ORDER
V.T. Raghavachari, Member (J)
1. The appellants M/s Fargo Mantle Products (Private) Limited are manufacturers of gas mantles for use in petromax lanterns. These gas mantles are classifiable under tariff item 68 CET. The appellants claimed exemption from payment of duty in respect of such products under notification No. 179/77-CE dated 18.6.1977. This was rejected by the Assistant Collector, Central Excise, Bombay Division P by order dated 4.1.1979. He held thereunder that the appellants are using electric power while warping the nylon yarn beam and also while knitting nylon hose in knitting machine and further that they are using power for drying the nylon hose and again in pressing the mantle with electric irons. The appellants filed an appeal which was rejected by the Appellate Collector of Central Excise, Bombay under Order dated 27.10.1980 Thereunder he held that while use of power in the manufacture of hoses would not, for that reason, deny entitlement to exemption under notification No. 179/77, since such hoses are only raw materials for the manufacture of gas mantles, the use of power in ironing is sufficient to deny the availability of the exemption. On the question of use of power for drying he noted that the appellants stated before him that they had now dis-continued use of power for the said purpose and held that it is only from the date of discontinuance of the use of power for drying that benefit of exemption would be available to the appellants even if the finding on the other question as to the use of power in ironing was to be in their favour. As already stated, he held that use of power in ironing the gas mantles was use of power in a process incidental or ancillary to the completion of manufacture of gas mantles and hence the appellants were not entitled to exemption applied for. On this finding he had rejected the appeal. The appellants preferred a revision petition to the Government against the said order. The same is now before us, on transfer, as a deemed appeal.
2. We have heard Dr. P.V. Jois, Advocate for the appellants and Shri S.R. Kunte, JDR for the Department.
3. As mentioned in the order of the Collector the process of manufacture of gas mantles by the appellants involves 9 stages, in three of which, according to the department, power is being used by the appellants. Notification 179/77=CE exempted from duty goods falling under TI No. 68 if in or in relation to the manufacture of such goods no process is ordinarily carried on with the aid of power. So far as power used at the stage of manufacture of the art silk hose, the Appellate Collector had decided that use of power at that stage would not deny entitlement of benefit of the notification to the appellants. As Dr. Jois points out, this finding of the Collector has not been challenged by the Department by initiating any review proceedings as was open to the Government. In the circumstances it is not necessary for us, in this appeal by the assessee, to go into the question whether the said finding of the Collector was right or not.
4. Regarding the use of power at the stage of drying, the Collector had noted that the appellants had represented before him that they had then discontinued use of power for drying. He had held that from the date of discontinuance the appellants would be entitled to benefit of notification 179/77 if the finding was in their favour regarding use of power at the other stage of ironing also. In effect he held that so long as the appellants used power at the stage of drying they would, for that reason itself, be disentitled to benefit under notification 179/77. No argument was advanced before us by Dr. Jois against this conclusion. Therefore even if our finding is to be in favour of the appellants on the question of disentitlement by reason of use of power at the stage of ironing, the appellants would have benefit under notification 179/77 only from the date of their discontinuance of the use of power at the stage of drying.
5. There is no dispute that the appellants do use electric power for ironing the gas mantles, preceding the packing thereof in a butter paper envelope. Dr. Jois explained that his ironing was resorted to in order to press down the gas mantle into a flat circular shape in order to enable insertion thereof easily in a butter paper envelope and that the packing in the butter paper envelope was in order to enable packing 25 of such envelopes in a larger carton. Dr. Jois contended that the need for ironing being for the abovesaid purpose ‘only the ironing was subsequent to the complete manufacture of the gas mantle and hence the use of ^power at that stage would not be use of power either in or in relation to the manufacture of the gas mantles. On the other hand the contention for the Department (as also the finding of the Collector) is that this process of ironing was a process incidental or ancillary to the completion of the manufacture of the gas mantle, and that therefore use of such power disentitled the appellants to benefit under notification No. 179/77’.
The main submissions, therefore, before us was with reference to the question whether the ironing of the gas mantle was a process incidental or ancillary to the completion of the manufacture of the gas mantle. Dr. Jois contended that the manufacture of the gas mantle was complete at the seventh stage of the nine stages mentioned in the Collector’s order and hence the eighth and ninth stages were not stages in, or even in relation to, manufacture. According to him the ironing was necessary only to facilitate packing and that, in fact, before the mantle could be put to use on the lantern it had to be fluffed out and elongated before the mouth could be tied to the related part of the petromax. He therefore contended that the effects of ironing were in fact to be totally and completely effaced before the mantle could be put to use and this would establish, that the unironed mantle was the complete manufactured product. According to him this circumstance should suffice to establish that far from ironing being a process incidental or ancillary to the completion of manufacture the said process was subsequent to the completion of manufacture and was resorted to only for purpose of ease of packing for transport. The assertion for the appellants that ironing was required only to make the mantle easy to handle for packing in the envelope and handling in the carton is not denied by the department. Nor is the assertion of Dr. Jois that the ironed mantle was to be fluffed out and elongated before actual use on the lantern denied on the part of the Department. It is with reference to the above facts, or conclusions, that the decisions cited by either side will have to be applied in order to arrive at a conclusion whether the process of ironing on the facts of the instant case would amount to a process incidental or ancillary to the completion of the manufacture of the product (gas mantles).
