1. The issue involved in this machines imported in knocked down condition amounts to manufacture under Section 2(f) of the Central Excise Act.
2. Shri Sudhakar Awasthi, Representative of the Appellants, submitted that they placed order for the purchase of 400 fax machines in knocked down condition with M/s. Samsung Ltd., Seoul; that the consignment was received under Bill of Entry No. 103934 dated 30-6-1992; that in their letter dated 24-6-1992, they requested to allow the clearance of machines without payment of excise duty since consequent to the assembly the resultant product would have the same identity namely facsimile machine which had been subjected to both the duty of Customs; that the Commissioner, under the impugned Order, has held that the activity carried out by them over the imported consignment to make it complete facsimile machine amounts to manufacture and Central Excise duty is liable to be paid: that there is no change in the nomenclature of the product which was imported, i.e. the facsimile machine in knocked down condition, and the product which was ultimately sold that is again a facsimile machine though after assembly; that it is only for sake of convenience that a product is imported in knocked down condition; that the indigenous parts are not technically speaking items of the facsimile machine but are only packing material/accessories of the facsimile machine; that the machine is complete even without these parts.
3. He further, mentioned that a manufacturing process is a process where there is complete transformation of the output from the inputs and a new product emerges which is commercially different from the inputs and has a new commercial use, name and character as held by the Supreme Court in U.O.I, v. Delhi Cloth Mills, 1977 E.L.T. (J199); S.B.Sugar Mills Ltd. v. U.O.I., 1978 (2) E.L.T. (J336); Empire Industries Ltd. v. U.O.I., 1985 (20) E.L.T. 179 (S.C.); Ujagar Prints v. U.O.I., 1988 (38) E.L.T. 535 (S.C.); that where the facts of a case are clear and apparent on the basis of which it can be determined whether a process is manufacturing process or not, falling upon and taking help of Notes & Heading is not required; that further bare perusal of Note 6 to Section XVI will show that it is for the conversion of an article which is incomplete or unfinished but having the essential characterstics of complete or finished articles; that in the instant case there was no conversion of any article but only assembly which was done with an object to restore the machine to its original shape which was before it was dismantled and imported, that the instant case is squarely covered by the case of Walchand Nagar Industries v. C.C.E., Pune, 1995 (79) E.L.T. 485 (T) wherein it was held "that the process carried out by the appellants upon the complete, machining centre imported in C.K.D. condition do not amount to manufacture as no new product bearing a new or different character or use emerge as a result thereof." He also relied upon the decision in Xeroxgraphics Systems Ltd. v. Collector of Customs, 1995 (80) E.L.T. 337 (T) in which it was held that assembly of photocopier machine imported in unassembled condition does not amount to manufacture, as no new product bearing a new or different name or different character or use having emerged as a result thereof.
4. Countering the arguments, Shri K.K. Goel, ld. SDR, reiterated the findings of the Commissioner as contained in the impugned Order and submitted that as per definition of 'manufacture' in Section 2(f) of the Central Excise Act manufacture includes any process "which is specified in relation to any goods in the Section or chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture;" that accordingly Section/ chapter Notes are to be considered by the Department for deciding whether any particular activity amounts to manufacture or not; that Note 6 to Section XVI makes it very clear that the process undertaken by the Appellants amounts to manufacture. He relied upon the decision in the case of Hansa Electronics (I) Pvt. Ltd. v. CCE, Mumbai-I, 1999 (35) RLT 23 (CEGAT) wherein it was held that the activity of assembling Central Processing Units from duty paid imported parts by screw driver technology amounts to manufacture. Reliance was also placed on the decision in Texmaco Ltd. v. CCE, Calcutta, 1999 (105) E.L.T. 146 (Tribunal) and CCE v. Maruti Udyog Ltd., 1997 (72) ECR 948. The ld. SDR also submitted that the number of items required for completing the machines are 70 as per Appellants own letter dated 19-8-1992 and all the items procured indigeneously were not packaging material. He pointed out that chord purchased locally is not a packaging material but an essential item. He relied upon the decision in CCE v. Jay Engineering Works Ltd., 1989 (39) E.L.T. 169 (S.C.) wherein even nameplate to be affixed on fan was considered to be an input and essential ingredient. He, therefore, contended that the fax machine is not marketable without all the raw materials procured indigenously; that the ratio in the cases of Walchand Nagar and Indian Xerox-graphics System is not applicable to the facts of the present matter.
