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TMI Blog2015 (5) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts to manufacture in which case excise duty would be liable to be paid on such instruments five times over on any given day of use. Further, what is to be remembered here is that the disposable syringe and needle in question is a finished product in itself. Sterilization does not lead to any value addition in the said product. All that the process of sterilization does is to remove bacteria which settles on the syringe's and needle's surface, which process does not bring about a transformation of the said articles into something new and different. Such process of removal of foreign matters from a product complete in itself would not amount to manufacture but would only be a process which is for the more convenient use of the said product. In fact, no transformation of the original articles into different articles at all takes place. Neither the character nor the end use of the syringe and needle has changed post-sterilization. The syringe and needle retains its essential character as such even after sterilization. - Decided in favour of assessee. - Civil Appeal No. 583 of 2005 - - - Dated:- 7-5-2015 - A. K. Sikri And R. F. Nariman,JJ. For the Petitioner : Mr. Rajesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, there is no mention of the test of integral or inextricable process and found that the wrong test had been applied to arrive at the wrong result. 5. The CESTAT in turn set aside the order of the Commissioner of Central Excise (Appeals) observing: An Article with distinct brand name and separate end use/quality has emerged by the activity undertaken. The use/character of a 'syringe' which was brought and which emerged has changed. While the goods brought were not fit for use on Humans Medical Needles as made were not usable till sterilized. The commercial identity nature use and understanding has changed, manufacturing has taken place, excise levy is attracted. 6. Shri Lakshmikumaran, learned advocate appearing on behalf of the appellant has argued before us that the judgment of the Tribunal is wrong on first principles. The Tribunal has failed to appreciate that a disposable syringe and needle continues to be a disposable syringe and needle even after the process of sterilization and, therefore, the basic test of a new article emerging as a result of a process, being a transformation of an article into something new, which has a distinctive name, character or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , facial tissue and toilet roll remains the same. 11. Another example of when transformation does not take place is when foreign matter is removed from an article or additions are made to the article to preserve it or increase its shelf life. 12. In MMTC v. Union of India, 1983 (13) E.L.T. 1542 (S.C.), this Court dealt with the separating of wolfram ore from rock to make it usable. It was held that the process of separation and sorting out pieces of wolfram or by washing or magnetic separation would not amount to a manufacturing process. Wolfram ore does not cease to be an ore even though by the aforesaid processes it may become concentrated wolfram ore. 13. In Mineral Oil Corporation v. CCE, Kanpur, 1999 (114) E.L.T. 166 (Tribunal), the facts were that used transformer oil, which by applying processes for removal of impurities therefrom, is again made usable as transformer oil. Both before and after the said processes, transformer oil remained as transformer oil. That being so, it was held that no new and distinct commodity has come into existence consequent to the process undertaken. The test for determining whether manufacture can be said to have taken place is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these parts were put together only after sterilization by ultra violet rays. The Tribunal held that the various parts that had been put together were already finished products and packing after sterilization would not bring into existence any new product as each of the items had already come into existence as individual items. It was further held that sterilization was only to improve the hygiene of the product and that since no change occurs in the name, character or use of the product, a new product does not come into existence. This Court dismissed the civil appeal filed against the aforesaid judgment on 1.3.2005. 16. Examples of additions made to the article to preserve it or increase its shelf life are to be found in Tungabhadra Industries Ltd. v. CTO, (1961) 2 SCR 14 and M/s. Maruti Suzuki India Ltd. v. CCE, 2015 (318) E.L.T. 353 (S.C.). In the Tungabhadra case, it was held that hydrogenated oil continued to be groundnut oil despite there being an intermolecular change in the content of the substance of the oil due to hydrogenation. It was held that oil made from groundnut continued as such despite the hardening process of hydrogenation. In its essential character, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad is recognised as a new and distinct Article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed Article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity. 19. Interestingly, a line was drawn between cases in which the essential character had changed and those in which no such change had taken place in the following terms: 5. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied: Does the processing of the original commodity bring into existence a commercially different and distinct article? Some of the cases where it was held by this Court that a different commercial article had come into existence include Anwarkhan Mehboob Co. v. The State of Bombay and Ors. (where raw tobacco was manufactured into bidi patti), A. Hajee Abdul Shukoor and Co. v. The State of Madras (raw hides and skins constituted a different commodity from dressed hides and skins with differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodities and can be sold and used as such. By the process of printing names or logos on the bottles, the basic character of the commodity does not change. They continue to be bottles. It cannot be said that but for the process of printing, the bottles will serve no purpose or are of no commercial use. 22. Similarly in Sterling Foods v. State of Karnataka, (1986) 26 ELT 3 (S.C.), raw shrimps/prawns/lobsters after various processes became fit for human consumption. Prior to such processing, they could not be used as articles of food. However, the aforesaid processes did not lead to a finding that there was manufacture inasmuch as shrimps/prawns/lobsters identity continued as such even after the aforesaid processes. 