TaxTMI 
TaxTMI 
2013 (8) TMI 537
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.... stainless steel production. ELG Group is planning to set up a scrap yard in India to support the ELG Group's Indian business activities and strengthen its local presence. The new operation, just as ELG's other international subsidiaries, will feature the full scope of an operational unit that serves the stainless steel industry. Applicant proposes to process various grades of stainless steel scrap ('metal scrap') to produce 'blended metal scrap'. Blended metal scrap is required by the stainless steel manufacturers as a raw material for its manufacturing activity i.e. for manufacture of stainless steel products. The most economical way to produce stainless steel is by using scrap as basic raw material. Only specific grades of metal scrap e.g. grade 304 and 316 are directly usable as a raw material by the stainless steel manufacturers. The other grades of metal scrap are not directly usable as 'raw material' for manufacture of stainless steel products. 4. Metal scraps are classified into various grades, primarily on the basis of chemical properties/composition of the scrap. ELG India proposes to produce 'blended metal scrap', primarily of grade 304....
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....onmental and financial implications. The contamination of production facilities, semi finished and finished products may have disastrous consequences for customers. Radiation in scrap is a serious and global problem. Other steps involved are (3) Sorting grade wise (4) Cutting/Shredding/Crushing and sizing of oversize material (5) Bundling and briquetting (6) Blending Blending is the term used to describe the up-valuation of random raw materials by mixing various steel and stainless steel scraps into a homogeneous product that is fit for use by the stainless steel manufacturers. It is a sustainable manufacturing process to replace primary raw materials and at the same time utilize scarce resources more efficiently. The use of blends saves on iron ore, nickel ore and chrome ore alike. To get an efficient blend, the material, which can consist of small lots of possibly more than 1500 different alloys and equally many formats, has to be processed to an appropriate s....
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....turer' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.' 10. In the aforesaid background it is submitted by the applicant that the activity carried out by the applicant qualifies as and has to be treated as, 'manufacture', It is urged that the definition of 'manufacture' is an inclusive one. 11. The Revenue in its response has submitted inter alia as follows: In the activity proposed to be undertaken by the applicant there shall not be any essential difference in the identity between the original commodity and the processed article and hence it will not be possible to say that the original commodity was consumed in the manufacture of another article. The original commodity may undergo a degree of processing but it shall retain its original identity, hence, cannot be considered as an article manufactured out of another commodity. The two fold test laid down by the Hon'ble Supreme Court of India in the case of Union of India v. J.G.Glass Industries Ltd, 1998 (97) ELT....
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....duction furnaces. Subsequently the Commissioner also submitted opinions dated 12/06/2013 and 19/06/2013 obtained from Director, National Institute of Secondary Steel Technology, Mandi Govindgarh. Among other things, the opinions state the following: ''Apparently there seems to be no difference between the final blended product and conventional 304 grade. Usually for making 304 grade of stainless steel, scrap composition is used as non-blended. As there is no production unit existing using the proposed methodology, final conclusions are to be drawn on the basis of documents submitted only. Blended stainless steel scrap of Grade 304 intended to be produced by the applicant is not a distinct commercial product but it is in the same form of metallic scrap to be used as a feed stock of the manufacturing system of final grade 304 products. The applicant in their proposal indicated the use of other type of scraps in different percentage having varying elemental contents and mi....
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.... become transformed into the basic or essential properties. (See Deputy Commissioner of Stales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Coco Fibres [1992] Supp (1) SCC 290). 14. 'Manufacture' implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one case to another. There may be several stages of processing, and a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can not longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. 'Process' in manufacture or in relation to manufacture implies not o....
