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TMI Blog2016 (10) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... as emerged as a result of processes then a manufacture can be said to have taken place. This is the test to be applied for arriving at a conclusion whether the process applied upon the product amounts to manufacturing or not. It has been held by the Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Trader Association Vs. Union of India [2003 (11) TMI 107 - HIGH COURT OF DELHI] that while examining justifiability of Excise Duty we must clearly comprehend that Excise Duty can be imposed on the manufacture of goods produced in India and that also on the bringing into existence a new substances known to the market. In view of the settled position of law crystallized by the various judgments, we have no difficulty in clearly arriving at the conclusion that mere cutting or slitting of steel sheets does not amount to manufacture because the identity of the product remains unchanged. The steel folded in coil remains steel even after cutting. No new, different and distinct article emerges having distinct name, character and use. Therefore, mere cutting and slitting would not amount to manufacture. We are also clearly of the view that merely because of change in tariff item, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MT bars are de-coiling, straightening and cutting into desirable sizes with the help of energy and it converts TMT coils into TMT bars which are absolutely new, distinct and identifiable products. The TMT bar is a distinct commercial commodity which is a marketable commodity having even a value addition. In common parlance, persons of the same trade are also giving different name to this commodity i.e. TMT bars. Thus, there is manufacture of TMT bars from TMT coils. The total manufacturing process has been mentioned in the showcause notices dated 7th May,2003, 30th May, 2003, 9th July, 2003, 16th March, 2004, 18th October, 2004 and 25th February, 2005, issued by the appellant to the respondents. Ad valorem duty at the rate of 16% has been prescribed under the Central Excise Tariff Act,1985 as leviable and, hence, there will be huge difference in the duty because there is substantial value addition on such TMT bars. Learned counsel for the appellant relied upon the following decisions: (a) Kartar Rolling Mills Vs. Commissioner of Central Excise, New Delhi reported in 2006 (197) ELT 151 (SC) (b) Collector of Central Excise, Hyderabad Vs. M/s. Bakelite Hylam Ltd. reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of penalty had been imposed upon Tisco Ltd. Jamshedpur and interest at the appropriate rate has also been imposed. It is submitted by counsel for the appellant that both the items viz. TMT coils as well as TMT bars and TMT rods are absolutely different items and are also covered by different Sub-Headings. TMT bars and TMT rods are manufactured from TMT coils by manufacturing process as stated hereinabove. This aspect of the mater has not been properly appreciated by the CESTAT hence, the judgment and order passed by the CESTAT deserves to be quashed and set-aside. ARGUMENTS ADVANCED ON BEHALF OF RESPONDENTS 3. Learned counsel for the respondents has submitted that conversion of TMT coils into TMT bars and TMT rods is not manufacturing at all, even if, these two items are mentioned under different Sub-Headings of the Central Excise Tariff Act, 1985. It is further submitted that commercially no new article has been manufactured, even if, TMT coils has undergone some processes. It has further been submitted by counsel for the respondents, that in fact, there is no difference between TMT coils and TMT bars and rods. TMT coils are coiled for easy transportation etc. and nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (196) ELT 400 (SC) (n) Metlex (I) Pvt. Ltd. Vs. Commissioner of C.Ex. reported in 2004 (165) ELT 129 (SC) (o) Aman Marble Industries Pvt. Ltd. Vs. Collector of C.Ex. reported in 2003 (157) ELT 393 (SC) (p) Commissioner of C.Ex. Cus. Vs. Pan Pipes Resplendents Ltd. reported in 2006 (193) ELT 129 (SC) (q) Commissioner of C.Ex. Vs. Swastik Rayon Processors reported in 2007 (209) ELT 163 (SC) On the basis of aforesaid decisions, it is submitted by counsel for the respondents that merely because there is value addition, it does not mean that manufacture has taken place and, hence, there is no liability upon the respondents to make payment of central excise duty. It is also submitted that in view of the aforesaid decisions, even if there is cutting or sizing into proper shape, there is no manufacturing at all. In the facts of the present case also, there is only decoiling, straightening and cutting into sizes of TMT coils giving shape of TMT bars and rods essentially there is no change at all and the commodity remains as it is. In fact, only for easy transportation, the TMT coils are brought into existence. Thus, it appears three processes of de-coiling, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid decisions of the Hon'ble supreme Court. Hence, these Appeals may not be entertained by this court. REASONS: 4. Having heard counsel for both sides and looking to the facts and circumstances of the case, we see no reason to entertain these Tax Appeals for the following facts, reasons and judicial pronouncements. (i) DEFINATION AND CONCEPT OF MANUFACTURE Section 2 (f) of The Central Excise Act, 1944 reads as under:- (f) 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 labelling or relabelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer ;] and the word manufacture shall be construed accordingly and shall include not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s end or at any other end it remains as sheet. The sheets in running length cannot be brought to the destination without folding it and when it is folded by the manufacturer, it is sheet in coil form and unfolded it is sheet as such and accordingly there is no difference in the steel sheets in coil form or cut straight to the specific sizes. The coils in running length are produced to save transportation cost and to minimize the wastage as during the cutting of the steel coils. 