ORDER
S.L. Peeran, Member (J)
1. In both these appeals, common question of law and facts are involved, hence they are taken up together for disposal as per law.
2. Appeal No. E/2148/94-C arises from Order-in-Appeal dated 22-9-1994 passed by the Collector of Central Excise (Appeals), New Delhi. By this order, he has confirmed the order of the Assistant Collector of Central Excise, Alwar, who has confirmed the classification of product “Milk Care Designer Feeder” in various sizes under sub-heading 3924.90 of Central Excise Tariff Act, 1985. However, he has granted the benefit of Notification No. 14/92-C.E., dated 1-3-1992 as amended, subject to the condition that inputs used in the product should be duty paid. As a consequence, he finalised the classification list with effect from 22-10-1993 bearing Div. S.No. 87/93 as the same was previously approved provisionally under Rule 9B of Central Excise Rules, 1944. The issue before the authorities in these appeals was as to whether putting together different articles of feeding bottles in a single pack amounted to the process of manufacture, as per the definition of the term manufacture given in Section 2(f) of Central Excises & Salt Act, 1944 and as to whether they are entitled for benefit of the said Notification? It was contended by the asses-see before the authorities that they were only doing packing activities of the product and their process did not amount to manufacture. It was stated by them that they are buying bottles from ‘W, feeder nipples from ‘X’, bottles lids from ‘Y’ and little plastic part is from ‘X’ manufacturers and then they assembled all these parts in their unit by putting all of them in a combine pack and sell the product in the brand name of “Milk Care Designer Feeder”, a prime product of the appellants. The Assistant Collector held that individually these articles can be called feeding bottle as claimed by them. It is only when a calibrated bottle is put alongwith nipple and flow regulator that the feeding bottle comes into existence. He has not accepted the citation of the Bombay High Court relied in the case of Commissioner of Sale Tax v. Trinity Product as reported in 1975 (35) S.T.C. 502, wherein it has been held that such activity does not amount to manufacture as defined in Section 2(17) of the Bombay Sales Tax Act, 1959. On this aspect, the Assistant Collector took a view that the said judgment is irrelevant for coming to the conclusion as to whether the activities undertaken by the assessee amounted to manufacture or not; as the definition of manufacture under the said Act was different from the one under Excise Act. As regards the classification, he has held that the product being plastic household articles are classifiable under Heading No. 3901 to 3915 of Central Excise Tariff Act, 1985 except rubber nipple whenever used (in other case silicon nipple is used which is classifiable under one of the headings of 3901 to 3915 of Central Excise Tariff Act, 1985). He has held that even in case feeding bottle where rubber nipple is used benefit of the said Notification can be given because the plastic articles are predominantly present by weight and/or value in the product. He has taken a view that the product would attract nil rate of duty as prescribed under the said Notification provided the duty has been paid on the inputs used in its manufacture and no Modvat credit under Rule 57A had been availed.
3. The learned Collector has confirmed the findings and has also distinguished the judgment cited by the appellants including the citation of British Physical Laboratory India Ltd. v. Collector of Customs as reported in 1990 (50) E.L.T. 567, on the ground that the same is not applicable as claimed by the appellants. The learned Collector has held that the appellants carried out the process of sterilization before packing, therefore, such a process would result in the process of manufacture.
4. In Appeal No. E/190/96-C, the Commissioner by her order dated 12-1-1996 has confirmed the classification of the said product under the said heading for the period 30th June, 1993 to 28-2-1994 on the same reasoning as taken by her referred to above.
