TMI Blog2015 (3) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such in the said matter. It has been emphasized by the learned counsel for the appellants that words "as such" were not mentioned in Rule 57-F at the relevant time. In our view the absence of these words does not make any difference as Rule 57-F of the Central Excise Rules deals with the "Manner of Utilization of Inputs and the Credit". It is clear that bumpers and grills are most certainly of commercial use in themselves whether the process of ED coating is applied or not. Importantly, this Court laid down that value addition without any change in name, character or end use of goods cannot possibly constitute criteria to decide as to what is manufacture. - Court would be adding words to Rule 57F(1) to the effect that value additions made to inputs covered by sub-rule (ii) would also suffer duty even if there is no manufacture. Second, sub-rule (3) and (3A) apply to an entirely different factual scenario, as has been conceded by learned counsel for Revenue, and it is only after all the conditions under the said sub-rules are met that duty attributable to inputs contained in partially processed inputs would then become dutiable - Impugned order set aside - Decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same, from the factory for home consumption or for export under bond. Provided that where the inputs are removed from the factory for home consumption on payment of duty of excise, such duty of excise shall be the amount of credit that has been availed in respect of such inputs under rule 57A. Rule for the period 1.3.97 to 31.3.2000 57F(1)The inputs on which credit has been taken may be used in or in relation to the manufacture of final products. (2) The inputs may be removed, after intimating the Assistant Commissioner of Central Excise concerned, in writing, for home consumption or for export under bond. (3) All removals of inputs for home consumption shall be made - (a) on payment of duty equal to the amount of credit availed in respect of such inputs; and (b) under the cover of invoice prescribed under rule 52A. Rules for the period 1.4.2000 to 28.2.2001 Explanation - When inputs or capital goods are removed from the factory, the manufacturer of the final products shall pay the appropriate duty of excise leviable thereon as if such inputs or capital goods have been manufactured in the said factory, and such removal shall be made under the cover of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In or in relation to the manufacture of final products for which such inputs have been brought into the factory; or (ii) Removed from the factory for home consumption or for export under bond. 5.2 Proviso to Rule 57-F(1) or subsequently Sub-rule (3) of Rule 57-F provided that where the inputs are removed for home consumption on payment of duty, such duty of excise shall be the amount of credit that has been availed in respect of such inputs. It is thus apparent that the Rule 57-F is in respect of such inputs only. Further Rule 57 AB of the Central Excise Rule provides for the removal of inputs as such. We, therefore, hold that as the Appellants have removed the inputs after subjecting them to the process of E.D. Coating, mere reversal of the MODVAT Credit availed in respect of those inputs would not be payment of appropriate amount of duty. The duty of excise has to be discharged on the intrinsic value of the goods as held by the Supreme Court in the case of Sidhartha Tubes Ltd., Supra. Accordingly, the Appellants have to discharge the duty liability after including the cost of E.D. Coating in the value of the goods. The Appellants, however, would be eligible to take the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st important judgments on the Central Excises and Salt Act, 1944, namely Union of India v. Delhi Cloth and General Mills Co. Ltd. [1977 (1) E.L.T. 199], an important distinction was made between manufacture and processing. It was held that processing and manufacture are distinct concepts in law and only such processing as results in a transformation, namely, that a new and different article emerges having a distinct name, character or use, that excise duty, which is only on manufacture, can be levied. The relevant portion of the judgment is as hereunder: - 14. 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 to manufacture and for this we can find no warrant in law. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion, inserted this definition of the word 'manufacture' in the definition section and not with a view to make the mere processing of goods as liable to excise duty. However, to buttress his submission Shri Guru Krishna Kumar, learned senior counsel, referred us to various judgments laid down by this Court. First, he referred us to 'Sidhartha Tubes Limited v. Collector of Central Excise' [2000 (10) SCC 194]. Since this judgment was also the only judgment relied upon by CEGAT in the impugned order, it is a little important to understand what exactly was held therein. In this case, the appellant manufactured mild steel pipes and tubes. At this stage, the product was known as black pipe . Part of the production of the black pipe was then taken to a separate shed in the appellant's factory premises and galvanised. On facts in that case, the appellants had themselves in their classification list separately declared black pipes and galvanised pipes as their products. In such a situation, this Court held that while the process of galvanisation by itself may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astly, in the instant case, the Commissioner as an adjudicating authority has held that there was a value addition of 180%. He found that jumbo rolls of tissue papers were purchased by the assessee @ ₹ 30/- to ₹ 70/- per kg. and the final product i.e. the toilet tissue paper was sold by the assessee @Rs.85/- to ₹ 100/- per kg. And, therefore, there was a value addition of around 180% i.e. between the range of ₹ 30/-to ₹ 85/- per kg. This finding of the Commissioner is erroneous. Under the Excise law, Value addition based on a process is certainly a relevant criteria to decide as to what constitutes manufacture . Such value addition should be on account of change in the nature or characteristics of the product. In the present case, as stated above, there is no change in the nature or characteristics of the tissue paper in the jumbo roll and the nature and characteristics of the tissue paper in the table napkin, facial tissues etc. Therefore, without such change in the nature or characteristics of the tissue paper, value addition on account of transport charges, sales tax, distribution and selling expenses and trading margin cannot be an indicia to dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 3 of the Act, the levy is on the manufacture of the goods. However, the measure of the levy is the normal price, as defined under section 4(1)(a) of the Act. It is not disputed that galvanization as a process does not amount to manufacture. However, on facts, it has been found by the commissioner that the process of galvanization has taken place before the product is cleared from the place of removal, as defined under section 4(4)(b). Further, on facts, the commissioner has found that galvanization has added to the quality of the product. It has increased the value of the pipes. Hence, the costs incurred by the assessee for galvanization had to be loaded on to the sale price of the pipes. Therefore, the cost had to be included in the assessable value of MS galvanized pipes. We do not find any error in the reasoning of the adjudicating authority. It is clear, as is apparent from the opening words of Section 4 of the Central Excise Act, 1944, that there must first be manufacture in order to attract the charging section, namely Section 3 of the Central Excise Act, 1944 before one comes to valuation of goods under Section 4. On the facts of the present case, we have first, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch operation is also returned to the said factory; (b) for the purposes of manufacture of intermediate products necessary for the manufacture of the final products and return the said intermediate products to his factory, for,- (i) further use in the manufacture of the final product; or (ii) removing the same without payment of duty under bond for export; or (iii) removing the same after payment of duty for home consumption. Provided that the waste, if any, arising in the course of such operation is also returned to the said factory: Provided further that the said waste need not be returned to the said factory after the appropriate duty of excise leviable thereon has been paid. (3A) Where a manufacturer intends to remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products to a place outside the factory for the purposes specified in sub-rule(3), the manufacturer shall do so after debiting an amount equivalent to the amount of credit of duty attributable to such inputs or the inputs contained in such partially processed inputs; Provided that, notwithstanding anything contained in rule 57A, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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