90. While examining justifiability of Excise Duty we must clearly comprehend that Excise Duty can be imposed on the manufacture of goods produced in India and that also on the bringing into existence a new substances known to the market . In view of the settled position of law crystallized by the aforesaid judgments, we have no difficulty in clearly arriving at the conclusion that mere cutting or slitting of steel sheets does not amount to manufacture because the identity of the product remains unchanged. The steel folded in coil remains steel even after cutting. No new, different and distinct article emerges having distinct name, character and use. Therefore, mere cutting and slitting would not amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f eyelets, but, no new article is emerging out of the raw material tarpaulin sheets. Manufacturing implies a change, but, every change is not a manufacture and yet every change in an article is the result of treatment, labour and manipulation. But, something more is necessary. There must be transformation, a new and different article must emerge having a distinct name, character or use. Paragraph nos. 13 and 15 and 23 of the decision rendered by the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Chennai Vs. Tarpaulin International reported 2010 (256) ELT 481 (SC) reads as under: 13. The result of the definition contained in Section 2 (f) of the Act is that the word manufacture means production of an article for use from raw or prepared materials, by giving these materials new form, quality, properties or combinations whether by hand labour or machinery. The word includes any process incidental or ancillary to the process of manufactured product. This Court has in several judgments starting from Tungabhadra Industries V. CTO, (1961) 2 SCR 14, Union of India v. Delhi Cloth General Mills Co. Ltd., (1997) 5 SCC 767, South Bihar Sugar Mills V. Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the fabrics. Therefore, even if there is value addition the same is minimum. To attract duty there should be a manufacture to result in different Goods and the Goods sought to be subject to duty should be known in the market as such. (Emphasis supplied) It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt.Ltd. reported in 2005 (186)ELT 385 (SC) in paragraph no.12 as under: 12. At the outset, we may point out that the assessee is one of the downstream producers. The assessee buys duty-paid jumbo rolls from M/s Ellora Paper Mills and M/s Padamjee Paper Mills. There are different types of papers namely, tissue paper, craft paper, thermal paper, writing paper, newsprints, filter paper etc. The tissue paper is the base paper which is not subjected to any treatment. The jumbo rolls of such tissue papers are bought by the assessee, which undergoes the process of unwinding , cutting/slitting and packing. It is important to note that the characteristics of the tissue paper are its texture, moisture absorption, feel etc. In other words, the characteristics of table napkins, facial tissues and toilet rolls in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity. Manufacture takes place on the application of one or more processes. Each process may lead to a change in the goods, but every change does not amount to manufacture . There must be something morethere must be a transformation by which something new and different comes into being, that is, there must now emerge an article which has a distinctive name, character or use. When a finished product cannot conveniently be used in the form in which it happens to be, and it is required to be changed into various shapes and sizes so that it can conveniently be used, no transformation takes place if the character and the end use of the first product continue to be the same. An illustration of this principle is brought out by the judgment in CCE, New Delhi V. S.R.Tissues, 2005 (186) ELT 385 (S.C.). On facts, in the said case, jumbo rolls of tissue paper were cut into various shapes and sizes so that they could be used as table napkins, facial tissues and toilet rolls. This Court held that there was no manufacture as the character and the end use of the tissue paper in the jumbo roll and the tissue paper in the table napkin, facial tissue and toilet roll remains the same. 20. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasis supplied) Even after applying the process or treatment there is labour and manipulation upon the raw material, but, if no new product is emerging out, there is no manufacturing at all and the end product continues to remain in its original character. Process of drawing wires from wire rods does not amount to manufacture as both the products are wire and the product is not considered as excisable as has been held by the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC). Decoration of ceramic glazed wall tiles printing does not change their basic character hence, it does not tantamount to manufacture because the original product and processed product remains the same and there is no change in their basic character as has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Custom, Gujarat Vs. Pan Pipes Resplendents Ltd. reported in 2006 (193) ELT 129 (SC) In view of the aforesaid decisions, the process applied upon the raw material if converts a raw material into a commercially different product which is marketable or if a new and distinct produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all. The case put forth by the learned counsel appearing on behalf of the appellant is that the cutting of blocks into marble slabs involves only sawing of the marble blocks and thereby does not bring into existence a distinct commodity so as to state that when such activity is completed a new substance has come into existence. The submission is that even after such activity is completed the