TaxTMI 
TaxTMI 
2015 (11) TMI 322
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.... the Hon'ble Supreme Court to entertain such appeal under Section 35 L of the Central Excise Act 1944 (hereinafter referred to as the 'Act'). Submissions of the Appellant 3. Learned counsel for the appellant submits that the appeal was filed as back as in the year 2007 and it was admitted by orders dated 18.3.2010 read with order dated 18.11.2011 and as such the objection as to filing of separate appeal cannot be raised. With regard to the second preliminary objection, he submits that the issue involved in the present appeal is as to whether the bought out Pumps and own manufactured I.C. Engine put in single carton by the assessee would amount to manufacture of Power Driven Pumps (hereinafter referred to as the "PD Pumps"). Thus, the basic question involved is as to whether the aforesaid activity amounts to manufacture under Section 2(f) of the Act. If this question is answered in affirmative only then the question of exemption on the PD Pumps removed and sold by the assessee would arise. 4. On merit, he submits that the assessee has been manufacturing general purpose I.C. Engines capable of being used to discharge various functions like vibrator, concrete mixe....
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.... period April 02 to February 03 creating a demand of Rs. 3,28,507/- with respect to I.C. Engine cleared with bought out Pumps as pump sets and another order in original no.9-11 dated 31.1.2006 for subsequent period creating the duty demand of 1,78,08,035/- under Section 11 A of the Act adjudicating the show cause notices dated 9.6.2004 and 29.6.2005 were passed. Against these two orders-in- original separate appeals being appeal No. E/2619 of 2004 and E/1786 of 2006 were filed by the assessee before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, under Section 35-B of the Act and the appeals were allowed by Final Order No.831 and 832/06-EX dated 20.10.2006 which is a common order. Therefore, two separate appeals should have been preferred by the appellants before this Court. 7. On merit he submits that the assessee has manufactured I.C. Engine and purchased Pumps from M/s MEW and placed the same inside single carton and marketed it as pump sets in unassembled condition. Thus, I.C. Engines were used in factory of production of the assessee and were consigned as a single commodity which amounts to manufacture under Section 2(f) of the Act. The assembly of the said....
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....r placing of own manufactured I.C. Engine with bought out pump in a single carton would amount to manufacture under Section 2(f) of the Central Excise Act 1944? Question No.(i) 10. Section 35 G of the Act provides that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law. Section 35 L provides that an appeal shall lie to the Supreme Court from any judgment of the High Court delivered in an appeal under Section 35 G or on a reference made under Section 35 G by the Appellate Tribunal before 1st day of July, 2003 or on a reference made under Section 35 H. Clause (b) of Section 35 L provides that an appeal shall lie to the Supreme court from any order passed by the Tribunal relating among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of ....
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....riginal No.9-11 dated 31.1.2006. Question No.(iii) 13. Before we proceed to examine the legal issue, it would be expedient to notice undisputed facts which emerge from the order in original and the impugned final order of the Tribunal. 14. The assessee is engaged in the manufacture of portable gen set I.C. Engine and parts thereof and P.D. pump sets falling under chapter headings no.84.07, 84.09, 85.02,85.03 and 84.13 of the Schedule to the Central Excise Tariff Act, 1985. The assessee has been manufacturing general purposes I.C. Engines capable of being used to discharge various functions like vibrator, concrete mixer, pumping power generation etc. They have been clearing I.C. Engine, as such, for sale in the open market on payment of duty. They have also been clearing I.C. Engine for captive consumption without payment of duty for use in the manufacture of PD Pumps where both the Pumps and the I.C. Engine have been developed and manufactured by the assessee. Apart from this the assessee has also been removing I.C. Engine without payment of duty alongwith bought out P.D. Pump by placing both the items in a single carton and clearing the same as P.D. Pump set [model no. WS....
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....perusal of the invoices used by M/s MEW also reveal that the models of WSK and WMK series pertained to their "Mahendra" pumps. These are supplied with the Honda Engine Models GK-100, GK-200 & GK-300 in a single carton by M/s HSPPL for use in the manufacture of Pump Sets at dealer/ customer's end. The agreement between M/s MEW and M/s HSPPL clearly mentions that Mahendra' shall be embossed on the casing of Pump set and a name plate showing "Mahendra" shall also be affixed on the Pump itself. M/s HSPPL were also supplying two buyers manual with such combination of Pump and I.C. Engine, one pertained to their own I.C. Engine and the other pertaining to "Mahendra" pumps supplied by M/s MEW. These manuals separately provided the description and the functioning of I.C. Engine and the "Mahendra" pump. The packing of such bought out Mahendra Pump with own Honda I.C. Engine clearly makes the distinction between the Honda Mono Block pump set and the other Pump sets using bought out pumps in respect of which no manufacturing activity was taken place at M/s HSPPL. Hence it can be said that no manufacturing was taking place in respect of Mahendra pump. And since there ....
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....f own manufactured I.C. Engine by placing them in a carton containing bought out pump does not amount to manufacture of PD Pump Sets. Accordingly, the benefit of the Notfn. No.6/2002-CE dated 1.3.2002 is not available to M/s HSPPL in respect of I.C. Engines cleared with bought out Pumps as PD Pump Sets, I hold that M/s HSPPL should have discharged the duty liability on the I.C. Engines." 18. In the impugned order the tribunal has not considered the findings of fact based on crucial evidences recorded by the Adjudicating Authority. It merely referred to the circular of the CBEC and observed in paragraphs 5,6,7 and 8 as under: 5. We have perused the record and heard both sides at length. Much case law has also been cited by both sides on the issue of manufacture. 6. As already noticed, the appellant was discharging duty at the time of clearance of the PD pump packages after classifying them under 8413. The appellant described the item under sale as "Water Pump-WSK2020" etc. The dealer invoice produced, forming part of the record, describes the item as "Portable water Pumpset Honda-WSK 2020". Thus, the appellant as well as trade were recognizing the item cleared a....
