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TMI Blog2017 (5) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... cisable as a result of their marketability does not arise - The process to which old tyres are subject to produce two or more pieces of cut tyre is not ‘manufacture’ within the meaning of Section 2 (f) of the CE Act. Whether the decision of this Court in Modi Rubber Limited v. Union of India [1986 (12) TMI 41 - HIGH COURT OF DELHI AT NEW DELHI] requires to be reconsidered? - Held that: - There can be no manner of doubt that by referring to the decision of Modi Rubber Limited v. Union of India and thereafter coming to the conclusion that cinder was not 'manufactured', the Supreme Court in Union of India v. Ahmedabad Electricity Co. Limited [2003 (10) TMI 47 - SUPREME COURT OF INDIA] impliedly approved the decision of this Court in Modi Rubber Limited v. Union of India, where it was held that Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone though the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty. - The decision of this Court in Modi Rubber Limited v. Union of India does not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rucks. 4. According to the prevalent import policy, import of used and old tyres with one cut in the bead wire and import of used rubber tubes cut in two pieces is permitted without a licence from the Directorate General of Foreign Trade ('DGFT'). This ensures that the used tyres are not put to use again with minor or major reconditioning. It is also pointed out by the Petitioner that the tyres are cut into two-three pieces for ease of accommodation in the shipping vessels. The cost of transportation of tyre scrap with one cut is much higher than transportation of tyres cut into two or three pieces. 5. This is the second round of litigation. The Petitioner had earlier made a representation to the Government of India protesting against the imposition of 12% CVD. When there was no response to the said representation, the Petitioner filed W.P. (C) No. 8160 of 2014 which was disposed of by the following order on 2nd December 2014: "Mr Shukla appearing on behalf of respondent Nos. I. and 2 states that he has taken instructions to the effect that the representation dated 11.08.2014 filed by the petitioner will be considered and disposed of within one month. The learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Ltd. v. Collector of Central Excise & Customs, Bombay 1983 (14) ELT 2401 (Tri - Delhi), in which it was held that the crushing of waste rubber into powder does not amount to manufacture. It was held that "a simple act of crushing and powdering like this one should not in our opinion be taken to be synonymous with creation of a new product." It was found by the CEGAT that "the product keeps its original character, molecular structure, chemical identity etc." The appeal against the said decision of the CEGAT was dismissed by the Supreme Court on 20th November 1989 in Civil Appeal No. 4194 of 1984 inter alia observing that "the Tribunal has not only given a finding that the powder is secured by a mere process of crushing but also that the crushed product was not a new product. This is essentially a finding of fact." Likewise the decision of the CEGAT in Elgi Rubber Products Ltd. v. Collector of Central Excise, Madras 2002 (145) ELT 112 (Tri - Del.) was also affirmed with the Supreme Court dismissing the appeal on the ground of delay. This was followed in Gujarat Reclaim & Rubber Products Ltd. v. Commissioner of Central Excise, Pune 2009 (243) E.L.T. 426 (Tri. - Mumbai). 10. Mr. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India are subject to the processes of cutting into two or three pieces and the cut pieces of tyres are marketable could it be said that there has been a manufacture of cut pieces of tyre scrap from the old tyres? 14. As pointed out by the Supreme Court in Commissioner of Central Excise, Chandigarh-I v. Markfed Vanaspati & Allied Industries (supra) it requires to be examined whether the twin test of manufacture and marketability are satisfied. In particular, as pointed out in Commissioner of Central Excise, Bangalore-II v. Osnar Chemical Pvt. Ltd. (supra), it would be required to be examined if in producing cut pieces of tyres from old tyres there is transformation of a product into a new product "having a different identity, characteristics and use". 15. It must be noted that when this case was argued before the Division Bench, it was not pointed out by counsel on either side that the decision of the Division Bench of this Court in Modi Rubber Limited, Modi Nagar, U.P. v. Union of India (supra) had impliedly been approved by a three Judge Bench of the Supreme Court of India in Union of India v. Ahmedabad Electricity Co. Limited (supra). This led the Division Bench to pass the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture, because no one would produce any such degrading or even inferior thing. If the raw material of rubber compound has undergone some change in the process of manufacture so as to turn into waste or scrap, it cannot be equated with any finished product. There is a change but every change in the raw material is not manufacture. There is no transformation in case of waste/scrap of a new and different article. No one has brought into, existence a new substance having a distinctive name, character or use." xxxx xxxx xxxx xxxx xxxx "10. Rule 49 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules), provides for duty chargeable only on removal of the goods from the factory premises or from an approved place of storage. Payment