23. In Crane Betel Nut Powder Works v. Commissioner, 2007 (210) E.L.T. 171 (S.C.), whole betel nuts could not be consumed by human beings. It is only after a process of cutting them into smaller pieces and sweetening them with oil that they become fit for human consumption. It was held that the aforesaid process would not amount to manufacture as betel nuts continued to be the same even after the aforesaid process resulting in no transformation of the commodity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held: 13. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to (sic that the) manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. 15. In J.K. Cotton Spg. Wvg. Mills Co. Ltd. v. STO [(1965) 1 SCR 900 : AIR 1965 SC 1310 : (1965) 16 STC 563], this Court in construing the expression 'in the manufacture of goods' held thus: (SCR pp. 906-07) But there is no warrant for limiting the meaning of the expression 'in the manufacture of goods' to the process of production of goods only. The expression 'in the manufacture' takes in within its compass, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture the process is carried on with the aid of power. 25. Thus processing may be an intermediate stage in manufacture and until some change has taken place and the commodity retains a continuing substantial identity through the processing stage, we cannot say that it has been manufactured. That does not, however, mean that any operation in the course of such process is not in relation to the manufacture. While interpreting the same exemption notification in Standard Fireworks Industries v. Collector of Central Excise [(1987) 1 SCC 600 : 1987 SCC (Tax) 138 : (1987) 28 ELT 56], it was held that manufacture of fireworks requires cutting of steel wires and the treatment of papers and, therefore, it is a process for manufacture of goods in question. The notification purports to allow exemption from duty only when in relation to the manufacture of goods no process is ordinarily carried on with the aid of power. It was observed that cutting of steel wires or the treatment of the papers is a process for the manufacture of goods in question. 26. We are, therefore, of the view that if any operation in the course of manufacture is so integrally connected with the further operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete in themselves and/or processes which clean goods that are complete in themselves fall within this category. (2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process. (3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place. (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place. 28. The instant case falls within the first category aforementioned. This is a case of manufacture of disposable syringes and needles which are used for medical purposes. These syringes and needles, like in the J.G. Glass case and unlike the Bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught forth again and again by way of manufacture and excisable duty is chargeable on the same. This would lead to an absurd result and fly in the face of common sense (The expression Flies in the face of common sense is taken from an interesting judgment of the House of Lords reported in R v. Secretary of State for the Home Department, (1995) 2 All ER 244. Lord Browne Wilkinson was faced with an argument that Section 171 of the Criminal Justice Act of 1988 vests in the Secretary of State a discretion for bringing into force certain sections of the said Act. It was argued that the Secretary of State had an absolute and unfettered discretion to bring in or not to bring in the said Sections. This argument was rejected stating that it was not only constitutionally dangerous but also flies in the face of common sense (at page 253).). If a surgical instrument is being used five times a day, it cannot be said that the same instrument has suffered a process which amounts to manufacture in which case excise duty would be liable to be paid on such instruments five times over on any given day of use. Further, what is to be remembered here is that the disposable syringe and needle in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurs and if manufacture takes place, it is dutiable. 'Manufacture' is bringing into being goods as known in the excise laws, that is to say, known in the market having distinct, separate and identifiable function. On this score, in our opinion, there is sufficient evidence. If that is the position, then the appellant was liable to pay duty. We are, therefore, clearly of the opinion that the order of the CEGAT impugned in this appeal does not contain any error. The appeal, therefore, fails and is accordingly dismissed. 32. This judgment again does not take us any further. It was found on the evidence led in that case that laminated kraft paper is a distinct and separate product known in the market as such and is apart from kraft paper. 33. CCE, Meerut, v. Kapri International (P) Ltd., (2002) 4 SCC 710, is a judgment in which cotton fabrics from a running length were cut into pieces which formed new articles like bed sheets, bed spreads and table clothes. On facts there, it was held that new commodities had emerged which had a definite commercial identity in the market and that the raw material (that is cotton fabrics) having suffered payment of excise duty would make ..... X X X X Extracts X X X X X X X X Extracts X X X X
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