7. In E.I.D. Parry Limited and Anr. v. Union of India (1978 ELT 18) the Madras High Court was dealing with manufacture of fertilizers which in terms of the provisions of the Fertilizer (Control) Order, 1957 could not be delivered except in packed condition. Even so it was held that packing cannot be regarded as a process incidental or ancillary to the completion of the manufactured product (fertilizer). It was held “thus the mere transfer of the end product into containers which, can be handled conveniently, the sealing of such containers with the object of preservation of the end product and ensuring that they would not be subjected to adulteration easily and of putting marks or labels on the containers with the object of identifying the end product and enhancing the goodwill of the manufacturer would not form part of manufacture”.
8. In case of Union of India v. Mansingka Industries Pvt. Ltd. (1979 ELT 158) the Bombay High Court was dealing with a case relating to manufacture and clearance of vegetable products. It. was held by the High Court that there was no warrant for the construction that the manufacture of the vegetable product is not complete until it is packed in a tin container. It was pointed out that such hydrogenated vegetable oils are also sold and transported in bulk containers, in tankers and it may indeed be sold to the whole-sale buyer who brings his own container for receiving the product.
9. To similar effect was the finding of the Madhya Pradesh High Court in the case of Malwa Vanaspati and Chemical Co. Ltd. v. Union of India (1979 ELT 243). Referring to the definition of the term manufacture in Section 2(f) of the Central Excises and Salt Act the Court observed that where the legislature intended to include in the term ‘Manufacture any process to make the commodity marketable to the consumer, it has been specifically provided for. The court therefore further held that packing the vegetable product in a container could not be said to be a process incidental or ancillary to the completion of the manufacture.
10. In the case of Orissa Industries Ltd. v. Union of India (1979 ELT 457) the Calcutta High Court was dealing with the manufacture of glass and glassware. The question that arose for consideration was whether packing is a process incidental or ancillary to the completion of the manufactured product, the contention for the assessee being that it was not. The court agreed with the assessee. For arriving at this conclusion the court took notice of the fact that such glass or glassware may be delivered to the customers even in wholesale without packing. But more significantly the court further observed “It is true in usual course of commercial practice these goods are packed by the manufacturer for delivery to the customer but that fact by itself cannot constitute such packing into a process incidental or ancillary to the completion of such manufactured goods”.
11. The Mysore High Court had to consider a similar case in Alembic Glass Industries Ltd. v. Union of India (1979 ELT 461). The High Court held that the mere fact that the bottles are released in a packed condition does not indicate that packing is a process incidental to the completion of the manufactured bottles.
12. The Bombay High Court also considered in Ogale Glass Works Ltd. v. Union of India (1979 ELT 468) the case of manufacture of glass and glassware which are packed before despatch. In paragraph 50 the court held “the manufacture of these articles is complete as soon as the glass and glassware which may be produced by the blow-process or mould-process is cooled and, if necessary, polished. Packing such goods can never be considered to be an element of manufacture”. In paragraph 56 they further observed “even otherwise, in the present petition the packing of goods was clearly done at the instance of the buyer who determined the nature of the packing and paid for it accordingly. This packing is clearly done as a matter of convenience and to facilitate the delivery and removal of the product from the factory gate”.
13. Dr. Jois placed special reliance on the judgement of the Bombay High Court in Bush (India) Ltd. v. Union of India (1980 ELT 258). The petitioner therein imported Garrard record-changers in the form of Garrard record-changer decks which were completely finished articles ready for use and capable of being used either in the form in which they were imported or after placing them on a wooden base with a cover. The petitioner installed these decks on a wooden base manufactured by itself and then sold the product under the trade name of “Bush Auto-changer”. The Court observed “the can be no manner of doubt that with or without the wooden base or with or without the cover, the imported Garrard record-changer decks remained the same commodity and that there was no change whatsoever in the end product merely because it was placed on a wooden base with or without a cover. That it was so done could be for many reasons viz. to make it more saleable by presenting it in a more appealable way or by making it more convenient to carry, or for several other reasons none of which change the slightest the nature or character of the product imported by the petitioner, viz. Garrard record-changers”. Dr. Jois contended that similarly in the present instance also the process of ironing the gas mantle and placing the same in a butter paper envelope was merely for making the already manufactured product more convenient to carry and to make it more saleable by presenting it in a more appealable way and hence the said process of ironing was not part of the process of manufacture.
14. Another decision which would also be relevant is Assistant Collector of Central Excise v. Subramania Chettiar (1980 ELT 609). It was held therein that packing of match-sticks in a match box was a part of the process of manufacture of matches since without the box the match could not be struck for ignition. It was held that it was not merely to facilitate easy counting of matches that they are packed in boxes or as a matter of convenience to facilitate delivery.
