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TMI Blog2013 (8) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... add that in the absence of such process being applied in India it was very difficult to establish commercial viability of the process - the opinion seems to centre around techno-commercial viability and does not give any conclusive findings on the question of manufacture - it cannot be taken as an authority for the proposition that the said process cannot amount to manufacture. It has not been denied that scrap of specific grades alone can be used in the manufacture of stainless steel and that the processes to be adopted by the applicant would result in the transformation of their raw materials, namely, metal scrap of assorted sizes, grades, composition etc. into metal scrap of specific grades which is directly usable for manufacture of stainless steel. Therefore what emerges from the processes would be a product having distinct identity and use, different from the raw material from which it is made. - proposed activity would amount to manufacture. - Ruling No. AAR/CE/02/2013 - - - Dated:- 7-8-2013 - Dr Arijit Pasayat, J. RULING This application seeking advance ruling has been filed under section 23C of the Central Excise Act, 1944 (in short the Act), by ELG India Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter 720421 of the Tariff Act. 6. The various steps carried out by the Applicant during the process are detailed below: (1) Procurement of raw materials Different grades of metal scrap are procured by the Applicant from India as well as outside India from various sources such as fabrication plants, small scrap collectors, domestic waste deposits and individual scrap dealers. These will comprise of both primary and secondary raw material. Both primary and secondary materials encompass the entire range of steel components, i.e Nickel /Chromium /Molybdenum/Iron /Titanium /Cobalt / Tungsten etc. and any random combination thereof. The secondary raw materials will form the core of the business and is procured in the form of alloyed scrap. The secondary raw material procured by the Applicant arrives in up to 1,500 different grades. Furthermore, the different grades of raw material comes in a variety of forms, such as solids, turnings, pipes, tubes, bars, sheets, coils, etc. (2) Processing of raw material into 'blended metal scrap' The scrap so procured in such a variety of forms and grades is not suitable for the stainless steel manufacturers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visages levy and collection of duty of excise on the excisable goods produced or manufactured in India in the manner prescribed under the Central Excise Rules, 1944 (in short the 'Rules') and at the rates specified in the Tariff Act. 8. The term 'excisable goods' is defined under Section 2(d) of the Act as under: "excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to duty of excise and includes salt" 9. Further, the term 'manufacture' has been defined under Section 2(f) of the Act as under: 'manufacture' includes any process- i. incidental or ancillary to the completion of a manufactured product; ii. which is specified in relation to any goods in the section or Chapter notes of the First Schedule to the Central Excise Tariff Act 1985 (5 of 1986) as amounting to manufacture; or iii. which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labeling or re-lebelling of containers including the declaration or alteration of retail sale price on it or adoption of any other tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain physical properties, such as, size of the material, may change. However, no change shall take place so as to transform the original commodity into a new commodity with the distinct name, character or use. The scraps which shall be put to certain processes and certain pieces of the scrap which are to be selected by the applicant for their commercial activity shall continue to be called 'iron and steel scrap' and the remnant shall also be called 'iron and steel scrap'. Simply because the applicant shall choose to call the selected scrap as 'blended metal scrap', it shall not change the character and use of the scrap. Simply because the so-called blended metal scrap shall be superior in quality and may cut the cost of production of stainless steel or alloy steel it shall not make the iron and steel scrap a different commodity with different character and use. Further, the iron and steel scrap which shall remain after the applicants have selected the material required for its commercial activity shall continue to be called as iron and steel scrap. The remnant iron and steel scrap shall have the commercial value and shall be capable of being used by the manufacturers of iron an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erall techno-economics of this product. The applicant may study these aspects in order to establish its viability." 12. As noted above, the core issue is whether the activity proposed to be undertaken is manufacture or production. 13. In Black's Law Dictionary (5th Edition), the word 'manufacture' has been defined as, 'the process or operation of making goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine'. Thus, by a process of manufacture something is produced and brought into existence which is different from that, out of which it is made in the sense that the thing produced is by itself a commercial commodity capable of being sold or supplied. The material from which the thing or product is manufactured may necessarily lose its identity or may become transformed into the basic or essential properties. (See Deputy Commissioner of Stales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Coco Fibres [1992] Supp (1) SCC 290). 14. 'Manufacture' imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged as a result of the process. There might be borderline cases where either conclusion with equal justification can be reached. Insistence on any sharp or intrinsic distinction between 'processing and manufacture', results in an oversimplification of both and tends to blur their inter-dependence. (See Ujagar Prints v. Union of India [1989] 3 SCC 488). 17. To put it differently, the test to determine whether a particular activity amounts to 'manufacture' or not is: Do new and different goods emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether it be the result of one process or several processes 'manufacture' takes place and liability to duty is attracted. Etymologically the word 'manufacture' properly construed would doubtless cover the transformation. It is the transformation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct of human activity or effort'. From the wide definition of the word 'production', it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word 'production' since ore is 'a thing', which is the result of human activity or effort. It has also been held by the Hon'ble Supreme Court in CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC) that the word 'production' is much wider than the word 'manufacture'. It was said : The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture'. The word 'production ' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods'. The expressions 'manufacture' and 'produce' are normally associated with movables, articles and goods, big and small but they are never employed to denote the construction activity of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss is certainly one of manufacture". 24. The crucial question as highlighted above, therefore, is whether the goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity with the determining factor to decide whether excise duty is leviable or not on those goods. 25. Further aspect which needs to be addressed is whether the commodity that is subjected to the process of manufacturing can be no longer be regarded as the original commodity, but it is recognized in the trade as a new and distinct commodity. Commonly, manufacture is end result of one or more processes through which the original commodity is made to pass. 26. Manufacture includes any process incidental or ancillary to completion of manufactured product. 'Any process' can be a process in manufacture or process in relation to manufacture of the end product, which involves bringing some kind of change to raw material at various stages by different operations. The process must have effect of bringing change or transformation in raw material and also lead to creation of any new or distinct and excisable product. Process in relation to manufacture means a process so integra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. The Constitution Bench of the Hon'ble Supreme Court in Ujagar prints case (Supra) followed the earlier decision in Empire Industries Ltd. (Supra). While following the earlier judgment it was held that if there should come into existence a new article with distinct character and use s a result of the process, the essential condition justifying manufacture of goods is satisfied. 33. In CST v. Jagannath Cotton Co., (1995) 5 SCC 527, it was held that manufacture in its ordinary connotation, signifies emergence of new and different goods as understood in relevant commercial circles. 34. In Gramophone Co. of India Ltd. v. Collector of Customs, (2000) 1 SCC 549, it was held that 'manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character and use. In this case, the word 'manufacture' has various shades of meaning but unless defined under the Act it is to be interpreted in the context of the object and the language used in the sections. It would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no new and distinct commercial product came into existence as the end product still remained stone and thus its original identity continued. Ultimately, it was held that it was also not possible to accept that excavation of stones and thereafter cutting and polishing them into slabs resulted in any manufacture of goods. 40. The question for consideration in Shyam Oil Cake Ltd. case, 110 Fed 120,121/ 2004 (174) ELT 145 (SC) was whether processing of the edible oil, manufactured by the appellant, resulted in manufacture. It was held that 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 remained edible vegetable oil. As actual manufacture has not taken place the deeming provision cannot be brought into play in the absence of its being specifically stated that the process amounts to manufacture. (See Hindustan Poles Corpn. V. CCE, (2006) 4 SCC 85. 41. In Laminated Packaging (P) Ltd. V. Collector of Central Excise 1990 (49) ELT 326 (SC) it was held that there can be 'manufacture' even if both inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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