AI Drafter 
TaxTMI 
TaxTMI 
2016 (2) TMI 283
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....to them while Revenue has filed the appeal on the ground that the first appellate authority has not quantified the demand, interest thereof and penalty on setting aside the order-in-original. 4. The relevant facts which arise for consideration are during the period 2003-04 and 2004-05 the appellant-assessee under commercial invoices were clearing the items such as impure dowtherm diphyl; old and damaged PTA scrap, wash water - 50% concentration of lactum, old and used sludge oil; old and used all types of oil, spin finish oil and old assorted bearings. During the course of audit in February 2005, it was noticed by the audit team that the appellant has not discharged any duty liability on these items which were cleared form the factory premises of the appellant-assessee. Show cause notice dated 29/05/2008 was issued to the appellant demanding duty on these items. The appellant-assessee contested the show cause notice on merits as well as on limitation. The adjudicating authority, after considering the submissions made and relying upon the judgment of the Tribunal in appellant's own case in respect of some other items, dropped the proceedings initiated by the show cause notice....
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....be allowed and the assessee's appeal be rejected. 7. I have considered the submissions made by both the sides. The issue for consideration is whether the items i.e. impure dowtherm diphyl; old and damaged PTA scrap, wash water - 50% concentration of lactum, old and used sludge oil; old and used all types of oil, spin finish oil and old assorted bearings cleared from the factory premises of the assessee are liable to duty. It is on record that the items on which duty demands are made are arising during the course of manufacture of the final products for the period in question. It is also undisputed that the assessee-appellant is clearing the products on commercial invoices and gets some consideration for the said items. At the outset, on perusal of the items which are cleared from the factory premises, description as per the annexure to the show cause notices, it may be seen that they are either used, old or damaged wash water, old and used sludge oil and old assorted bearings. The description itself would indicate that these products are not manufactured nor they are associate product and therefore cannot be said to be distinct products as contended by the learned Department....
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....or ancillary to the completion of the manufactured product. This 'any process' can be a process in manufacture or process in relation to manufacture of the end product, which involves bringing some kind of change to the raw material at various stages by different operations. The process in manufacture must have the effect of bringing change or transformation in the raw material and this should also lead to creation of any new or distinct and excisable product. The process in relation to manufacture means a process which is so integrally connected to the manufacturing of the end product without which, the manufacture of the end product would be impossible or commercially inexpedient. This Court has in several decisions starting from T ungabhadra Industries v. CTO, AIR 1961 SC 412, Union of India v. Delhi Cloth & General Mills Co. Ltd., AIR 1963 SC 791, South Bihar Sugar Mills Ltd. v. Union of India, AIR 1968 SC 922 and in line of other decisions has explained the meaning of the word 'manufacture' thus: "14. The Act charges duty on manufacture of goods. The word 'manufacture' implies a change but every change in the raw material is not manufacture. Th....
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....re treated as marketable and thus excisable. 8. However, before the aforesaid fiction is to be applied, it is necessary that the process should fall within the definition of "manufacture" as contained in Section 2(f) of the Act. The relevant portion of amended Section 2(f) reads as under: Section 2(f) - "manufacture" includes any process - (i) incidental or ancillary to be completion of a manufactured product; (ii) which is specified in relation to any goods in the section or Chapter notes of [The First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or] (iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such gods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; and the word "manufacture shall be construed accordingly and shall include not only a person who employs hired labour in theproduction or manufacture of excisable goods, but also any person who engaged....