resulted in the creation of a new and commercially distinct product, meeting the legal definition of 'manufacture.' The appellant's argument that the assembly did not alter the characteristics of the imported components was rejected, and the Court upheld the imposition of excise duty on the appellant.