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2015 (5) TMI 292

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....eir manufacturers), be made to pay excise duty again as a result of sterilization. The show cause notice alleged that sterilization brings about a change in the character of the final product, which now becomes disposable syringes and needles. Therefore, a new commodity having a different character has come into existence. In their reply to the show cause notice dated 1.10.1996, the petitioners claimed that the activity of sterilization would not amount to manufacture. They said that no new product comes into existence by merely sterilizing disposable syringes and needles which continue to be disposable syringes and needles post-sterilization. No new product, therefore, came into existence as a result of sterilization. 3. By an order dated 31.12.1997, the Assistant Commissioner Central Excise held that the process of sterilization was essential to complete manufacture before the products are sold in the market. This being so, the process of sterilization was found to be an integral and inextricable part of the manufacturing process to make the product marketable. It was further held that the process of sterilization brings about a transformation of the product by making something ....

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....ture and marketability 9. A duty of excise is levied on the manufacture of excisable goods. "Excisable goods" are those goods which are included in the schedules of the Central Excise Tariff Act, 1985. "Excisable goods" brings in the concept of goods that are marketable, that is goods capable of being sold in the market. On the other hand, manufacture is distinct from sale-ability. Manufacture takes place on the application of one or more processes. Each process may lead to a change in the goods, but every change does not amount to manufacture. There must be something more - there must be a transformation by which something new and different comes into being, that is, there must now emerge an article which has a distinctive name, character or use. When transformation does not take place. 10. When a finished product cannot conveniently be used in the form in which it happens to be, and it is required to be changed into various shapes and sizes so that it can conveniently be used, no transformation takes place if the character and the end use of the first product continue to be the same. An illustration of this principle is brought out by the judgment in CCE, New Delhi v. S.R. Tis....

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.... the following words - For processing on soap treatment the party uses soaps/soap flakes which are diluted in plain water in a tank. This solution is transferred to a Soaping Machine operated by power where different colours are added. The fabrics are then dipped in the solution which is heated with steam. After the colouring treatment and soap impregnation the wet fabrics are dried up with the aid of steam on passing the fabrics through rollers fitted with the aforesaid Soaping Machine. 4. In our opinion the said process cannot be said to be one which results in changing the identity of the cloth which is subject to the said treatment and the said process does not give rise to a new product which is marketable. The said process cannot, therefore, be regarded as a manufacturing process. We find that the Central Government itself, in another matter relating to M/s. Premier Tyres Ltd. has passed an Order on 17-5-1977 (page 83 of Paper Book) wherein, it has been held that the transformation brought about the dipping of cotton fabrics in a soap solution is not a permanent one; it is not an operation which results in the production of a new article which could be bought and sold as su....

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....vegetables and spices in the name of rice and spice. It was held that the said product in its primary and essential character was sold in the market as rice only, despite the addition of dehydrated vegetables and certain spices. Further, the rice remained in raw form and in order to make it edible it had to be cooked like any other cereal. As we have already seen, the same test was applied in Tungabhadra case (supra) and in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers, (1980) 3 SCR 1271. In that case, the process undertaken was to remove the inedible portions of Pineapple together with its outer cover and then slice such Pineapple and can the same after adding sugar as a preservative. It is important to note that the cans were sealed under high temperature and then put into boiling water for sterilization. It was held that there was no manufacture inasmuch as the essential character of the Pineapple had not changed. The Court said: "Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed....

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....0. In Brakes India Ltd. v. Superintendent of Central Excise, (1997) 10 SCC 717, the commodity in question was brake lining blanks. It was held on facts that such blanks could not be used as brake linings by themselves without the processes of drilling, trimming and chamfering. It was in this situation that the test laid down was that if by adopting a particular process a transformation takes place which makes the product have a character and use of its own which it did not bear earlier, then such process would amount to manufacture irrespective of whether there was a single process or several processes. 21. Similarly in Union of India v. J.G. Glass, 1998 (97) E.L.T. 5 (S.C.), this Court held that plain bottles are themselves commercial commodities which can be sold and used as such. By the process of printing names or logos on the said bottles, the basic character of the commodity does not change, they continue to be bottles. The Court said: "16. On an analysis of the aforesaid rulings, a two-fold test emerges for deciding whether the process is that of "manufacture". First, whether by the said process a different commercial commodity comes into existence or whether the identity....

