1990 (3) TMI 167 - AT - Central Excise

Recording sound on tapes not 'manufacture' under Excise Act. Appellant not liable. Appeal allowed.

The Tribunal held that recording sound on duty-paid magnetic cassette tapes does not amount to 'manufacture' under the Central Excises and Salt Act, 1944. ... Manufacture Issues Involved:1. Is mere recording of sound on duty-paid magnetic or cassette tapes a 'manufacture' in terms of the provisions of the Act, the Schedule, or otherwiseRs.2. Have the appellants manufactured 'excisable goods' and rendered themselves liable to pay the duty demanded or fines leviedRs.Issue-Wise Detailed Analysis:1. Is Mere Recording of Sound on Duty-Paid Magnetic or Cassette Tapes a 'Manufacture'Rs.The primary issue revolves around whether the process of recording sound on blank cassette tapes constitutes 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944. The appellant argued that mere sound recording does not amount to manufacturing as it does not result in a new commodity with a distinctive name, character, or use. This argument was supported by a reference to the Union of India & Others v. Delhi Cloth & Gen. Mills Co. Ltd. & Others case, which emphasized that not every change is manufacture and that transformation into a new article is necessary.The appellant also highlighted the ambiguity in Tariff Item No. 59 and contended that the Budget Speech by the Finance Minister for the Year 1982-83 indicated that the duty was intended for those who manufacture and record tapes, not for mere recording on blank tapes. The appellant cited cases like K.P. Varghese v. I.T.O. and Controller of Estate Duty v. V.R. Kanakasabai & Others to support the interpretation favoring the assessee in cases of ambiguity.Conversely, the Department argued that the language in Tariff Item No. 59 and the definition of manufacture under Section 2(f) clearly included the process of sound recording as a manufacturing activity. They cited the case of Hyderabad Asbestos Cement Products Ltd. & Another v. Union of India & Others, emphasizing that once an item is included in the Schedule, its validity cannot be questioned. The Department also referenced the Budget Speech to argue that commercial recordings are not exempt from duty.Upon analysis, the Tribunal noted that Section 2(f) provides an inclusive definition of manufacture, which does not explicitly include sound recording. The Tribunal concluded that recording sound on duty-paid cassette tapes is not a manufacturing activity as per the inclusive definition in the Act.2. Have the Appellants Manufactured 'Excisable Goods'Rs.The second issue concerned whether the appellant had manufactured 'excisable goods' as defined under Section 2(d) of the Act, which means goods specified in the Schedule as being subject to a duty of excise. The Tribunal examined Item 59 of the Central Excise Tariff, which describes articles used for sound recording, whether recorded or not.The Tribunal observed that the manufacture of magnetic or cassette tapes is complete without recording, and the term 'whether recorded or not' in Item 59 signifies that these tapes are excisable irrespective of recording. The Tribunal emphasized that the mere process of recording does not transform the blank tape into a new product and thus does not constitute manufacture.The Tribunal also considered the argument that once an article is named in the Schedule, it automatically becomes chargeable to duty. However, it rejected this argument, stating that the legislative intent is to levy duty only on goods that are manufactured, which involves the creation of a new product with a distinct identity.The Tribunal referred to the dissenting order in the case of Prabhat Associates v. Collector of Central Excise, which concluded that recording sound on duty-paid tapes is not manufacture. The Tribunal concurred with this reasoning.Conclusion:The Tribunal held that the appellant is not liable to pay any duty or fine for recording sound on duty-paid magnetic cassette tapes, as this process does not constitute manufacture under the Central Excises and Salt Act, 1944. The appeal was allowed, and the impugned order was set aside.