TaxTMI 
TaxTMI 
2016 (10) TMI 274
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....d set-aside. Being aggrieved and dissatisfied by the order passed by the CESTAT, the present Tax Appeals have been preferred by the department raising following substantial questions of law: (i) Whether Hon'ble Tribunal has committed an error of law in holding that the activities for processing TMT coils into TMT bars/rods after de-coiling, straightening and cutting into size is identical to the activity in the case of M/s Faridabad Iron & Steel Traders Association Vs. Union of India ? (ii) Whether the activities for processing TMT coils into TMT bars / rods after de-coiling, straightening and cutting into size amounts to manufacturing process ? ARGUMENTS ADVANCED ON BEHALF OF APPELLANT 2. Learned counsel for the appellant has submitted that in the facts of the present case, TMT coil has been processed further by CASTINGS (India) INC.-respondent no.1 and the same is converted into brand name of 'TISCON' TMT Bars. This manufactured item is classifiable under Sub-Heading No. 7214.90 of the Schedule to the Central Excise Tariff Act, 1985. TMT coil is falling within Sub-Heading No. 7213.90 of the Act, 1985. The activities undergone for conversion of ....
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....rcentage of the cost of production and there is contravention of the provision of Section 4 and 6 of the Central Excise Act, 1944 and violation of Rules 4,6,8,9,10,11 and 12 of the Central Excise Rules, 2002 and as there was evasion of central excise duty for the different periods, the aforesaid show-cause notices were issued and they were held liable for payment of excise duty as well as the interest and penalty etc. It has further been submitted that TMT bars and TMT rods have been cleared from the factory of CASTINGS (India) Ltd. without payment of central excise duty. There is evasion of the duty by the CASTINGS (India) Ltd. and, hence, the central excise duty of Rs. 57,54,29,470/- (amount involved in Tax Appeal No. 21 of 2007 and Tax Appeal No. 23 of 2007) was confirmed and equal amount of penalty was imposed upon CASTINGS (India) Ltd. U/s 11 AC of the Central Excise Act,1944 to be read with Rule 26 of the Central Excise Rules, 2002. Penalty of Rs. 50,000/- was also imposed upon TISCO Ltd.-Respondent no.2. Interest at the appropriate rate has also been held as leviable by the respondent no.2. For Tax Appeal no. 22 of 2007 the excise duty assessed was Rs. 4,39,76,279/- and e....
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....n 2004 (178) ELT 1099 (DEL) (b) U.O.I. Vs. Faridabad Iron & Steel Trader Association reported in 2005 (181) ELT A 68 (SC) (c) Commissioner of C. Ex. Mumbai Vs. Rajpurohit GMP India Ltd. reported in 2008 (231) ELT 577 (SC) (d) Commissioner Vs. Bemcee Ltd. reported in 2010 (256) ELT A 16 (SC) (e) Commr. Of C.Ex. Chandigarh-I Vs. Markfed Vanaspati & Allied Indus reported in 2003 (153) ELT 491 (SC) (f) Prabhat Sound Studios Vs. Additional Collector of Central Excise reported in 1996 (88) ELT 635 (SC) (g) Commissioner of C.Ex. Chennai-II Vs. Tarpaulin International reported in 2010 (256) ELT 481 (SC) (h) Commissioner of Central Excise Vs. S.r. Tissues Pvt. Ltd. reported in 2005 (186) ELT 385 (SC) (I) Servo-Med Industries Pvt. Ltd. Vs. Commissioner of C.Ex. reported in 2015 (319) ELT 578 (SC) (j) Commissioner of C.Ex. Vs. Tejo Engineering Services P.Ltd. reported in 2015 (322) ELT 418 (SC) (k) Satnam Overseas Ltd. Vs. Commissioner of Central Excise reported in 2015 (318) ELT 538 (SC) (l) Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC) (m) H....
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....he present case, there is no addition of any item like preservative, sugar, etc. It is only basically cutting and nothing beyond that and for easy cutting of the TMT coils firstly de-coiling is must then straightening and thereafter cutting. In fact, there is no change in the original commodity. No new commodity has been manufactured and, hence, these Tax Appeals may not be entertained by this Court as there is no substantial question of law involved in these Tax appeals. It is also submitted that merely because the aforesaid two commodities might have been covered under two sub-headings of Central Excise Tariff Act, 1985 that does not mean that manufacturing process is undertaken by the CASTINGS India Ltd. unless there is Section note or Chapter note. Thus, what is to be appreciated is not the different Tariff entries,but, the manufacturing process, and by the said manufacturing process whether a "commercially different" item has been manufactured or not ? The test to be applied is: whether essential character of the product is changed or not ? In the facts of the present case, essential character of the TMT coil remain as it is. The issues which are raised in these Tax Appeals ar....
