Professional Documents
Culture Documents
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
Salt tax was increased in the later half of 19th century. Lord Elgin imposed countervailing duty of 5% (excise on yarn
Meaning to cut off, raze, demolish, eliminate i.e. deduct or cut off something for the benefit of the State
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,
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:
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.
CCE Vs Acer India Ltd, 2004 (172) ELT 289 (SC) Duty of excise
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.
CE Department says:
You are a manufacturer It attracts duty of 30% on market value of motor cars
Rate???
Classification?? Valuation??
When payable??
Records/returns/authentication Prior permission ??
Rules, 2000,
CE (Compounding of Offences) Rules, 2005, CE (Determination of Retails Sale Price of Excisable Goods)
Rules 2008
Tariff values
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
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
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.
Explanation Goods include any article, material or substance which is capable of being bought and sold for
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).
manufactured product;
ii)
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
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)
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
Putting together different duty XI Telecom Ltd. Vs. CCE 1999 paid items not manufacture (105) ELT 263 (A.P.)
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
Coffee
Reprocessing of coffee
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
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
Ingots / billets Jelly (stone) (See contract decision under Table below)
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.
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)
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
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.)
Glass Moulds
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.)
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
iv.
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
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
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,
In BPL India Ltd. Vs. CCE 2002 (143) ELT 3, the Supreme Court held that assembly
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
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
character or use. Also see South Bihar Sugar Mills ltd Vs UOI,
1978 (2) ELT J.336 (SC).
Whether that something else is a different commercial commodity having its distinct
as
such,
is
an
important
consideration
in
UOI Vs Parle Products, 1994 (74) ELT 492 (SC) Whether or not something results 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
to CETA;
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
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
Adoption of any other treatment on the goods to render the product marketable to consumer.
thereof
Amounts to manufacture
Basic duty
Special Excise duty
Education Cess
Secondary and Higher Education Cess National Calamity Contingent Duty Duties under other Acts: