TMI Blog1985 (1) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... The Asstt. Collector of Central Excise, Bombay-6 did not agree with the said contention and held that whereas the chlorine received by the appellants was only a raw material, the vinyl chloride handed over by the appellants to the customer was altogether a new product known by a different name and as such the process of conversion cannot be considered as job work entitling the appellants to the benefit under Notification No. 119/75. On appeal to the Appellate Collector of Central Excise, Bombay, the said order of the Assistant Collector was confirmed and the appeal was dismissed. It is against the said order dated 6-3-1976 that the appellants preferred a revision petition to the Government of India which on transfer to this Tribunal under Section 35-P of the Central Excises and Salt Act is now being disposed of as an appeal. 2. The appeal was initially heard by a Special Bench consisting of three members who took into consideration the judgments of several High Courts as also an order of this Tribunal and in view of the conflict amongst the said several cases, placed the matter before the President for constituting a special bench of more than three members for a proper determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the amount charged for the job work. Explanation. - For the purposes of this notification the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier, after article has undergone the intended manufacturing process, on charging only for the job work done by him." In terms of the explanation to the said notification the expression 'job work' would mean that : (i) an article must be handed over by the customer to the assessee; (ii) a manufacturing process must be carried out by the assessee to the said article; (iii) the article must then be returned to the customer; and (iv) the assessee must have charged the customer only for the job work done by him. In the present ease the article handed over by the customer is chlorine; the process carried out by the appellants is reacting the said chlorine with its own ethylene; the article returned by the appellants to the customer is vinyl chloride; charges are collected by the appellants from the customer as towards conversion charges only such charges evidently being inclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing process was carried out and not to the chlorine. This contention not merely does not appeal to us but further appears to be against the case of the department itself at earlier stages. For instance the Order-in-Original itself reads that the chlorine supplied to the appellants is covered by the appellants into vinyl chloride and not that the ethylene of the appellant is converted into vinyl chloride. In the affidavit of Sri C.P. Bhatt, Assistant Collector of Customs and Central Excise, Division Thane IV, dated 29-6-1964 filed before this Tribunal the process is referred to in detail and it is mentioned that the ethylene is introduced at the top of the absorber 'and same reacts with chlorine to form dichloroethane. Therefore, this affidavit also makes no distinction that it is the ethylene which is converted into vinyl chloride and not chlorine into vinyl chloride. Further in any chemical process involving two chemicals there can be no distinction as to which of the two is converted into the end-product, the fact being that both of them undergo chemical reaction and change, leading to the emergence of the final end-product. Therefore, we can proceed to the determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court extended the benefit of the notification to the four appellants in the said case. 9. In Madura Coats Limited v. Collector of Central Excise [1980 E.L.T. 582 (Cal.)] nylon or rayon yarn supplied by customers were to be arranged by M/s. Madura Coats Limited in parallel rows loosely held together by cotton yarn supplied by Madura Coats, the resultant product being called tyre cord wrap sheets. The Court held that no new or different commodity had been manufactured but that even if it were to be held otherwise the party was entitled to benefit under the notification. This judgment was confirmed on an appeal by a Division Bench of the same High Court in the decision reported in 1982 E.L.T. 129 (Calcutta). It was held that a work does not cease to be a job work merely because the job worker supplies some additional articles which do not constitute a substantial part in the manufacturing process but were used merely incidentally. The Division Bench further held (paragraph 8, page 132 of the report) that if the person claiming to do the job work supplies his own materials in substantial proportion and they constitute an important element in the manufacturing process the work w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussing the said Judgment it is observed at page 880 - "I respectfully agree with the view taken by the Division Bench of the Gujarat High Court in Anup Engineering Company v. Union of India (supra) and the said decision is also in accord with the view taken by this Court in Madura Coats Limited v. The Collector of Central Excise (supra)." 