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....ized as a new and distinct article that has emerged as a result of processes then a manufacture can be said to have taken place. This is the test to be applied for arriving at a conclusion whether the process applied upon the product amounts to manufacturing or not. It has been held by the Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Trader Association Vs. Union of India reported in 2004 (178) ELT 1099 (Del) in paragraph no. 85,86 and 90 which are as under: "85. In the light of ratio of various judgments the generally accepted test for imposing excise duty is to ascertain whether the manufacturing in fact had taken place or not ? It is imperative to apply this test to ascertain whether the change or series of changes brought about by the application of processes take the commodity to the point where , commercially it can no longer be regarded as the original commodity but is instead recognized as a distinct and new article that has emerged as a result of processes. 86. Reverting to the facts of this case, Steel coil is basically sheet in running length. When it is produced by the manufacturer's at their end and when it is folded ....
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....he processes applied upon it, then also it will not tantamount to manufacture as reported in 2010 (256) ELT A 16 (SC) [Commissioner V. Bemcee Ltd.] If the resultant product maintains its original character then there is no manufacturing at all, even if some processes undergone like cutting, slitting/sawing etc. as held by the Hon'ble Gujrat High Court in the case of Commissioner of Customs Vs. Posco India Delhi Steel Processing Centre Pvt. Ltd. reported in 2014 (299) ELT 263 (Guj). If no new substances emerge there is no manufacturing at all. There may be addition of sound in a compact disc (CD) or there may be addition of the sound in blank tapes, but, that process does not tantamount to manufacture as held by the Hon'ble Supreme Court in the case of Prabhat Sound Studios Vs. Additional Collector of Central Excise reported in 1996 (88) ELT 635 (SC). Unless there is a distinct marketable commodity produced by the manufacturer, the commodity cannot be said to have been manufactured. Every change is not a manufacture. Stitching of Tarpaulin sheets and eyelets does not change the basic character of the raw material and the end product does not bring ....
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....o take place. This court in the case of Union of India v. Delhi Cloth and General Mills, [1977(1) E.L.T. (J199)] referring to the meaning of expression manufacture explained in the case of Anheuser-Busch Brewing Association v. United States, stated: " Manufacture implies a change but every change is not manufacture and yet every 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 or use." 23. Is there any manufacture when Tarpaulin sheets are stitched and eyelets are made ? In our view, it does not change basic characteristic of the raw material and end product. The process does not bring into existence a new and distinct product with total transformation in the original commodity. The original material used i.e. , the tarpaulin, is still called tarpaulin made-ups even after undergoing the said process. Hence, it cannot be said that the process is a manufacturing process. Therefore, there can be no levy of central Excise duty on the tarpaulin made-ups. The process of stitching and fixing eyelets would ....
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....r slitting and cutting, in the table napkins, in the toilet rolls and in the facial tissues." (Emphasis supplied) In view of the aforesaid decisions if the characteristics of the raw material and final product remain as it is, there is no manufacture at all, even though, there is process of unwinding, cutting/slitting and packing. The product emerging out of the process applied upon the raw material must be commercially different and marketable product. To amount to manufacture, there must be transformation by which a new and different article emerges which has a distinctive name, character or use. Mere sterilizing process of removal of foreign material from goods complete in themselves, is not manufacturing at all, as has been held by the Hon'ble Supreme Court in the case of Servo-Med Industries Pvt. Ltd. Vs. Commissioner of C.Ex., Mumbai reported in 2015 (319) ELT 578 (S.C.) at paragraph nos. 9,10,20 and 27 which reads as under: "Distinction between manufacture 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 ....
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....egory. (2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process. (3) Where the goods are transformed into something different and / or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place. (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place." (Emphasis supplied) It has been held by the Hon'ble Supreme court in the case of Satnam Overseas Ltd. Vs. Commissioner of Central Excise, New Delhi reported in 2015 (318) ELT 538 (SC) at paragraph no. 9 which reads as under: "9. From the aforesaid arguments advanced by counsel on the either side, it is cl....
