2015 (11) TMI 322 - HC - Central Excise

High Court: Bought-out pump with I.C. Engine in single carton not 'manufacture' under Central Excise Act.

The High Court held that it had jurisdiction to entertain the appeal regarding whether placing a bought-out pump with a manufactured I.C. Engine in a ... Manufacture - whether the bought out Pumps and own manufactured I.C. Engine put in single carton by the assessee would amount to manufacture of Power Driven Pumps - Admissibility of exemption claim - Held that:- Clause (b) of Section 35 L provides that an appeal shall lie to the Supreme court from any order passed by the Tribunal relating among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Thus, the exclusion of power of the High Court to entertain an appeal under Section 35 G of the Act is limited to an order of the Tribunal relating, among other things to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Thus Section 35 G of the Act does not exclude the power of the High Court to entertain an appeal against an order passed by the Appellate Tribunal on the question of manufacture. Finding recorded by the Tribunal in the impugned order that by putting together a Pump and Engine and a platform the assessee had produced a new item viz. 'P.D. Pump' is wholly baseless and also without consideration to the findings of fact based on relevant material and evidences recorded by the Adjudicating Authority. Merely putting together one bought out item with own manufactured item in a carton does not involve any process amounting to manufacture under Section 2(f) of the Act. - activity of manufacture must involve any process incidental or ancillary to the completion of a manufactured product, or any process 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 any process which, in relation to the goods satisfied in the third schedule involves packing or repacking of such goods in a unit container or lebelling or relebelling 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. Mere addition in the value of a product would not amount to manufacture. To bring the process within the definition of manufacture, it must be shown that due to the process original identity of the product undergoes transformation and it becomes a distinct and new product. - impugned final order of the Tribunal arising from the order in original no.9-11 dated 31.1.2006 and remand the matter to the Tribunal to pass an order afresh - Decided in favour of Revenue. Issues Involved:1. Jurisdiction of the High Court under Section 35 G of the Central Excise Act, 1944.2. Requirement of filing separate appeals against each order passed by the Tribunal.3. Determination of whether placing a manufactured I.C. Engine with a bought-out pump in a single carton amounts to 'manufacture' under Section 2(f) of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Jurisdiction of the High Court under Section 35 G of the Central Excise Act, 1944:The primary question was whether the High Court had jurisdiction to entertain the appeal under Section 35 G of the Act. Section 35 G allows appeals to the High Court from orders of the Appellate Tribunal, except those relating to the rate of duty or the value of goods for assessment purposes. The court found that the basic question involved was whether the activity of placing a bought-out pump with a manufactured I.C. Engine in a single carton amounted to 'manufacture.' Since this issue did not pertain to the rate of duty or value of goods but rather to the definition of 'manufacture,' the High Court held that it had jurisdiction to entertain the appeal.2. Requirement of filing separate appeals against each order passed by the Tribunal:The Tribunal had passed a common order in two separate appeals filed by the respondent assessee. The appellants filed a single appeal against this common order. Section 35 G stipulates that an appeal shall lie to the High Court from every order passed by the Appellate Tribunal. The court observed that the appellants should have filed two separate appeals challenging the two final orders of the Tribunal. However, it decided to treat the present appeal as filed against one of the final orders. Consequently, the appeal was entertained against the final order arising from the order in original no.9-11 dated 31.1.2006.3. Determination of whether placing a manufactured I.C. Engine with a bought-out pump in a single carton amounts to 'manufacture' under Section 2(f) of the Central Excise Act, 1944:The court examined the facts and findings of the Adjudicating Authority, which stated that the activity of placing a bought-out pump with a manufactured I.C. Engine in a single carton did not amount to 'manufacture' under Section 2(f) of the Act. The Adjudicating Authority found that the identity of the bought-out pump and the manufactured I.C. Engine was retained separately, and no manufacturing process took place in respect of the PD Pumps with bought-out pumps in the factory of the assessee. The Tribunal, however, had concluded that the activity amounted to manufacture, relying on a circular from the CBEC and industry practices.The High Court noted that the Tribunal had ignored crucial findings of fact recorded by the Adjudicating Authority and had not properly analyzed the evidence. The court emphasized that mere addition in value or packaging of items does not constitute 'manufacture' unless the original identity of the product undergoes transformation, resulting in a distinct and new product. The court referred to various judgments, including those of the Supreme Court, which clarified that 'manufacture' involves bringing into existence a new product with a distinct name, character, and use.The court concluded that the Tribunal's finding that placing a pump and engine together in a carton amounted to 'manufacture' was baseless and not supported by the evidence. It held that the activity did not involve any process amounting to manufacture under Section 2(f) of the Act. Consequently, the court set aside the Tribunal's order and remanded the matter for de novo consideration, directing the Tribunal to consider the facts, findings, and evidence afresh and render a reasoned decision.Conclusion:The appeal was allowed to the extent indicated, and the matter was remanded to the Tribunal for a fresh decision in light of the High Court's observations and directions. The court emphasized the need for a thorough analysis of the evidence and proper consideration of the legal principles related to 'manufacture' under the Central Excise Act. No order as to costs was made.