5. The learned Advocate, Shri V Sridharan contending in both the appeals reiterated the earlier submissions made before the lower authorities, that such process of putting together all the parts of the feeding bottle in packing after sterilization by ultra violet rays before packing in master pack does not bring into existence a new product. It is his contention that for an activity to amount to manufacture, there should be an integration to result in the emergence of a single whole and further, in most of these cases, should involve some kind of fabrication to amount to manufacture; this vital test is not fulfilled. It was contended that the appellants do not undertake any assembly. Individual items have to be unpacked and assembled by the customer before use of the feeding bottle. They merely sterilised it and packed the same and such packing would not bring into existence a new product. He again relied on the said Bombay High Court judgment rendered in the Bombay Sales Tax Act and drew attention to the definition of the term ‘manufacture’ under the said Act and stated that there is no difference between the definition and the said term in both the legislation and therefore there was no reason for the authorities to have rejected the said ratio of the judgment without giving any reasons. He further stated that the Larger Bench judgment in the case of Shriram Rayons v. Collector of Central Excise, as reported in 1987 (30) E.L.T. 850 held that the said Bombay High Court judgment cannot be rejected. He also relied on the judgment of the Gujarat High Court rendered in case of Zaver-chand Gaekwad Pvt. Ltd. v. Union of India, as reported in 1992 (61) E.L.T. 225, wherein it was held that process of galvanisation does not amount to manufacture and in this regard the High Court followed the judgment rendered in the case of Gujarat Steel Tubes Ltd. v. State of Kerala, as reported in 1989 (42) E.L.T. 513. He further relied on the Judgment of the Tribunal rendered in Order No. 175/87, dated 23rd March, 1987 in the case of Singeri Galleries Co. Ltd. v. Collector of Central Excise, wherein it was held that mere assembly of tub wheel with the axle rod would not amount to manufacture. He further relied on the judgment rendered in the case of Paramount Furnace Co. Ltd. v. Collector of Central Excise, as per Order No. 971/97-B, dated 30-6-1997, wherein it was held that wheel and axles by themselves were liable to duty under appropriate item of tariff, but merely joining them together would not bring any further additional duty liability. He also relied on the ratio of the following judgments, wherein it has been held that mere putting together various items in a common packing does not amount to manufacture;
1. Soni Chemicals v. Collector of Central Excise 1991 (54) E.L.T. 298)
2. Collector of Central Excise v. Kalinga Paints & Chemicals Industries 1989 (44) E.L.T. 548
3. Garware Paints Ltd. v. Collector of Central Excise 1993 (67) E.L.T. 953
6. He further relied on the judgment rendered in the case of Tata Robins Fraser Ltd. v. Collector of Central Excise, as reported in 1990 (46) E.L.T. 562, wherein it was held that mere collection of parts does not amount to manufacture. It was contended that the Collector (Appeals) reliance on the aspect of sterilization amounting to process of manufacture was never stated in the show cause notice and such reliance on extraneous material is violative of principles of natural justice. It was stated that sterilization is purely temporary in the nature as the consumer has to sterilize the bottle every time before use. Sterilization by the appellant is of no avail. Further, sterilization is merely to take care of the impurities, if any, during the handling and packing of the product. It only improves the hygiene of the product. There is no change in the name, character and use of the product. In this context, he relied on the judgment rendered in the case of Heattreaters & Engineers v. Collector of Customs, as reported in 1990 (47) E.L.T. 281, wherein it has been held that the process of heat treatment will not be a manufacturing activity.