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....the cutting of TMT coil is manufacturing or not ? Various decisions have been pointed out to this court which have discussed the process of cutting. It has been held that cutting per-se is not manufacturing at all. It is held by the Hon'ble Supreme Court in a case of The Deputy Commissioner, Sales Tax (Law), Board of Revenue (Tases), Ernakullam vs. Pio Food Packers reported in 1980 (6) ELT 343 (SC) that the process undertaken by the assessee was to wash the pineapple and then to remove its inedible portion. Thereafter, it was cut into slices and slices were filled in canes after adding sugar as preservative. Thereafter, canes would be sealed under temperature and then put in boiled water for sterilization. The question that arises in this decision is as to whether this process amounts to manufacture ? The answer given by the Hon'ble Supreme Court is in negative and it has been held that even if the original commodity experienced a change, such change would not amount to manufacture unless, it ceased to be the original commodity and a new and distinct article is produced therefrom. It has been held by the Hon'ble Supreme Court in the case of Aman Marble Industri....
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.... is not manufacturing at all, as no new and distinct commercial product came out. The end product remains as it is. In the facts of the present case also original identity of the TMT coil remains as it is, even after converted into TMT bars and rods. It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise MumbaiV Vs. Swastik Rayon Processors reported in 2007 (209) ELT 163 (S.C.) that the process of twisting and doubling of cellulosic filament yarn with a blended yarn comprising polyester and viscose does not amount to manufacture because no new commodity has emerged by doubling or multi folding of the yarn. As cutting per-se does not tantamount to manufacture, likewise, welding of stepped transmission poles/pipes or joining of three pipes, one with other, of different dimensions to obtain a desired length, can by no stretch of imagination be brought within category of manufacture as no new marketable product is produced as has been held by the Hon'ble Supreme Court in the case of Hindustan Poles Corporation Vs. Commissioner of C.Ex. Calcutta reported in 2006 (196) ELT 400 (SC) In the case reported in 2004 (178) ....
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....nt of the Delhi High Court and withdraws the earlier Circular dated 7th September, 2001. Thus, the position is now made clear that cutting and slitting of steel sheets and polyester films used for lamination purposes do not amount to manufacture according to Board which is binding on the Department. Shri Vikash Sharma learned counsel appearing on behalf of the Department, however, contended before us that in the present case the show cause notice alleges that sheets of various sizes which emerged after the slitting process were again diepunched on the press machine and the diepunched pieces were sealed by heat leaving three sides open which, according to the learned counsel, amounted to manufacture. It was urged that this aspect needs to be remitted by this Court to the Adjudicating Authority for fresh consideration. We find no merit in this argument for the simple reason that in these cases we are concerned with the period up to 2001. At that time the previous Circular dated 7th September, 2001 held the field. That Circular was applied for the past period. That Circular essentially proceeded on the basis of interpretation of the tariff items and not on examination of the entire pr....
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.... in the jumbo roll enumerated above is different from the characteristics of the tissue paper in the form of table napkin, toilet roll and facial tissue. In the present case, the Tribunal was right in holding that the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper, after slitting and cutting, in the table napkins, in the toilet rolls and in the facial tissues." 14. Applying the above tests, we hold that no new product had emerged on winding, cutting/slitting and packing. The character and the enduse did not undergo any change on account of the above mentioned activities and, therefore, there was no manufacture on first principles. 16. In the case Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur reported in 2004 (174) E.L.T. 145, this Court held that if a process is indicated in a tariff entry without specifying that the same amounts to manufacture then indication of such process is merely for identifying the product. For a deeming provision to come into play, it must be specifically stated that a particular process amounts to manufacture and in its absence, the commodity would not beco....
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.... 538 (SC) in paragraph nos. 12,13,17 and 18 as under. "12. Though the authorities below had decided against the assessee, this Court reversed the said view holding that the said process would not amount to 'manufacture' as the process involving manufacture does not always result in the creation of a new product. In the instant case notwithstanding the manufacturing process, it could not be said that a transformation had taken place resulting in the formation of a new product. The relevant portion of the judgment is reproduced below: "30. In our view, the process of manufacture employed by the appellant-company did not change the nature of the end product, which in the words of the Tribunal, was that in the end product the "betel nut remains a betel nut'. The said observation of the Tribunal depicts the status of the product prior to manufacture and thereafter. In those circumstances, the views expressed in the D.C.M General Mills Ltd. (Supra) and the passage from the American judgment (supra) become meaningful. The observation that manufacture implies a change, but every change of not manufacture and yet every change of an article is the result of treatmen....