of duty in respect of excisable goods is made when they are about to be issued out of the place or premises specified. Under second proviso to Rule 49, the proper officer may not demand duty due on any goods claimed by the manufacturer as unfit for consumption or marketing. The excisable goods lying in the licensed premises and found unfit for consumption or for marketing can be destroyed without payment of duty leviable thereon subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.1. The above decision of this Court was referred to and impliedly approved by the Supreme Court in Union of India v. Ahmedabad Electricity Co. Ltd. (supra). The question that arose for consideration before the Supreme Court was whether the 'cinder' - which was a waste that emerged from burning of coal in boilers - was an excisable commodity subject to levy of excise duty under Entry 26.21 to the First Schedule to the Central Excise Tariff Act ('CET Act')? It was inter alia contended by the Union of India that an item mentioned in the Schedule to the CET Act per se becomes excisable. It was contended that the charging provision was Section 3 of the Central Excises and Salt Act 1944 (CE Act) and therefore, both the tests were satisfied. 17.2 The first question before the Supreme Court which was answered against the Revenue was "whether inclusion of an item in the entries to the First Schedule to the Tariff Act per se makes the item exigible to excise duty?" It was explained that the words "excisable goods" occurring in Section 3 of the CE Act have been quantified by the words "which are produced or manufactured in India." Relying on the decision in Hyderabad Industries Limited v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry 26.21 of the Tariff Act." 17.5 The Supreme Court also referred to its decision in CCE v. Markfed Vanaspati and Allied Industries (supra) where excise duty was sought to be levied on 'spent earth' which resulted from the treatment of fatty substances. It was held that the 'spent earth' remained 'earth' even after processing though its capacity to absorb was reduced. No excise duty was leviable on 'spent earth'. 17.6 The Court in Union of India v. Ahmedabad Electricity Co. Ltd. (supra) proceeded to discuss the decision of this Court in Modi Rubber Limited v. Union of India (supra) as under: "34. In Modi Rubber Limited v. Union of India it was held that waste/scrap obtained not by any process of manufacture but in the course of manufacturing the end product was not exigible to excise duty. This was a case of manufacture of tyres, tubes etc. In the course of manufacturing process to produce the end product i.e., tyres, tubes, flaps etc. Waste was obtained in the shape of cuttings. It was held that this was not exigible to tax even though the waste may have some saleable value. The essential reason for this was that there was no transformation in the case of waste/scrap to a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second question posed before this Bench requires to be answered in the negative. Is the cutting of old tyres into two or more pieces, manufacture? 18. The above discussion should also suffice to answer in the negative the first question referred to this Bench, viz., whether the process to which used or old tyres are subject to produce two or more pieces of cut tyre is 'manufacture' within the meaning of Section 2 (f) of the CE Act? Nevertheless, the Court proceeds to discuss the other decisions referred to by both counsel in order that a comprehensive survey of the relevant case law is undertaken. 19. In CCE v. Tata Iron & Steel Co. Ltd (supra) a three Judge Bench of the Supreme Court was considering the excisability of zinc dross, flux skimming and zinc scallings arising as by-product during galvanisation of steel sheets. Following the decisions in Union of India v. Delhi Cloth and General Mills Company Limited AIR 1963 SC 791 and Commissioner of Central Excise, Chandigarh-I v. Markfed Vanaspati & Allied Industries (supra) the Supreme Court in CCE v. Tata Iron & Steel Co. Ltd (supra) disagreed with the Department that zinc dross, flux skimming and zinc scallings are 'ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of applicability of the 'twofold test'. The first part of the test involved ascertaining what the 'essential character' of the product that emerged through the process was. It was explained: "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 end use of the first product continue to be the same." 22.3 Reference was made to the decision in CCE-I v. S.R. Tissues Pvt. Ltd. (2005) 6 SCC 310 where "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 etc." This Court held that there was no manufacture as the character and 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. Another example of when "transformation does not take place" was "when foreign matter is removed from an article or additions are made to the article to preserve or increase its shelf life." In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 23. Turning to the case at hand, the products we are concerned with are used tyres and tubes. It is only when the old and used tyres and tubes reach a stage where they can no longer be used for automobiles that they are sold as scrap to dealers who in turn sell them to processors. The recycling process involves mixing crumb rubber with bitumen to make CRMB. Worldwide CRMB is made by mixing radial tyre crumb. Since Indian tyres are cross-ply and non-radial, the Petitioner imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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