7. With regard to Appeal No. E/190/92-C, the learned Counsel submitted that the classification adopted is incorrect in view of the fact that the department had classified the feeder bottles under Heading 39.24 which indicates that feeder bottles in question are products made from goods falling under Heading 39.01 to 39.14. He stated that if the feeder bottles are not made from products of 39.01 to 39.14 they cannot be treated as articles of plastic for the purpose of Heading 39.24. Since, according to the department, feeding bottles fall under Heading 39.24, there can be no dispute that the feeder bottles are indeed made from the goods falling under Headings 39.01 to 39.14. It is his submission that the various plastic parts like bottle, cap, etc. themselves are not goods of Headings 39.01 to 39.14. These are of plastic articles. These are in turn made from goods falling under Headings 39.01 to 39.15. In other words, the basic raw material is resin only. The evidence that the basic raw material used is resin is clear from certificates/invoices, which were filed before the lower authorities. He submitted that the position that emerges is that the feeder bottle in question falls under Heading 39.24. The basic raw material is resin falling under Heading 39.02. The intermediate products viz., parts like caps, bottles, etc., certainly do not fall under Headings 39.01 to 39.15. He also submitted that the aspect pertaining to articles of plastic has been settled by the Revenue by issuing series of circulars dated 26-12-1985, 25-6-1987 and 22-8-1990 and a circular telex dated 11-4-1986. He also relied on number of Tribunal’s judgments relating to the identical Notification dealing with plastic and parts thereof. He submitted that the appellants are not manufacturer of these inputs. These are all purchased from the market. What has been purchased from the market is deemed to be duty paid. In this regard, he also relied on the judgment rendered in the case of Collector of Central Excise v. Decent Dyeing Co. as reported in 1990 (45) E.L.T. 201.
8. On the other hand, the learned DR submits that the appellants have carried out the process of assembling the various parts into a feeder bottle and that they had carried out the process of sterilization before they are packed. Therefore, this process of sterilization before assembling and packing amounts to manufacture. In this regard, he relied on the judgment of the Supreme Court rendered in the case of Name Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise, as reported in 1988 (38) E.L.T. 566. He further relied on the judgment rendered in the case of T.T.G. Industries v. Collector of Central Excise, as reported in 1996 (82) E.L.T. 517 besides relying on the judgments rendered in the case of Wandleside National Conductors Ltd. v. Collector of Central Excise, as reported in 1996 (84) E.L.T. 419 and that of Pressure Cookers and Appliances Ltd. v. Collector of Central Excise, as reported in 1987 (28) E.L.T. 566 (T).
9. Countering the arguments, the learned Advocate submits that the inputs purchased from the market is deemed to be duty paid and as there is no sufficient proof of discharge of this burden, therefore, they are also entitled to the benefit of Notification No. 14/92-C.E. In this regard, he relied on the Board Circular dated 26-12-1996, the Tribunal’s judgment rendered in the case of Bradma of India Ltd. v. Collector of Central Excise, as reported in 1990 (50) E.L.T. 533 and that of Vapson Products v. Union of India, as reported in 1987 (27) E.L.T. 608.
10. We have heard both the sides in the matter. The main question that is required to be answered in these appeals is as to whether the activity of packing various parts of “Milk Care Designer Feeder” after sterilization would amount to manufacture in terms of Section 2(f) of the Act and as to whether they are goods? The next question is that about it classification and entitlement of exemption under the relevant Notification referred to. The main case of the appellants is that their activity does not result into a process of manufacture, inasmuch as that there is no assembly in the strict terms but merely packing of the goods and the process of sterilization is not a process of manufacture incidentally or ancillary to the completion of a manufactured product. As noted in their contentions, they have stated that they are repacking various new parts of the feeder bottles and merely because it is packed, it does not bring into existence a new article. In this regard, heavy reliance has been placed on the Division Bench’s judgment of the Bombay High Court rendered in the case of Commissioner of Sale Tax v. Trinity Product (supra). The appellants have also relied on several judgments in the matter. As can be seen from the definition of the term ‘manufacture’ appearing in Section 2(f) of the Act, it includes any process :
“(i) incidental or ancillary to the completion of a manufactured product; and
(ii) which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, and the word “manufacture” shall be construed accordingly and shall include not only a person who employs hired labour in the production and manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.”
