India Ltd. Vs. Commissioner, Central Excise, Calcutta-II  Insc 89 (10
N. Variava & H. K. Sema. S. N. Variava, J.
Appeal is against the Judgment dated 31st December, 1997 passed by the Customs, Excise &
Gold (Control) Appellate Tribunal, New Delhi (for short CEGAT).
stated the facts are as follows:
Appellants carry on the business of fixing rubber linings on pipes, tanks and
other such articles. The articles were supplied to them by their customers.
They fixed the lining and returned the articles. They were issued a
show-cause-notice claiming that they were manufacturing dutiable goods and that
they were not declaring the correct value inasmuch as the value of the articles
supplied to them and the packing, forwarding charges and rubber lining charges
had not been included in the assessable value. The Appellants' reply was
accepted and the Assistant Collector dropped the show-cause-notice.
Department preferred an Appeal to the Collector (Appeals).
Appeal was allowed by the Collector (Appeals). The Appellants filed an Appeal
to CEGAT which has been dismissed by the impugned order.
question for consideration is whether a new and marketable product having a
distinct name, character and use could be said to have come into existence as a
result of the process undertaken by the Appellants.
case of U. O. I. vs. D.C.M. reported in 1977 E.L.T.
(J 199), a Constitution Bench of this Court held that manufacturing of Vanaspati
from raw oil did not amount to manufacture of a new product. It was inter alia
observed as follows:
The other branch of Mr. Pathak's argument is that even if it be held that the
respondents do not manufacture "refined oil", as is known to the
market they must be held to manufacture some kind of "non-essential
vegetable oil" by applying to the raw material purchased by them, the
processes of neutralization by alkali and bleaching by activated earth and/or
carbon. According to the learned Counsel "manufacture" is complete as
soon as by the application of one or more processes, the raw material undergoes
some change. To say this is to equate "processing of manufacture" and
for this we can find no warrant in law. 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. This
distinction is well brought about in a passage thus quoted in Permanent Edition
of Words and Phrases, Vol. 26, from an American Judgment. The passage runs thus
:- "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
and use." In the case of Indian Hume Pipe Co. Ltd. vs. Collector of
Central Excise reported in 1990 (45) E.L.T. 457 (Tribunal), the question was
whether lining and coating steel pipes with cement amounted to changing the
character of the pipes and bringing into existence a new product. CEGAT relied
upon a Circular issued by the Central Board of Excise and Customs, which held
that cement mortar coating would not amount to manufacture. It also took note
of the tariff item and held that the tariff item made no distinction between
coated and uncoated pipes. On this basis it is held that by the process of
coating a new product had not come into existence.
case of Lathia Industrial Supplies Co. Pvt. Ltd. vs. Collector of Central
Excise reported in 1987 (29) E.L.T. 751 (S.C.), this Court has held that
rubberizing or relining of old and used rollers does not amount to manufacture.
Similarly, in the case of Telangana Steel Industries vs. State of A.P. reported
in 1994 (Vol. 93) Sales Tax Cases (S.C.), the question was whether wires drawn
from duty paid wire rods were different commodities. This Court noted the
tariff item and observed that the tariff item made no difference between wire
rods and wires whether they were rolled, drawn, galvanized, aluminized, tinned
or coated. This Court held that as both wire rods and wires form part of the
same tariff item they could not be taken as different commodities for the
purpose of assessment of sales tax. On this basis it was held that the two were
not different commodities for the purposes of sales tax. An identical view has
also been taken by this Court in the case of Collector of Central Excise vs. Technoweld
Industries reported in 2003 (155) E.L.T. 209 (S.C.), wherein this Court has
held that wires drawn from duty paid wire rods were not a different product and
that they were not excisable even though they fell under two separate entries.
case of Commissioner of Sales Tax vs. Lal Kunwa Stone Crusher (P) Ltd. reported
in (2000) 3 SCC 525, this Court has held that chips, gitti and stone ballast
obtained by crushing stone pipes continued to be stone and that they did not
become a separate commodity or item.
above authorities reiterate the well established law that Circulars issued by
the Central Board of Excise & Customs are binding.
law also is that if a tariff item makes no difference between coated and
uncoated goods then the mere process of coating would not amount to manufacture
of some new commodity. Merely because some extra process is carried on the
product would not by itself mean that a new item has come into existence.
this case the tariff item reads as follows:
Sub- Description of goods Rate of duty No. Heading No. (1) (2) (3) (4) 73.03
7303.00 Tubes, pipes and hollow Rs. 100 profiles, of cast iron per tonne 73.04
Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or
steel 7304.10 - Of iron Rs. 100 per tonne 7304.90 - Other Rs. 1,500 per tonne
" Thus it is to be seen that the tariff item makes no distinction between
coated and uncoated tubes, pipes etc. The Board had in June 1988 issued a
Circular clarifying that the process of guniting i.e. cement mortar coating on
the outside did not amount to manufacture of a new product. By another Circular
dated 9th February,
1994 the Board has
also clarified that galvanized pipes and tubes continued to be covered by the
expression Tubes and Pipes and galvanization does not amount to manufacture.
as the Appellants are concerned they are merely fixing, rubberizing and
painting pipes etc. which are supplied to them by their customers. Of course,
some times in order to do the above work they have to cut the pipes and then
weld them with flanges in order to restore the pipes to its original length.
But, in our view, no process of manufacture has been undertaken and no new
commodity has come into existence.
therefore unable to uphold the view taken by the Collector (Appeals) and the
CEGAT. The Orders passed by these authorities are set aside. The Appeal is
accordingly allowed. There will be no order as to costs.