CENTRAL EXCISE LAW- Adv Thirumalai.pptx

7/28/2019 CENTRAL EXCISE LAW- Adv Thirumalai.pptx

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Historical and constitutional background

Taxable Event / Charging section section 3

Concept of

Manufacture

Deemed Manufacture


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Meaning Tax Vs. Duty any difference

Types of Taxes

Nature of CE Why tax is collected

Tax Vs. Fee


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Essential characteristics of a tax

Not a voluntary payment or donation

Enforced contribution exacted pursuant tolegislative authority, in exercise of taxing power.

Imposed, levied and collected for the purpose ofraising revenue

Used for public or governmental purposes and notfor payment for some special privilege granted orservice rendered


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Lord Lytton introduced income-tax and lowered excise duty.

His successor Lord Curzon lowered excise duty on salt during

1900.

Salt tax was increased in the later half of 19th century.

Lord Elgin imposed countervailing duty of 5% (excise on yarn

produced in Indian mills which would compete with

Lancashire yarn, imposed)


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Excise derived from ??

Latin words variants

Excido / excisum / accisus / accidere

Meaning to cut off, raze, demolish, eliminate

i.e. deduct or cut off something for the benefit of the

State


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Excise duty on all Indian woven goods

Cotton Duties Act, 1896 levy and collection at

every mill in British India, upon all cotton goods

produced in such mills.

Intoxicants and drugs subjected to excise for

checking consumption than for raising revenue.


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VII Schedule Union List Entry 84 - Duties of excise on

tobacco and other goods manufactured or produced in India

except: alcoholic liquors for human consumption;

opium, Indian hemp and other drugs and narcotics,

but including medicinal and toilet preparations containing

alcohol or any substance including in sub-paragraph (b) of

this entry (eg. Medical syrups for cold/cough)


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State List

Entry 51 Excise duty on alcoholic liqours, opium

and narcotics

Union list Entry 97 any other matter not included

in List II, III and any tax not mentioned in list II or III

(residual powers)


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Courts views:

The Province of Madras Vs Boddu Paidanna & Sons, 1978 (2)

ELT J.272 (FC):

Duties of excise were on manufacture or production of

an article and although the expression duty of excise

was wide enough to include sales tax, in view of the

power expressly given to another authority to levy a

sales tax, the said expression must be given a more

restricted meaning than it might otherwise bear.


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In appeal before the Privy Council in Governor

General in Council Vs Province of Madras, 1978 (2)

ELT J.280 (PC) Excise was primarily a duty levied

upon a manufacturer producer on the commodity

manufactured or produced.

Tax on goods and not on sales or sale proceeds.


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There was no overlapping of excise duty and sales tax.

R.C.Jall Parsi and Ors Vs UOI, AIR 1962 SC 1281 Excise duty is

primarily a duty on production or manufacture of goods within

the country.

It is an indirect duty passed on to ultimate customer.

Ultimate incidence will always be on the customer. Can be

levied at any convenient stage.


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CCE Vs Acer India Ltd, 2004 (172) ELT 289 (SC) Duty of excise

is a tax upon goods and not sale or proceeds thereof. Taxable

event is manufacture or production.


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UOI Vs Bombay Tyres International, 1983 (14) ELT

1896 (SC):

Ultimate incidence of an excise duty, a typical

indirect tax, must always be on the consumer, who

pays as he consumes or expends and it continues to

be an excise duty on homemade goods, no matter at

what stage it is collected.


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Eri Beach Company Ltd Vs Attorney General of

Ontario, AIR 1930 PC 10 direct tax is one which is

demanded from the very person who it is intended

or desired should pay it. Indirect taxes are those

which are demanded from one person in the

expectation and intention that he shall indemnify

himself at the expense of another.


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The Central Board of Revenue Act, 1963 defines direct tax to

mean any duty leviable or tax chargeable under Estate Duty Act,

1953, Wealth-tax Act, 1957, Expenditure Tax Act, 1957, Gift Tax Act,1958, Income-tax Act, 1961, Super Profits Tax Act, 1963, Interest

Tax Act, 1974, Hotel Receipts Tax Act, 1980, and any other duty or

tax which, having regard to its nature or incidence, may be

declared by the Central Government, by notification in the official

gazette to be a direct tax.


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Art.366(28) of Const. of India Taxation includes the

imposition of any tax or impost, whether general or

local or special, and tax shall be construed

accordingly.