11. Thus, putting all these items after sterilization inside the pack would amount to a process incidental or ancillary to the completion of a manufactured product is the question. The Revenue has stated that this activity is a process of assembly. The defintion of the term “assemblies” as appearing in Chambers Twentieth Century Dictionary is “to call or bring together; to collect-to put together the parts of.- v.i. to meet together”. The meaning of the term “assembly” given in the said dictionary is “the act of assembling; putting together of parts”. In this case there does not appear to be an act of assemblying as each part is not fed into other to bring into existence a new product. The various parts have already come into existence and they have been only packed and such packing after sterilization certainly would not bring into existence a new product as each of the items have already come into existence, as individual items. In this connection, the reliance on the judgment of the Hon’ble Bombay High Court rendered in the case of Commissioner of Sale Tax v. Trinity Product (supra) is very relevant as the Hon’ble Bombay High Court in that case dealing with an identical product answered the question of the term ‘manufacture’ as defined in clause 17 of Section 2 of Bombay Sales Tax Act, and held that it is not sufficient for an activity to amount to “manufacture” for the goods purchased to be sold under a different label or trade name even if that label or trade name is known as separate commercial commodity different from that by which the goods purchased are known in the market. The Court held that what is essential is that a commercially different commodity should come into being as a result of one of the activities described in clause (17) of the said Section 2 namely, producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods. It held that it is not possible in the present case to describe the activity of the respondents by any of the activity set out in clause (17) of the said Section 2. As can be seen the ingredients in Clause (17) of the said Section is more exhaustive then the defintion appearing in the Section 2(f) of the Act. Therefore, Bombay High Court’s judgment in an identical matter pertaining to auto feeders involving such purchase of glass bottles, rubber nipples and plastic caps and selling them as auto feeders after putting them in one carton does not amount to manufacture is squarely applicable to the present case.
12. The Tribunal in the case of Heattreaters & Engineers (supra) has held that mere heat treatment does not amount to manufacture. This judgment would cover the point pertaining to sterilization of the goods before packing. This process of sterilization is not a process incidental or ancillary to the completion of a manufactured product. The product even otherwise can be sold without sterilization. It is done only to improve the hygiene of the product. The appellants are taking care of removing the impurities, before they are packed. By sterilization, a change does not occur in the name, character and use of the product and a new product does not come into existence. Therefore, the Revenue’s contention that the activity of the sterilization completes the process of manufacture is required to be negatived.
13. Likewise, the Tribunal in the case of Tata Robins Fraser Ltd. (supra) has also held that mere collecting various component parts at site, partly by manufacturer from one’s own factory, partly getting them manufactured from other factories and partly buying components from market, does not amount to manufacture of entire Conveyor Belt System in CKD condition.
14. In the case of Collector of Central Excise v. Kalinga Paints & Chemicals Industries (supra), the Tribunal held that in the facts of the said case, it was not denied by the Revenue that operation of putting the two materials separately had been carried out outside the factory. It was also noted that it has not been shown that putting these separately manufactured in a common container amounts to manufacture. It has been held that it may well be a final product for a particular consumer end use which emerges after the two are mixed, but until it has been done, it has to be shown as to whether under the law by putting the two items together separately packed containers would amount to manufacture. Answering the question the Bench held that it did not bring into existence a newly manufactured product as envisaged by Section 2(f) of the said Act. It further held that putting two products separately manufactured does not amount to manufacture, as stated.
15. In the case of Sone Chemicals v. Collector of Central Excise (supra), the Tribunal again held that common packing of correcting fluid and thinner did not result into a new product.
16. In the case of Garware Paints Ltd. v. Collector of Central Excise (supra), the Tribunal held that the two products packed together namely the paint and the catalyst do not bring into existence a new commodity although it might be sold by the appellant packed in a single container and under the nomenclature Eomite Airdrying Paint. It held that a product comes into existence only when they are mixed together immediately before their use.-This is done only by the consumer and not by the appellant, as it is sold and removed from the factory. Hence no separate duty liability arises in packing the products as had been done by the appellant. In this regard, the Tribunal relied on the judgment rendered in the case of Collector of Central Excise v. Kalinga Paints & Chemicals Industries.
17. As can be noticed in the case of Paramount Furnace Co. Pvt. Ltd. v. Collector of Central Excise by Final Order No. E/971/97-B1, dated 30-6-1997, the Tribunal held that the process of drilling, grinding etc. on cast wheels is not a process of manufacture to attract duty under T.I. 68.