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....laid down in the judgment leads to manufacture. Thus understood, this judgment does not lead to the result that merely because the unsterilized syringe and needle is of no commercial use without sterilization, the process of sterilization which would make it commercially usable would result in the sterilization process being a process which would amount to manufacture. If the original commodity i.e. syringes and needles continue as such post-sterilization, the second test would not lead to the conclusion that the process of sterilization is a process which leads to manufacture. This is because, in all cases, there has first to be a transformation in the original article which transformation brings about a distinctive or different use in the article. The test of integrated process without which manufacture would be impossible or commercially inexpedient. 25. It is at this point that the decision contained in Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works, (1991) 4 SCC 473 needs explanation. This Court was concerned with the language of a certain notification which read as follows: "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Centra....

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....rocess of manufacture. The handling for the purpose of transfer may be manual or mechanical but if power is used for such operation, it cannot be denied that an activity has been carried on with the aid of power in the manufacturing process. The use of diesel pump sets to fill the pans with brine is an activity with the aid of power and that activity is in relation to the manufacture. It is not correct to say that the process of manufacture starts only when evaporation starts. The preliminary steps like pumping brine and filling the salt pans form integral part of the manufacturing process even though the change in the raw material commences only when evaporation takes place. The preliminary activity cannot be disintegrated from the rest of the operations in the whole process of manufacture. Similarly, when coke and lime are taken to the platform in definite proportions for the purpose of mixing, such operation is a step in the manufacturing process. It precedes the feeding of the mixture into the kiln where the burning takes place. The whole process is an integrated one consisting of the lifting of the raw materials to the platform mixing coke and lime and then feeding into the ki....

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....ding was that the use of diesel pump sets to fill pans with brine is an activity which occurred with the aid of power and is in relation to manufacture. That is why it held that the process of manufacture of common salt from brine in salt pans is an integrated one whose operations are so inter-related that without any one of these operations the manufacturing process could not be completed. If, therefore, any one of several processes in relation to manufacture is carried on with the aid of power, the exemption under the notification would not apply. It was in that context that this Court held that where any particular process is so integrally connected with the ultimate production of goods that but for that process, the manufacture of such goods would be impossible or commercial inexpedient. Two things need to be noticed here. One is that what is spoken about is raw material which is subjected to several processes after which a final manufactured product emerges and two that the test of integral connection of a particular process with the ultimate production of goods that but for such process manufacture of goods would become impossible or commercially inexpedient was applied in th....

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....acteria. However, temperatures almost twice as high are usually required to destroy the spore cells. The discovery that heat, in the form of flame, steam, or hot water, kills bacteria made possible the advances of modern surgery, which is based on freedom from microorganisms, or asepsis, and prevention of contamination. Sterilization of all equipment used during an operation, and of anything that in any way may touch the operative area, is carried out scrupulously in hospitals. Physicians and nurses wear sterile clothing. Instruments are sterilized by boiling, by chemical antiseptics, or by autoclaving. In a physician's office needles for injections and any instruments used for treatment of wounds or other surgical procedures are also carefully sterilized, and other aseptic techniques are observed." In the Oxford Dictionary of Nursing, 'sterilization' is defined as: "the process by which all types of micro-organisms (including spores) are destroyed. This is achieved by the use of heat, radiation, chemicals, or filtration." 30. The added process of sterilization does not mean that such articles are not complete articles in themselves or that the process of sterili....

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....nt in Laminated Packings (P) Ltd. v. CCE, 1990 (49) ELT 326 held: "4. Lamination, indisputably by the well settled principles of excise law, amounts to 'manufacture'. This question, in our opinion, is settled by the decisions of this Court. Reference may be made to the decision of this Court in Empire Industries Ltd. v. Union of India [(1985) 3 SCC 314: 1985 SCC (Tax) 416]. Reference may also be made to the decision of this Court in CCE v. Krishna Carbon Paper Co. [(1989) 1 SCC 150: 1989 SCC (Tax) 42: (1988) 37 ELT 480] We are, therefore, of the opinion that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper. 5. Counsel for the appellant sought to contend that the kraft paper was duty paid goods and there was no change in the essential characteristic or the user of the paper after lamination. The fact that the duty has been paid on the kraft paper is irrelevant for consideration of the issue before us. If duty has been paid, then benefit or credit for the duty paid would be available to the appellant under Rule 56-A of ....