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.... or several processes 'manufacture' takes place and liability to duty is attracted. Etymologically the word 'manufacture' properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view, is a question depending upon the facts and circumstances of the case. (See Empire Industries Ltd. v. Union of India [1985] 3 SCC 314). 18. The aforesaid aspects were highlighted in Kores India Ltd. v. Commissioner of Central Excise [2005] 1 SCC 385 and India Cine Agencies v. Commissioner of Income etc. (2009) 308 ITR 98 (SC). 19. The matter can be looked at from another angle. In CIT v. Sesa Goa Ltd. [ 2004] 271 ITR 331 the Hon'ble Supreme Court considered the meaning of the word 'production'. The issue in that case was whether the extraction and processing of iron ore amounted to manufacture or not in view of the various processes involved and the various processes would involve production within the meaning of section 32A of the ....
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....ts which emerge in the course of manufacture of goods'. The expressions 'manufacture' and 'produce' are normally associated with movables, articles and goods, big and small but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road and a building. (See Moti Laminates v. Collector of Central Excise [1995] 3 SCC 23).' 21. In Advanced Law Lexicon, 3rd Edn. by P.Ramanatha Aiyar, the expression 'production' and 'manufacture' are described as under: ''Production' with its grammatical variations and cognate expressions; includes i. packing, lebelling, relabelling of containers. ii. Re-packing from bulk packages to retail packages, and iii. The adoption of any other method to render the product marketable 'Production' in relation to a feature film includes any of the activities in respect of the making thereof. (See Cine Workers and Cinema Theatre Workers (Regulation of Employment) Act (50 of 1981), section 2 (i)). ....
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....s' can be a process in manufacture or process in relation to manufacture of the end product, which involves bringing some kind of change to raw material at various stages by different operations. The process must have effect of bringing change or transformation in raw material and also lead to creation of any new or distinct and excisable product. Process in relation to manufacture means a process so integrally connected to manufacturing of end product without which, manufacture of end product would be impossible or commercially inexpedient. (See Grasim Industries v. Union of India, (2011) 10 SCC 653: (2011) 273 ELT 10. 27. Every change in an article is not 'manufacture'. 'Manufacture' means production of an article for use from raw or prepared materials, by giving these materials new from, quality, properties or combinations whether by hand labour or machinery. It also includes any process incidental or ancillary to process of manufactured product. It implies a change in an article as a result of treatment, labour and manipulation so as to be recognized as a new and different article having a distinctive name, character or use. 28. The word 'manufacture' is a compound word o....
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....ery change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character and use. In this case, the word 'manufacture' has various shades of meaning but unless defined under the Act it is to be interpreted in the context of the object and the language used in the sections. It would not be applicable in cases where only processing activity is carried out. Further, such production activity must be by an industrial undertaking. 35. In CCE v. Markfed Vanaspati & Allied Industries, (2003) 4 SCC 184, it was held that the burden to prove that there is manufacture is on the Revenue. In that case, the question that arose was whether the goods became excisable merely because they fell within a tariff item. 'Spent earth' was 'earth' on which duty had been paid. It remained earth even after the processing. Thus, if duty was to be levied on it again, it would amount to levying double duty on the same product. It was further observed that merely because an item falls under tariff entry, it cannot be presumed or deemed that there is manufacture. ....
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....r refining, it remained edible vegetable oil. As actual manufacture has not taken place the deeming provision cannot be brought into play in the absence of its being specifically stated that the process amounts to manufacture. (See Hindustan Poles Corpn. V. CCE, (2006) 4 SCC 85. 41. In Laminated Packaging (P) Ltd. V. Collector of Central Excise 1990 (49) ELT 326 (SC) it was held that there can be 'manufacture' even if both inputs and final products fall within same tariff heading if a different identifiable commercially known product comes into existence. 42. The steps to be put in place in the proposed activity have been detailed. It has not been denied that scrap of specific grades alone can be used in the manufacture of stainless steel and that the processes to be adopted by the applicant would result in the transformation of their raw materials, namely, metal scrap of assorted sizes, grades, composition etc. into metal scrap of specific grades which is directly usable for manufacture of stainless steel. Therefore what emerges from the processes would be a product having distinct identity and use, different from the raw material from which it is made. We have also noted th....