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....he generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. 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 there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no 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. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity. 5. A large number of cases has been placed before us by ....
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....es Motor Freight Lines v. Frosen Food Express, where the U.S. Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken. It was pointed out: "Killing, dressed and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasteurising, homogenizing, adding vitamin concentrates, standardizing and bottling." It was also observed: "........ there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton seed, as well as the dressed chicken, have gone through a processing stage. But neither has been 'manufactured' in the normal sense of the word. Referring to AnheuserBusch Brewing Association v. United States the Court said: "Manufacture implies a change but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is ne....
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....rs/Rods. (b) Mind set or satisfaction of customers for TMT Bars/Rods. (c) Demand in the market of TMT Bars/Rods in comparison with demand of TMT coils. Unless the end product is different, distinct and separate marketable from raw material, there is no manufacture at all, even though the end product fetches higher price. It has been held by the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) ELT 209 (SC) in paragraph no. 7 which is as under: "7. This Court was also taken through the processes, which are undergone by the manufacturer and which have been set out in some of the orders passed by the Commissioner. It was submitted that the raw material is a rod falling under tariff item 72.13 and /or 72.15 whereas after the process a distinct and separate marketable product falling under tariff item 72.17 has come into existence. It was submitted that the market price of both the products is also different inasmuch as the cost of the raw material was approximately Rs. 13,000/per metric ton whereas for the final product the market price was approximately Rs. 15,000/per metri....
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....lities that Tariff Item 59 is categorized as it is. But it is altogether different to say that by reason thereof the recording of sound on blank tapes, as done by the appellant on jobwork basis, is a manufacturing process. As the Tribunal in M. Basheer Ahammed's case has rightly pointed out, even such a prerecorded tape can have the sound erased from it and it can be used again for recording other sound. 8. We are in agreement with the view taken by the dissenting Member, and in M. Basheer Ahammed's case, that no process of manufacture is involved as afore stated. It is therefore, unnecessary to go into the alternative argument based on an exemption notification." (Emphasis supplied) In view of the aforesaid decisions if on a job work basis, the assessee is recording sound in spool magnetic tapes, no process of manufacture is involved even though there may be value enhancement in the end product in comparison to the raw-material. It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt.Ltd. reported in 2005 (186)ELT 385 (SC) that value addition, without any change in the name, cha....
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....39;ble Supreme Court in several decisions. It has been held by the Hon'ble Supreme Court in a case reported in 2003 (153) ELT 491 (SC) at paragraph no. 6 that merely because there is change in the tariff item for the end product it does not become excisable. To become excisable goods, there should be manufacturing and the goods must be marketable. It has been held by Hon'ble Supreme Court in a case reported in 1996 (88) ELT 635 (SC) at paragraph no. 5 that after recording of the sound of magnetic cassettes or tapes or spool magnetic tapes, the end product may be covered by another tariff entry, but, the process of recording of sound of such tapes does not tantamount to manufacturing. It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. S.R.Tissues Pvt. Ltd. reported in 2005 (186) ELT 385 (SC) in paragraph no. 19 which is as under: "19. Applying the above tests to the facts of the present case, we hold that mere mention of a product in a tariff heading does not necessarily imply that the said product was obtained by the process of manufacturing. That, just because the raw material and the finished prod....
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.... also a wire. All that is done is that the gauge of the rod is made thinner and the product is finished a little better. In our view the earlier decisions of the Tribunal are correct. There is no manufacture of a new product. Merely because there are two separate entries does not mean that the product becomes excisable. The product becomes excisable only if there is manufacture." (Emphasis supplied) Thus, merely because there are two separate entries for the raw material and the end product that does not mean that the end product becomes excisable. The end product becomes excisable only if there is manufacture. It has been held by the Hon'ble Supreme Court in the case of Hindustan Poles Corporation Vs. Commissioner of Central Excise reported in 2006 (196) ELT 400 (SC) at para 37 which is as under: " 37. We have heard learned counsel for the parties at length. We have also carefully perused the pleadings and examined a series of cases decided by this Court. The following conclusions are irresistible. (1) The process carried out by the appellants do not change the basic identity of original character of M.S. Welded Pipes to make it a n....