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Department friendly assessee (DFA)

Law conscious assessee (LCA)


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DFA is engaged in painting of Motor Cars. The Motor Cars

are imported by their customers and sent to DFA for

painting. DFA clears it from their premises by collecting

painting charges from their customers.

CE Department says:

You are a manufacturer

It attracts duty of 30% on market value of motor cars Pay duty on a daily basis by cash.

File copies of invoices before clearance and take our permission.

At the end of the month you show the records.


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DFA refers the matter to their finance department,

who work out the costs and say it is unviable.

DFA is confused and they come to you for advise???

How do you make them lawconscious?


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What is the taxable event??

Is there manufacture/production of goods.

Does it result in excisable goods?

Rate???

Classification??

Valuation??

When payable??

Records/returns/authentication

Prior permission ??


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Central Excise Act, 1944

Rules

CE Rules, 2002,

Cenvat Credit Rules, 2004,

CE (Appeal) Rules, 2001,

CE (Advance Rulings) Rules, 2002,

CE (Settlement of cases) Rules, 2007,

CE (Removal of Goods at Concessional Rate of duty for

manufacture of excisable goods) Rules, 2001,


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CE Valuation (Determination of Price of Excisable Goods)

Rules, 2000,

CE (Compounding of Offences) Rules, 2005,

CE (Determination of Retails Sale Price of Excisable Goods)

Rules 2008

Central Excise Tariff Act, 1985

Notifications

Case laws


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Section 3 of CE Act, 1944

Levy and collection

CENVAT other name

Manufacture/production in India

Goods/Excisable goods

Basic/Special Excise duty

SEZs excluded

EOUs special treatment

Tariff values


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Levy collection meaning

Somaiya Organics Ltd Vs State of UP, 2001 (130) ELT

3 (SC) the word collection in Art.265 would mean

physical realization of tax, which is levied or

imposed. Levy and collect are not synonymous

terms. Levy means assessment or charging or

imposition of tax, collect means physical realization.


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JK Spinning & Weaving Mills Vs UOI, 1987 (32) ELT 234 (SC)

there was nothing in theory to prevent the central legislature

from imposing duty of excise on a commodity as soon as it

came into existence, no matter what happened to it

afterwards, whether it was sold, consumed or destroyed and

it was for the convenience of the taxing authority that duty

was collected at the time of removal.


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Art.366(12) Goods include all materials, commodities

and articles.

Sale of Goods Act, 1930 section 2(7) Goods every

kind of moveable property other than actionable claims

and money; and includes stocks and shares, growing

crops, grass and things attached to and forming part of

the land which are agreed to be severed before sale or

under the contract of sale.


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UOI Vs Delhi Cloth Mills, 1997 (1) ELT J.199 (SC), - in

order to be goods, the articles must be capable of

coming to the market to be bought and sold.

Therefore the items must be moveable and

marketable.


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Moveability:

DCM case

South Bihar Sugar Mills Vs UOI, 1978 ELT J.336 (SC)

The articles must be something, which can ordinarily

come or can be bought to the market to be bought and

sold. As opposed to moveable goods, immoveable

property cannot be brought to the market to be sold.


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Section 3(36) GC Act, 1897 moveable goods mean

property of every description except immovable

property

Section 3(26) GC Act, 1897 immoveable property

shall include land, benefits to arise out of land, andthings attached to the earth or permanently

fastened to anything attached to the earth.


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Marketability:

Capability of a product of being put into the market for sale.

Union Carbide India ltd Vs UOI, 1986 (24) ELT 169 (SC) An

article must be something which can ordinarily come to the

market to be bought and sold. Articles in crude or elementary

form are not dutiable as they are merely intermediary

products and not goods. Aluminum cans or torch bodies

produced by extrusion process neither sold nor marketable

not goods.


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CCE Vs Ambalal Sarabhai Enterprises, 1989 (43) ELT 214 (SC)

Duty of excise is on the manufacture of goods and for an

article to be goods, it must be known in the market as such

or must be capable of being sold in the market as goods.

Actual sale is not necessary. Usage in captive consumption is

not determinative of whether the article is capable of being

sold in the market or is known in the market as goods.


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Even transient items/articles can be goods, provided

they are known in the market as distinct and

separate articles, having separate uses. Thus, goods

with unstable character can be theoretically

marketable if there was a market for such transienttypes of articles, but one has to be take a practical

view on the basis of available evidence.


