Historical and constitutional background Taxable Event / Charging section section 3 Concept of

Manufacture
Deemed Manufacture

Meaning Tax Vs. Duty any difference Types of Taxes Nature of CE Why tax is collected Tax Vs. Fee

Essential characteristics of a tax Not a voluntary payment or donation Enforced contribution exacted pursuant to legislative authority, in exercise of taxing power. Imposed, levied and collected for the purpose of raising revenue Used for public or governmental purposes and not for payment for some special privilege granted or service rendered

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)

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

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.

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)

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)

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.

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.

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.

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.

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.

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.

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.

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.

Department friendly assessee (DFA)

Law conscious assessee (LCA)

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.

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 law conscious?

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 ??

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,

 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

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

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.

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.

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.

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.

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.

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, and things attached to the earth or permanently fastened to anything attached to the earth.

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.

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.

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 transient types of articles, but one has to be take a practical view on the basis of available evidence.

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 India Ltd Vs CCE, 1999 (112) ELT 746 (SC)

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.

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)

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).

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

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;

Definition starts with the word includes

3 limbs in the definition

2nd and 3rd limb Deemed manufacture

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]

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]

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 of manufacture 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 of manufacture.

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.

Final Products
Aluminium Aluminium cans (torch bodies)

Product / Process/Activity
Cutting, drilling and punching of aluminium section Aluminium slugs converted to intermediate product

Citation
CCE Vs. Ajit India Pvt. Ltd. 2000 (119) ELT 274 (S.C.) Union Carbide India Ltd. Vs. CCE 1986 (24) ELT 169 (S.C); Geep Industrial Syndicate Ltd. Vs. CG 1987 (31) ELT 865 (S.C) State of Tamil Nadu Vs. Bharat Diary Farm 1992 (61) ELT 25 (Mad.) CC&CE Vs. Crown Tapes Pvt. Ltd. 2009 (233) ELT 357 (Tri. Ahmd)

Butter

Stirring of cream

BOPP Films

Winding, slitting and packing

Cable Joining Kits

Putting together different duty XI Telecom Ltd. Vs. CCE 1999 paid items not manufacture (105) ELT 263 (A.P.)

Final Products Chilled Water

Chilly Powder

Product / Process/Activity
Chilling of Water Pulverising of chilly

Citation
Farm & Co. Vs. CCE 1987 (30) ELT 541 (T) Namputhiris Pickle Industries Vs. State of Kerala 194(92)STC 1 (S.C.) CCE Vs. Papyrus Papers, 1983 (33) ELT 97 (T), Union of India Vs. Ahmedabad Electricity Co. 2003 (158) ELT 3 (SC) CCE VS. Brooke Bond India Ltd. 198 (101) ELT 2965 (TSZB) Swastic Products 1980 ELT 164 (Guj.) Vs. SCE

Cinder

Burning in boiler of coal

Coffee

Reprocessing of coffee

Coloured / Printed paper

Colouring / printing of white paper

Final Products Coloured plastic granules

Computer under Heading No. 84.71

Product / Process/Activity
Conversion of plastic granules

Citation
Vadodara CTN No. 61/92, dated 22-07-1992, 1192 (60) ELT T43 CBEC Circular No. 454/20/99CX, dated 12-04-1999, Universal Micro Systems Vs. CCE 1999(107)ELT 505(T)

Upgradation does not amount to manufacture Installation at customers site not manufacture

Curry powder, rasam powder, masala powder

Cycle Feeding bottle

Mixing of chilly powder coriander powder

Assembling of cycle parts Putting together bought out parts like bottles, nipples, lids ect. Is not manufacture

State of Tamil Nadu Vs. SVS Natarajan & Sons 1992 (84) STC (Mad.)
T.I. Cycles of India Vs. U.O.I. 1983 ELT 681 (Mad.) Dalmia Industries Ltd. Vs. CCE 1999 (112) ELT 305 (T)

