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TMI Blog2023 (2) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction of oil have to be replaced at times. At times, residuary portion of tubes or pipes upon cutting and fitting of operation etc., also arises as waste/scrap. It is undisputed that the appellant sells these waste and scrap to third parties. 3. The case of the Revenue is that the appellant is generating this scrap in the process of manufacture of excisable goods namely oil and, therefore, it is chargeable to excise duty. Excise duty totaling Rs. 76,23,366/- was, therefore, demanded in three show cause notices and was confirmed by the original authority and upheld on appeal, by the impugned orders. Penalties amounting to Rs. 47,74,082/- have been imposed upon the appellant. 4. Learned Counsel for the appellant submits that waste and scrap in the form of pipes and barrels only arises in the process of production of oil and this waste and scrap is not manufactured by the appellant. According to the learned Counsel unless the goods are manufactured, no central excise duty can be levied. He relies on several case laws and in particular Grasim Industries Ltd. versus Union of India [2011 (273) E.L.T. 10 (S.C.)] to assert that waste and scrap which is not generated as a result of man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods. ....... 23. We are in agreement with the submission that under the amended definition, which is an inclusive definition, it is not necessary that only in the section or chapter note it must be specified that a particular process amounts to manufacture. It may be open to so specify even in the tariff item. However, either in the section or chapter note or in the tariff entry it must be specified that the process amounts to manufacture. Merely setting out a process in the tariff entry would not be sufficient. If the process is indicated in the tariff entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purposes of identifying the product and the rate which is applicable to that product. In other words, for a deeming provision to come into play it must be specifically stated that a particular proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le product. The process in relation to manufacture means a process which is so integrally connected to the manufacturing of the end product without which, the manufacture of the end product would be impossible or commercially inexpedient. This Court has in several decisions starting from Tungabhadra Industries v. CTO, AIR 1961 SC 412, Union of India v. Delhi Cloth & General Mills Co. Ltd., AIR 1963 SC 791 = 1977 (1) E.L.T. J199 (S.C.), South Bihar Sugar Mills Ltd. v. Union of India, AIR 1968 SC 922 = 1978 (2) E.L.T. J336 (S.C.) and in line of other decisions has explained the meaning of the word "manufacture‟ thus : "14. The Act charges duty on manufacture of goods. The word "manufacture‟ implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use." ........ 14. In the present case, it is clear that the process of repair and maintenance of the machinery of the cement manufacturing plant, in which M.S. scrap and Iron scrap arise, has no contribution or effect on the process of manufacturing of the cement, which is the excisable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me other processes, such as, maintenance and repair of capital goods. To qualify as "incidental or ancillary to manufacture", the process has to be a process which is so integrally connected to the manufacturing of the end product, that without it, the manufacture of the end product would be impossible or commercially inexpedient. 8. In this case, the scrap which has been generated is mainly in the form of pipes. According to learned Authorized Representative, the pipes in this case have a significance because the entire oil is produced with the help of pipes, therefore, these are in the form of an input to the manufacturing process itself as opposed to other companies where they may be simply capital goods. The pipes do get broken or suffer from wear and tear and need to be replaced. The generation of these pipes as scrap is inextricably linked to the production of the excisable product namely, the oil itself. Therefore, the pipes in this case must be treated as having been generated in the process of manufacture of the final product. 9. Per-contra, according to the learned Counsel of the appellant, the pipes are in the nature of capital goods and are not inputs although the use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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