Rubber lining in tanks not considered manufacturing for excise duty

The Tribunal held that the activity of rubber lining in tanks/vessels does not amount to a process of manufacture for excisability purposes. Previous judgments and the Apex Court's decision supported this view, emphasizing that rubber lining did not create new goods but extended the life of the tanks. The Tribunal set aside the duty demand, ruling in favor of the appellants based on the precedent that rubber lining is not classified as a manufacturing process under the Central Excise Act.

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Issues:
1. Whether the activity of rubber lining in tanks/vessels amounts to a process of manufacture for excisability.
2. Whether rubber lined tanks and naked tanks should be considered as different goods for excisability purposes.
3. Whether the Tribunal's previous judgments and the Apex Court's decisions support the classification of rubber lining activity as not amounting to manufacture.

Analysis:

Issue 1:
The appeals involved a common question of whether the activity of rubber lining in tanks/vessels on a job work basis constitutes a process of manufacture. The Collector (Appeals) upheld the duty demand, considering the rubber lining as a manufacturing process resulting in assessable duty. The appellants argued that previous judgments, including one by the Tribunal in the case of CCE, Bombay v. Industrial Roller Corporation, concluded that rubber lining on old duty paid vessels/tanks does not create new goods and is not a process of manufacture. They contended that the activity did not bring into existence any new goods, as supported by the Apex Court's decision in Lathia Industrial Supplier Pvt. Ltd. v. CCE. They emphasized that the new tariff did not change the nature of the activity, and there was no legislative intent to classify rubber lining as a manufacturing process under Section 2(f) of the C.E. Act.

Issue 2:
The Departmental Representative argued that rubber lined tanks and naked tanks should be considered as different goods due to functional differences, such as greater resistance to alkaline in rubber lined tanks. However, both types fell under the same heading without a separate entry or sub-heading. The contention was that value addition through rubber lining required duty payment, even without a distinct heading for rubber lined tanks. The Bench noted the absence of separate headings for naked tanks and rubber lined tanks, leading to the conclusion that they were not distinct goods for excisability purposes.

Issue 3:
Upon careful consideration of the submissions and previous judgments, the Tribunal concluded that the activity of rubber lining did not amount to the manufacture of new goods for excisability. The Tribunal had previously examined similar issues in the case of CCE v. Industrial Roller Corporation & Another and found that such activities did not result in the creation of new goods. The Apex Court's decision in Lathia Industrial Supplier Pvt. Ltd. v. CCE also supported this view, emphasizing that the activity only extended the life of the tank without constituting a manufacturing process. The absence of legislative intent to classify rubber lining as a manufacturing activity led the Tribunal to set aside the duty demand and allow the appeals, following the precedent and judgments referenced.

In conclusion, the Tribunal's judgment clarified that the activity of rubber lining in tanks/vessels on a job work basis did not amount to a process of manufacture for excisability purposes, as supported by previous decisions and the absence of legislative intent.

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