Judgment:
1. Burn Standard Company Limited, 10-C, Hungerford Street, Calcutta had filed a Revision Application to the Additional Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi being aggrieved from order in appeal No. 313/Cal/82 dated 24-4-82 passed by the Appellate Collector of Central Excise, Calcutta. The said Revision Application stands transferred to the Tribunal in terms of the provisions of Section 35P of the Central Excises and Salt Act 1944 to be disposed of as an appeal.
2. Briefly the facts of the case are that the appellant is a holder of L-4 Central Excise Licence and manufacture excisable goods falling under Tariff Item 68 of the First Schedule to the Central Excises and Salt Act 1944. The appellant manufactured and cleared different types of identifiable machine parts/goods against specific orders made out of steel castings. In order to manufacture these items, steel castings of required shapes and sizes were cast. Thereafter these castings were machined/ polished so as to make the finished products as identifiable goods/machine parts having distinct trade names, characters and uses.
The Revenue authorities were of the view that these products were classifiable under item 68 of the Central Excise Tariff as these were not covered under any items 1 to 67 of the Central Excise Tariff. The Superintendent of Central Excise, Range 3, Calcutta V-Divn had issued a show cause notice as to why the duty of excise amounting to Rs. 26,150.98 should not be paid by them as required under Rule 10 read with Rule 1733 of the Central Excise Rules 1944. In reply to the said show cause notice the appellant had contended that they had some doubts about paying of excise duty on machined steel castings under T.I.68 as the same were covered originally under Tariff Item 26AA(V) of the C.E.T. It was further mentioned that the appellant had referred to this matter vide their letter dated 6-8-79 and a clarification to this effect was duly given by the respondents vide letter dated 4-9-75 that machine steel castings should not attract excise duty for the second time under Tariff Item 68 and while the machine iron castings should be covered under Tariff Item 68 as they were exempted from the purview of excise duty being under T.I. 25. Accordingly the appellant had been paying excise duty on machined iron castings but not on machined steel castings. It was also argued before the Assistant Collector that steel I castings under consideration do not undergo major change in appearance after machining and as such no further duty liability should be charged on these goods. The learned Assistant Collector was of the view that after machining the castings no longer remained castings. New commodities having new trade names such as buffer plunger, C.S. Sheet, lock lift lever etc. emerge. He was of the view that machining amounts to manufacture and the new products which emerge out after machining were classifiable under Tariff Item 68 of the Central Excise Tariff.
The learned Assistant Collector had confirmed the demand. Being, aggrieved from the aforesaid order the appellant had filed an appeal before the learned Appellate Collector of Central Excise, Calcutta. The learned Appellate Collector had observed that the appellants themselves sell this product not as a simple steel casting but as a specified component and machine part mostly used in the Railway System as buffer plunger, C.S. Sheet, lock lift lever etc. the products have assumed completely new identity as correctly held by the Assistant Collector in the impugned order. He had confirmed the findings of the learned Assistant Collector and had held that the products so manufactured were correctly classifiable under Tariff Item 68 of the Central Excise Tariff; and had rejected the appeal. Being aggrieved from the aforesaid order, the appellants have come in appeal.