Final Products

Product / Process/Activity
Straightening and cutting into required sizes of wires (stainless steel)
Polishing / colouring of old furniture Preparation of flowers

Citation
D&H Sechron Electrodes Pvt. Ltd. Vs. CCE 1990 (40) ELT 401 (T)
CST Vs. Musarafalli Kutbuddin 35 STC 503 (Bom.) CST Vs. Habib Kasambai 35 STC 560 (Bom.) Sudhir Ch. Mukherjee Vs. Addl. Commissioner of CT 1976 (37) STC 554 (Cal.) Salco Extrusions P. Ltd. Vs. CCE 1984 (16) ELT 356 (T) Reliable Rock Builders Vs. State of Karnataka, 49 STC 110 (Kant); Kher Stone Crushers Vs. G.M. District Industries Centre, 1992 (62) ELT 586 (M.P.)

Filler wire

Furniture (for resale) Garland / bouquets

Ingots / billets Jelly (stone) (See contract decision under Table below)

Recycling of aluminium waste Breaking of boulders

Final Products
MS Scrap, borings, turnings, etc., Pan-masala Paper Pillows Pine apple Planks / rafters

Product / Process/Activity
Generated during maintenance and repair work Mixing of supari, variyali, dhana dal etc., Polishing / printing of paper Covering an uncovered pillow Slicing of pineapple Sawing of timber logs

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

State of Gujarat Vs. Sukhram Jagannath 50 STC 76 (Guj.) Modern Paper Industries Vs. Union of India 1983 ECR 636 D (Bom.) DP Foam Pvt. Ltd. Vs. CCE 1999 (106) ELT 544 (T) Dy. CST Vs. PIO Food Packers, 1980 (6) ELT 343 (S.C.) 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.

Final Products Powdered pepper / Turmeric

Product / Process/Activity

Citation

Powdering of pepper / turmeric Mahabirprasad Bishiwala Vs. State of W.B. 31 STC 628 (Cal.) Krishna Chander Dutta (Spice) Pvt. Ltd. Vs. CTO (1994) 93 STC 180 (S.C.) 1994 (70) ELT 501 (S.C) Slitting and rewinding of paper CCE Vs. Reelco Paper Products (P) (jumbo reels) Ltd., 1989 (40) ELT 435 (T)

Reels of lesser width and diameter

Turmeric Powder
Water

Pulverising of turmeric
Process of removing chemicals to make it soft without purifying

Krishna Chander Dutta (Spice) P. Ltd. Vs. CTO 1994 (70) ELT 501 (S.C.)
McDowel Co. Ltd. Vs. CCE 1999 (105) ELT 577 (T)

Final Products
Audio Cassettes

Product / Process/Activity

Citation

Recording of audio cassettes Gramophone Co. Ltd. Vs. CC 1999 (114) amounts to manufacture as pre- ELT 770 (SC) recorded cassette is distinct
Crushing of sugarcane Deccan Sugar and Abkhari Company Vs. Union of India, 1986 (26) ELT 209 (Mad.)

Bagasse

Bed Sheets, bed spreads and table cloths

Biris Brass

Cutting, hemming and stitching of running cloth

Rolling of Tobacco Mixing of copper & Zinc

Kapri International Vs. CCE 1986 (23) ELT 538 (T)

Y. Tirupathy Rao Vs. CCE 1983 ELT 2346 (AP) Khandelwal Metal & Engg. V. Union of India 1983 ELT 292 (Del.) (affirmed in 1985(20)ELT 222 (S.C.)