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.... industry recognized PD pump sets as two varieties, one monoblock and the other "having two separable units whether coupled or not put/intended to be put on a common platform". Thus, the industry recognition of power driven pump is as a pump put together or intended to be put together on a common platform. In the appellant's case also, the carton contained a pump and an engine along with the platform on which the engine and pump are to be mounted. The packing contained all the items required from putting together at site, a power driven pump. Thus, the packing was a power driven pump. Central Excise law makes no distinction between a manufactured item cleared as an assembled integral unit or cleared as parts, because whether an item is fully put together or cleared as parts is merely a matter of convenience of packing and transport. In fact, even incomplete products, having the essential characteristics of a manufactured item get treated as the fully manufactured item for the purpose of levy. 8. From the above noted factual situation, we are clear that the packets removed by the appellants were, in fact, power driven pump sets and that by putting together an appropriat....
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....duty on such I.C. Engines which were merely put in a carton along with bought out Pump manufactured by M/s. MEW. The packing of bought out Mahindra pump with the I.C. Engine manufactured by the respondent assessee contained two buyers' manual, one pertain to their own I.C. Engine and other pertain to Mahindra Pumps purchased from M/s. MEW. These manuals separately provided the description and the functioning of I.C. Engine. The Mahindra Pump manufactured by M/s. MEW has been retained separately even on the printed sheet to be pasted on the packing box which bear the description "G.K. 200" with Mahindra WMK 2520 water pump". These facts clearly indicate that the I.C. Engines were not used by assessee within the factory of production for the manufacture of the P.D. Pump sets in question. 22. In view of the above discussion, we are of the view that the finding recorded by the Tribunal in the impugned order that by putting together a Pump and Engine and a platform the assessee had produced a new item viz. "P.D. Pump" is wholly baseless and also without consideration to the findings of fact based on relevant material and evidences recorded by the Adjudicating Authority. Merely pu....
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....d. 26. In the case of Commissioner of Central Excise Commissioner Batore Vs. Matri plex pump private Ltd 2015(322) ELT 6 SC (para 3 and 4), Hon'ble Supreme Court held as under: "In that view of the matter, we are of the considered opinion that being the Tribunal, a Statutory Authority and being vested with the responsibility of appreciating and recording findings of facts, it was expected that it would analyse and discuss the reasons for arriving at the said conclusion by the Commissioner before taking a contrary view. Considering the facts and circumstances of the case, we set aside the order of the Tribunal and remit back the matter to CESTAT for de novo consideration of the facts of the case after which a considered and reasoned decision shall be rendered by the Tribunal." 27. In view of the above discussion, we are of the view that the impugned order of the Tribunal can not be sustained and, consequently, deserve to be set aside and the case deserve to be remitted back to the Tribunal for de novo consideration of the facts of the case, the findings recorded by the Adjudicating Authority in the order in original and the evidences referred therein afte....
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....e that mere addition in the value, after the original product has undergone certain process, would not bring it within the definition of 'manufacture' unless its original identity also under goes transformation and it becomes a distinctive and new product." 32. In the case of XI Telecom Ltd. Vs. Superintendent of Central Excise Hyderabad (1999) 105 ELT 263 (AP) (para 11,12,13), the Andhra Pradesh High Court considered the law settled by Hon'ble Supreme Court on the question of 'manufacture' in the cases of Union of India Vs. Delhi Cloth General Mills AIR 1963 SC 791, South Bihar Sugar Mills Ltd. Vs. Union of India, AIR 1968 SC 922, Ujagar Prints Vs. Union of India (1989) 3 SCC 488 and Moti Laminates Pvt., Ltd Vs. Collector of Central Excise, Ahemadabad, (1995)3 SCC 23 and held as under: 11. The Supreme Court in DCM's case (supra) construing the definition of 'manufacture' observed the word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. While making the above observatio....
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....though the goods in which he was carrying on business were excisable goods being mentioned in the schedule but they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable of being marketed." The next decision to be considered is Porriils & Spencer (Asia) Ltd. v. CCE, New Delhi, (supra) while reiterating the test laid down in DCM's case it was held : "Every change does not necessarily fall within the expression 'manufacture' unless it is shown that the process has brought into existence any new product having a distinct identity in the commercial world. In the absence of any evidence in that behalf which the Revenue ought to have laid, it is difficult to come to the conclusion that excisable goods came into existence by the treatment of cotton and nylon yarn into a muiltiford yarn." 12. What emerges from the above is excise duty is leviable on goods manufactured. The expression manufacture means bringing into existence a new substance and does not mean merely to produce some change in a substance, however min....
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....39;ble Supreme Court held that mere cutting or silting of steel sheet does not amount to manufacture because identity of the product remains unchanged and the steel remains steel even after cutting no new different and distinct article emerges having distinct name, character and use. The Special leave to appeal filed by the Union of India against the aforesaid judgment of Delhi High Court was dismissed by Hon'ble Supreme Court, reported in 2005 (181) ELT A 68 (SC). 34. The judgment relied by learned counsel for the respondent assessee in the case of Western India Paints and Colour Co. Ltd. (supra) is clearly distinguishable on facts inasmuch as the aluminium paint was cleared by supplying aluminium paste in a specified quantity along with aluminium medium in a specified quantity in a single carton to facilitate their use as aluminium paint by the consumer as the aluminium paste, if, kept in a mixed form has no shelf life. Therefore, it was necessary to pack both the aluminium paste and aluminium medium in specified quantity for ready use as aluminium paint. 35. The case of Rajasthan State Chemical Works (supra) is also of no help to the respondent assessee as evident from....