3. Shri Shankar Ghose, learned Sr. Advocate, has appeared on behalf of the appellants. He has reiterated the facts and has referred to the contentions made in para No. 7 of the Revision Application. He has pleaded that the appellants manufacture buffer plunger, C.S. Sheets, lock lift levers etc. by casting operation and these things without any change in the shape or name are delivered to the customers after giving it a finishing in the finishing shop and as such these identical goods with identical names and sizes had already been assessed to central excise duties under Tariff Item 26AA(V) and no excise duty is leviable under Tariff Item 68 of the Central Excise Tariff, He has pleaded that after the process of casting the same product is put to machining, polishing and spray painting etc. and excise duty cannot be levied twice. In support of his arguments he has referred to a judgment of the Hon'ble Supreme Court in the case of Union of India v. Delhi Cloth and General Mills and Ors.: Civil Appeal Nos. 168-170 of 1980, Order dated 12-10-62 reported in Excise and Customs Reporter Compilation C-1-216/AIR 1963 Supreme Court 791 where the Hon'ble Supreme Court had held that processing cannot be equated with manufacture. The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. "Manufacture" implies a change, but every change is not 'manufacture' and yet every change of an article is the resultant 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." He has referred to another judgment of the Hon'ble Supreme Court in the case of Allenbery Engineers Pvt. Ltd. v. Shri Ram Krishna Dalmia and Ors. reported in AIR 1973 SC 425 at 428 where the Hon'ble Supreme Court had held that the word 'manufacture' implied a change, but that a mere change in the material was not 'manufacture'. There must be such a transformation that a new and a different article must emerge having a distinctive name, character or use and in this judgment the Hon'ble Supreme Court had referred to an earlier judgment of the Supreme Court in the case of South Bihar Sugar Mills Ltd. v. Union of India 922. Shri Ghose, the learned Sr. Advocate, has also relied on the South Bihar Sugar Mill case. He has also referred to another judgment of the Supreme Court in the case of Municipal Council, Damoh v. Vraj Lal Manilal & Co. and Ors. reported in AIR 1982 SC 844 where it was held that the well settled cannotation of the 'concept of manufacture' and 'manufacturing process' was that as a result of undergoing the process a distinct commercial commodity different from raw material comes into existence." Shri Ghose states that the steel castings had suffered duty under Tariff Item 26AA(V) and the castings after machining and polishing do not become liable to further excise duty under Tariff Item 68 of the Central Excise Tariff as no manufacturing activity is involved. He has again referred to letters dated 5-8-75 written by the appellant to the Superintendent of Central Excise, Calcutta where the appellants had written to the Revenue authorities to examine and issue a clarification whether Central Excise Duty under Tariff Item 68 was leviable or not, where the appellant had already paid duty on steel castings under Tariff Item 26AA(V) of the Central Excise Tariff, and the Revenue authorities had duly replied to the said letter dated 4-9-75 which appears on page 29 of the paper book, where the Revenue authorities had duly mentioned that steel castings were covered under Tariff Item 26AA(V) and iron castings fall under the purview of Tariff Item 68 when such castings are converted into different shapes/sizes of different character through further process of machining, and used as machine parts or other components and even on those iron castings if no machining was done they were only crude castings of iron, and the product was not liable to duty under Tariff Item 68 as the same was covered under Tariff Item 25 of the Central Excise Tariff. His alternative argument is that there cannot be any double taxation. In support of his argument he has referred to a judgment of the Hon'ble Supreme Court in the case of Union of India and Ors. v. Tata Iron and Steel Company Limited reported in 1976 SC 599 where the Hon'ble Supreme Court had held that there cannot be double taxation on the same article. In the said case there was dispute as to the applicability of exemption notification No. 30/60 dated 1-3-60 granting exemption to duty paid pig iron. The Hon'ble Supreme Court confirmed the findings of the High Court that the notification does not show that exemption is granted only when duty paid pig iron is used and that the exemption would not be available if the duty paid pig iron is mixed with other non-duty paid material. If the intention of the Government were to exclude the exemption to duty paid pig iron, when mixed with other materials, then the notification would have used the expression "only" or "exclusively" or "entirely" in regard to the duty paid pig iron. The object of the notification was to grant relief by exempting duty paid pig iron. He has laid special emphasis on para Nos. 17, 22 and 23 of the said judgment. Shri Shankar Ghose has also pleaded that in case there is ambiguity in a statute, the same has to be exercised in favour of the assessee. Shri Shankar Ghose has pleaded for the acceptance of the appeal.
