TMI Blog1993 (11) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the manufacture of the goods. By the impugned order, the Collector held that items in question are excluded by the explanation and hence, they would not qualify for exemption. Hence this appeal. 3. Relevant Notification No. 217/86-C.E., dated 2-4-1986 reads as under :- Exemption to MODVAT items if used within the factory of production in the manufacture of finished goods. - In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, The Central Government hereby exempts goods specified in column (2) of the Table hereto annexed (hereinafter referred to as input ) manufactured in a factory and used within the factory of production, in or in relation to the manufacture of final products specified in column (3) of the said Table, from the whole of the duty of excise leviable thereon, which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986): Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise leviable thereon or is chargeable to nil rate of duty. Explanation. - For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-assembly of the machinery is manufactured by a manufacturer and used within the factory of manufacture for the manufacture of a machinery which is cleared on payment of duty from the factory, such sub-assembly would undoubtedly qualify for the exemption under Notification No. 217/86-C.E. It is clear from the proviso to Notification that machineries which do not produce goods, do not come within the purview of the exclusion clause and, accordingly, modvat is permissible on such items. He strongly relied upon a decision of the Tribunal in the case of WS Industries (India) Ltd. v. Collector of Central Excise, reported in 1991 (56) E.L.T. 433 (Tribunal) and the order of the Tribunal bearing Nos. A-722-723/91-CAL dated 31-10-1991 passed by East Regional Bench in the case of Straw Products Ltd. v. Collector of Central Excise and Customs, Bhubaneswar, [1992 (59) E.L.T. 572 (Tri.) in support of his contention. He drew our attention to the relevant portion of the findings in the case of W.S. Industries (supra) while interpreting explanation to Rule 57-A of the Central Excise Rules, 1944 which is similar to proviso to the present Notification No. 217/86-C.E. wherein it was observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appliances are excluded by the explanation they would not qualify for exemption. Hence, the point to be considered is whether the items in question are covered by the explanation clause or not. In the case of M/s. Doypack Systems Private Limited v. Union of India [1988 (36) E.L.T. 201 (S.C.) = AIR 1988 S.C. 782] Supreme Court held that in relation to is a very broad expression and its meaning includes associated with or in connection. Further, in the case of M/s. J.K. Cotton Spinning and Weaving Mills Ltd., (supra) it was held:- The expression in the manufacture of goods should normally encompass the entire process carried on by the dealer in converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression in the manufacture of goods . It is not the case of the party that the items in question are not associated with and on the other hand, it was urged that they are instruments and material handling equipments are associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of manufacturing leading to the production of a commercially new article. In determining what constitutes manufacture no hard and fast rule can be applied and each case must be decided on its own facts having regard to the context in which the term is used in the provision under consideration. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the result of one or more process through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. 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 recognised as a new and distinct article that a manufacture ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipment, apparatus tool or appliances without exception, then it was not necessary to qualify these words with the phrase used for production or processing of any goods or for bringing any change in any substance in or in relation to the manufacture of final products . 11. Learned Counsel has given many examples, but it will not be appropriate to make any general observation with regard to them, inter alia, because some of these can have multiple uses and their actual use may vary from case to case and, therefore, a finding must await a decision on merits of each individual case. However, it is clear that the word production or processing or bringing about any change have been used in the context of production or manufacture of a marketable commodity. If, therefore, any one of them was used, per se, for purely research, teaching or training purposes or a demonstration during an exhibition, it could hardly be said to be used for the purposes of the Act or the Notification. 12. It is significant that the Notification talks of use within the factory of production in or in relation to the manufacture of final products. 13. The words used in or in relation to the manufacture of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture and the intervening words were not called for. 18. It may also be mentioned that in the case of Rajasthan State Chemical Works, the Hon ble Supreme Court has in paragraph 16 emphasized the context of Notification and made its observations in the following words In our view the word processed" in the context in which it appears in the aforesaid Notification includes an operation or activity in relation to manufacture". 19. It is important to remember in this respect that same and similar words or phrases may be used in different Notifications (and other provisions) in different sense depending upon the context and cases, where they are used in broader sense have to be distinguished from cases, where they are used in restricted sense keeping in view inter alia the exact words used and the intention of the legislature (and the purpose of exemption in case of Notification). 20. In view of the above discussion, I feel that whereas in the first flush, one is tempted to apply the aforesaid judgments straightaway and be done with but on second thoughts and deeper consideration, the distinction sought to be made out by the learned Counsel, appeals. 21. The order of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the Rajasthan State Chemical Works, the appeal was required to be dismissed or in view of the phraseology used in Clause (1) of the Explanation, a restricted meaning was required to be adopted for the purpose of the exclusion in the context of the Notification No. 2171/86". Date: 7/1993. Sd/- (G.A. Brahma Deva) Judicial Member Sd/- (S.K. Bhatnagar) Vice President 26. [Order per: K.S. Venkataramani, Member (T), Third Member on Reference]. - The ld. Counsel, Shri Lakshmikumaran, appearing for the appellants, addressed the arguments on the point of difference. It was submitted that the preamble to the notification is differently worded from the Explanation I to the Notification. The preamble indicates exemption to the input manufactured in a factory and used within the factory of production in or in relation to the manufacture of final product. The words used for producing or processing of any goods or for bringing about any change in any substance which are found in the Explanation are absent in the preamble to the Notification. The Ld. Counsel submitted that the words in relation used in the preamble to the Notification is of wider scope. The phrase used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g about a change in the raw-material. Appellants, themselves, admitted that the inputs are used in relation to the manufacture of their final products. The Explanation I to the Notification 217/86 would indicate that exemption is available only to those inputs which go into the final product. Appliances and material handling equipments, which bring about change in the raw-material, are not covered. It was further submitted that the second proviso to Notification 118/75 is not identically worded as the Explanation to. Notification 217/86. Therefore, reliance placed on interpretation of that Notification in the Amrit Banaspati case (supra) is misplaced. The Ld. DR contended that processing in the context of Notification 217/86 covers all the processes in an integrated manufacturing process. 28. The submissions made by both the sides, have been carefully considered. The point is whether gauges/templates (measuring instruments) lifting tackles, trolleys, conveyors, carrier (material handling equipments) manufactured by the appellants and utilised for captive consumption are eligible for exemption under Notification 217/86 read with the Explanation thereto. The records reveal that adm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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