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TMI Blog2015 (3) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of duty on account of value addition in such inputs after processing. More specifically, what was alleged was that various spare parts relatable to motor vehicles that were manufactured by the appellant and were procured by it in the form of bumpers, grills, etc., on which the process of Electro Deposition anti-rust so that the shelf life of the said bumpers, grills, etc., would be generally increased) have escaped duty on account of the value addition of EDC. The show cause demanded by way of differential duty a sum of Rs. 2,00,20,310.14/-. Since the period covered relates to August, 1996, to March, 2001, we need to see the provisions of Rule 57F of the Central Excise Rules, 1944 (hereinafter referred to as 'Rules') as it existed in three different periods. For the purposes of this appeal, however, there is no material change made post 20.02.1997 or post 31.03.2000 when this rule was twice amended. For the period in question, the said rule together with its amendments is set as hereinbelow: - Rule for the period August 1996 to 28.2.1997 "57F(1) The inputs in respect of which a credit of duty has been allowed under rule 57A- (i) may be used in or in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable if it is paid within 30 days of the date of communication of the order. The appeal filed before Customs, Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as 'CEGAT') was unsuccessful. The CEGAT after referring to the arguments of both sides found as follows: - 5.1 We have considered the submissions of both the sides. The facts which are not in dispute are that the Appellants purchase inputs, avail MODVAT Credit of duty paid thereon subject them to the process of E.D. Coating and remove the same on payment of duty equivalent to the amount of MODVAT Credit availed by them initially at the time of receipt of the inputs. It is thus apparent that the inputs are removed from the factory after undertaking the process of E.D. Coating. In view of this the ratio of the decision of the Larger Bench in the case of Commissioner of Central Excise, Vadodra v. Aisa Brown Boveri Ltd., 2000 (120) ELT 228 is not applicable as the facts are different in as much as the inputs were cleared as such in the said matter. It has been emphasized by the learned counsel for the appellants that words "as such" were not mentioned in Rule 57-F at the relevant time. In our v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adverted to a little later in this judgment. On the other hand, Shri Guru Krishna Kumar, learned senior counsel appearing for the Department, referred us to the show cause notice and to various judgments in order to show that the process of ED coating which led to value addition, would, in fact, amount to "manufacture" and that therefore, the "input" would not be the same input so as to qualify under sub-rule(ii) on a mere reversal of MODVAT duty. The duty on the value addition would also therefore have to be paid. In support of this proposition, he cited a number of judgments which will also be adverted to a little later in this judgment. In addition, he referred us to Rule 57F (3) and Rule 57F(3A) which, according to him, would show that whenever there is a value addition to an input, the said value addition would also be liable to duty. We have heard learned counsel for the parties. In our view, on the true construction of Rule 57F(1), it would be clear that the "input" that is removed from the factory for home consumption is bumpers, grills, etc., being spare parts of motor vehicles procured by the appellant before us. According to us, ED coating which would incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market". "But", says the learned Counsel, look at the definition of "manufacture" in the definition clause of the Act and you will find that "manufacture" is defined thus: Manufacture includes any process incidental or ancillary to the completion of a manufactured product." S.2(f) 19. We are unable to agree with the learned Counsel that by inserting this definition of the word "manufacture" in S.2 (f) the legislature intended to equate "processing" to "manufacture" and intended to make mere "processing" as distinct from "manufacture" in the sense of bringing into existence of a new substance known to the market liable to duty. The sole purpose of inserting this definition is to make it clear that at certain places in the Act the word 'manufacture' has been used to mean a process incidental to the manufacture of the article. Thus in the very Item under which the excise duty is claimed in these cases, we find the words "in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". The definition of 'manufacture' as in S.2(f) puts is beyond any possibility of controversy that if power is used for any of the nume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roll would by itself lead to the irresistible conclusion that there is "manufacture" and not mere "processing". This was turned down by this Court stating that jumbo rolls cannot conveniently be used as such for household or sanitary purposes. If therefore, for the sake of convenience, they are required to be cut into various shapes and sizes so that they can conveniently be used as table napkins, etc., this would not mean that the table napkins, etc., would be a new product distinct from the jumbo roll. The end use of both jumbo rolls and toilet rolls, etc., would remain the same, namely, for household or sanitary use. It was then held following Union of India v. J.G. Glass Industries Ltd.[ 1998 (97) E.L.T. 5] that there is a fundamental distinction between manufacture and processing. On an aspect not adverted to in the Delhi Cloth and General Mills Co. Ltd. case supra, this court held that where the commodity already in existence is of no commercial use but for a super added process, then on facts, there may be manufacture. In the present case, it is clear that bumpers and grills are most certainly of commercial use in themselves whether the process of ED coating is applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition criteria as applied by the Commissioner is erroneous." Shri Guru Krishna Kumar, learned senior counsel, also cited two other decisions in support of the proposition that, in fact, manufacture had taken place on the facts of the present case. One such decision, namely, Brakes India Limited v. Superintendent of Central Excise and others [1997 (10) SCC 717] dealt with brake lining blanks. It was found on facts that these brake lining blanks purchased by the appellant could not be used as brake linings by themselves without the process of drilling, trimming and chamfering. This judgment has been distinguished in para 13 of the judgment which has been cited above, namely, Commissioner of Central Excise, New Delhi v. S.R. Tissues Pvt. Ltd. [2005 (186) E.L.T. 385]. Unlike the facts in the Brakes India Limited judgment, on the facts here, bumpers, grills, etc., are of commercial use and liable to duty as such, even without any ED coating. Shri Guru Krishna Kumar, learned senior counsel, then cited Siddhartha Tubes Ltd. v. Commissioner of Customs & Central Excise, Indore (M.P.)[(2005) 13 SCC 559]. This case again concerned manufacture of galvanised pipes. This court, in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the amount of credit that has been availed in respect of such inputs under Rule 57A. We now, come to the second argument made by Shri Guru Krishna Kumar, learned senior counsel, namely, that from a reading of Rule 57F (3) and 57F(3A), that Rule 57F(1) should be construed in such a way that the moment an input which falls under the said Rule has a value addition on account of processing it will cease to be an input covered by the Rule. To appreciate this argument, we set out rule 57F(3) and Rule 57F(3A) which are as follows: - (3) [Subject to sub-rule (3A) and notwithstanding] anything contained in sub-rule(1), manufacturer may after intimating the [Assistant Commissioner of Central Excise] having jurisdiction over the factory and obtaining dated acknowledgment of the same, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside the factory,- (a) For the purposes of test, repairs, refining, re-conditioning or carrying out any other operation necessary for the manufacture of the final products and return the same to his factory, for,- (i) further use in the manufacture of the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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