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Bhor Industries Ltd Vs CCE, 1989 (40) ELT 280 (SC)

Merely because an article is specified under the

Tariff, it would not be correct to state that it is

chargeable to duty, unless it is proved that the

goods are marketable. See also Ion Exchange IndiaLtd Vs CCE, 1999 (112) ELT 746 (SC)


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Number of purchasers not relevant.

Does not confine to territorial limits of India.

The fact that goods are not actually marketed is of no

relevance nor is it necessary that the goods in question

should be generally available in the market.


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Section 2 (d) of CE Act it means goods specified in the

First and Second Schedules to the CE Tariff Act, 1985 as

being subject to a duty of excise and includes salt.

Explanation Goods include any article, material or

substance which is capable of being bought and sold for

a consideration and such goods shall be deemed to be

marketable. (2008 amendment)


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CET 1st and 2nd schedule

Section wise each section has chapters each

chapter heading/sub-heading.

Nil rate/ exemption (whether excisable) Wallace

Flour Mills Ltd Vs CCE, 1989 (44) ELT 598 (SC) & UOI

Vs Nandi Printers P.Ltd, 2001 (127) ELT 645 (SC).


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Manufactureincludes anyprocess, -

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


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iii) which, in relation to the goods specified in the Third Schedule,

involves packing or repacking of such goods in a unit container or

labelling or re-labelling of containers including the declaration or

alteration of retail sale price on it or adoption of any other treatment

on the goods to render the product marketable to the consumer

and the word manufacturer shall be construed accordingly and shall

include not only a person who employs hired labour in the production or

manufacture of excisable goods, but also any person who engages in their

production or manufacture on his own account;


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Definition starts with the word includes

3 limbs in the definition

2nd and 3rd limb Deemed manufacture


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a) Activity of transferring the goods from tankers into

smaller drums not amounts to manufacture

As per note 10 to Chapter 29, the activity of repacking products mentioned in

the said Chapter from bulk packs to retail packs shall amount to manufacture

under section 2(f)(iii) of the Central Excise Act, 1944.

In this regard, it has been clarified that the activity of transferring the goods

from tankers into smaller drums cannot be said to be covered by the said

chapter note 10 because the tankers cannot be termed as bulk packs.

[Circular No. 910/30/2209-CX dated 16-12-2009]


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b) Pickling and oiling is not manufacture

It has been clarified that the process of pickling and oiling does not amount to manufacture.

Pickling is removing surface oxides from metals by chemical or electro chemical reaction and

pickle means the chemical removal of surface oxides (scale) and other contaminants such as

dirt from metal by immersion in an aqueous acid solution. Therefore it can be said that the

process of pickling is only a chemical cleaning process to remove scales and dirt from the

metal by immersion in chemical solution and does not result in emergence of any new

commercially different commodity.

The Tribunal has also in the case of Resistance Alloys [1996(84)ELT507(T)] & Bothra Metal

Industries [1998(99)ELT120(Tribunal)] held that the process of pickling being preparatory

process to drawing of wire does not amount to manufacture.

Therefore it has been clarified that mere undertaking the process of oiling and pickling as

preparatory steps do not amount to manufacture. [CircularNo.927/17/2010-CX dt.24.06.2010]


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A. The distinction between the manufacture and process has been dealt by the Supreme

court in the case of Union of India Vs. J.G. Glass Industries Ltd. 1998 (097) ELT 0005

(S.C) where in the apex court observed that the answer to the question whether the

process is that ofmanufacture would be based on two-fold test-First, whether by the

said process a different commercial commodity comes into existence or whether the

identity of the original commodity ceases to exist- Secondly, whether the commodity

which was already in existence will serve no purpose or will be of no commercial use but

for the said process. In the above case with reference to the process of Printing,

whether a process amounting to manufacture Test is whether the product would

serve any purpose but for the printing If the product could serve a purpose even

without printing and there is no change in the commercial product after the printing is

carried out, the process cannot be said to be one ofmanufacture.


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B. The meaning of incidental or ancillary : However inessential the process may be, if it

is found incidental or ancillary to the completion of the manufactured product, then

that process falls within the compass of the expression manufacture.


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Final Products Product / Process/Activity Citation

Aluminium Cutting, drilling and punchingof aluminium section

CCE Vs. Ajit India Pvt. Ltd.2000 (119) ELT 274 (S.C.)

Aluminium cans (torch

bodies)

Aluminium slugs converted to

intermediate product

Union Carbide India Ltd. Vs.

CCE 1986 (24) ELT 169 (S.C);Geep Industrial Syndicate Ltd.Vs. CG 1987 (31) ELT 865 (S.C)

Butter Stirring of cream State of Tamil Nadu Vs. BharatDiary Farm 1992 (61) ELT 25(Mad.)

