Full Judgment Text
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CASE NO.:
Appeal (civil) 3621-3625 of 2002
PETITIONER:
M/s. Prachi Industries
RESPONDENT:
Commissioner of Central Excise, Chandigarh
DATE OF JUDGMENT: 28/03/2008
BENCH:
S.H. Kapadia & B. Sudershan Reddy
JUDGMENT:
J U D G M E N T
REPORTABLE
CIVIL APPEAL NOS.3621-25 OF 2002
WITH
Civil Appeal No.5401 of 2004
M/s. Prachi Industries \005 Appellant (s)
versus
Commissioner of Central Excise,
Chandigarh. .... Respondent (s)
KAPADIA, J.
These civil appeals are filed by the assessee under
Section 35-L of the Central Excise Act, 1944 (for short, "1944
Act") and are against Final Order No.3-7/2002-B dated
4.1.2002 in Appeal No.E/2042-2046/2001-B and Final Order
No.120/04-B dated 19.1.04 in Appeal No.E/1558/03-B
passed by CEGAT. By the impugned orders CEGAT has
allowed appeals filed by the Revenue. By the impugned
decision CEGAT has held that the process of swaging
undertaken by the assessee on swaging machine on duty paid
MS tubes falling under Heading 73.06 of the Schedule to the
Central Excise and Tariff Act, 1985, amounts to "manufacture"
within the meaning of Section 2(f) of the 1944 Act.
2. For the sake of convenience we reproduce hereinbelow
facts mentioned in Civil Appeal Nos.3621-25 of 2002 (lead
matter).
3. M/s. Prachi Industries is the small scale unit. It buys
duty-paid MS tubes from its manufacturers. The said MS
tubes are classified under Heading 73.06 of the Schedule to
the Central Excise and Tariff Act, 1985 (for short, "1985 Act").
After receiving MS tube from the manufacturers, the assessee
cuts the same into requisite lengths. The cut MS tube is
thereafter put in the swaging machine in which dies are fitted
which imparts "folds" to the flat surface of the MS tube/pipe.
4. The short question which arises for determination in this
batch of civil appeals is :
"Whether swaging constitutes manufacture in terms
of Section 2(f) of the 1944 Act?"
5. At the outset, it may be reiterated that MS tubes bought
by the assessee from its manufacturers falls under Heading
73.06 and the Revenue seeks to demand duty once again
under the same heading by treating the process of swaging as
"manufacture". Accordingly, we quote hereinbelow Chapter
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Note 3 in Chapter 73 which covers "Articles of Iron and
Steel" :
"In relation to pipes and tubes of heading
Nos.73.04, 73.05 and 73.06, the process of drawing
or redrawing shall amount to ’manufacture’."
6. We quote hereinbelow the Heading 73.06 which reads as
follows:
Heading
No.
Sub-
heading
No.
Description of goods
Rate of
Duty
(1)
(2)
(3)
(4)
73.06
Other tubes, pipes and hollow
profiles (for example, open
seam or welded, riveted or
similarly closed), of iron or
steel
7306.10
Of iron
15%
7306.90
Other
15%
7. We also quote hereinbelow the distinction between "tubes
and pipes" and "hollow profiles" as indicated in HSN, Vol.3,
which reads as under:
"Tubes and pipes
Concentric hollow products, of uniform cross-
section with only one enclosed void along their whole
length, having their inner and outer surfaces of the same
form. Still tubes are mainly of circular, oval, rectangular
(including square) cross-sections but in addition may
include equilateral triangular and other regular convex
polygonal cross-sections\005.
Hollow profiles
Hollow products not conforming to the above definition
and mainly those not having their inner and outer
surfaces of the same form."