4. Shri A.K. Jain, the learned SDR, who has appeared on behalf of the respondent, has pleaded that machining was done on castings and after machining the castings no longer remain castings. New commodities having new trade names such as buffer plunger, C.S. Sheets, lock lift lever etc. emerge and the machining amounts to manufacture and the products so manufactured were classifiable under Tariff Item 68 of the Central Excise Tariff; and these articles were used by Railways. He has referred to the definition of manufacture as given in Section 2(f) of the Central Excises and Salt Act, 1944 in terms of which "manufacture" includes any process incidental or ancillary to the completion of the manufactured product. He has laid special emphasis on the word 'incidental' and has referred to the dictionary meaning of incidental in New Websters Dictionary Deluxe and Encyclopaedic Edition of English language page 485. He has submitted that the dictionary meaning is casual or accidental; liable to happen or natural appertaining to. He has pleaded that after machining etc. steel casting ceases to be a casting, and is liable to Central Excise Duty under Tariff Item 68 of the Central Excise Tariff, and after machining or polishing etc. the products are not known as castings, but are known by their distinct names. In support of his argument he has relied on a judgement of the Hon'ble Supreme Court in the case of Empire Industries Ltd. and Ors. v.Union of India and Ors. reported in 1985(20) ELT 179. He has referred to para Nos. 25 and 30 of the said judgment. He has pleaded that in the said case the Hon'ble Supreme Court had held that to constitute manufacture it is not necessary that one should absoiutely make out a new thing because it is well-settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand, it is the transformation of a matter into something else, and that something else is question of degree, whether that something else is a different commercial commodity having its distinct character use and name and commercially known as such. In other words, if by application of labour and skill an object is transformed to the extent that it is commercially known differently, it will suffice to say that manufacture has taken place for the purpose of Central Excise. The degrees of transformation and labour and skill spent are irrelevant. Therefore, the question of whether a particular process is a process of manufacture or not, has to be determined naturally having regard to the facts and circumstances of each case and having regard to the well known test laid down by the Supreme Court in various decisions. He has also referred to another judgment of the Delhi High Court in the case of Metal Forgings Pvt. Ltd. and Anr. v. Union of India and Ors.
reported in 1985(20) ELT 280 where the Hon'ble High Court had held that by the process of forging, a forged product of iron and steel comes into existence. It acquires distinguishable identity as forged product.
Once an article comes into existence with the definite identity, the process of manufacture is complete and it is excisable to duty. Merely because a manufactured goods is used subsequently for manufacturing another article, it cannot be Concluded that the earlier process of manufacture was not complete or finished goods had not come into existence. Forged products which are machined, polished, holed etc.
made fit for being used as machine parts, assume a different name, character and uses. But manufacture is not complete untill all the processes incidental or ancillary to have been completed. In the case of forged products the removal of extra unwanted material by either trimming or by gas cutting or by spin cutting for removal superfluous extra skin of cast iron is a process incidental to the forging. But, when the forged products are machined/drilled/polished, they assume an altogether different character form what it was when forged. In the present case they are identifiable and usable as machine parts without any further process. They become liable to duty of central excise under Item 68 of the Central Excise Tariff in addition to the duty paid at the stage of forging under Item 26AA(ia). He has laid special emphasis on para 15 of the said judgment. In support of his arguments he has also referred to the following judgments :-Steel Authority of India Ltd. v. Collector of Central Excise, CalcuttaPerfco Foundry and Chemicals Ltd., Pune v. Collector of Central Excise, Pune : 1985(5) ETR 42, where this Tribunal had held that proof machined castings of cylinder liners were classifiable under Item 25 and fully machined cylinder liners were liable to a two-stage levy first under Item 25 and later under Item 68.
Shri Jain, the learned SDR, has pleaded that under the law the duty can always be charged twice. In support of his argument he has referred to a judgment of the Tribunal in the case of Mahindra Engineers & Co. Pvt.
Ltd., Pimpri v. Collector of Central Excise, Pune reported in 1984(4) ETR 249 where the Tribunal had held that glass fabrics and the housing are different commercial products. There is no illegality if the housing is taxed again and under the same entry. Shri Jain has pleaded for the dismissal of the appeal.
