TMI Blog2015 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order that by putting together a Pump and Engine and a platform the assessee had produced a new item viz. "P.D. Pump" is wholly baseless and also without consideration to the findings of fact based on relevant material and evidences recorded by the Adjudicating Authority. Merely putting together one bought out item with own manufactured item in a carton does not involve any process amounting to manufacture under Section 2(f) of the Act. - activity of manufacture must involve any process incidental or ancillary to the completion of a manufactured product, or any process which is specified in relation to any goods in the Section or Chapter notes of the first schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or any process which, in relation to the goods satisfied in the third schedule involves packing or repacking of such goods in a unit container or lebelling or relebelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. Mere addition in the value of a product would not amount to manufacture. To brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been manufacturing general purpose I.C. Engines capable of being used to discharge various functions like vibrator, concrete mixer, pumping, power generation etc. and has been clearing I.C. Engine as such for sale in the open market on payment of duty. The assessee was also clearing I.C. Engine for captive consumption without paying duty for use in the manufacture of PD Pumps where both the PD Pumps and the prime mover have been developed and manufactured by the assessee themselves. Besides this they have also been removing I.C. Engine without payment of duty alongwith bought out PD pump by simply placing both the items in a single carton and clearing the same as PD pump set in terms that bought out PD Pumps have been developed and manufactured by M/s Mahendra Engineering Works, Coimbatore (for short M/s MEW ). 5. A show cause notice was issued to the assessee on the allegation that the activity of mere placing bought out PD Pumps with the own manufactured IC Engine in cardboard carton is not covered by the provisions of Interpretative Rule 2(a) of Central Excise Tariff Act, 1985 and since the bought out PD Pump is complete in all respect and does not require any further proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and were consigned as a single commodity which amounts to manufacture under Section 2(f) of the Act. The assembly of the said article is required at the customer's end. In terms of Rule 2(a) of the Interpretative Rules to the Central Excise Tariff Act, the clearance is of fully made Pump in unassembled condition and the consignment as a whole is to be treated as a single commodity for the purposes of excise liability classifiable under Chapter heading 84.13 and, therefore, Engine would be exempt under the relevant notification. He, submits that definition of the word manufacture under Section 2(f) of the Act is very widely worded which clearly covers the activity in question. He also refers to the provisions of Rule 2(a) of the interpretative Rules as well Chapter Note no.3 and 6 of Section XVI of the Central Excise Tariff Act, the Circular No.2 to 4/58/96-CX dated 26.6.1996 issued by the Central Board of Excise and Customs New Delhi and the law laid down in the cases of Royal Bank of Scotland N.V. Vs. Commissioner of Customs and Central Excise (2014) 35 STR 68 (Allahabad), Commissioner of S.T.,Bangalore Vs. Scoff Wilson Kirkpatrick (I) Pvt. Ltd. 2011(23) STR 321 (K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Thus, the exclusion of power of the High Court to entertain an appeal under Section 35 G of the Act is limited to an order of the Tribunal relating, among other things to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Thus Section 35 G of the Act does not exclude the power of the High Court to entertain an appeal against an order passed by the Appellate Tribunal on the question of manufacture. The basic question involved in the present appeal as also contested by the parties from the initial stage is whether the activity of the assessee with respect to the goods in question cleared by them is manufacture? Thus, we do not find any substance in the first preliminary objection raised by the respondent assesse as the maintainability of the appeal before the High Court under Section 35 G of the Act and accordingly, the said preliminary objection is rejected. We hold that the appeal is maintainable under Section 35 G of the Act . Question No.(ii) 11. It is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with bought out P.D. Pump by placing both the items in a single carton and clearing the same as P.D. Pump set [model no. WSK 2020, WMK 3025(3), WMK 3025, WMK 2520, WMK 2020, WMK 3025 (3) (L)]. The aforesaid bought out Pumps have been developed and manufactured by M/s MEW. 15. Show cause notices were issued by the appellants to the respondent assessee alleging that the activity of mere placing bought out Pump with own manufactured I.C. Engine in a cardboard carton is not covered by the provision of Interpretative Rule 2(a) of the Tariff Act, 1985, inasmuch as, the bought out Pump is complete in all respect at consignee's end and does not require any further process by the unit. It was also alleged in the show cause notice that the activity of placing bough out Pump by the assessee with their own manufactured I.C. Engine is not ''manufacture' as defined under Section 2(f) of the Act. The assessee submitted the reply. The Adjudicating Authority framed the following question for determination: Whether the mere placing of a bought out Pump with their own manufactured I.C. Engine in a single carton would amount to manufacture and entitle them (assessee) for the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be said that no manufacturing was taking place in respect of Mahendra pump. And since there is no manufacturing involved, the benefit of condition No.58(ii)(b) of the Notfn. No.6/2002-CE dated 1.3.2002 is not available to M/s HSPPL for these products. Regarding the Board's circular dated 26.6.96, I find the same not being applicable as there is no dispute in classification of P.D. Pump sets. The present issue revolves around whether the activity undertaking by M/s HSPPL in relation to bought out pumps tantamouts to manufacture