IMPORTANT POINTS
1. Process undertaken by an assessee of merely joining of three pipes, one with other, of different dimensions to obtain a desired length for bringing into existence the resultant stepped Transmission Poles, does not amount to manufacture under the provisions of the Section 2(f) of the Central Excise Act, 1944.
2. The Revenue must refrain from sending of indiscriminate show cause notices under the Central Excise Act, without proper application of mind. This is absolutely imperative to curb unnecessary and avoidable litigation in Courts leading to unnecessary harassment and waste of time of all concerns including Tribunals and Courts.

Headnote:(i) Central Excise and Salt Act, 1944—Section 2(f)—Manufacture—Process of ‘welding’ of electric resistant pipes/tubes of different diameters, which are duty paid, and purchased from the open market—Whether process undertaken by appellants for bringing into existence the resultant stepped Transmission Poles amounts to manufacture under the provisions of Section 2(f) of the Act—(No)—Show cause notice issued on ground that process results in a new product and, hence, is liable to excise duty under the Residuary Entry, i.e., Tariff Item 68 upto 27.2.1986, and thereafter under Tariff Item 7308 for the period from 28.2.1986—Whether sustainable—(No)—CEGAT was not justified in holding that pipes and poles are two different and distinct items known in the market—Activity of the appellants of merely joining of three pipes can by no stretch of imagination be brought within the category of ‘manufacture’.
       Held : We have also carefully perused the pleadings and examined a series of cases decided by this Court. The following conclusions are irresistible :
       1)The process carried out by the appellants do not change the basic identity or original character of M.S. Welded Pipes to make it a new marketable product leading to manufacture as defined under Section 2(f) of the Central Excise Act, 1944.
       2)The burden to prove manufacture is always on the Revenue. In the instance case the Revenue has completely failed to prove that the activity carried out by the appellant amounts to manufacturing. It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to residuary entry.
       3)The residuary entry is meant only for those categories of goods which clearly fall outside the ambit of specified entries. Unless the Department can establish that the goods in question can by no conceivable process of welding be brought under any of the tariff items, resort cannot be had to the residuary item.
       In view of the settled legal position the activity of the appellants of merely joining of three pipes, one with other, of different dimensions to obtain a desired length can by no stretch of imagination be brought within the category of ‘manufacture’.(Paras 38 & 39)
       Before we part with this case we would like to impress upon the respondent authorities that before issuance of show cause notices the Revenue must carefully take into consideration the settled law which has been crystallized by a series of judgments of this Court. The Revenue must make serious endeavour to ensure that all those who ought to pay excise duty must pay but in the process the Revenue must refrain from sending of indiscriminate show cause notices without proper application of mind. This is absolutely imperative to curb unnecessary and avoidable litigation in Courts leading to unnecessary harassment and waste of time of all concerns including Tribunals and Courts.(Para 41)
       (ii) WORDS AND PHRASES—Word ‘Manufacture’—Meaning—Meaning is not confined to that which is done by hand alone, but by machinery as well.
       Held : The word “manufacture” is a compound word of Latin origin derived from the words “manu,” by hand and “facere,” to do, to make, to form; but the meaning is not confined to that which is done by hand alone, but by machinery as well.(Para 3)

JUDGMENT

Dalveer Bhandari, J.—A short question involved in these appeals is whether the process undertaken by the appellants for bringing into existence the resultant Stepped Transmission Poles amounts to manufacture under the provisions of the Section 2(f) of the Central Excises Act, 1944.

2. Section 2(f) of the said Act reads as under :

“Manufacture” includes any process—

(i)incidental or ancillary to the completion of a manufactured product;

(ii)which is specified in relation to any goods in the section or Chapter notes of [The First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or]

3. The word “manufacture” is a compound word of Latin origin derived from the words “manu,” by hand and “facere,” to do, to make, to form; but the meaning is not confined to that which is done by hand alone, but by machinery as well. (In re Tecopa Min. Etc., Co. 110 Fed 120, 121.)

4. The following passage in the Permanent Edition of Words and phrases was referred to with approval in Delhi Cloth and General Mills AIR 1963 SC 791 at page 795 :

‘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 or use.

5. Our endeavour in the instant case would be to examine the activity of the appellant in the light of legislative intention as encompassed in the said definition.

6. In these appeals, the appellants have challenged the show-cause-notice issued by the Additional Collector of Central Excise, Calcutta -1. The said notice was issued on the ground that by the process of “welding” of electric resistant pipes/tubes of different diameters, which are duty paid, and purchased from the open market, results in a new product and, hence, is liable to excise duty under the Residuary Entry i.e. erstwhile Tariff Item 68 upto 27.2.1986, and thereafter under Tariff Item 7308 the period from 28.2.1986.

7. In pursuance to the Finance Minister’s Budget speech of 1984, a Study Group was constituted to review the Central Excise Tariff with a view to rationalize it. The Study Group in its report has mainly recommended :—

(1)To rationalize the Central Excise Tariff to make it more scientific and detailed one duly supported by formal Rules of Interpretation and clarificatory notes so as to avoid classification disputes;

(2)To omit non-specific Tariff Item 68 and to re-classify the goods covered by it under the respective class of goods of new Tariff;

(3)To incorporate the concept of ‘Manufacture’ in the selective Tariff entries, wherever needed;

(4)To minimize the multiplicity of effective rates of duty;

(5)To extend Proforma Credit/Set-off procedure to all products with few exceptions;

(6)To devise long term flawless scheme for exemption to Small Scale Sector;

(7)To provide for the issue of administrative rulings on classification of goods;

(8)Change in the departmental stand on classification of goods to have prospective effect only; and

(9)Change in Excise procedures to make them more simplified with a view to avoid complications and disputes.

8. Based on these recommendations of the Technical Study Group, the Central Excise Tariff has been delinked from the Central Excise Act and is an independent enactment.

9. The main features of the new Excise Tariff are :—

(a)Central Excise Tariff has been made more detailed and comprehensive after taking into account all Technical and Legal aspects.

(b)It is based on a system of classification derived from international convention of ‘Harmonised Commodity Description’ and ‘Coding System’ (HSN) with such “Contractions or Modifications” as are necessary to fall within the scope of levy of Central Excise Duty.

(c)Goods of the same class have been grouped together to enable parity in treatment.

(d)It contains Section/Chapter notes giving detailed explanation as to the scop

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2006 Supreme(SC) 274

Cases Referred (12)