BOPP Films Winding, slitting and packing CC&CE Vs. Crown Tapes Pvt.Ltd. 2009 (233) ELT 357 (Tri.Ahmd)

Cable Joining Kits Putting together different dutypaid items not manufacture

XI Telecom Ltd. Vs. CCE 1999(105) ELT 263 (A.P.)


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Chilled Water Chilling of Water Farm & Co. Vs. CCE 1987 (30)ELT 541 (T)

Chilly Powder Pulverising of chilly Namputhiris Pickle Industries

Vs. State of Kerala 194(92)STC1 (S.C.)

Cinder Burning in boiler of coal CCE Vs. Papyrus Papers, 1983(33) ELT 97 (T), Union of IndiaVs. Ahmedabad Electricity Co.2003 (158) ELT 3 (SC)

Coffee Reprocessing of coffee CCE VS. Brooke Bond IndiaLtd. 198 (101) ELT 2965 (T-SZB)

Coloured / Printedpaper

Colouring / printing of whitepaper

Swastic Products Vs. SCE1980 ELT 164 (Guj.)


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Coloured plasticgranules

Conversion of plastic granules Vadodara CTN No. 61/92,dated 22-07-1992, 1192 (60)ELT T43

Computer underHeading No. 84.71 Upgradation does not amountto manufacture Installation atcustomers site notmanufacture

CBEC Circular No. 454/20/99-CX, dated 12-04-1999,Universal Micro Systems Vs.CCE 1999(107)ELT 505(T)

Curry powder, rasampowder, masala powder

Mixing of chilly powdercoriander powder

State of Tamil Nadu Vs. SVSNatarajan & Sons 1992 (84)

STC (Mad.)Cycle Assembling of cycle parts T.I. Cycles of India Vs. U.O.I.

1983 ELT 681 (Mad.)

Feeding bottle Putting together bought outparts like bottles, nipples, lidsect. Is not manufacture

Dalmia Industries Ltd. Vs. CCE1999 (112) ELT 305 (T)


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Filler wire Straightening and cutting intorequired sizes of wires (stainlesssteel)

D&H Sechron Electrodes Pvt. Ltd.Vs. CCE 1990 (40) ELT 401 (T)

Furniture (for

resale)

Polishing / colouring of old

furniture

CST Vs. Musarafalli Kutbuddin 35

STC 503 (Bom.) CST Vs. HabibKasambai 35 STC 560 (Bom.)

Garland / bouquets Preparation of flowers Sudhir Ch. Mukherjee Vs. Addl.Commissioner of CT 1976 (37) STC554 (Cal.)

Ingots / billets Recycling of aluminium waste Salco Extrusions P. Ltd. Vs. CCE1984 (16) ELT 356 (T)

Jelly (stone) (Seecontract decisionunder Table below)

Breaking of boulders Reliable Rock Builders Vs. State ofKarnataka, 49 STC 110 (Kant);Kher Stone Crushers Vs. G.M.District Industries Centre, 1992

(62) ELT 586 (M.P.)


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Final Products Product /Process/Activity

Citation

MS Scrap, borings,

turnings, etc.,

Generated during

maintenance and repair

work

Prism Cement Ltd. Vs. CCE 2008 (232) ELT 564 (T)

Pan-masala Mixing of supari,variyali, dhana dal etc., State of Gujarat Vs. Sukhram Jagannath 50 STC 76(Guj.)

Paper Polishing / printing of

paper

Modern Paper Industries Vs. Union of India 1983

ECR 636 D (Bom.)

Pillows Covering an uncovered

pillow

DP Foam Pvt. Ltd. Vs. CCE 1999 (106) ELT 544 (T)

Pine apple Slicing of pineapple Dy. CST Vs. PIO Food Packers, 1980 (6) ELT 343(S.C.)

Planks / rafters Sawing of timber logs Y. Mohiden Kunhi and Others Vs. CCE 1986 (23) ELT

293 (Kar.) See also Sanghvi Enterprises Vs. CCE

1984 (16) ELT 317 (T), CCE Vs. Kutty Flush Doors &

Furniture P. d. 1988 (35) ELT 6 (S.C.). Departmental

appeal dismissed 1997 (89) ELT A105.