15. Another decision which would also be relevant is that of the Rajasthan High Court in Ramnugar Cane and Sugar Co. Ltd. v. Union of India (1983 ELT 6). That was a case relating to manufacture and clearance of vegetable products. It was held that as these vegetable products are meant for human consumption (falling under TI 13 GET) canning of such a product was an essential part of processing to get it to the consumer. It was held that in such circumstances packing the vegetable oil in cans is a process incidental or ancillary to the “completion of the manufacture of the vegetable product to make it fit to reach the retailer or consumer in a consumable condition. It was further held, after taking into consideration the several processes mentioned in Section 2(f) itself as amounting to process of manufacture with reference to specified items, that it would be permissible in a given case, not directly covered by any of the said clauses, to ascertain whether packing, which include containers, is a process incidental or ancillary to the completion of a manufactured product. It may be noted that this decision is a departure from the decisions cited earlier relating to manufacture of vegetable products. Shri Kunte for the Department placed reliance on this case for his submission that, in the present instance also, the ironing preceding packing of the gas mantle would constitute a process incidental or ancillary to the completion of the manufacture of the gas mantle.
16. Another decision on which Shri Kunte placed reliance is of the Gujarat High Court in Union of India v. Tata Chemicals (1983 ELT 776). It is pointed out that the High Court has observed “all those expenses are incurred in order to put the article in a marketable condition at the factory gate so as to introduce it in the stream of goods” and that the expenses incurred in that connection enter the cost structure of the product and as it is the packed article which is sold to the wholesaler the value of packing will also include in the value. But inclusion of the packing charges in terms of provision of Section 44 would not necessarily make the process of packing part of the process of manufacture as defined in Section 2(f).
17. Shri Kunte further refers to the decision of this Tribunal in Hindustan Lever Ltd. v. Collector of Central Excise, Bombay (1985 Vol. 19 ELT 96). Several of the decisions cited earlier had been considered in the said decision and it was held that normal minimum packing (not in a special packing or durable/returnable containers) without which the manufactured product could not be delivered, whether for -reasons of transport or otherwise, should be treated as a process incidental or ancillary to the completion of that, products.
18. The Appellate Collector has in his order relied on one judgement only to arrive at his conclusion that the. process of ironing in the present case was a process incidental and ancilliary to the completion of the manufactured product (Gas mantles). The said decision is that of the Kerala High Court in Metro Readywear Company v. Collector of Customs (1978 ELT 520). The assessee in that case was manufacturing Brassieres. After stitching, the said brassieres were ironed with the aid of power. The question was whether the use of power at that stage would amount to use of power in the manufacture of Brassieres. The Court held “in our opinion, the process of ironing that was applied to the stitched brassieres prior to their packing was a process incidental to the completion of the brassieres as a manufactured product since the said process was obvious (sic) intended to give a finishing touch in order to render them marketable as ready-to-wear undergarments. In as much as the said process was admittedly being carried out with the aid of power, liability for payment of duty under Item 22D gets attracted. The contention to the contrary put forward by the petitioner cannot therefore be accepted”. Shri Kunte relies upon this decision before us also. On the other hand, Shri Jois contends that the said decision is of no relevance to the facts of the present case. According to him, the ironing of the stitched brassieres was a necessary process in the manufacture of the Brassieres since without such ironing the stitched brassieres would be wrinkled and could not be marketed in such a condition. The said contention is reasonable since the brassieres to be marketed should present the appearance of a clean and fresh product and not present the appearance of a used garment as it would if it were full of wrinkles, though new. Hence the process of ironing was, in the said case, not merely for the purpose of ease of packing or transport but necessary to make the product marketable in a presentable condition. It, therefore, appears to us that reliance on that decision may not be fully justified on the facts and in the circumstances of the present case.
19. It is with reference to these above decisions that we have to consider whether the process of ironing, preceding the packing of the gas mantles in envelopes, was a process in or in relation to the manufacture of the gas mantle. As earlier mentioned, the gas mantles even before ironing are ready for use as gas mantles and in fact even after ironing they have to be fluffed out and the effect of ironing removed before they could be actually used as gas mantles. This circumstance would establish that the process of ironing was after the completion of the manufacture of the product and not a process in, or even in relation to, the manufacture of the gas mantle. The process of ironing is carried out only for the purpose of ease of convenient packing for the purpose of transport and delivery. The mantles could be sold even without such packing, the effect of nonironing only making the packing a little more bulky and space consuming. We have seen that several of the High Courts have held that even when a particular form of packing is made obligatory in law before the manufactured product could be sold to the consumer, such packing would not be a process incidental or ancillary to the completion of the manufacture of the product. In the present instance packing in a butter paper envelope is neither obligatory nor even necessary but is only carried out for the purpose of convenient despatch and delivery. In such circumstances we are of the view, following the dicta in the several decisions cited supra, that the process of ironing carried out by the appellants, though with the aid of power, did not, for that reason, disentitle them from the benefit of notification 179/77-CE dated 18.6.1977.
20. Hence, we set aside the order of the Appellate Collector to the above extent but maintain his order in so far as it denied benefit under the notification for the period when drying (third of the nine stages mentioned in his order) was being carried out by the appellants with the aid of power. The appeal is therefore allowed in the above terms.