Brass tubes new

Marking and remarking of tubes Multi. Metal Ltd. Vs. CCE 1995 (75) ELT 938 of brass out of old brass tubes (T) affirmed by the Supreme Court in 1995 (78) ELT A31

Final Products
Bright bars
Camphor Cubes Canned Foods Chappals Cinema Wall paper Circles Coconut fiber

Product / Process/Activity
Drawing of round bars
Conversion of camphor granules Canning of vegetable products Assembly of rubber sole & rubber strap mouldings Printing of paper Rolling & billets of copper Conversion of coconut husk

Citation
Veekayan Industries Vs. CCE 1985 (21) ELT 596 (T)
Om Prakash Gupta Vs. CTO 38 STC 73 (Cal.) Ramnagar Cane & Sugar Co. Vs. Union of India, 1983 ELT 6 (Raj.) Achamma Sebastian Vs. State of Kerala, 1967 (20) STC 483 (Ker.) CCE Vs. Sudhakar Litho Printers, 1988 (36) ELT 346 (T) Union of India Vs. Ramlal, 1978 ELT (J389) (SC) DCST Vs. Coco fibers, 1991 (53) ELT 515 (SC)

Final Products
Computers

Product / Process/Activity

Citation

Assembly of computer from duty Sheth Computers Pvt. Ltd. Vs. CCE 2000 paid parts amounts to (121) ELT 738 (T) manufacture Dyeing & printing of grey cloth Empty bottles cleaned, siliconized, evacuated sealed and sterlised to make a new product Conversion of fruit pulp to ready made drink Boiling of butter Lal Woolen and Silk Mills P. Ltd. Vs. CCE 1999(108) ELT 7 (S.C) Shri Krishna Keshav Laboratories Ltd. Vs. CCE 1999 (105) ELT 117 (T) Godrej Foods Ltd. Vs. CCE 2000 (122) ELT 231 (T) Motilal Ramchandra Oswal Vs. State of Bombay 3 STC 140 (Bom.)

Dyed & printed cloth Evacuated Bottles Fruit Drink Ghee

Glass Moulds

Grinding polishing of glass blanksopthalmic

Forbes Gokak Ltd., Vs. Collector of C.Ex., 2003 (153) ELT 24 (SC)

Final Products

Product / Process/Activity

Citation
Kher Stone Crusher Vs. G.M. Dist. Industries Centre 1992 (61) ELT 587 (MPFB); Contra Reliable Rock Builders Vs. State of Karnataka, 1982 (49) STC 110 (Kar.)
CCE Vs. Herbal Isolates (P) Ltd. 1994 (74) ELT 929(T) CCE Vs. Zandu Pharmaceuticals Works Ltd, 2006 (204) ELT 18 (SC) Rangoon Meal & Refining Com Vs. State of Tamil Nadu 47 STC 60 (Mad.) Bapalal & Co. Vs. Government of India, 1981 ELT 587 (Mad.)

Gittis, ballast Crushing of stone boulders

Ground black pepper Hair Oil Ingots Jewellery Masala Powser

Grinding of black pepper Addition of perfume to hair oil Melting of scrap Iron Conversion of Crude diamonds

Prepared by grinding and mixing AP Products Vs. State of Andhra Pradesh, of various spices and condiments 2007 (214) ELT 485 (SC) in certain proportion After grinding and mixing, integredients

Final Products
New Jewellery Photographic films Polythene Kraft Recorded video cassette Rice Rice Water filter

Product / Process/Activity
Melting / Conversion Jewellery (Old) Cutting slitting of jumbo rolls of photographic films Lamination of paper (kraft) Recording and re-recording of blank video cassette Dehusking of paddy Milling Paddy Putting together parts alongwith bought out filter cum purifier

Citation
Chenna Kesavalu Vs. Board of Revenue, 1981(47) STC 403 (Mad.) CBEC Circular No. 13/92-CX3, dated 28-121992, 1993 (63) ELT T31 Laminated Packing (P) Ltd. Vs. CCE 1990 (49) ELT 326 (SC) Garware Plastics & Polyesters Ltd. Vs. CCE 1993 (67) ELT 670, 673 (T) State of Karnataka Vs. B. Raghuram Sethy, 47 STC 282 (S.C) M. Narayanan Nambiar Vs. State of Karnataka 44 (STC) 191 (Ker.) 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 see conflicting decisions being rendered by various courts on the same set of facts

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.