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Powdered pepper/ Turmeric

Powdering of pepper / turmeric Mahabirprasad Bishiwala Vs. Stateof W.B. 31 STC 628 (Cal.) KrishnaChander Dutta (Spice) Pvt. Ltd. Vs.CTO (1994) 93 STC 180 (S.C.) 1994

(70) ELT 501 (S.C)

Reels of lesserwidth and diameter

Slitting and rewinding of paper(jumbo reels)

CCE Vs. Reelco Paper Products (P)Ltd., 1989 (40) ELT 435 (T)

Turmeric Powder Pulverising of turmeric Krishna Chander Dutta (Spice) P.

Ltd. Vs. CTO 1994 (70) ELT 501 (S.C.)

Water Process of removing chemicalsto make it soft withoutpurifying

McDowel Co. Ltd. Vs. CCE 1999(105) ELT 577 (T)


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Audio Cassettes Recording of audio cassettesamounts to manufacture as pre-recorded cassette is distinct

Gramophone Co. Ltd. Vs. CC 1999 (114)ELT 770 (SC)

Bagasse Crushing of sugarcane Deccan Sugar and Abkhari Company Vs.

Union of India, 1986 (26) ELT 209 (Mad.)

Bed Sheets, bedspreads andtable cloths

Cutting, hemming and stitchingof running cloth

Kapri International Vs. CCE 1986 (23) ELT538 (T)

Biris Rolling of Tobacco Y. Tirupathy Rao Vs. CCE 1983 ELT 2346

(AP)Brass Mixing of copper & Zinc Khandelwal Metal & Engg. V. Union of

India 1983 ELT 292 (Del.) (affirmed in1985(20)ELT 222 (S.C.)

Brass tubes new Marking and remarking of tubesof brass out of old brass tubes

Multi. Metal Ltd. Vs. CCE 1995 (75) ELT 938(T) affirmed by the Supreme Court in 1995

(78) ELT A31


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Bright bars Drawing of round bars Veekayan Industries Vs. CCE 1985 (21) ELT596 (T)

Camphor Cubes Conversion of camphorgranules

Om Prakash Gupta Vs. CTO 38 STC 73(Cal.)

Canned Foods Canning of vegetable products Ramnagar Cane & Sugar Co. Vs. Union ofIndia, 1983 ELT 6 (Raj.)

Chappals Assembly of rubber sole &rubber strap mouldings

Achamma Sebastian Vs. State of Kerala,1967 (20) STC 483 (Ker.)

Cinema Wall

paper

Printing of paper CCE Vs. Sudhakar Litho Printers, 1988 (36)

ELT 346 (T)

Circles Rolling & billets of copper Union of India Vs. Ramlal, 1978 ELT (J389)(SC)

Coconut fiber Conversion of coconut husk DCST Vs. Coco fibers, 1991 (53) ELT 515(SC)


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Computers Assembly of computer from dutypaid parts amounts tomanufacture

Sheth Computers Pvt. Ltd. Vs. CCE 2000(121) ELT 738 (T)

Dyed & printedcloth

Dyeing & printing of grey cloth Lal Woolen and Silk Mills P. Ltd. Vs. CCE1999(108) ELT 7 (S.C)

EvacuatedBottles

Empty bottles cleaned,siliconized, evacuated sealed andsterlised to make a new product

Shri Krishna Keshav Laboratories Ltd.Vs. CCE 1999 (105) ELT 117 (T)

Fruit Drink Conversion of fruit pulp to readymade drink

Godrej Foods Ltd. Vs. CCE 2000 (122)ELT 231 (T)

Ghee Boiling of butter Motilal Ramchandra Oswal Vs. State ofBombay 3 STC 140 (Bom.)

Glass Moulds Grinding polishing of glass blanks-

opthalmic

Forbes Gokak Ltd., Vs. Collector of C.Ex.,

2003 (153) ELT 24 (SC)


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FinalProducts Product / Process/Activity Citation

Gittis, ballast Crushing of stone boulders Kher Stone Crusher Vs. G.M. Dist.Industries Centre 1992 (61) ELT 587 (MP-FB); Contra Reliable Rock Builders Vs. Stateof Karnataka, 1982 (49) STC 110 (Kar.)