18. In the case of Collector of Central Excise v. Lakaki Works Pvt. Ltd. as reported in 1988 (37) E.L.T. 392, it has been held that repacking, relabelling and renaming of a product does not amount to manufacture hence goods are not liable to duty even if repacked in smaller containers and marked in a different name provided the nature and identity of the product is not changed. It was further held that the branding, repacking, and relabelling does not amount to manufacture.
19. In the case of Zaverchand Gaekwad Pvt. Ltd. v. Union of India (supra), the Gujarat High Court has held that process of galvanisation of duty paid steel strips purchased from open market does not amount to the process of manufacture. This supports/the argument that process of sterilization by itself does not amount to manufacture.
20. The Revenue has relied on judgment rendered by the Hon’ble Supreme Court in the case of Name Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise (supra). In this case various items like platform, load cells and indicating system were assembled by an activity of manufacture and on such assembly and having all of them being put together brought into existence a new weighbridge. As has been analysed by the Hon’ble Supreme Court, there were processes which led to the completion and emergence of a new commercial goods and in that context held that the new product that came into existence namely weighbridge brought into being a distinct product with a different name, character or use. In the present case, such a thing does not appear to have happened to bring into existence a different product by various processes and a mere process of sterilization by itself does not transform the item itself into a different form. Hence this judgment is distinguishable.
21. Likewise, the judgment rendered in the case of Pressure Cookers and Appliances Ltd. v. Collector of Central Excise (supra) is also distinguishable, wherein various products were brought together and on undertaken of various processes, it brought into existartce a new product known to the trade and hence it was held that such processes brought into emergence of a new product.
22. Likewise, the same view was taken in the case of Wandleside National Conductors Ltd. v. Collector of Central Excise (supra), wherein the process of fabrication was carried out and such fabrication brought into existence a new product with a distinct, name and hence it was held that the assembly of parts brought into existence a product namely machine. Machine was being a process of manufacture resulting into emergence of a new goods. This judgment is also distinguishable.
23. Likewise, in the case of T.T.G. Industries Ltd. v. Collector of Central Excise (supra), assembly of parts namely, Hydraulic Mudgun and Drilling Machine brought into existence new goods, as there was a process of assembly and such process resulted in the emergence of a new product.
24. In view of the citations referred to in favour of the appellants and more particularly, the judgment of the Bombay High Court referred to, it has to be held that there has been no emergence of new goods namely, “Milk Care Designer Feeder” on the appellants packing, repacking the various articles received by them from various manufacturers and further a process of sterilization is not a process of manufacture.
25. The next question is of its classification and grant of benefit of the Notification. As we have held that the activity does not result into manufacture and no goods emerges, therefore, question of its classification and grant of the benefit of the Notification does not arise and no finding is called for. In that view of the matter, the appellants succeeded and the appeals are allowed.
S.K. Bhatnagar, Vice President
26. With due respects to Hon’ble Member (Judicial), my views and orders in the matter are as follows :
27. I observe that the basic facts as narrated by the learned Counsel are not in dispute. According to him, “the assessee is buying bottles from the manufacturer, ‘W. Feeder Nipples are bought from manufacturer, ‘X’. Bottle lids are bought from the manufacturer, ‘Y’ . little plastic parts from the manufacturer. The assessee assembles all these parts in its unit by putting all of them in a combined pack and sells the product with the brand name, Milk Care Designer Feeder.”
28. He has further stated that after blister packing and price stamping bottles are sterilized by ultra violet rays before packing in master pack. This sterilization makes the product occupy a special place in the market different from ordinary feeder bottle system.
29. The assessees have argued that the activity undertaken by them does not amount to manufacture.
30. In support of their contention, learned Counsel has filed a flow chart and cited various case law and extracts from the Tribunal’s observations and orders.