or not and whether they are eligible for the benefit of Notf. No.6/2002-CE dated 01.03.2002. M/s HSPPL in support of their contention have also cited certain case laws. The ratio of the judgment in the case of M/s Vishwa Industrial Co. (P) Ltd. V/s CCE, does not appear to be applicable in the instant case because the issue taken up therein pertained to supply and erection of the Conveyer at site against the specific contract placed upon the party. Further the ratio of the judgment of Fedders Lloyd Corp. Ltd. V/s CCE, Mumbai-II is not applicable because the appellant were affixing their own brand before clearing the split Air Conditioner to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, the appellant as well as trade were recognizing the item cleared as pump set. The tariff heading already extracted specifically recognized power driven pump as an item. The board's clarification also notes that power driven pump is a separately recognized item. We may read that circular:- Subject:- CE-Classification and excisability of Power Driven Pump Sets for handling water- Regarding. I am directed to say that the Confederation of Indian Industry has pointed out about divergence in practice of classification of Power Driven Pump Sets for handling water. A P.D. Pump Set may be a pump having an inbuilt prime move designed and built as a complete unit, called a monoblock pump-set, or a pump and a prime mover being two separable units whether coupled or not put/intended to be put on a common platform. It has been represented that it is classified in some Commissionerates under Chapter Heading 84.13 extending the benefit of Notification No.56/95, dated 16.3.1995 (previous Notification No.46/94 dated 1.3.94) either fully or partially whereas, other Commisisonerates are classifying this product under Chapter Heading 84.79 hererby denying the benefit of exemption. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp sets and that by putting together an appropriate pump, an engine and platform the appellant has produced a new item viz. power driven pump and the finding to the contrary is not sustainable. It is well settled that manufacture involves the bringing into existence of a new item with a distinct name, identity, character and use. That a power driven pump has a different and new commercial identity, character and use than the components going into its production is clear from the fact that the pump or engine in itself cannot perform as a power driven pump. We have already noted that PD pumps are recognized as a separate product by the industry manufacturing it and Central Excise tariff. We do not consider it necessary to go into the case law relied upon by both sides, since we have taken a view that in the facts of the case and the industry trade and taxation practice, there could be no dispute that power driven pump is a manufactured item. The Commissioner was, therefore, in error in holding that the clarification of the board was not relevant on the issue of manufacture. This is to presume that classification circulars are an academic exercise in a theoretical framework and has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recorded by the Adjudicating Authority. Merely putting together one bought out item with own manufactured item in a carton does not involve any process amounting to manufacture under Section 2(f) of the Act. 23. In the case of Omar Salay Mohamed Sait Vs. Commissioner Income Tax, AIR 1959 SC 1238 (para 42), Hon'ble Supreme Court laid down the law as under: We are aware that the Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the evidences referred therein after which a reasoned decision shall be rendered by the Tribunal. 28. Before parting, it would be appropriate to consider the definition of the word manufacture' under Section 2(f) of the Act which reads as under: (f) manufacture includes any process, - i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; 29. A peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation relied on a passage quoted in Permanent Edition of Words and Phrases, Vol.26 from an American Judge which reads as follows : '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.'' In South Bihar Sugar Mills Ltd. v. Union of India, (supra) the Supreme Court followed the decision in DCM Ltd. and observed that : 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 distinctive name, character or use. In Ujagar Prints v. Union of India, (supra) the Supreme Court reiterated the view expressed in DCM's case and observed that : The prevalent and generally accepted test to ascertain that there is 'manufacture' is whether the change or the series of changes brought about by the application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be and as a result of treatment, labour and manipulation there should be transformation in the raw material and as a result of treatment, labour and manipulation a new and different article must emerge having a distinct name, character or use. It is not enough if there is change, the change should result in bringing into existence a new and definite article having a distinctive name, character or use and the said article must be marketable and it should be known to the market as such. In the absence of any one of the ingredients referred to above, the provisions of the Act are not attracted and no excise duty is leviable. Even if the goods so produced were excisable goods mentioned in the schedule, they cannot be subjected to duty unless they are marketed or capable of being marketed. The marketability is one of the principle test in determining the liability to excise duty. In addition the product which is brought into existence must have a distinct identity in the commercial world. 13. Let us apply the above tests to the facts of the present case. As pointed out in the earlier paragraph, the identity of the items placed in the kit is not changed. They are known in the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment as under: 11. 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 end-result of one or more processes 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 can be said to take place. 12. Manufacture thus involves 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 operation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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