Groundblack pepper

Grinding of black pepper CCE Vs. Herbal Isolates (P) Ltd. 1994 (74)ELT 929(T)

Hair Oil Addition of perfume to hair oil CCE Vs. Zandu Pharmaceuticals Works Ltd,2006 (204) ELT 18 (SC)

Ingots Melting of scrap Iron Rangoon Meal & Refining Com Vs. State of

Tamil Nadu 47 STC 60 (Mad.)Jewellery Conversion of Crude diamonds Bapalal & Co. Vs. Government of India,

1981 ELT 587 (Mad.)

MasalaPowser

Prepared by grinding and mixingof various spices and condimentsin certain proportion After

grinding and mixing, integredients

AP Products Vs. State of Andhra Pradesh,2007 (214) ELT 485 (SC)


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FinalProducts

Product / Process/Activity Citation

New Jewellery Melting / Conversion Jewellery

(Old)

Chenna Kesavalu Vs. Board of Revenue,

1981(47) STC 403 (Mad.)

Photographic

films

Cutting slitting of jumbo rolls of

photographic films

CBEC Circular No. 13/92-CX3, dated 28-12-

1992, 1993 (63) ELT T31

Polythene Kraft Lamination of paper (kraft) Laminated Packing (P) Ltd. Vs. CCE 1990 (49)

ELT 326 (SC)

Recorded video

cassette

Recording and re-recording of

blank video cassette

Garware Plastics & Polyesters Ltd. Vs. CCE

1993 (67) ELT 670, 673 (T)

Rice Dehusking of paddy State of Karnataka Vs. B. Raghuram Sethy, 47

STC 282 (S.C)Rice Milling Paddy M. Narayanan Nambiar Vs. State of Karnataka

44 (STC) 191 (Ker.)

Water filter Putting together parts alongwith

bought out filter cum purifier

Eureka Forbes Ltd. Vs. CCE 2000 (122) ELT 550

(T)

It should be noted that the above decisions may not be the final word since we normally seeconflicting decisions being rendered by various courts on the same set of facts


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It must also be understood that as discussed earlier the

Supreme Court in its decisions in Union Carbide India Ltd.

Vs. Union of India (1986) (24) ELT 169 and in Bhor

Industries Ltd. Vs. C.C.EX. (1989) (40) ELT 280 has held

that an intermediate product would be excisable only if it is a

complete product in the sense that it is capable of being sold

to a consumer.


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Considering the conflicting judgments, CBEC issued circular No.

58/1/2002-CX, dated 15-1-2002 to clarify its position on the

excisability of immovable property which is as under:

i. For goods manufactured at site to be dutiable they should have a new

identity, character and use, distinct from the inputs/components that

have gone into its production. Further, such resultant goods should be

specified in the Central Excise Tariff as excisable goods besides being

marketable i.e. they can be taken to the market and sold (even if they

are not actually sold). The goods should not be immovable.


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ii. Where processing of inputs results in a new product with a distinct

commercial name, identity and use (prior to such product being

assimilated in a structure which would render them as a part of

immovable property), excise duty would be chargeable on such

goods immediately upon their change of identity and prior to their

assimilation in the structure or other immovable property.

iii. Where change of identity take place in the course of construction or

erection of a structure which is an immovable property, then there

would be no manufacture ofgoods involved and no levy of excise

duty.


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iv. Integrated plants/machines, as a whole, may or may not be goods.

For example, plants for transportation of material (such as handling

plants) are actually a system or a network of machines. The system

comes into being upon assembly of its component. In such asituation there is no manufacture of goods as it is only a case of

assembly of manufactured goods into a system. This cannot be

compared to a fabrication where a group of machines themselves

may be combined to constitute a new machine which has its own

identity/marketability and is dutiable (e.g. a paper making machine

assembled at site and fixed to the earth only for the purpose of

ensuring vibration free movement).


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v. If items assembled or erected at site and attached by foundation to

earth cannot be dismantled without substantial damage to is

components and thus cannot be reassembled, then the items would

not be considered as moveable and will, therefore, not be excisable

goods.


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v. If any goods installed at site (example paper making machine) are capable of being sold orshifted as such after removal from the base and without dismantling into its component/parts,

the goods would be considered to be moveable and thus excisable. The mere fact that the

goods, though being capable of being sold or shifted without dismantling, are actually

dismantled into their components/parts for ease of transportation etc., they will not cease to

be dutiable merely because they are transported in dismantled condition. Rule 2(a) of the

Rules for the interpretation of Central Excise Tariff will be attracted as the guiding factor is

capability of being marketed in the original form and not whether it is actually dismantled or

not, into its components. Each case will therefore have to be decided keeping in view the

facts and circumstances, particularly whether it is practically possible (considering the size and

nature of the goods, the existence of appropriate transport by air, water, land for such size,

capability of goods to move on self propulsion ships-etc.) to remove and sell the goods as

they are without dismantling into their components. If the goods are incapable of being sold,

shifted and marketed without first being dismantled into component parts, the goods would

be considered as immovable and therefore not excisable to duty.