12. The decisions of this Tribunal referred to before us are four in number. In Orissa Construction Corporation v. Collector of Central Excise (1983 E.L.T. 2382), the assessee had received bars, plates, slabs, etc., and had fabricated radial gates out of the same and erected the same. With reference to the claim for benefit under Notification No. 119/75 it was held by this Tribunal that the sheets of steel and iron have been transformed into new and different articles having a distinct name, character and use and that the identical article received from the customer not having been returned to the customer after it had undergone the manufacturing process the benefit of Notification No. 119/75 was not available. 13. In Indian Steel Rolling Mills v. Collector of Central Excise (1983 E.L.T. 2396) this Tribunal had to consider a case where iro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Parekh placed reliance on the decision in the Anup Engineering case as also the decisions of the Calcutta High Court in the cases of Madura Coats Limited and Associated Pigments Limited. He pointed out that the mere fact that the commodity received from the customer is transformed into another commodity bearing a distinct name and having a distinct use would not for that reason disentitle the benefit under Notification No. 119/75 since as observed in the above decisions no duty itself could be claimed or collected unless a new excisable commodity had come into existence. He pointed out that the facts of the present case are akin to the facts in the case of Associated Pigments Limited, since just as lead was converted into lead suboxide and lead monoxide in that case, chlorine in the present case is converted into vinyl chloride by reaction with ethylene. He claimed that hence the work would be a job work only as defined in the notification since for the entire chlorine received, except for other small byproducts of no commercial value, the entire vinyl chloride processed out of the chlorine is returned back to the customer. 17. But the argument for the department is to lay stre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22-2-1983, 18 days after the decision of the Calcutta High Court in the Associated Pigments case and that if the decision' of the Calcutta High Court had been brought to the notice of the Tribunal the decision could well have been different. In the circumstances he contends that the decision in the Waldies case should not be followed but that the decision of the Gujarat High Court in the Anup Engineering Limited case as also the decisions of the Calcutta High Court cited earlier should be followed in the present case. 19. The decisions of the various High Courts as also this Tribunal having thus been set forth as also the contentions of both sides, it is now to be considered whether in the facts and circumstances of this case the provisions of Notification No. 119/75 are attracted. As earlier mentioned, chlorine is received by the appellants and reacted with their ethylene to form vinyl chloride. Would this conversion of chlorine into vinyl chloride be a job work as mentioned in the explanation to the notification? In the present case the charges collected by the appellants from the customer (M/s. Calico Chemicals) were inclusive of the cost of ethylene supplied by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat notification, we proceed to consider that matter also to record our conclusions. 20. The Notification No. 119/75 contemplates the need for levy and collection of excise duty from the person described as job worker and provides for computation thereof. Excise duty would be recoverable only when a manufacturing activity takes place and as a result a new and distinct product with a distinctive name, character and use comes into existence. Therefore, the mere fact that by reason of the activity of the job worker a new product (processed product) has come into existence than what was entrusted to him by the customer would not for that reason itself rule out the applicability of the notification. 21. It has, therefore, to be considered what would be the nature of the activity that would be comprehended within the explanation to the notification as job work. It is in this connection that the words "manufacturing process" used in the explanation to the notification become important. It should be noted that the term "manufacture" is not as such defined in the Central Excises and Salt Act. Section 2(f) of the Act contains an inclusive definition. It is to the effect that the term "ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture in the primary sense, rather than a manufacturing process by way of secondary processing. 