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.

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 of goods involved and no levy of excise duty.

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 a situation 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).

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.

v.

If any goods installed at site (example paper making machine) are capable of being sold or shifted 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.

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.

Particulars

Citation

Plant and machinery embedded in earth, structures, Quality Steel Tubes Vs. CCE 1995 erections and installations are not goods (75) ELT 17 (SC)

Boiler erected at site with duty paid components Chethar Vessels Ltd. Vs. CCE 2009 which were cleared in CKD/SKD condition was held (241) ELT 580 (T) to be not excisable since the boiler became an immovable property on assembly and erection at site as it was removable only on dismantling MS tanks of various capacities manufactured at site Prodip Engineering works Vs. and attached to earth can neither be removed CCEx., Kolkata, 2007 (216) ELT 534 without dismantling nor separable without (Tri. Kolkata) destroying. Not liable to duty as these are immovable property
Installing the storage systems rails flush with floor Collector of CE Vs. Nikhil level by digging to trench and refilling it with Equipments Pvt. Ltd., 2004 (165) concrete etc., at site is a permanent fixture fixed to ELT 487 (S.C.) the ground which cannot be removed from the place of installation

Particulars UPS is goods and not an immovable property

Citation National Radio & Electronics Co. Ltd. Vs. CCE 1995 (76) ELT 436 (T)

RCC Poles erected for electricity purposes are APSEB Vs. CCE, 1994 (70) ELT 3 goods (SC) Machines first assembled and then affixed to Wandleside National Conductors ground are goods Ltd. Vs. CCE, 1996 (84) ELT 419 (T) D.G. set assembled at site is goods and Cheran Spinners Ltd. Vs. CC Ex. marketable as such, hence the same is excisable. Coimbatore, 2008 (231) ELT 315 The D.G. set is assembled and bolted to the (Tri. Chennai) concrete platform so that its operation is vibration free. The D.G. set could be easily unbolted and bought and sold. Therefore, D.G. Set assembled at site cannot be held to be immovable property. They are goods and are marketable.

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.

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.

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

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).

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.

Whether that something else is a different commercial commodity having its distinct

character, use and name and is commercially known

as

such,

is

an

important

consideration

in

determining whether there is a manufacture.

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 any

number of processes undertaken which do not result in a commercially different commodity cannot result in manufacture.

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.

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 their interdependence in cases.

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.

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.

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.

Chapter / Section Notes for

Processes amounting to Deemed Manufacture

Ores, Slag and Ash Process of converting ores into concentrate Marble, Granite, Process of cutting or sawing or sizing or polishing of blocks or sandstone, etc any other process of converting stone blocks into slabs or tiles Aluminium Tubes The process of drawing or redrawing & Pipe 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, Spirit Labelling or relabelling of containers, or, packing or repacking and Vinegar from bulk packs to retail packs, or, adoption of any other treatment to render the product marketable to the consumer

Chapter / Section Notes for

Processes amounting to Deemed Manufacture

Misc edible preparations

Labelling or re-labelling of containers or re-packing from bulk packs to retail packs of pan masala, yeast, sauces, extracts from tea/coffee shall amount to manufacture
Affixing brand name, labelling or re-labelling or repacking from bulk pack to small pack of readymade garments (Articles of Apparel) is manufacture Process of refining dore bar

Made up textile articles; sets; worn clothing & worn textile articles; rags Natural or coloured pearl; precious or semi precious stones; precious metals; Imitation jewellery; Coin Sound recorders and reproducers

Recording of sound or other phenomena on audio or video tapes shall amount to manufacture

Goods specified in Third Schedule to CETA

Packing or repacking in a unit container

Labelling or re-labelling of containers including the

declaration 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.

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

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.

Basic duty
Special Excise duty

Education Cess
Secondary and Higher Education Cess National Calamity Contingent Duty Duties under other Acts:

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.