marble will remain marble and, therefore, this activity does not attract tax. 3. Learned counsel for the Department, however, submitted that the activity has been specifically brought into tariff item and when certain processes are applied to a commodity to make it marketable, it certainly amounts to manufacture and thereof attracts tax under the Central Excise Act. 4. In Rajasthan State Electricity Board v. Associated Stone Industries anr-JT 2000 (6) SC 522 such a question fell for consideration before this Court although in a different context, and this Court held as follows: (SCC p. 146, para 12) .....This apart, excavation of stones from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. The word manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nos. 16,17,18 and 25 which are as under: 16. In another case CCE V. Kutty Flush Doors Furniture Co. Pvt. Limited reported as 1988 (35) E.L.T. 6 (S.C.) the Supreme Court held that conversion of timber logs into sawn timber is not manufacture as no new product emerges . 17. Reliance has also been placed on State of Orissa V. Titaghur Paper Mills Co. Limited reported as AIR 1985 SC 1293. In this case the Supreme Court held that mere change in form does not amount to manufacture. The court in para 127 (10) of the judgment observed that timber and seized or dressed logs are one and the same commercial commodity. Beams, rafters and planks would also be timber. 18. It has been canvassed that to constitute manufacture, a new and different article must emerge having a distinct name, character or use. Reliance has been placed on Collector of Central Excise, Chandigarh v. Steel Strips Ltd. reported as 1995 (77) E.L.T. 248 (S.C.) . In this case the court observed that coldrolled steel strips produced out of duty paid hotrolled steel strips do not undergo a process of manufacture hence, not liable to duty again. 25. The Hon'ble Supreme Court in Civil Appeal No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nching amounts to manufacture, hence we are not inclined to remit the matter to the Adjudicating Authority. (Emphasis supplied) It has been held by Hon'ble the Supreme Court in a case reported in [Commissioner V. Bemcee Ltd.] 2010 (256) ELT A 16 (SC) that slitting/shearing of steel coils does not tantamount to manufacture as the identity of the product remained unchanged. It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt. Ltd. reported in 2005 (186) ELT 385 (SC) in paragraph nos. 12,14 and 16 which are as under: 12. At the outset, we may point out that the assessee is one of the downstream producers. The assessee buys dutypaid jumbo rolls from M/s Ellora Paper Mills and M/s Padamjee Paper Mills. There are different types of papers namely, tissue paper, craft paper, thermal paper, writing paper, newsprints, filter paper etc. The tissue paper is the base paper which is not subjected to any treatment. The jumbo rolls of such tissue papers are bought by the assessee, which undergoes the process of unwinding , cutting/slitting and packing. It is important to note that the characteristics of the tis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note nor in the chapter note, refining as a process was indicated as amounting to manufacture. In the circumstances, it was held that refining of edible vegetable oil did not amount to manufacture . In our view, the ratio of the said judgment is squarely applicable to the facts of the present case. As stated above, the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper in the toilet rolls, table napkins, facial tissues, etc. Moreover, cutting/slitting of tissue paper is not indicated in the section note or in the chapter note as amounting to manufacture and, therefore, Section 2(f) of the Act was also not applicable to the facts of this case. (Emphasis supplied) Issue involved in this case was whether process of unwinding , cutting and slitting of Jumbo rolls of Tissue Paper would tantamount to manufacture. The answer given by the Hon'ble Supreme Court is in negative because essentially the end product is the same. There is no change in the main characteristic of the raw material and final product. Thus, by the activity of decoiling, straightening and cutting into sizes of TMT coils into TMT bars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess, the Court did not treat it as 'manufacture' within the meaning of Section 2(f) of the Act on the ground that the end product was still a betel nut and there was no change in the essential character to that article even when it was the result of treatment, labour and manipulation, inasmuch as even after employing the same it had not resulted in the manufacture of a new product as the end product continued to retain its original character. 17. Last judgment to which we would like to refer to is Deputy Commissioner Sales Tax (Law), Board of Revenue (Taxes), Ernakulam V. PIO Food Packers 1980 (6) E.L.T 343 (S.C.). In that case, the process undertaken by the assessee was to wash the pineapple, after purchase, and then remove inedible portion, the end crown as well as skin and inner core. After removing those inedible portions the pineapple fruit used to be sliced and the slices were filled in canes after adding sugar as preservative. Thereafter, canes would be sealed under temperature and then put in a boiled water for sterilization. Identical question was posed viz. whether this process amounted to 'manufacture'. Giving the answer in the negative, the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Abdul Shukoor and Co. v. The State of Madras (raw hides and skins constituted a different commodity from dressed hides and skins with different physical properties), The State of Madras v. Swasthik Tobacco Factory (raw tobacco manufactured into chewing tobacco) and Ganesh Trading Co. Karnal v. State of Haryana and Another, (paddy dehusked into rice). On the other side, cases where this Court has held that although the original commodity has undergone a degree of processing it has not lost its original identity include Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool (where hydrogenated groundnut oil was regarded as groundnut oil) and Commissioner of Sales Tax, U.P. ,Lucknow v. Harbiles Rai and Sons (where bristles plucked from pigs, boiled, washed with soap and other chemicals and sorted out in bundles according to their size and colour were regarded as remaining the same commercial commodity, pigs bristles). 