5. In reply, the ld. Representative of the Appellants relied upon the decision in Eureka Forbes Ltd. v. CCE, Chandigarh, 2000 (120) E.L.T.533 (Tri.-LB) wherein it was held that Note 6 to Section XVI has no application when the Acquaguard was put in the new carton along with some other bought out item termed as Prefilter. He also placed reliance on the decision in the case of CCE, Chandigarh v. Modi Business Machines Ltd., 1999 (112) E.L.T. 112 (T) wherein it was held that power cord is necessary only to connect the typewriter to electrical mains and cannot be regarded as component and integral part of electronic typewriter.
6. We have considered the submissions of both the sides. The Appellants claim that they are importing facsimile machine in knock down condition and the assembly of these components does not bring a new product into existence. The fact, however, remains that what is imported by them are component parts of the facsimile machine and not facsimile machine as such. The process of assembly undertaken by them in their factory premises amounts to manufacture as out of the components imported by them a distinct commercial product with a new name, character and use emerges. The fact is that what they imported were components of the fax machine and it was only the process of assembly undertaken by them which has brought into existence facsimile machines. The Revenue has rightly relied upon Note 6 to Section XVI which reads as under : "In respect of goods covered by this Section, conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article (including 'blank', that is an article, not ready for direct use, having the approximate shape or outline of the finished article or part and which can only be used, other than in exceptional cases, for completion into the finished article or part), into complete or finished article shall amount to 'manufacture'." 7.1 It is apparent from the wordings of this Note that if a product which is incomplete or unfinished is completed or finished, the process for making it complete or finished will amount to manufacture.
According to Webster IXth New College Dictionary, Conversion means "something converted from one use to another." The Appellants are converting CKD kits into fax machine so that the components could be used as a fax machine. The decisions relied upon by the Appellants are not applicable to the facts of the present case. The decision in the case of Indian Xeroxgraphic System was in respect of Item No. 33D of the erstwhile Central Excise Tariff which did not contain any Note like Note 6 to Section XVI. As per Section 2(f) of the Central Excise Act, manufacture includes any process which is specified in relation to any goods in the Section or Chapter Note of the Schedule to the Central Excise Tariff Act as amounting to manufacture. Such a definition was not in existence at the relevant time for deciding the matter in the case of Indian Xeroxgraphic System Ltd. Similar was the situation in the case of Walchand Nagar Industries as the goods were manufactured and cleared during the period August, 1984 to January, 1986 when the definition of manufacture under Section 2(f) of the Central Excise Act did not provide that the process mentioned in Section or Chapter Note would amount to manufacture.
7.2 Further the decision in Eureka Forbes case is not applicable as the facts are different. In that case, the Assessees were buying Water filter-cum-purifier and packing it in one carton along with other bought-out accessories like prefilter bowl, prefilter candle, nozzles, nipples, prefilter clamp, hose clip and nuts. The Tribunal found that, according to reports of three laboratories -University of Agricultural Sciences, Bangalore, Central Food Technological Research Institute and Environmental Services SGS India Ltd. - that Aquaguard without prefilter not only filters the water but also purifies it. Accordingly, the Tribunal held that "it is a complete unit in itself as filtering and purification are concerned. To have its efficacy increased and to give a longer lifetime to the activated carbon column fixed on the left side of the equipment, the assessee canvases for a prefilter to be added to it...They take the characterstics of accessories" In the light of these facts, Tribunal held that Note 6 to Section XVI has no application. It is not the case of the Appellant that the components imported by them could be used as fax machine without the process of assembly undertaken by them. Only the process undertaken by them makes the product complete or finished product.
8. Our views are further strengthened by the Tribunal in the case of Collector of Customs v. Maruti Udyog Ltd., 1996 (16) RLT 646 (CEGAT) wherein it was held that for customs assessment purpose the goods have been deemed to be cars as a result of legal fiction. The imported goods, however, remain to be components assemblies or sub-assemblies.
Similar views were also held by the Tribunal in the case of Wipro G.E.Medical System Ltd. v. C.C., Bangalore, 1999 (106) E.L.T. 169. In that case the Appellants therein had imported two sets of Cat Scan Systems in SKD/CKD condition and the Tribunal observed that Central Excise Department has correctly levied duty on the system after they are fully manufactured as what was imported was merely deemed to be a system though for "Practical Purpose" were component parts. The Tribunal also observed that the Appellants therein had to establish a utility costing over rupees one crores to put the components together. We therefore hold that the process of assembly undertaken by the appellants amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act. The Appeal is thus rejected.