(emphasis supplied)
8. At the outset we may clarify that our judgment in this
case is based on interpretation of the word "manufacture" as
defined in Section 2(f) of 1944 Act. With the introduction of
1985 Act, the definition of "manufacture" has been substituted
to include "any process \026 incidental or ancillary to the
completion of a manufactured product". Therefore, on
analyzing Section 2(f), it becomes clear that the word "process"
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must be in relation to manufacture. By this definition, it is
made clear that the process must be incidental to the
completion of the manufactured product. In other words,
incidental process must be an integral part of manufacture
resulting in a finished product which has to be of a different
physical shape, size and use. The said process must impart a
change of lasting character to the original product or raw-
material. After the process, a new finished product must come
into existence. It comes into existence only when it acquires a
distinguishable identity. For example, in the case of blending
of ore what emerges after the process of blending is an ore but
of different type. Once the process amounts to manufacture,
the fact that the goods belong to the same entry would not be
relevant. In the present case, the swaging machine contains
dies of different sizes and patterns. Swaging is a process
which imparts a change of lasting character to the plane MS
pipe or tube by use of dies which exists in the machine. After
the process of swaging the identity of the plane MS pipe or
tube undergoes a change both in terms of form, shape and
user.
9. According to Production Technology, Metal Forming is a
manufacturing process by which the size or shape of plane
pipe or tube is changed by the application of forces that
produce stress in the part of tube or pipe which is greater than
the yield strength and less than the fracture strength of the
material. The applied forces may be compressive, bending,
sharing or a combination of all. In Metal Forming the sheet
metal is strained beyond its yield point so that it takes a
permanent new shape which is retained for all times. Metal
Forming is one of the most important of the manufacturing
processes. It is the fastest way to change the shape of the iron
pipe or tube. There are various types of Metal Forming
Operations. These Operations are performed on Presses and
Hammers. They are also performed on rolls. Open and
closed-die forging, coining, forward extrusion, embossing,
swaging etc. are Forming Operations performed on Presses
and Hammers.
10. According to Production Technology by O.P. Khanna,
Forming Operation in which the diameter of bars or tubes is
changed by repeated blows of shaped hammers is called as
"Swaging".
11. It is important to note that in the mechanics of Forming
Processes, the mechanics of rolling is different from the
mechanics of forging, which is different from mechanics of
drawing, which is different from mechanics of bending and
which is different from mechanics of extrusion. The shape
that is formed on the metal sheet depends upon the shape of
the punch and the shape of the die used to produce the
workpiece. Depending upon the nature of the desired
configuration, the formed shape may be developed over a
series of operations or it may be simultaneously formed. A
wide variety of punches and dies are used in the swaging
machine. The dies are of different shapes, namely, V-dies, W-
dies, U-dies, rotary dies etc. The use of these dies would
largely depend upon the desired production rate and volume.
In rotary swaging the final shape is round because the dies
rotate around the workpiece while the operation is being
performed.
12. Swaging is a general term which is applied to a number
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of Metal Forming Operations. Production Swaging
Operations are commonly performed on rotary swaging
machines. Swaging has proved to be an economical-
production method for forming shapes confined to a portion of
the total length of a given pipe or tube, by tapering, pointing,
reducing or sizing. Swaging process is also used for joining
and fastening operations. It is also used in assembling two or
more components by joining a bushing to a shaft, swaging of
rings onto wire for use as electrical connectors, and for
attaching fittings to tubes.
13. According to Dictionary of Technical Terms by F.S.
Crispin, the word "swage" is defined to mean a form of die
used as an aid in forming forged work. According to the said
Dictionary the word "profile" refers to an outline or contour.
Swaging provides a pattern or contour, with peaks and valleys,
depending upon the desired configuration. Therefore, even in
matter of classification, distinction is made between pipes and
tubes on one hand and hollow profile on other hand.
14. Applying the above tests, we are of the view that the MS
tube/pipe after insertion in the swaging machine receives
"folds" on a portion of the plane MS tube/pipe depending upon
the die in the swaging machine. It is the die which gives
accurate shape to the workpiece. In the present case, the
assessee has assigned distinct code numbers and distinct
design numbers for different shapes of profiles (pattern or
contours). This aspect has not been considered by the
adjudicating authority which decided the matter in favour of
the assessee.
