2008 (3) TMI 25 - SC - Central Excise

Court affirms swaging on MS tubes as manufacture under Central Excise Act, 1944.

The court dismissed the civil appeals, affirming that swaging on MS tubes constitutes manufacture under Section 2(f) of the Central Excise Act, 1944. The ... Manufacture - process incidental to manufacture - lasting change - distinguishable identity - metal forming - swaging - classification where goods remain under same tariff heading - Chapter Note 3 - drawing or redrawing amounting to manufactureManufacture - process incidental to manufacture - lasting change - distinguishable identity - swaging - metal forming - Whether the process of swaging duty-paid MS tubes amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944. - HELD THAT: - The Court construed 'manufacture' under Section 2(f) as including only those 'processes' which are incidental or ancillary to manufacture and which are integral to producing a finished product that acquires a lasting change and a distinguishable identity. The process must impart a change of lasting character so that a new finished product, distinguishable in form, shape or use, comes into existence. Drawing on principles of production technology, the Court treated swaging as a metal forming operation in which dies and rotary hammering impart permanent contours (folds, profiles) to a plane MS tube. The rotary swaging machine, using dies of different shapes, produces profiles that are identified by distinct codes/design numbers and result in altered form and user (for example decorative use or enhanced grip) as compared to the original plain tube. Consequently, swaging effects a lasting change and creates a workpiece with a distinguishable identity and therefore falls within the statutory concept of 'manufacture'. The Court distinguished earlier precedents relied on by the assessee, holding that Bharat Forge (mere change in length/size not amounting to manufacture) and Hindustan Poles (welding/joining of pipes not altering basic identity) do not apply to the facts where dies impart profiles and folds producing a new configuration. The Court therefore upheld the view that the process of swaging amounts to manufacture and allowed the Revenue's appeals. [Paras 15, 16, 17, 20, 21]The process of swaging of duty-paid MS tubes imparts a lasting change and produces a distinguishable workpiece and therefore amounts to manufacture under Section 2(f); the civil appeals are dismissed.Final Conclusion: Swaging of duty-paid MS tubes, performed by rotary swaging machines with dies that impart permanent profiles, constitutes 'manufacture' under Section 2(f) of the Central Excise Act, 1944; the assessee's appeals are dismissed with no order as to costs. Issues involved:1. Whether swaging constitutes manufacture under Section 2(f) of the Central Excise Act, 1944Rs.Analysis:The case involved civil appeals by the assessee against orders passed by CEGAT allowing appeals filed by the Revenue, contending that the process of swaging undertaken on duty-paid MS tubes amounts to 'manufacture' under Section 2(f) of the 1944 Act. The assessee, a small scale unit, purchased MS tubes classified under Heading 73.06 of the Central Excise and Tariff Act, 1985, and after cutting them into requisite lengths, subjected them to the swaging process using dies on a swaging machine. The key question before the court was whether swaging constitutes manufacture as per the legal definition.The court analyzed the relevant provisions, including Chapter Note 3 in Chapter 73, which states that for pipes and tubes of certain headings, processes like drawing or redrawing amount to 'manufacture'. Heading 73.06 covers 'Other tubes, pipes, and hollow profiles of iron or steel.' The court also referred to the definition of 'tubes and pipes' and 'hollow profiles' to distinguish between them. The definition of 'manufacture' under Section 2(f) was crucial in determining whether the swaging process qualified as manufacturing.The court emphasized that for a process to be considered manufacturing, it must result in a new finished product with a distinguishable identity, different physical shape, size, and use from the original product. The process must impart a change of lasting character to the raw material. In this case, the swaging process on the MS tubes using a rotary swaging machine with different dies was found to change the shape and user of the product, creating a distinct workpiece with a lasting character.Various technical aspects of metal forming and swaging were discussed, highlighting how swaging involves changing the shape of pipes or tubes using shaped hammers or dies. The court noted that the distinct shapes produced by the swaging machine indicated a new product emerging from the process. The court also distinguished this case from previous judgments related to welding or connecting pipes, emphasizing the unique nature of the swaging process and the resulting products.Ultimately, the court dismissed the civil appeals filed by the assessee, affirming that swaging in this case amounted to manufacture under Section 2(f) of the 1944 Act. The judgment clarified the distinction between mere changes in shape or size and processes that lead to the creation of new, distinguishable products, thereby upholding the Revenue's position on the duty liability for the swaging process on MS tubes.