IMPORTANT POINT
If tariff made no difference between coated and uncoated goods then mere process of fixing rubber lining on pipes and tanks etc. would not amount to manufacture of some new commodity.

JUDGMENT

S.N. Variava, J.-This Appeal is against the Judgment dated 31st December, 1997 passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (for short CEGAT).

2. Briefly stated the facts are as follows :

The Appellants carry on the business of fixing rubber linings on pipes, tanks and other such articles. The articles were supplied to them by their customers. They fixed the lining and returned the articles. They were issued a show-cause-notice claiming that they were manufacturing dutiable goods and that they were not declaring the correct value inasmuch as the value of the articles supplied to them and the packing, forwarding charges and rubber lining charges had not been included in the assessable value. The Appellants reply was accepted and the Assistant Collector dropped the show-cause notice.

3. The Department preferred an Appeal to the Collector (Appeals). The Appeal was allowed by the Collector (Appeals). The Appellants filed an Appeal to CEGAT which has been dismissed by the impugned order.

4. The question for consideration is whether a new and marketable product having a distinct name, character and use could be said to have come into existence as a result of the process undertaken by the Appellants.

5. In the case of U.O.I. vs. D.C.M. reported in 1977 E.L.T. (J 199), a Constitution Bench of this Court held that manufacturing of Vanaspati from raw oil did not amount to manufacture of a new product. It was inter alia observed as follows :

"14. The other branch of Mr. Pathak s argument is that even if it be held that the respondents do not manufacture "refined oil", as is known to the market they must be held to manufacture some kind of "non-essential vegetable oil" by applying to the raw material purchased by them, the processes of neutralization by alkali and bleaching by activated earth and/or carbon. According to the learned Counsel "manufacture" is complete as soon as by the application of one or more processes, the raw material undergoes some change. To say this is to equate "processing of manufacture" and for this we can find no warrant in law. 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. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passage runs thus :-

"Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of 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 and use."

6. In the case of Indian Hume Pipe Co. Ltd. vs. Collector of Central Excise reported in 1990 (45) E.L.T. 457 (Tribunal), the question was whether lining and coating steel pipes with cement amounted to changing the character of the pipes and bringing into existence a new product. CEGAT relied upon a Circular issued by the Central Board of Excise and Customs, which held that cement mortar coating would not amount to manufacture. It also took note of the tariff item and held that the tariff item made no distinction between coated and uncoated pipes. On this basis it is held that by the process of coating a new product had not come into existence.

7. In the case of Lathia Industrial Supplies Co. Pvt. Ltd. vs. Collector of Central Excise reported in 1987 (29) E.L.T. 751 (S.C.), this Court has held that rubberizing or relining of old and used rollers does not amount to manufacture. Similarly, in the case of Telangana Steel Industries vs. State of A.P. reported in 1994 (Vol. 93) Sales Tax Cases (S.C.), the question was whether wires drawn from duty paid wire rods were different commodities. This Court noted the tariff item and observed that the tariff item made no differen