5. Shri Shankar Ghose, the learned Sr. Advocate, has again referred to the Hon'ble Supreme Court judgment in the case of Union of India v.Delhi Cloth Mills reported in AIR 1963 SC 791. He has argued that there is no transformation and there is no evidence that on record to the effect that there had been transformation. He has pleaded that the judgments cited by the learned Departmental Representative are not relevant. He has pleaded for the acceptance of the appeal.
6. We have heard both the sides and have gone through the facts and circumstances of the case. The appellant had manufactured steel castings of required shapes and sizes and the castings so manufactured are liable to Central Excise Duty under Tariff Item 26AA(V). Relevant extract from the then Tariff Item 26AA is reproduced below :- 7. In the matter before us there is no dispute as to the levy of Central Excise Duty on steel castings. The appellant disputes that these steel castings are machined and polished and are sold to Railways. After machining/ polishing the commodities buffer plungers, C.S. Sheet, lock lift lever etc.. remain steel castings and no excise duty is leviable under Tariff Item 68 of the Central Excise Tariff.
Shri Ghose had referred to a number of judgements of the Hon'ble Supreme Court starting from the Union of India v. Delhi Cloth Mills reported in AIR 1963 SC 791 to Allenbury Engineers Pvt. Ltd. v. Shri Ram Krishna Dalmia and Ors. reported in AIR 1973 SC 425. In the case of Allenbury Engineers the . Hon'ble Supreme Court has referred to its earlier decisions in the case of South Bihar Sugar Mills Ltd. v. Union of IndiaUnion of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. and Ors.. We, however, find that in the matter before us the facts are very much different and the ratio of the Hon'ble Supreme Court's decision is not applicable. Steel castings made by the appellant cannot be put to any use and excise duty is leviable on them in terms of Tariff Item 26AA(V) of the Central Excise Tariff. Steel castings after machining and polishing become altogether distinct and new commodities. Component parts come into existence which are known by specific names and are to be used straight away by Railways. There is no doubt that after machining the casting, it ceases to be a "casting" and a particular part assessable under a different Tariff Item namely Tariff Item 68 comes into existence. The Hon'ble Supreme Court in the case of Empire Industries Ltd. and Ors. v. Union of India and Ors. reported in 1985(20) ELT 179 had held that to constitute manufacture it is not necessary that one should absolutely make out a new thing because it is well settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand, it is the transformation of matter into something else and that something else is a question of degree, whether the something else is a different commercial commodity having its distinct character, use and name and commercially known as such. In other words, if by application of labour and skill an object is transformed to the extent that it is commercially known differently, it will suffice to say that manufacture has taken place for the purpose of Central Excise. The degrees of transformation and labour and skill spent are irrelevant. Therefore, the question of whether a particular process is a process of manufacture or not, has to be determined naturally having regard to the facts and circumstances of each case and having regard to the well known test laid down by the Supreme Court in various decisions. Para Nos. 25, 30, 31 and 37 from the said judgment are reproduced below :- "25. It may be noted that in the case of Hiralal Jitmal v. Commissioner of Sales Tax(1957) S.T.C. Vol. VIII 325 a Division Bench of Madhya Pradesh High Court in considering the meaning of the expression 'manufacture' for the purpose of the Madhya Bharat Sales Tax Act, 1950, was of the view that it was not necessary that there must be a transformation in the materials and that the transformation must have progressed so far that the manufactured article became commercially known as different article from the raw materials and all that was required was that the material should have been changed or modified by man's art or industry so as to make it capable of being sold in an acceptable form to satisfy some want, or desire, or fancy or taste of man. It is apparent that the concept of 'manufacture' in that decision has been given a wide meaning. It is not necessary to go into this aspect any further. It may be mentioned that this Court in the case of Commissioner of Sales Tax, U.P., Lucknow v. Harbilas Rai and Sons (1968) S.T.C. Vol.21 p.17, pointed out that the word 'manufacture' has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour was applied remained essentially the same commercial article, it could not be said that the final product was the result of manufacture. Referring to the Madhya Pradesh High Court's decision in the case of Hiralal Jitmal (supra), this court observed at page 20 as follows :- "...The decision of the Madhya Pradesh High Court might perhaps