JUDGMENT S.H. KAPADIA, J.- THE SHORT QUESTION WHICH ARISES FOR DETERMINATION IN THESE CIVIL APPEALS FILED BY THE ASSESSEE UNDER SECTION 35-L(B) OF THE CENTRAL EXCISE ACT, 1944 (HEREINAFTER REFERRED TO AS "THE ACT") IS WHETHER THERE WAS VALUE ADDITION ON ACCOUNT OF GALVANISATION INCLUDIBLE IN THE ASSESSABLE VALUE OF MS GALVANISED PIPES. IN THESE CIVIL APPEALS, WE ARE CONCERNED WITH THE PERIOD MAY 1994 TO JULY 1996. 2. THE APPELLANT WAS ENGAGED INTER ALIA IN THE MANUFACTURE OF MS 9 GALVANISED PIPES. THESE PIPES WERE MADE FROM HR COILS. THE PIPES EMERGING ON HYDRO-TESTING STAGE WERE PICKLED IN ACID, WASHED IN RUNNING WATER AND GALVANISED BY DIPPING IN MOLTEN ZINC. 3. THE APPELLANT FILED ITS CLASSIFICATION LIST CLAIMING THAT "GALVANISATION" DID NOT AMOUNT TO MANUFACTURE. THE APPELLANT CLAIMED THAT MS GALVANISED PIPES WERE NON-EXCISABLE GOODS, AS THE SAID PIPES HAD BEEN PROCESSED OUT OF H DUTY-PAID MS PIPES MANUFACTURED IN ITS FACTORY. A SHOW-CAUSE NOTICE WAS ISSUED BY THE DEPARTMENT STATING THAT THE APPELLANT HAD CLEARED MS, PIPES WITHOUT ADDING THE COST OF GALVANISATION. ACCORDING THE DEPARTMENT ALLEGED UNDER-INVOICING. ACCORDING TO THE APPELLANT, THERE WERE TWO SECTIONS IN ITS FACTORY, NAMELY, "TUBE MILL SECTION" AND "GALVANISING SECTION. ACCORDING TO THE APPELLANT, 30% OF ITS TOTAL PRODUCTION WAS IN MS PIPES CLEARED FROM TUBE MILL SECTION AND THE BALANCE 70% OF .THE PIPES WERE TRANSFERRED TO ANOTHER SECTION, KNOWN AS GALVANISING SECTION, IN .WHICH THE FULLY FINISHED MS PIPES WERE GALVANISED. ACCORDING TO THE APPELLANT THE PROCESS OF GALVANISATION TOOK PLACE AFTER COMPLETION OF THE MANUFACTURE OF THE MS PIPES, WHICH WERE CLEARED ON PAYMENT OF DUTY AND SINCE THE PROCESS; OF GALVANISATION TOOK PLACE AFTER COMPLETION OF MANUFACTURE OF MS PIPES AND SINCE GALVANISATION DID NOT AMOUNT TO MANUFACTURE, THE DEPARTMENT WAS, NOT ENTITLED TO LOAD THE COST OF GALVANISATION ON THE NORMAL PRICE OF MS PIPE. 4. SHRI JOSEPH VELLAPALLY, LEARNED SENIOR COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE PROCESS OF GALVANISATION DID NOT AMOUNT TO MANUFACTURE, BOTH ON GENERAL PRINCIPLES AS WELL AS UNDER SECTION 2(F) OF THE SAID ACT. HE SUBMITTED THAT IN THE MATTER OF LEVY OF EXCISE DUTY, THE TAXABLE EVENT TAKES PLACE AT THE POINT WHERE THE GOODS ARE CLEARED FROM THE LICENSED PREMISES AND, THEREFORE, THE VALUE OF A PRODUCT AT THE TIME OF CLEARANCE, SHOULD BE TAKEN INTO ACCOUNT. HE SUBMITTED THAT IN THE MATTER OF LEVY OF EXCISE DUTY, THE TAXABLE EVENT TAKES PLACE AT THE POINT WHERE THE GOODS ARE CLEARED FROM THE LICENSED PREMISES AND, THEREFORE, THE VALUE OF A PRODUCT AT THE TIME OF CLEARANCE, SHOULD BE TAKEN INTO ACCOUNT. IN THIS CONNECTION, HE URGED THAT THE ASSESSEE WAS A REGISTERED COMPANY HAVING ITS FACTORY AT SARANGPUR DISTRICT RAJGARH, MADHYA PRADESH AND WAS INTER ALIAENGAGED IN THE MANUFACTURE OF MS PIPES AND TUBES. HE FURTHER POINTED OUT THAT THE ASSESSEE HAD TWO SECTIONS