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vi. When the final product is considered as immovable and hence not excisable

goods, the same product in CKD or unassembled form will also not be dutiable

as a whole by applying Rule 2(a) of the Rules of interpretation of the Central

Excise Tariff. However, components, inputs and parts which are specified

excisable products will remain dutiable as such identifiable goods at the time

of their clearance from the factory or warehouse.

vii. The intention of the party is also a factor to be taken into consideration to

ascertain whether the embedment of a machinery in the earth was to be

temporary or permanent. This, in case of doubt, may help determine whether

the goods are moveable or immovable.


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Particulars CitationPlant and machinery embedded in earth, structures,erections and installations are not goods

Quality Steel Tubes Vs. CCE 1995(75) ELT 17 (SC)

Boiler erected at site with duty paid componentswhich were cleared in CKD/SKD condition was heldto be not excisable since the boiler became animmovable property on assembly and erection atsite as it was removable only on dismantling

Chethar Vessels Ltd. Vs. CCE 2009(241) ELT 580 (T)

MS tanks of various capacities manufactured at siteand attached to earth can neither be removedwithout dismantling nor separable without

destroying. Not liable to duty as these areimmovable property

Prodip Engineering works Vs.CCEx., Kolkata, 2007 (216) ELT 534(Tri. Kolkata)

Installing the storage systems rails flush with floorlevel by digging to trench and refilling it withconcrete etc., at site is a permanent fixture fixed tothe ground which cannot be removed from the place

of installation

Collector of CE Vs. NikhilEquipments Pvt. Ltd., 2004 (165)ELT 487 (S.C.)


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Particulars Citation

UPS is goods and not an immovable property National Radio & Electronics Co.Ltd. Vs. CCE 1995 (76) ELT 436 (T)

RCC Poles erected for electricity purposes aregoods

APSEB Vs. CCE, 1994 (70) ELT 3(SC)

Machines first assembled and then affixed toground are goods

Wandleside National ConductorsLtd. Vs. CCE, 1996 (84) ELT 419(T)

D.G. set assembled at site is goods andmarketable as such, hence the same is excisable.

The D.G. set is assembled and bolted to theconcrete platform so that its operation isvibration free. The D.G. set could be easilyunbolted and bought and sold. Therefore, D.G.Set assembled at site cannot be held to beimmovable property. They are goods and are

marketable.

Cheran Spinners Ltd. Vs. CC Ex.Coimbatore, 2008 (231) ELT 315

(Tri. Chennai)


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The leading judgment in the context is Narne Tulaman Manufacturers Pvt. Ltd.,

Vs. CCE 1988 (38) ELT 566 (S.C.). Their Lordships held that as the Tribunal had

found that the Appellant had fitted a platform, load cells and indicator system

which in the assembled form became a weigh bridge, there was a commercial

commodity, having a distinct name, character and use resulting in manufacture.

The aspect whether the resultant product would become an immovable property

was not argued or considered. Therefore, the general proposition would be that

if the assembly results in new commercial commodity with a distinct name,

character and use, then it would amount to manufacture.


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In BPL India Ltd. Vs. CCE 2002 (143) ELT 3, the Supreme Court held that assembly

of imported kits of VTR with colour monitor in disassembled condition amounted

to manufacture since the end product had a distinct character and use and the

process of assembly was done by technical experts or skilled persons.

In a recent Supreme Court Judgment in Mallur Siddeswara Spinning Mills (P) Ltd.

Vs. CCE, Coimbatore, 2004 (166) ELT 154, it was held that Generating sets

assembled and installed in the factory from bought out duty paid components

would be dutiable.


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Dutiability of waste and scrap

Packing, labelling and branding activities

Can the test of change in tariff heading / sub-headings be

adopted for identifying whether a process amounts to

manufacture

Determination of taxable event for charge of duty


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UOI Vs Delhi Cloth & General Mills Co.ltd, 1977 (1) ELT J.199

(SC) manufacture implies a change, but every change is

not manufacture and yet change of an article is the result of

treatment, labour and manipulation. But something is

necessary and there must be transformation; a new and

different article must emerge having a distinctive name and

character or use. Also see South Bihar Sugar Mills ltd Vs UOI,

1978 (2) ELT J.336 (SC).


