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TMI Blog2011 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... elp of welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams, etc. In this process of repair certain metal scrap or waste is generated. In a surprise inspection conducted by the officials of the Central Range-II, Jodhpur, it was found that the assessee has cleared various types of metal scrap and waste without the payment of the excise duty for the period from 1.10.1995 to 16.07.1999. A show cause notice dated 05.10.2000 was issued to the assessee demanding a duty of Rs. 10,81,736/- under Section 11A of the Central Excise Act, 1944 [hereinafter referred to as "the Act"] along with equal amount of penalty under Section 11AC of the Act and further penalty under Rule 173 Q of the Central Excise Rules, 1944 [hereinafter referred to as "the Rules"] for non-payment of excise duty on clearance of said metal scrap and waste. On the request of the assessee on two occasions, the revenue has granted extension of time, first up to 31.12.2000 which was further extended till 22.01.2001, in order to reply to the said show cause notice. Thereafter, the assessee further made a request for some more time to file reply vide letter dated 20.01.2001, the same was rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The spare or replaceable part comes into existence as distinct product during the repairing of the parts of the cement plant. Also, the generation of scrap need not be in the process of manufacture of the excisable end product such as cement. Being aggrieved, the assessee has filed this appeal under Section 35L of the Act against the judgment and order of the High Court. 4) Shri. Alok Yadav, learned counsel has appeared for the assessee and the Revenue is represented by Shri. B. Bhattacharyya, learned Additional Solicitor of India. We will refer to their submissions while dealing with the issue canvassed before us. 5) Learned counsel Shri. Alok Yadav submits that the Revenue has wrongly relied on the definition of the metal waste and scrap under Note 8 (a) to Section XV of the Tariff Act which states- `Metal waste and scrap from the manufacture or metal waste and scrap from mechanical working of metal' in order to establish that metal scrap and waste arising out of the repairing and maintenance of the various machinery or parts of the cement manufacturing plant amounts to manufacture of such scrap and waste. He submits that nowhere the definition of waste and scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epair and replacement of the old machinery or parts of the cement manufacturing plant, which is incidental and ancillary to the manufactured product, that is, cement. In other words the process of generation of scrap and waste amount to the manufacture in terms of Section 2(f) of the Act. In support of his contention, learned ASG has relied on the decision of this Court in CST v. Bharat Petroleum Corpn. Ltd., (1992) 2 SCC 579. He further submits that once the conditions or requirements of excisable goods and manufacture as envisaged by Section 2(d) and Section 2(f), respectively, of the Act are satisfied, then only, such metal scrap and waste would attract the levy of excise duty under the charging Section 3 of the Act. Shri. B. Bhattacharyya has cited several decisions of this Court in support of his submission. 7) We have heard the learned counsel for the parties. In the present case, the assessee had undertook repair and maintenance work of his worn out old machinery or parts of the cement manufacturing plant for the period between 1995 to 1999. The assessee repaired machinery or capital goods such as damaged roller, shafts and coupling by using welding electrodes, mild ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to that product. In other words, for a deeming provision to come into play it must be specifically stated that a particular process amounts to manufacture. In the absence of it being so specified the commodity would not become excisable merely because a separate tariff item exists in respect of that commodity. 24. In this case, neither in the section note nor in the chapter note nor in the tariff item do we find any indication that the process indicated is to amount to manufacture. To start with, the product was edible vegetable oil. Even after refining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision cannot be brought into play in the absence of it being specifically stated that the process amounts to manufacture." 8) The goods have to satisfy the test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. Simply because a particular item is mentioned in the First Schedule, it cannot become exigible to excise duty. [See Hyderabad Industries Ltd. v. Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the processes" 10) In Hindustan Polymers v. CCE, (1989) 4 SCC 323, this Court has observed: "11. Excise duty is a duty on the act of manufacture. Manufacture under the excise law, is the process or activity which brings into being articles which are known in the market as goods and to be goods these must be different, identifiable and distinct articles known to the market as such. It is then and then only that manufacture takes place attracting duty. In order to be goods, it was essential that as a result of the activity, goods must come into existence. For articles to be goods, these must be known in the market as such and these must be capable of being sold or are being sold in the market as such. In order, therefore, to be manufacture, there must be activity which brings transformation to the article in such a manner that different and distinct article comes into being which is known as such in the market." 11) In CCE v. Rajasthan State Chemical Works, (1991) 4 SCC 473, this Court has considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e operation on some material in order to (sic effect) its conversion to some particular stage. There is nothing in the natural meaning of the word `process' to exclude its application to handling. There may be a process which consists only in handling and there may be a process which involves no handling or not merely handling but use or also use. It may be a process involving the handling of the material and it need not be a process involving the use of material. The activity may be subordinate but one in relation to the further process of manufacture." 12) In Union of India v. Ahmedabad Electricity Co. Ltd., (2003) 11 SCC 129, the issue before this Court was that whether the process in which cinder is produced by burning of coal as a fuel for producing steam to run machines used in the factory to manufacture end product amounts to manufacture. This Court has held: "19. What is the meaning of "manufacture" in the context of excise law? We have already quoted the definition of the word "manufacture" as contained in Section 2(f) of the Act. According to this definition, manufacture includes any process incidental or ancillary to the completion of a manufactured produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionerate v. Tarpaulin International, (2010) 9 SCC 103, whilst addressing the issue whether the process of preparing tarpaulin made-ups by cutting and stitching the tarpaulin fabric and fixing the eyelets would amount to manufacture, this Court has held: "25. Is there any manufacture when tarpaulin sheets are stitched and eyelets are made? In our view, it does not change the basic characteristic of the raw material and end product. The process does not bring into existence a new and distinct product with total transformation in the original commodity. The original material used i.e. the tarpaulin is still called tarpaulin made-ups even after undergoing the said process. Hence, it cannot be said that the process is a manufacturing process. Therefore, there can be no levy of Central excise duty on the tarpaulin made-ups. The process of stitching and fixing eyelets would not amount to manufacturing process, since tarpaulin after stitching and eyeleting continues to be only cotton fabric. The purpose of fixing eyelets is not to change the fabric. Therefore, even if there is value addition the same is minimum. To attract duty there should be a manufacture to result in different g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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