1988 (9) TMI 51 - SC - Central Excise

Assembling weighbridges held taxable as manufacture; both component and finished product liable to excise duty, appeal dismissed

SC held the appellant liable for excise duty on weighbridges, finding its assembling activity amounted to manufacture because it brought into existence a ... Manufacture - excisable goods - transformation test (distinctive name, character or use) - process incidental or ancillary to completion of manufactured product - abatement under rulesManufacture - excisable goods - transformation test (distinctive name, character or use) - process incidental or ancillary to completion of manufactured product - Whether the appellant's activity of assembling platform, load cells and indicating system at site amounts to manufacture of a weighbridge and thus creates excisable goods liable to duty - HELD THAT: - The Court applied the established principle that ''manufacture'' denotes a process which brings into existence new goods and requires transformation such that a new and different article emerges having a distinctive name, character or use. Section 2(f) of the Act was held to be inclusive, covering processes incidental or ancillary to completion of a product. On the facts, the appellant assembled the three components at site so that they operated as one machine; this activity produced a market recognised article known as a 'weighbridge.' The Tribunal's factual finding that assembly produced a complete weighbridge was accepted. Consequently the assembly process amounted to manufacture and the completed weighbridge was held to be excisable goods. The Court rejected the appellant's submission that doing only a part (the indicator system) precluded liability in respect of the end product: while parts may themselves be dutiable, the activity that creates the finished, distinct article renders the assembler a manufacturer liable to duty on that article. [Paras 2, 3, 4]Assembly of the three components into a functioning weighbridge constituted manufacture; the completed weighbridge is excisable and the appellant is liable to duty on it.Abatement under rules - Whether the appellant may claim abatement or adjustment in respect of duty paid on constituent parts - HELD THAT: - The Court observed that if duty had been paid on a part (for example, the indicator system) and the statutory rules provide for abatement, the appellant remains entitled to claim such abatement under the rules. This observation preserves the appellant's procedural right to seek abatement or adjustment as per applicable rules without affecting the primary finding of liability on the completed weighbridge. [Paras 3, 4]The appellant may claim abatement under the rules, if entitled, notwithstanding the finding that the completed weighbridge is excisable.Final Conclusion: Appeals dismissed; the Tribunal correctly held that on assembling the components the appellant manufactured an excisable weighbridge and is liable to duty on it, subject to the appellant's right to claim any abatement under the rules. Issues involved: Appeals under Section 35L of the Central Excises and Salt Act, 1944 regarding the liability to duty of manufacturing weighbridges.Summary:Issue 1: Manufacturing of Weighbridges The question before the Tribunal was whether the appellant, M/s. Narne Tulaman Manufacturers Pvt. Ltd., manufactured weighbridges and was liable to duty under the Act. The appellant claimed to have only manufactured the indicator system of the weighbridges, while the platform was obtained from others and the load cells were imported. The Tribunal found that the appellant brought the three components together, fitted and assembled them to create a new weighbridge, which was not excised before. The Tribunal held that as long as a weighbridge is made and completed, duty has to be paid on the complete machine. The definition of 'manufacture' under Section 2(f) of the Act includes any process incidental to the completion of a manufactured product, and the activity of assembling the components to create a new commercial product constitutes manufacture. The Tribunal's decision was based on established principles that a new and different article must emerge with a distinctive name, character, or use.Issue 2: Liability for End Product The appellant contended that it was only preparing a part of the weighbridge, which should be dutiable separately. However, the appellant's activity of assembling the components resulted in the creation of a new product known in the market as a weighbridge, which made the appellant liable to duty as a manufacturer of the end product. The Tribunal rejected the appellant's argument that if a part is dutiable, the entire end product should not be separately taxable. It was clarified that when both parts and the end product are separately dutiable, both are taxable. Therefore, the appellant's claim that it is only liable for the component part and not the end product was not accepted by the Tribunal.Conclusion: The Tribunal found that the appellant was liable for manufacturing the complete weighbridge and upheld the duty imposition. The appeals were dismissed, with a clarification that the order would not prejudice the appellant's right to claim abatement if entitled under the rules.