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TMI Blog2010 (7) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... fer to Section 2(f) of the Central Excise Act, 1944 (hereinafter referred to as the Act ), which at the relevant time read as follows:- 2(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 Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account. 3. It is obvious that under clause (i) Chapter 2(f), manufacture will include any process, which is incidental or ancillary to the completion of a manufactured product. This would relate to the normally understood dictionary meaning of the word manufacture . Under the normally understood meaning of the word manufacture , a new product should come into being for any process to be called a manufacturing process. However sub clause (2) is a deeming provision which empowers the Government to specify in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not change and also because of the reason that the excise duty had already been paid on this item. The assessee s case was that it had only repaired/rectified the goods and had not carried out any process, which would amount to manufacture. The goods had never been sold but only cleared for use by a sister unit and were to be used for manufacturing some other finished products. The identity of the goods after rectification remained completely unchanged and they were covered by the same nomenclature. 8. This argument of the assessee could have been accepted if we were only dealing with the dictionary meaning of the word manufacture . 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 . 9. In M/s. Sterling Foods v. State of Karnataka and another, 1986 (3) SCC 469, the question for determination before the Apex Court was whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen changed it into powder form. The question was whether this amounted to manufacture within the meaning of Income Tax Act. The Madras High Court held as follows:- The fact that the chicory powder is used for consumption in combination with coffee powder does not make the chicory powder any different in so far as its identity is concerned, as chicory. Chicory powder is chicory in powder form and nothing else. Mere change in the form of the same commodity does not necessarily involve change of identity. The pineapple fruit when plucked from the tree and even after it is cut into pineapple slices retains the same identity as pineapple. Chicory powder and chicory root have the common identity of being chicory. The change in the form to powder in the case of chicory and to slices in the case of pineapple does not result in a change of identity. 12. It would be pertinent to mention here that this decision of the Madras High Court was upheld by the Apex Court in Sacs Eagles Chicory v. Commissioner of Income Tax, 2002 (255) ITR 178. 13. In Indian Hotels Co.Ltd. and others v. Income Tax Officer and others, 2000 (245) ITR 538, the Apex Court again dealt with the question as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w material from which it was manufactured. A distinct change comes about in the finished product. The submission of the learned counsel for the Revenue that the assessee was doing only the processing work and was not involved in the manufacture and producing of a new article cannot be accepted. The process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes. The different processes are integrally connected which result in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after processing the raw berries converts them into coffee beans which is commercially different commodity. Conversion of the raw berry into coffee beans would be a manufacturing activity. 16. Similar view was taken by the Apex Court in Crane Betel Nut Powder Works vs. Commr. of Cus. C. Ex. Tirupathi, 2007 (210) E.L.T. 171 (S.C.). In all these cases, the Apex Court was dealing only with the question as to what was meant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material was taken out of its original packaging, went through various stages of processing and finally repacking. Merely because the original material bore the same name does not mean that no manufacturing take place. The original defective material was virtually broken down, reprocessed and re-manufactured by following various processes described hereinabove. This matter is squarely covered by the last portion of the Chapter Note. Admittedly the defective material was not marketable and, therefore, returned to the assessee. The treatment given to the material was to make it marketable so that it could be sold to the consumers and, therefore, would amount to manufacture within the meaning of Chapter Note. 19. Lastly, it was urged on behalf of the assessee that the material was only rectified in terms of Rule 173 (4) of the Central Excise Rule, 1944 and since it was merely repaired the assessee could not be directed to again pay excise duty on the same product. This argument cannot be accepted in view of Sub Rule (3) of Rule 173 which reads as follows: (3) The goods or parts thereof retained in, or brought into, a factory or a warehouse in accordance with the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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