be justified on the ground that a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed."In Deputy Commissioner, Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. Pio Food Packers - (1980) SCR/271 arising out of Kerala General Sales Tax Act, 1963 where the expression used under Section 5-A(1)(a) was "consumes such goods in the manufacture of other goods for sale or otherwise", and the meaning of the expression under Section 5-A(1)(a) fell for conside ration for exigibility to tax of pineapple fruit when processed into slices for the purpose of being sold in sealed cans. Though in the facts of that case in the context of Sales Tax Law, it was held that there was no manufacture, the principles enunciated by this Court are in the following terms :- "There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes, through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind processing at each stage. With each process suffered, the original commodity experiences a change. 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, Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity." It may be noted that the taxable event in the context of Sales Tax Law is 'sale'. The taxable event under the Excise Law is 'manufacture'. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted. Though in the facts of that case perhaps it was not necessary and as such the attention of the Court was not drawn to the definition of the term 'manufacture' under Section 2(f) of the Central Excise Act nor was the Tariff Item IB placed before the Court.
31. This decision was referred to and followed in the case of Chowgule & Co. Pvt. Ltd. and Anr. v. Union of India and Ors. -(1981) 1 SCC 653. Whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of 'manufacture'. Any process or processes creating something else having distinctive name, character and use would be manufacture.
37. It may, however, be pointed out that when Darling J. dealt with the example of a carpenter, the learned judge thought it was right that it could not be said that when 'box' is prepared that the carpenter was manufacturing 'wood' but transforming 'wood' into 'box' would certainly be manufacturing 'boxes'. It is well settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand, it is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view is a question depending upon the facts and circumstances of the case. Plain wood is certainly different from 'box' made of wood. Rindley J. it may be pointed out, disagreed with the view and observed at page 362 of the report that where any process of art is used upon some substance, it is "manufactured". He observed as follows :- "To say that a person does not "manufacture" a thing because it has the same name after the process has been passed upon it as it had before seems to me - but I suppose I am wrong - to be simply a question of words. If there had happened to be another word for saccharin of the strength of 550, different from saccharin of the strength of 330, it would almost - I will not say quite - follow from the reasoning of my learned brothers that this would have been a manufacture. I cannot think that that is so. Take the case of the manufacture of steel; and lead it be steel before it goes into works: apply some process to it and it becomes a particular sort of steel. But it is steel both before and after, although steel of different qualities. Is not that the manufacture of steel? I should have thought so. Take the manufacture of wool, it is wool when it is on the sheep's back; it is wool when it has passed through the process of sorting and picking which it has to go through in the mill. Is not that the manufacture of wool? I should have thought it most certainly was, although the name "wool" is applied to it both before the process begins and after it has ended." "The learned judge further observed that in that case saccharin was 'manufactured' and manufacture of saccharin does cover a process that was done in that case." A simple perusal of the above paras reflects that the facts of the present case clearly lead us to the inference that steel castings after machining and polishing become a new distinct identifiable commodity and the duty is correctly leviable on them under Tariff Item 68 of the Central Excise Tariff. The Tribunal in the case of Mahindra Engineering and Chemical Products Ltd., Pimpri, Pune v. Collector of Central Excise, Pune reported in 1984(4) ETR 249 had made similar observations.
The learned Senior Advocate's argument that there cannot be double taxation does not fit in the facts and circumstances of the present matter before us. For the levy of Central Excise Duty, there has to be manufacture in terms of the provisions of Section 2(f) of the Central Excises and Salt Act, 1944. If the same product is put to different processes and in those processes different commodities emerge, the Central Excise duty is leviable, if the products which so emerge fall in different tariff items of the Central Excise Tariff. In view of the above discussion, we do not find any merit in the appeal. The appeal is dismissed.