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Empire Industries ltd Vs UOI, 1985 (20) ELT 1 (SC) 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 (scientifically). It is

transformation of matter into something else that would

amount to manufacture. That something is a question of

degree.


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Whether that something else is a different

commercial commodity having its distinct

character, use and name and is commercially knownas such, is an important consideration in

determining whether there is a manufacture.


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UOI Vs Parle Products, 1994 (74) ELT 492 (SC) -

Whether or not something results in manufacture

would depend on the facts of the case but anynumber of processes undertaken which do not

result in a commercially different commodity

cannot result in manufacture.


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Ujagar Prints Vs UOI, 1988 (38) ELT 535 (SC) Prevalent and

generally accepted test to ascertain whether there was

manufacture was whether the change or the series of

changes brought by application of processes take the

commodity to the point where, commodity can no longer be

regarded as the original commodity but is, instead,

recognised as a distinct and new article that has emerged

because of the result of the processes.


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There might be borderline cases where either

conclusion can be reached with equal justification.

Insistence on any sharp or intrinsic distinction

between processing and manufacture results in an

over simplification of both and tends to blur theirinterdependence in cases.


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Dictionary meaning of produce to bring forward, to bring

forth or out, to bring (to a specified condition), to bring into

existence or being, to work up from raw material, manufacture

(material) objects.

Hyderabad Asbestos Ltd Vs UOI, 1980 ELT 735 manufactured

and produced were synonymous same test should be

applied.

Produced used in respect of natural items.


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Processes which may not amount to manufacture in

their natural meaning

Brought under tax ambit by the artificial definition

Processes mentioned in CETA as manufacture

Third schedule in CETA repacking, re-labelling,

putting or altering retail sale price etc. mostly

consumer goods.


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Processes which are specified in relation to any goods in

the Section Notes or Chapter Notes to the First Schedule

to CETA;

Mere specification of a process in the Tariff entry not

sufficient;

Should be specifically stated that the process amounts to

manufacture.


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Chapter / SectionNotes for

Processes amounting to Deemed Manufacture

Ores, Slag and Ash Process of converting ores into concentrate

Marble, Granite,

sandstone, etc

Process of cutting or sawing or sizing or polishing of blocks or

any other process of converting stone blocks into slabs or tiles

Aluminium Tubes& Pipe

The process of drawing or redrawing

Iron and Steel Process of drawing or redrawing a bar, rod, wire rod, round bar

or any other similar article into bright bar.Process of galvanization

Beverage, Spiritand Vinegar

Labelling or relabelling of containers, or, packing or repackingfrom bulk packs to retail packs, or, adoption of any othertreatment to render the product marketable to the consumer


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Chapter / Section Notes for Processes amounting to Deemed Manufacture

Misc edible preparations Labelling or re-labelling of containers or re-packingfrom bulk packs to retail packs of pan masala, yeast,sauces, extracts from tea/coffee shall amount to

manufacture

Made up textile articles; sets;worn clothing & worn textilearticles; rags

Affixing brand name, labelling or re-labelling orrepacking from bulk pack to small pack ofreadymade garments (Articles of Apparel) ismanufacture

Natural or coloured pearl;precious or semi preciousstones; precious metals;Imitation jewellery; Coin

Process of refining dore bar

Sound recorders and

reproducers

Recording of sound or other phenomena on audio or

video tapes shall amount to manufacture


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Goods specified in Third Schedule to CETA

Packing or repacking in a unit container

Labelling or re-labelling of containers including thedeclaration or alteration of retail sale price on the

container or

Adoption of any other treatment on the goods to

render the product marketable to consumer.


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Air Liquide North India Pvt. Ltd. Vs CCEx. [2011] 271

ELT 321 (SC)

Relabeling and repacking of gas in small cylinders

Helium gas rendered marketable to ultimate consumers

thereof

Amounts to manufacture


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Person who carries on the activity of manufacture.

Job worker

Brand owner not manufacturer Cibatul Ltd Vs UOI,

1978 (22) ELT 302 (SC) principal to principal basis.

Should not be dummy.


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Basic duty

Special Excise duty

Education Cess

Secondary and Higher Education Cess

National Calamity Contingent Duty Duties under other Acts:


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Addl. Excise duty on pan masala and tobacco products

Duty on Medical and Toilet preparations

Addl. duty on mineral products

Other cesses:

Clean energy cess, cess on automobiles, tractors, biris, jute

manufacturers, sugar, tea, tobacco, coffee, paper and paper

board, rubber, mines, limestone and dolomite and manganese

ore.


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