2008 (3) TMI 25 - SC - Central Excise

Merely because the good(s) after processing becomes different commercial commodity or having a distinct name, would not result in any change in excise classification - Process of cutting and swaging (alteration of dimensions) on MS Tubes is a manufacturing activity.

Summary

Issues involved:
1. Whether swaging constitutes manufacture under Section 2(f) of the Central Excise Act, 1944?

Analysis:
The case involved civil appeals by the assessee against orders passed by CEGAT allowing appeals filed by the Revenue, contending that the process of swaging undertaken on duty-paid MS tubes amounts to "manufacture" under Section 2(f) of the 1944 Act. The assessee, a small scale unit, purchased MS tubes classified under Heading 73.06 of the Central Excise and Tariff Act, 1985, and after cutting them into requisite lengths, subjected them to the swaging process using dies on a swaging machine. The key question before the court was whether swaging constitutes manufacture as per the legal definition.

The court analyzed the relevant provisions, including Chapter Note 3 in Chapter 73, which states that for pipes and tubes of certain headings, processes like drawing or redrawing amount to 'manufacture'. Heading 73.06 covers "Other tubes, pipes, and hollow profiles of iron or steel." The court also referred to the definition of "tubes and pipes" and "hollow profiles" to distinguish between them. The definition of "manufacture" under Section 2(f) was crucial in determining whether the swaging process qualified as manufacturing.

The court emphasized that for a process to be considered manufacturing, it must result in a new finished product with a distinguishable identity, different physical shape, size, and use from the original product. The process must impart a change of lasting character to the raw material. In this case, the swaging process on the MS tubes using a rotary swaging machine with different dies was found to change the shape and user of the product, creating a distinct workpiece with a lasting character.

Various technical aspects of metal forming and swaging were discussed, highlighting how swaging involves changing the shape of pipes or tubes using shaped hammers or dies. The court noted that the distinct shapes produced by the swaging machine indicated a new product emerging from the process. The court also distinguished this case from previous judgments related to welding or connecting pipes, emphasizing the unique nature of the swaging process and the resulting products.

Ultimately, the court dismissed the civil appeals filed by the assessee, affirming that swaging in this case amounted to manufacture under Section 2(f) of the 1944 Act. The judgment clarified the distinction between mere changes in shape or size and processes that lead to the creation of new, distinguishable products, thereby upholding the Revenue's position on the duty liability for the swaging process on MS tubes.