IN ITS FACTORY, ONE NAMED AS TUBE MILL SECTION, IN WHICH THE ASSESSEE MANUFACTURED MS PIPES AND TUBES. FOR MANUFACTURE OF MS PIPES AND TUBES, STEEL COILS, STRIPS AND SLITS OF REQUIRED THICKNESS WERE PURCHASED FROM THE MARKET BY THE ASSESSEE. THESE ITEMS WERE THEN ROLLED IN, WELDED AND CUT TO REQUIRED LENGTHS AND TO ENSURE SMOOTHNESS, GRINDING WAS CARRIED OUT THROUGHOUT THE LENGTH SQ FT THE PIPES. THE EDGES OF THE PIPES WERE SUBJECTED TO THE PROCESS OF ELIMINATION OF UNEVEN EDGES. THE PIPES WERE THEN SUBJECTED TO HYDRO-TESTING, AND THREADING. LEARNED COUNSEL SUBMITTED THAT AT THIS .STAGE, THE MANUFACTURE OF PIPES GOT COMPLETED AND THEY BECAME MARKETABLE. ACCORDING TO THE ASSESSE; THE ENTIRE PROCESS ABOVE WAS CARRIED, OUT IN "TUBE MILL" SECTION THE APPELLANT SOLD ABOUT 30% OF THE ENTIRE PRODUCTION OF MS PIPES FROM THE TUBE MILL SECTION TO ITS WHOLESALE DEALERS AFTER PAYMENT OF DUTY UNDER SUB HEADING 7306.90. THE BALANCE 70% OF THE PIPES MANUFACTURED IN TUBE MILL SECTION WERE TRANSFERRED, TO ANOTHER SECTION KNOWN AS "GALVANISING SECTION", WHICH WAS FAR AWAY FROQ1 THE TUBE MILL SECTION AND IN A DIFFERENT SHED. ACCORDING TO THE ASSESSEE, IN THE GALVANISING SECTION, THE FULLY FINISHED MS PIPES WERE GALVANISED. THEY WERE WASHED IN RUNNING WATER AND DIPPED IN MOLTEN ZINC ACCORDING TO THE ASSESSEE, GALVANISATION OF PIPES AND TUBES WAS DONE IN ORDER TO PROTECT THE PIPES FROM, RUSTING. APART FROM THIS, THE ASSESSEE ALSO PURCHASED FROM THE MARKET FULLY FINISHED BLACK PIPES, WHICH WERE ALSO SUBJECTED TO PROCESS OF GALVANISATION IN THE GALVANISING SECTION AND THEREAFTER SOLD AS MS GALVANISED PIPES. APART FROM THIS, THE ASSESSEE ALSO PURCHASED FROM THE MARKET FULLY FINISHED BLACK PIPES, WHICH WERE ALSO SUBJECTED TO PROCESS OF GALVANISATION IN THE GALVANISING SECTION AND THEREAFTER SOLD AS MS GALVANISED PIPES. LEARNED COUNSEL URGED THAT "GALVANISATION" DID NOT AMOUNT TO MANUFACTURE AND SINCE 70% OF THE ASSESSEES PRODUCTION OF BLACK PIPES WAS TRANSFERRED TO THE GALVANISING SECTION AND SINCE IT WAS NOT DISPUTED THAT BLACK PIPES WERE IN FULLY FINISHED FORMS, AND THAT THEY WERE CLEARED FROM TUBE MILL SECTION ON PAYMENT OF DUTY, THE COST OF GALVANISATION WAS NOT INCLUDIBLE IN THE ASSESSABLE VALUE. ACCORDING TO THE LEARNED COUNSEL, AS SOON AS MANUFACTURE OF MS PIPES BECAME COMPLETE, THE PRODUCT BECAME CAPABLE OF BEING BOUGHT AND SOLD; THE TARIFF DESCRIPTION CONTAINED IN SUB-HEADING 7306.90 ALSO STOOD ANSWERED AND LEVY GOT ATTRACTED AT THAT STAGE ALONE UNDER SECTION 3 OF THE SAID ACT. THAT, IN ANY EVENT, EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE PROCESS OF GALVANISATION AMOUNTED TO MANUFACTURE ON THE FACTS OF THIS CASE, GALVANISATION AS A PROCESS TOOK PLACE AFTER COMPLETION OF MANUFACTURE OF MS PIPES AND, THEREFORE, THE COST OF GALVANISATION WAS NOT INCLUDIBLE IN THE ASSESSABLE VALUE. 