1998 (8) TMI 275 - AT - Central Excise

Construction cutting & welding not manufacturing for duty

The judgment concluded that cutting and welding activities for construction purposes, such as trusses, beams, and purlines, do not amount to manufacturing ... Manufacture Issues:1. Whether cutting and welding of structures like trusses, beams, and purlines amounts to manufacture.Analysis:The judgment dealt with the issue of whether the process of cutting and welding various structures like trusses, beams, and purlines constitutes manufacturing. The Addl. Collector, relying on precedent, concluded that mere cutting, welding, and assembling for building construction do not change the identity of the product and thus do not amount to manufacture. The Revenue argued that the name, character, and end-use of the product are crucial in determining dutiability. They contended that trusses and purlines, distinct from raw materials, were complete products in the factory and should be dutiable. Citing Supreme Court decisions, the Revenue emphasized the expansive definition of manufacture under Section 2(f) of the Act, encompassing processes beyond the natural meaning and specified in the tariff schedule. However, the respondents, supported by various precedents including decisions of the Tribunal and High Court, maintained that cutting, welding, and drilling for construction purposes do not amount to manufacture. They argued that no new distinct article emerges from such activities, aligning with the Tribunal's consistent stance on the matter.The judgment referred to previous decisions such as those in the cases of Aruna Industries, Tansi Engg. Works, Bajaj Tempo Ltd., and Kinetic Honda Motors Ltd. to support the argument that cutting and welding for construction purposes do not constitute manufacturing. The M.P. High Court, in the Bajaj Tempo Ltd. case, specifically ruled that erecting a shed using iron and steel components does not amount to manufacturing unless a new distinct article is created. Similarly, the Tribunal consistently held that processes like cutting, drilling, and welding of iron and steel products for construction purposes do not result in the production of new goods subject to duty. The Tribunal's decisions in cases like Orissa Construction Corpn. Ltd. and Tansi Engg. Works reiterated that activities like cutting to size, drilling, and welding do not transform the materials into dutiable goods. The judgment ultimately dismissed the Revenue's appeal, upholding the view that cutting and welding for construction purposes do not amount to manufacturing based on the established precedents and absence of contrary decisions from higher authorities.In subsequent appeals, the Tribunal followed the same line of reasoning, relying on past decisions such as Aruna Industries and Tansi Engg. Works, as well as the M.P. High Court's ruling in Bajaj Tempo Ltd. to allow the appeals and grant relief to the appellants. The consistent interpretation across various cases and the absence of conflicting judgments from higher courts led to the dismissal of the Revenue's appeals and the acceptance of the appellants' contentions regarding the non-dutiable nature of cutting and welding activities for construction purposes. The issue of whether cutting and welding constitute manufacturing was thoroughly considered in light of the established legal principles and precedents, resulting in the consistent application of the law across related cases.