31. Learned DR, on the other hand, has argued that the process amounts to manufacture and the goods were classifiable under Heading 3924.90 and were liable to duty.
32. Learned Counsel has argued by way of an alternative submission that even if for arguments sake, the activity was considered as a manufacturing activity, the benefit of Notification 14/92 as amended would be available.
33. Since the details of the submissions of both the sides have already been mentioned in the order of my learned colleague, I am not repeating them but would like to focus on the following.
34. In my opinion, the argument that the inputs are all duty paid is not relevant for the purpose of determining whether the activity undertaken by the appellants amounts to manufacture.
35. The fact remains that various items of inputs are received into the factory and are put together to form a distinct unit which is sterilized packed and sold. Therefore, what is being done in the factory is assembling, sterilising and packing and making them ready for sale. I am of the opinion that it was neither possible nor desirable to generalise as to whether assembling an article amounts to manufacture or not. This is because in some cases, assembling involves or includes manufacture and in others, it does not. Therefore, each case has to be examined on its own merits.
36. Again, many finished products are transported and sold in SKD or CKD condition but that does not necessarily mean that a new article had not in the factory and comes into existence only at the place or site of use. Once again, generalisation is neither possible nor desirable.
37. In the present case, what is done at the customers’ end is to put the article to use and what the learned counsel has described is the method and manner of use.
38. Learned Counsel is, however, correct in drawing our attention to observations of the Tribunal in some of the cases that only that activity amounts to manufacture which includes an integration resulting in emergence of a single whole but, what is a single whole in a particular case is a question of fact. Further, it is not necessary that the activity ‘manufacture’ must involve some kind of fabrication.
39. It should not be forgotten that the definition of ‘manufacture’ in central excise is very wide and incorporates many deeming provisions or fictions and for the same reason, in my opinion, the definition as given in central excise is not pari materia with the definition of manufacture in the case of Bombay Sales Tax Act. It is noteworthy that Section 17 of the Bombay Sales Tax Act not only describes various activities or processes etc. amounting to manufacture but, also gives authority to the State Government to specify any such processes and the scope and extent of the concept of manufacture in central excise and sales tax are not identical although undoubtedly, a very large area is common to both.
40. Again, insofar as the determination, as to whether a particular process or activity does or does not amount to manufacture, is concerned, it is always better to examine each case on merits and one has to be very careful while drawing analogy and utilising orders and judgments passed with reference to either other acts or activities or commodities. What is essential is to keep in view the ratio of the famous Supreme Court judgment declaring that any or every process does not necessarily amount to manufacture and it is essential to see that a new article having a distinct character, name and use emerges and is normally bought and sold as a distinct commodity in the market.
41. In view of the common area between the definition given in the Bombay Sales Tax Act and the Central Excise, in the present case, however, the Bombay High Court’s judgement in the case of Trinity Products (supra) is apparently relevant and has to be applied keeping in view the definition of manufacture in central excise and the ratio of the Supreme Court judgment regarding manufacture.
42. Again, it is neither possible nor desirable to generalise whether sterilization amounts to manufacture because in many cases, it may amount to a process incidental or ancilliary to the process of manufacture or otherwise but, in the present case, unless the activity proceeding sterilization amounts to manufacture proper, the activity could not, by itself, be treated as a process amounting to manufacture.
43. Insofar as the central excise tariff is concerned, Chapter 39 referred to by the learned DR does not incorporate any deeming fiction to the effect that such an assembly as the appellants undertake or the process of sterilization as such amounts to manufacture. I, therefore, agree with my learned colleague to the extent that in this particular case, in view of the undisputed facts stated before us, the activity undertaken by the appellants does not amount to manufacture and the ratio of the Bombay High Court judgement in the Trinity Products’ case applies.
44. In view of the above position, it is not necessary to enter into the arena of classification as observed by my learned colleague and I, therefore, agree with him that the impugned order is required to be set aside and the appeal accepted.