ORDER
G.A. Brahma Deva, Member (J)
1. These three appeals are filed by the appellants, M/s. Bartronics India Ltd., and Ors. with reference to Order-in-Original No C. Ex. 39/97 dated 1-10-1997 passed by the, Commissioner of Central Excise, Hyderabad.
2. Since the issue involved in these three appeals are common, all these appeals were taken together for hearing and are being disposed of by this common order.
3. Shri G. Shivadass, learned Advocate appearing for the appellants submitted that the appellants were engaged in the supply of one or more items mentioned below viz.,
(a) Scanners;
(b) Keyboard wedge or decoder or wand; and/or
(c) Software in the form of floppy diskettes.
Shri Shivadass submitted that the scanners were imported by the appellants and the keyboard wedges were purchased from other manufacturer. He said that the activity of placing both of these items in a pouch does not amount to manufacture whereas the Commissioner has relied upon the Note 6 to Section XVI of the Central Excise Tariff Act, 1985 to come to the conclusion that the activity of the appellants of placing the scanner and the keyboard wedge in a pouch would amount to manufacture of excisable commodity. Note 6 to Section XVI is as under : –
“6. In respect of goods covered by this Section, conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article (including ‘blank‘, that is an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into the finished article or part), into complete or finished article shall amount to ‘manufacture”.
He further contended that the above note would, apply only in a situation where the raw material is incomplete or semi-finished and would not apply to a situation where the raw materials are fully finished. In the instant case, both the items are complete and putting each of them into a pouch would not amount to manufacture. In support of his contention, he relied upon the decision of the High Court of Andhra Pradesh in the case of XI Telecom Limited v. Superintendent of C. Ex., Hyderabad [1999 (105) E.L.T. 263 (A.P.)] wherein it was held that putting together different duty paid items in a kit does not amount to manufacture. He said that the view taken by the High Court was upheld by the Supreme Court as reported in 1999 (107) E.L.T. A185 under Court Room Highlights. The Supreme Court dismissed the appeal filed by the Department. He also said that in pursuance of the decision of the Supreme Court, the Department had issued a Circular accepting the decision wherein it was clarified that two different items putting together in a kit does not amount to manufacture. In this context he referred to the Circular No. 583/20/2000-CX., dated 20-8-2001. He also submitted that the ratio of the decision of the Supreme Court has been followed subsequently by the Tribunal in a series of cases. In this context he referred to the following cases : –
(a) T.I. diamond Chain Ltd. v. CCE, Chennai [2000 (126) E.L.T. 790 (Tribunal)] (b) CCE Jaipur-I v. Venelec Electromech Indus (P) Ltd. [2002 (141) E.L.T. 156 (Tri. - Del.)] (c) Dalmia Industries Ltd. v. CCE, Jaipur [1999 (112) E.L.T. 305 (Tribunal)] (d) Narang Latex and Dispersions Pvt Ltd. v. CCE, Mumbai-VI [2001 (134) E.L.T. 482 (Tri. - Mumbai)]. (e) Yamuna Gases & Chemicals Ltd. v. CCE, New Delhi [2001 (130) E.L.T. 854(Tri.-Del.)] 4. On the other hand, Shri Narasimha Murthy, JDR for Revenue drew our attention to Para 9(c) of the impugned order which reads as under :- "9. (c) Sri Kiran Jerdhar, Senior Development Engineer of SBPL, in his statement, inter alia, stated that he along with four more engineers of SBPL attend to the works like - 1. solding of Key Board Wedges, PCB Board assembly attesting of key board wedges and the completely assembled key board wedge and the scanner which is received from the head office (of SBPL) together form a bar-code system; 2. test the imported scanners and necessary configuration is attended to suit the key board wedges; 3. manufactured the key board wedges of model No SB-22, SBPL-1100; SBP-1200 and SBPL-1300.
He further stated that the customers place orders for the complete Bar-code system consisting of key board wedge and scanner. As seen from invoices dated 1-4-1992 and 6-4-1992 a single invoice clearly indicating the whole Barcode System is being raised by SBPL.”
He said that most of the activities such as testing and others were undertaken before clearing the items. Since the activities of packing and testing were undertaken by the party before clearing the goods would amount to manufacture. He also referred to the Catalogue issued by the party wherein it was specifically mentioned that they are manufacturer of the Bar-code hardware and Systems. He said in view of this position, the ratio of the decisions referred to above is not applicable to the facts of this case.
5. In this context, Shri G. Shivadass, Counsel submitted that in the case of TI Diamond Chain Ltd. (supra), the issue with reference to packing after testing also has been considered by the Tribunal and on relying upon the decision of the High Court of Andhra Pradesh, it was held that activity undertaken by the party does not amount to manufacture.
6. We have carefully considered the submissions made by both sides and perused the records. In the instant case, as can be seen from the records that the scanners were imported by the party whereas the key board wedges/decoders were procured from other manufacturer. Both the items were put together in a pouch and cleared as such. The Supreme Court in the case of D.C.M. Ltd. [1977 (1) E.L.T. (J 199) (S.C)] considering the definition of ‘manufacture’ observed the word “manufacture” used as a verb is generally understood to mean as “bringing into existence a new substance” and does not mean merely “to produce some change in a substance,” however minor in consequence the change may be. Further while reiterating the test laid down in D.C.M’s case [Porritts & Spencer (Asia) Ltd. v. CCE, New Delhi [1999 (106) E.L.T. 18 (S.C.) = 1995 (Suppl.) SCC 219] it was held-
“Every change does not necessarily fall within the expression ‘manufacture’ unless it is shown that the process has brought into existence any new product having a distinct identity in the commercial world. In the absence of any evidence in that behalf which the Revenue ought to have laid, it is difficult to come to the conclusion that excisable goods came into existence by the treatment of cotton and nylon yarn into a multifold yarn.”
What emerges from the above is excise duty is leviable on goods manufactured. The expression manufacture means bringing into existence a new substance and does not mean merely to produce some change in a substance, however, minor in consequence the change may be and as a result of treatment, labour and manipulation there should be transformation in the raw material and as a result of treatment, labour and manipulation a new and different article must emerge having a distinct name, character or use. In other words, it is not enough if there is a change, the change should result in bringing into existence a new and definite article having a distinct name, character or use and said article must be marketable and it should known to the market as such. In view of this definition and the facts and circumstances, putting both of them into a pouch would not change its character or use and the issue similar to one has already been considered in an appeal in the case of XI Telecom Ltd. (supra) and furthermore the view taken by the High Court decision was upheld by the Supreme Court, we are of the view that ratio of the aforesaid decision is applicable to the facts of this case and accordingly we find that the activity does not amount to manufacture. In view of this position, we accept the plea of the party and in the result the appeals are allowed with consequential relief if any.