23. But Sri Sridharan appearing as an intervener as well as Sri Parekh appearing for the appellants contend that the restricted meaning sought to be attached to the words "that article" would not be proper. Their contention is that not merely some manufacturing process should have been carried out on the article entrusted by the customer which would necessarily result in a change in the article received but that such a change should have resulted in the emergence of a new commodity without which no excise duty itself would have been chargeable. They, therefore, contend that the acceptance of the argument that the very same article as was received from the customer should be returned to the customer would render the exemption notification itself nugatory. They submit that it is only such an interpretation that should be adopted as would make the notification workable rather than one that would make it unworkable. It has been already seen that the very fact that excise duty is to be demanded would require the emergence of a new commodity rather than retention of the old commodity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 119/75. It was held that it would not, following the decision of the Gujarat High Court and the earlier decision of the same (Calcutta) High Court. As earlier observed it had been specifically mentioned by the Division Bench in the said judgment that it agreed with the view taken by the Division Bench of the Gujarat High Court as also the earlier Division Bench of the same High Court. No question appears to have been argued about disentitlement to benefit under Notification No. 119/75 on the basis that the process carried out was a chemical process leading to the emergence of entirely a new article distinct in physical, chemical and other properties from the commodity handed over by the customer. We have earlier given our reasons as to why the benefit of the notification cannot be extended in such cases, where a manufacturing process in the nature of primary manufacture is carried out, and why the benefit should be confined only to cases where the manufacturing process carried out by the assessee should be of the nature of an incidental or ancillary process for the completion of the manufactured product. The Madras High Court had in its decision reported in 1982 E.L.T. 370 spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or the other High Court which appears to it to be more appropriately applicable to the facts of the case before us. 27. Applying the said principle and in view of the discussion earlier regarding the words in the notification, the scope thereof, the interpretation on the words of the notification by the decisions of the High Courts, the need to evolve an interpretation which would make all the stipulations in the notification workable, we hold that the interpretation of the notification by the Madras High Court and the Gujarat High Court (subject to the qualification mentioned earlier regarding the examples cited) have to be adopted, this interpretation not being against the decision of the Calcutta High Court also in the Madura Coats Limited case, though this interpretation may not be fully in accordance with the result of the decision of the Calcutta High Court in the Associated Pigments case. Such a course has become inevitable in view of the conflict between the decisions of the Calcutta and Madras High Courts, as would become apparent when it is seen that the decision in the Associated Pigments case in the Calcutta High Court would have been different if the principle laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal is dismissed. 31. [Order per assent : M. Gouri Shanker Murthy, Member (J)]. - While agreeing in the order proposed to be made by my learned Brother Raghavachari, I have, necessarily, to record my reservations with the observations made in paras 15 and 19 thereof. 32. I am afraid, there was no consensus amongst the decisions of the High Courts - the High Courts of Gujarat and Calcutta in 1978 E.L.T 53, 1982 E.L.T. 129 and 1983 E.L T. 876 on the one hand and the High Courts of Madras in 1982 E.L.T. 370 on the other in regard to the points specified in para 15 of the order proposed by my learned Brother and this was the reason for reference to a Larger Bench in this Tribunal. 33. In 1978 E.L.T. 533 (Anup Engineering Ltd. v. Union of India), it was categorically held in a case of conversion of duty paid sheets, tubes, etc., into equipments and components on a job work basis, that "the article supplied has to undergo a manufacturing process as intended. It is obvious, in the context of Excise law that unless a new article known to trade emerges after the manufacturing process is completed, excise duty cannot be levied at all. That is the very basis of taxation under the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It cannot be that an entirely new article is manufactured and yet the original article can still be identified in it. If it can be so identified, no new article has, in reality, emerged. The latter part of the passage in the judgment of Madras High Court extracted supra, is merely to emphasize the loss of identity of the article originally supplied. The passage cannot be construed to mean and signify that there can be a case where a wholly different article emerges on manufacture and yet the original article is identifiable therein and it is only in such a case that benefit of the notification can be availed of. So long as the identity of the original article remains, a wholly different article does not emerge in a manufacture. 36. Again, the ratio of 1982 E.L.T. 129 (Collector of Central Excise v. Madura Coats Ltd.) was, in reality, there was no manufacture involved. Since "it is apparent from the sample that the nylon yarns have not undergone any change and it is difficult so say that any new substance has come out." It was not that a new commodity had, indeed, come into existence and yet the original articles supplied can still be identified therein. Nor was it the ratio th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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