15. Applying the above tests in the context of Section 2(f) of
the 1944 Act, we are of the view that in the present case the
rotary swaging machine with different dies therein imparts a
change of lasting character to the plane pipe or tube by use of
dies. That, a workpiece having a distinguishable identity
comes into being depending on the shape of the die and the
punch used. On facts, we find that after undergoing the
swaging process a workpiece of a different shape and user
emerges and, therefore, in our view, the process of swaging
amounts to manufacture under Section 2(f).
16. Before concluding, we may mention that MS plane
pipe/tube can carry water to the overhead tank whereas the
workpiece produced in the present case is useful as a
decorative item or as an item which provides a strong grip in
the case of auto-rickshaw. Therefore, in our view a
distinguishable identity is acquired of a lasting character
imparted to a plane MS pipe/tube by use of dies and presses.
17. In the case of Bharat Forge & Press Industries (P) Ltd.
V. Collector of Central Excise \026 1990 (45) E.L.T. 525 (SC),
this Court held that a mere change in length, size or shape
does not bring into existence a new product and the same is
not dutiable. Merely because the good(s) after processing
becomes different commercial commodity or having a distinct
name, would not result in any change in excise classification if
they continue to be goods of same specie. This court held that
pipe fittings made out of pipes and tubes continued to be
pipes and tubes. In our view, the judgment of this Court in
Bharat Forge (supra) has no application. In this case, we are
not concerned with pipe fittings. In this case, the assessee is
carrying out the process by which shape of the MS pipe
changes and what emerges is a workpiece (desired
configuration) after passing through swaging machine. That,
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after going through the swaging machine what emerges is a
profile of a workpiece.
18. According to Chambers Science and Technology
Dictionary the word "profiling" means producing the profile of
a die or other workpiece, with a grinding machine or a milling
machine, incorporating a tracing mechanism. In the present
case, we are concerned with rotary swaging machine which is
based on rotary hammering process. The important thing to
be noted is that the die is an important segment of that
machine and that is why in the present case, as stated above,
the assessee has been assigning different, distinct code/design
numbers for different shapes/types of hollow profile (See: page
132, Vol. II, of the Civil Appeal paper book).
19. Before us, it has been urged that in any event the
assessee is entitled to the benefit of CENVAT credit and SSI
exemption. This point was not raised by the assessee before
the Tribunal. However, we make it clear that we express no
opinion on the entitlement of the assessee in that regard.
However, our order will not preclude the assessee from making
the claim for such entitlement in accordance with law.
20. Before concluding we may clarify that the judgment of
this Court in case of Hindustan Poles Corpn. V.
Commissioner of Central Excise, Calcutta - 2006 (4) SCC
85 has no application to the facts of the present case. In the
case of Hindustan Poles (supra) the question which arose for
determination before this Court was : whether joining of duty-
paid pipes of different diameters by the assessee by welding
would amount to manufacture. It was held that even after
welding there is no change in the basic identity or original
character of MS welded pipes so as to make the same a
marketable product. It is important to note that in that matter
the original item was MS welded pipes. It was a case of
connecting duty-paid pipes of different diameters. It was not
the case where "folds" were to be imparted on to the plane MS
pipes which is the case herein. Further, in Hindustan Poles
(supra) swaging machines were used. However, various
functions are performed by swaging machines, welding is one
of them. In numerous cases swaging machines are used by
which the sizes of two pipes are welded through that machine.
However, welding is not the only function of swaging machine.
Imparting of folds on to the plane pipes through the swaging
machine containing dies of different shapes and sizes is the
other function of that machine. That function was not for
consideration in the case of Hindustan Poles (supra).
Therefore, that judgment has no application to the facts of the
present case.
21. Accordingly, the above civil appeals filed by the assessee
are dismissed with no order as to costs.