TMI Blog2011 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the cement, which is the excisable end product, as since welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. which are used in the process of repair and maintenance are not raw material used in the process of manufacturing of the cement, which is the end product - Held that: the metal scrap and waste arising out of the repair and maintenance work of the machinery used in manufacturing of cement, by no stretch of imagination, can be treated as a subsidiary product to the cement which is the main product - Appeal is allowed - 7453 OF 2008 - - - Dated:- 13-10-2011 - H.L. DATTU, CHANDRAMAULI KR. PRASAD, JJ. J U D G M E N T H.L. Dattu, J. 1) This appeal is directed against the Judgment and Order dated 31.07.2008 of the High Court of Judicature of Rajasthan in Central Excise Appeal No. 60/2006. By the impugned Order, the High Court has set aside the Order dated 09.08.2005 of the Customs, Excise and Service Tax Appellate Tribunal [hereinafter referred to as "the Tribunal"] whereby the Tribunal had dropped the entire duty demand and penalty imposed on the assessee. 2) The issue before us is: Whether the metal scrap or waste gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... metal scrap and waste has been generated during mechanical working of metal in the workshop, as contemplated by the definition of the waste and scrap under Section Note 8(a) of Section XV of the Central Excise Tariff Act, 1985 [hereinafter referred to as "the Tariff Act"] and, in view of the decision of the Tribunal in Budhewala Co-op. Sugar Mills Ltd. vs. CCE, Chandigarh-I, 2002 (141) ELT 490 (Tri. Delhi). Being aggrieved by the portion of the Order of the Commissioner (Appeals), pertaining to confirmation of demand of duty along with equal amount of penalty of Rs. 4,75,781 on the metal scrap and waste generated during repair of machinery, the assessee preferred an appeal before the Tribunal. The Tribunal, vide its Order dated 09.08.2005, allowed the appeal and set aside the demand of duty and penalty confirmed by the said portion of the Order of the Commissioner (Appeals) on the ground that metal scrap and waste cleared by the assessee does not arise out of any manufacturing activity and, thereby, not excisable to any excise duty in view of the decision of the Tribunal in CCE v. Birla Corpn. Ltd., 2005 (181) ELT 263. The Revenue, aggrieved by this Order, filed an appeal under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court in Union of India v. Delhi Cloth and General Mills Co. Ltd., AIR 1963 SC 791 in support of his submission that the High Court, vide its impugned judgment, has grossly erred in observing that any incidental or ancillary process to the completion of any manufactured product, which itself need not be end product or excisable goods, would amount to manufacture and is excisable. In other words, such observation of the High Court creates very anomalous situation by conferring the status of manufacture on every process incidental and ancillary to any manufactured product which itself need not be excisable manufactured end product. Learned counsel submits, by placing reliance on several decisions of this Court in order to buttress his contention, that the excise duty mentioned under the tariff entry for the excisable goods cannot be levied in terms of charging Section 3 unless such excisable goods or items are produced and manufactured. In other words, the event of levying of excise duty under the charging Section 3 is the manufacture of the excisable goods. Learned counsel concludes that the manufacture of the excisable goods in terms of Section 2 (f) is the prerequisite to levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cake Ltd. v. CCE, (2005) 1 SCC 264, this Court has held: "16. Thus, the amended definition enlarges the scope of manufacture by roping in processes which may or may not strictly amount to manufacture provided those processes are specified in the section or chapter notes of the tariff schedule as amounting to manufacture. It is clear that the legislature realised that it was not possible to put in an exhaustive list of various processes but that some methodology was required for declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods. 23. We are in agreement with the submission that under the amended definition, which is an inclusive definition, it is not necessary that only in the section or chapter note it must be specified that a particular process amounts to manufacture. It may be open to so specify even in the tariff item. However, either in the section or chapter note or in the tariff entry it must be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s `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 Tungabhadra 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. There must be such a transformation that a new and different article must emerge having a disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. 13. Manufacture thus involves a series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected (sic that the) manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. 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 impossible or commercially inexpedient, that process is one in relation to the manufacture. 14. The natural meaning of the word `process' is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject-matter in order to transform or reduce it to a certain stage. According to Oxford Dictionary one of the meanings of the word `process' is a `continuous and regular action or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y process which is incidental or ancillary to the completion of manufactured product is included within the meaning of manufacture. The word "process" has not been defined in the Act. In its ordinary meaning "process" is a mode of treatment of certain material in order to give a desired shape to the material. It is an activity performed on a given material in order to transform it into something." This Court further observed thus: "27. In the case in hand also, coal which leads to production of cinder is not used as a raw material for the end product. It is being used only for ancillary purpose, that is, as a fuel. Therefore, irrespective of the fact whether any manufacture is involved in the production of cinder it should be held to be out of the tax net for the reason that it is not a raw material for the end product. 28. In producing "cinder", there is no manufacturing process involved. Coal is simply burnt as fuel to produce steam. Coal is not tampered with, manipulated or transformed into the end product. For purposes of manufacture the raw material should ultimately get a new identity by virtue of the manufacturing process either on its own or in conjunction or combin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the M.S. scrap and Iron scrap cannot be said to be a by-product of the final product. At the best, it is the by-product of the repairing process which uses welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. 15) Learned ASG has placed reliance on the decision of this Court in CST v. Bharat Petroleum Corpn. Ltd., (Supra). In that case, the assessee purchased sulphuric acid and cotton for the manufacturing of kerosene and yarn/cloth. In the manufacturing process, the acid sludge and cotton waste emerged as a distinct product having commercial identity. The issue before this Court was that whether the assessee can be said to manufacture acid sludge and cotton waste. This Court observed that where a subsidiary product is turned out regularly and continuously in the course of a manufacturing business and is also sold regularly from time to time, an intention can be attributed to the manufacturer to manufacture and sell not merely the main item manufactured but also the subsidiary products. We are afraid, the decision does not help the Revenue because the metal scrap and waste arising out of the repair and maintenance work of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
