1. The facts of the case are that the appellants are engaged in the manufacture of what is called by them to be Filler Wire. They receive stainless steel wires in coil form. In their factory, they undertake the processes of straightening the said wires and cutting them into required sizes. For this processing, the stainless steel wires pass through a rotor, rotating at high speed and having 8 dies and thereby the wires get straightened to a very close accuracy. These wires then go to the cutting section of the machine where it is cut to pre-determined sizes. The appellants did not obtain a Central Excise licence for these processes and cleared the "Filler Wire" from their factory without payment of Central Excise duty. A show cause notice was, therefore, issued to them by the Superintendent of Central Excise, Range-IV, Indore on 3-8-83 for confiscation of the seized filler wire valued at Rs. 3,500/-, imposition of penalty under Rule 173Q of the Central Excise Rules and for recovering duty amounting to Rs. 68,684.82 under Rule 9(2) of the Central Excise Rules and Section 11-A of the Central Excises and Salt Act, 1944 in respect of Filler Wires cleared during the period from August, 1978 to June, 1983. In reply to the show cause notice, the appellants contended that the processes of straightening the stainless steel wires and cutting them into required sizes did not amount to manufacture and hence no licence was to be obtained under the Central Excise Laws and no duty was to be paid on the Filler Wire. The Additional Collector of Central Excise, who adjudicated the case, did not accept the appellants' contention. He held that conversion of stainless steel wire into Filler Wire involved a transformation into a different identifiable product having a distinct name, character or use. Hence, the processes undertaken by the appellants were manufacture under Section 2(f) of the Central Excises & Salt Act, 1944 and the Filler Wire was classifiable under Item 68 of the erstwhile Central Excise Tariff. He, therefore, confiscated the seized Filler Wire valued at Rs. 3,500/- under Rule 173Q of the Central Excise Rules with a redemption fine of Rs. 500/- only. He confirmed the demand for duty of Rs. 68,684.82 under Rule 9(2) ibid. He also imposed a penalty of Rs. 5,000/- on the appellants under Rule 173Q of the Central Excise Rules, 1944. Hence, the present appeal before us.
2. The learned advocate for the appellants have argued before us that the processes undertaken by the appellants in straightening and cutting of the stainless steel wire did not amount to manufacture within the meaning of Section 2(f) of the Central Excises & Salt Act as there was no transformation into a new product. Hence, the appellants were not required to obtain a Central Excise licence and no duty was payable on the Filler Wire cleared from the appellant's factory. In support of his argument the learned advocate relied on the following judgments/decisions :- (i) 1988 (34) ELT 5 (SC) - Collector of Central Excise, Bombay-II v. M/s. Kiran Spinning Mills, Thane.
It was held by the Hon'ble Supreme Court in that case that straightening and cutting of the running lengths of man-made fibre into shorter lengths was not 'manufacture' under the Central Excise law as no new substance was brought into existence under Section 2(f) of the Central Excises & Salt Act, 1944.
(ii) 1988 (35) ELT 6 (SC) - Collector of Central Excise, Madras v. M/s. Kutty Flush Doors & Furniture Co. (P) Ltd. In that case it was held by the Hon'ble Supreme Court that sawing and cutting of timber logs into smaller sizes was not manufacture as no new product emerged as a result of cutting of timber into various sizes.
(iii) 1977 ELT (J 199) (S.C.) - UOI v. Delhi Cloth & General Mills Co. Ltd. and Ors.
It was held in that judgment that the definition of the word 'manufacture' in Section 2(f) of the Central Excises and Salt Act did not equate 'processing' to 'manufacture' and therefore, mere processing of goods was not liable to excise duty. It was further held that the word 'manufacture' was generally understood to mean as bringing into existence a new substance and did not mean merely to produce some change in a substance. Therefore, manufacture imply a change, but every change was not manufacture and yet every change of an article was the result of treatment, labour and manipulation. But something more was necessary and there must be transformation, a new and different article must emerge having a distinct name, character or use.
(iv) 1978 ELT (J 336) (S.C.) - South Bihar Sugar Mills Ltd. and Anr.
etc. v. UOI and Anr. etc. and Tata Chemicals Ltd., Bombay v. R.M. Desai, Inspector, C. Ex. Mithapur and Ors.
In that judgment also it was held that the word 'manufacture' implied a change but every change in the raw material was not a manufacture. There must be such a transformation that a new and different article must emerge having a distinct name, character or use.Collector of Central Excise, Bombay v. Western India Tanneries Ltd. It was held in the said case that cutting of tanned leather to various sizes was not a process of manufacture, nor had the original commodity undergone a change to result in a new product.R.S. Steel Works, Ghaziabad v. Collector of Central Excise, Meerut. It was held by the Tribunal that cutting to sizes, punching and galvanising of duty-paid M.S. angles and sections was not manufacture as no new product came into existence as a result of these processes.Collector of Central Excise, Vadodara v. Mahavir Minerals Store Supply Co. and 2 Ors. The Tribunal held in that case that crushing and grinding dolomite lumps into powder/chips was not manufacture within the meaning of Section 2(f) of the Central Excises & Salt Act, 1944 since there was no transformation into a new product.Union of India and Ors. v. M/s.
Piramal Spinning & Weaving Mills Ltd. In that case the Hon'ble High Court held that inter-twining of yarns with four-five twists per inch was not manufacture as no new product came into existence under Section 2(f) of the Central Excises & Salt Act, 1944.M/s. Aruna Industries, Visakhapatnam v. Collector of Central Excise, Guntur & Four Ors. The Tribunal held that cutting, drilling and welding did not amount to manufacture as no change of identity of the product was involved in the processes.Purolator India Limited v. Collr.
of C. Ex.. It was held by the Tribunal in that case that slitting, pleating and cutting of impregnated filter paper to form impregnated filter paper pleated pack did not amount to manufacture, but were only processes of 'conversion', not bringing any fundamental change.
Hence, there was no manufacture under Section 2(f) of the Central Excises & Salt Act and no duty was chargeable under Tariff Heading 4818.90 of Central Excise Tariff Act, 1985.
3. The learned advocate further argued that the show cause notice in this case was issued on 3-8-1983 for the period from August, 1978 to June, 1983. Part of the demand was, therefore, time-barred. The Officers of Central Excise and audit party visited the appellants' factory and the processes undertaken by the appellants were known to the officers. There was, therefore, no suppression of facts by the appellants.
4. The learned DR reiterated what has been stated in the impugned order.
5. We have gone through the records of the case. We have also considered the arguments of the learned advocate and have gone through the judgments/decisions relied on by him. Following the ratio laid down by the aforesaid judgments/decisions, we hold that the processes of straightening the stainless steel wire and cutting the same into required sizes do not amount to manufacture within the meaning of Section 2(f) of the Central Excises & Salt Act, 1944 as no new product emerge as a result of the processes. The stainless steel wires remain stainless steel wire' after processing. The change in their form does not bring about a new product although the appellants gave a local name 'Filler Wire' to the straightened and cut stainless steel wire. Since there was no manufacture under Section 2(f) ibid, no Central Excise duty was chargeable on the Filler Wire under Tariff Item 68.