Judgment:
1. This appeal is directed against Order-in-Appeal dated 10-11-1989 passed by the Collector of Central Excise (Appeals), Calcutta, confirming the Order-in-Original, dated 8-8-1988 passed by the Assistant Collector of Central Excise, Berhampore.
2. On two price lists, both effective from 1-3-1986 in Part VII filed by the appellant, the jurisdictional Superintendent issued show cause notice dated 6-6-1988 stating that appellant was manufacturing dutiable product and the value declared was not correct, inasmuch as the value of pipes and pipe fittings supplied by customers, the forwarding charges, packing charges and rubber lining charges had not been included in the assessable value. The policy proposed inclusion of these additional elements in the assessable value. Appellant resisted the notice contending that the processes undertaken by the appellant did not amount to manufacture, that the articles produced were not in any manner different from the pipes received from the customers and, therefore, the product covered by the price lists was not excisable or dutiable. The Assistant Collector held that assessable value should not include the cost of raw material, namely, steel frames and structures received from the customers but should include the elements of packing charges and incidental expenses. This order was challenged before the Collector (Appeals) by the Department under Section 35E(4) of the Central Excise Act, 1944. The present appellant did not challenge the order before the Collector (Appeals). The Collector (Appeals) set aside the order passed by the Assistant Collector and directed inclusion of the value of raw materials supplied by the customers, in the assessable value of the finished product. This order is now challenged.
3. The only contention raised by the learned Counsel for the appellant in the course of arguments is that the various processes undertaken by the appellant do not amount to manufacture as defined in Section 2(f) of the Central Excise Act, 1944, since the processes did not convert the pipes into a new product known to the trade with a distinct name, character or use. Learned Counsel, for the appellant, referred to certain decisions where the scope of expression "manufacturer" as defined in the Act has been explained. In one of the cases, it was held by the Supreme Court that although a degree of processing is involved in preparing tinned pineapple slices from the original pineapple yet the commodity continues to possess its original identity and there was no manufacture. In another case, it was held that re-rubberisation and re-lining of old rollers would not amount to manufacture. The High Court of Bombay in a case held that lacquering/metallising of PVC film would not amount to manufacture. Shri M. Ali, JDR, on the other hand, referred to a decision of the Tribunal which held that re-glass lining of old and used glass amounted to manufacture. He also relied on a decision which held that cutting of aluminium circles from aluminium sheets would amount to manufacture.
4. We considered the identical contention raised by the same appellant in a batch of appeals E/1506 to 1511/89-A disposed of by Final Order Nos. 795-800/97-A, dated 2-5-1997 and took a view against the appellant.
5. The various processes undertaken by the appellant were described thus in the earlier batch of appeals :- "Pipes are supplied by customers. Flanges are procured from the market and are welded into the pipes....After the fabrication, as per the thickness of rubber lining, the rubber sheets are prepared from out of the rubber compound by a calender machine. The aforesaid fabricated pipes are then sand blasted and the surface is prepared for rubber lining. The rubber sheets are then cut to particular size and are lined inside the pipes through bonding agents (adhesives).
The said bond agents are also procured from outside market. The pipes duly rubberlined are then cured inside vulcanizer.... After vulcanization, the outside steel surface of the pipes are painted with red oxide and are ready for despatches." The above passage will indicate the following acts on the part of the appellant:- (e) Cut rubber sheets to size and line inside the pipes using adhesives.
It is stated that during the period involved in this appeal, all articles were being supplied by the suppliers and no purchases were being made from the market.
5. There cannot be any dispute that steel pipes received from suppliers and steel pipes returned to the suppliers are both steel pipes falling under erstwhile T.I. 25(15) and the present Chapter 73. It is stated that rubber lining is intended to protect the pipes from chemical reaction with liquids which may pass through the pipes when the pipes are put to use and painting outside is intended to protect the pipes from rust. It is also stated that flanges are welded into the pipes to give support to the pipes and hold the pipes in position when they are put to use in running length in factories and plants.
6. Our attention is invited to Central Excise Trade Notice published in 1988 (37) E.L.T. T7 based on Ministry's letter to Collector. The notice dealt with the question whether the process of Guniting (cement mortar coating) on the outside and epoxy/bitumen painting inside duty paid steel pipes carried out at site on construction of water supply pipelines would amount to manufacture and indicated that it would not amount to manufacture. Learned Counsel for the appellant did not contend that the Trade Notice would apply to steel pipes used by the appellant in this case. He referred to the Trade Notice to indicate that on an analogy, the same principle must hold good in this case. We do not agree that the scope of a Trade Notice can be extended by analogy to other situations.
7. We have briefly adverted to the decisions referred to by the learned Counsel for the appellant which are referred in detail in Final Order Nos. 795-800/97-A, dated 2-5-1997 1997 (93) E.L.T. 755 (T) in which we indicated that the decisions are not helpful to the appellant in the present fact-situation. The processes involve not merely affixing rubber lining or painting. The steel pipes received from the customers are subjected to various processes as a result of which flanges are welded into the pipes, the pipes are protected inside from adverse chemical reaction and outside from effect of rain or sun and rubber lining is given. It appears that for a long number of years the appellant proceeded on the basis that as a result of the various processes carried out, an excisable product emerged and the appellant was paying duty prior to 1-3-1986, taking advantage of the benefit of Notification No. 120/75. Even in respect of the period covered in this appeal, appellant filed price lists declaring the value without including the cost of raw materials supplied by the suppliers. This could have been done only on the basis that an excisable product emerged as a result of the processes undertaken by the appellant. This conduct, of course, will not stand in the way of the appellant raising a contention that a mistake was committed in paying excise duty or in filing price list and that really there was no "manufacture" involved in the processes and no excise duty was payable. But, however, in this background, it would be necessary for the appellant to explain how the processes undertaken would not amount to manufacture and a new commercial product did not come into existence. No such evidence has been placed before the lower authorities. As we have indicated the process adopted is not a simple process but a series of processes as a result of which though the product remains a pipe, it is a pipe of a different kind and quality useful for performing specified functions such as being used for flow of corrosive chemicals and the like. This use is different from the use to which an ordinary steel pipe can be put. Persons who require an ordinary pipe would not naturally go in for this special kind of pipe. Considering the nature of the processes undertaken, the nature of the product and the absence of any material in support of the appellant's case, we are inclined to agree with the view of the Department that the processes undertaken by the appellant bring into existence a new commercially known product, quite different from original pipes received from the suppliers and, therefore, the processes amount to manufacture as defined in Section 2(f) of the Act and the product is dutiable. This is the view taken by the Tribunal in the earlier batch of appeals.
8. Learned Counsel for the appellant at one stage stated that if the processes amount to manufacture, the final product and the raw material may fall under the same Tariff Heading or Tariff sub-heading. This may be so. But as held in several decisions this does not have much relevance indicating the question whether the processes amount to manufacture. [See Laminated Packings Pvt. Ltd., 1990 (49) E.L.T. 326 (S.C.)] 9. For the reasons indicated above, we find no ground to interfere and accordingly dismiss the appeal.