18. Another important aspect which needs to be highlighted from this judgment is that the argument of the Revenue that the sale of pineapple slices after the aforesaid process, was at a higher price in the market than the original fruit and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the Revenue that pineapple slices have a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put in to making the fruit more readily consumable and because of the cane employed to contain it. It is not as if the higher price is claimed because it is a different commercially commodity. It is said that pineapple slices appeal to a different sector of the trade and that when a customer asks for a cane of pineapple slices he had in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the essential identity of the two, but is derived from the mere form in which the fruit is desired. Learned Counsel for the Revenue contends that even if no manufacturing process involved, the case still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the final product the market price was approximately ₹ 15,000/per metric ton, whereas the raw material was having approximately ₹ 13,000/per metric ton. Thus, value enhancement may be there with the final product, but, the article remained as it is and hence,there is no manufacture at all. It has been held by the Hon'ble Supreme Court in the case of Prabhat Sound Studios Vs. Additional Collector of Central Excise reported in 1996 (88) ELT 635 (SC) in paragraph no. 5,7 and 8 which are as under: 5. In the case of M. Basheer Ahammed V. Collector of Central Excise [1990 (48) ELT 591 (Tribunal)]. The same question arose before a two Member Bench of the Tribunal. It noted the judgments that are under appeal before us and preferred to follow the dissenting view. It held that the recording of sound on such tapes was not a process that fell within the ambit of the definition of manufacture. Accordingly, the recoding of sound on duty paid tapes was not by itself manufacture. With reference to Tariff Item 59 it was said that the rationale of the categorization was that each of the categories was brought to duty at an identical rate ad valorem and it was not inconce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention raised by counsel for the appellant that as there is value addition for the end product TMT bars/ rods and, therefore, the process applied upon TMT coil amounts to manufacture, is not accepted by this court. (iv) DIFFERENT TARIFF ENTRIES: Learned counsel for the appellant has submitted that Entry no.72.13 and 72.14 are different as per schedule attached to the Central Excise Tariff Act, 1985. One is for TMT coils and another is for TMT bars/rods and, therefore, the process undertaken by the CASTINGS India Ltd. is a manufacture. We are not in agreement with this contention. For ready reference 72.13 and 72.14 of Chapter-72 of the first schedule of Central Excise Tariff Act, 1985 reads as under: Chapter 72 Iron and Steel 72.13 72.13 Bars and rods, hot rolled, in irregularly wound coils, of iron or non-alloy steel 7213.10 Of free cutting steel 16.00% 7213.90 Other 16.00% 72.14 72.14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause tissue paper in the jumbo roll of the size exceeding 36 cms. Fell in one entry and the toilet roll of a width not exceeding 36 cms fell in a different entry, it cannot be presumed that the process of slitting and cutting of jumbo rolls of toilet tissue paper into various shapes and sizes amounted to manufacture. (Emphasis supplied) Thus, even if the end product is falling in a different tariff entry, it does not mean that there is manufacturing. If no commercially another item which is marketable is emerging out of the said process and just because raw-material and final product comes under two different heading it cannot be presumed that the process of obtaining the final product from such raw-material, automatically constitutes manufacturing. In the facts of the present case, TMT coils are cut into TMT bars and rods which requires firstly de-coiling then straightening and thereafter cutting. Thus, the process involved is cutting the TMT coils, but, no new product is emerging out, after such process. In fact, the burden of proof is upon the department-appellant that the process undergone, is a manufacture, but, no material has been adduced by the counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activity carried out by the appellant amounts to manufacturing. It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to residuary entry. (3) The residuary entry is meant only for those categories of goods which clearly fall outside the ambit of specified entries. Unless the Department can establish that the goods in question can by no conceivable process of welding be brought under any of the tariff items, resort cannot be had to the residuary item. (Emphasis supplied) Even if there is change in the tariff entry for the end product, may be falling within residuary entry, it does not mean that process of manufacture has taken place. There is neither section note nor chapter note. Thus, in the facts of the present case, neither in the section note nor in the chapter note and also not in the tariff item, there is any indication that de-coiling, straightening and cutting into desirable sizes of TMT coil tantamounts to manufacture. It has been held by the Hon'ble Supreme Court in the case of Shyam Oil Cake Ltd. Vs. Collector of Central Excise, Jaipur reported in 2004 (174) ELT 145 (SC) at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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