5. SHRI G.E. VAHANVATI, LEARNED SOLICITOR GENERAL SUBMITTED ON BEHALF OF THE DEPARTMENT THAT THE QUESTION INVOLVED IN THESE APPEALS RELATED TO ASSESSMENT OF DUTY UNDER SECTION 4 OF THE ACT AND NOT ON THE EXCITABILITY OF THE GOODS. HE SUBMITTED THAT THE CONCEPT OF "VALUATION" WAS DIFFERENT FROM THE CONCEPT OF "MANUFACTURE". HE SUBMITTED THAT IN THE PRESENT CASE, THE GOODS WERE CLEARED AS MS GALVANISED PIPES. HE SUBMITTED THAT THE CUSTOMERS WERE CHARGED BY THE ASSESSEE FOR PURCHASE OF MS GALVANISED PIPES. LEARNED COUNSEL SUBMITTED THAT IN THE MATTER OF VALUATION, ONE HAS TO ASCERTAIN THE "NORMAL PRICE" UNDER SECTION 4 OF THE ACT. LEARNED COUNSEL URGED THAT IN CASES OF "VALUE ADDITION", THE COST OF A PROCESS INCIDENTAL TO THE MANUFACTURE OF MS GALVANISED PIPES HAS GOT TO BE TAKEN INTO ACCOUNT. LEARNED COUNSEL SUBMITTED THAT PER SE THE PROCESS OF "GALVANISATION" MAY NOT AMOUNT TO MANUFACTURE. HOWEVER, IF SUCH A PROCESS WAS INCIDENTAL OR ANCILLARY TO THE MANUFACTURE OF MS GALVANISED PIPES THEN THE COST OF GALVANISATION HAS GOT TO E BE INCLUDED IN ITS ASSESSABLE VALUE. IN THIS CONNECTION, LEARNED COUNSEL RELIED UPON THE JUDGMENT OF THIS COURT IN SIDHARTHA TUBES LTD. HOWEVER, IF SUCH A PROCESS WAS INCIDENTAL OR ANCILLARY TO THE MANUFACTURE OF MS GALVANISED PIPES THEN THE COST OF GALVANISATION HAS GOT TO E BE INCLUDED IN ITS ASSESSABLE VALUE. IN THIS CONNECTION, LEARNED COUNSEL RELIED UPON THE JUDGMENT OF THIS COURT IN SIDHARTHA TUBES LTD. V. CCE1 AND THE DECISION IN PROCTER & GAMBLE HYGIENE & HEALTH CARE LTD. V. CCE2. 6. IN THE PRESENT CASE, THE COMMISSIONER ON FACTS FOUND THAT THE ASSESSEE WAS CLEARING FROM ITS FACTORY GALVANISED PIPES CLASSIFIABLE UNDER HEADING 73.06. IT WAS NOT DISPUTED THAT THE PROCESS OF GALVANISATION BY ITSELF DID NOT AMOUNT TO MANUFACTURE, BUT WHEN THE ASSESSEE WAS SELLING ITS PRODUCT (MS GALVANISED PIPES) MANUFACTURED OUT OF HR COILS AFTER PASSING THROUGH VARIOUS PROCESSES (INCLUDING GALVANISATION) THEN SUCH A PROCESS GAVE VALUE ADDITION TO THE PRODUCT AND, CONSEQUENTLY, THE COST OF GALVANISATION HAD TO BE INCLUDED IN THE ASSESSABLE VALUE. GALVANISATION ADDED TO THE QUALITY. GALVANISATION INCREASED THE VALUE OF PIPES. IT ENRICHED THE VALUE OF GOODS AND, THEREFORE, THE COST INCURRED BY THE ASSESSEE FOR GALVANISATION WAS REQUIRED TO BE INCLUDED IN THE ASSESSABLE VALUE. 7. AT THE OUTSET, WE MAY STATE THAT VALUE IS THE FUNCTION OF PRICE UNDER SECTION 4(4)(D)(I) OF THE ACT. THE CONCEPT OF "VALUATION" IS DIFFERENT FROM THE CONCEPT OF "MANUFACTURE". UNDER SECTION 3 OF THE ACT, THE LEVY IS ON THE MANUFACTURE OF THE GOODS. HOWEVER, THE MEASURE OF THE LEVY IS THE NORMAL PRICE, AS DEFINED UNDER SECTION 4(1)(A) OF THE ACT. IT IS NOT DISPUTED THAT GALVANISATION AS A PROCESS DOES NOT AMOUNT TO MANUFACTURE. HOWEVER, ON FACTS, IT HAS BEEN FOUND BY THE COMMISSIONER THAT THE PROCESS OF GALVANISATION HAS TAKEN PLACE BEFORE THE PRODUCT IS CLEARED FROM THE PLACE OF REMOVAL, AS DEFINED UNDER SECTION 4(4)(B). FURTHER, ON FACTS, THE COMMISSIONER HAS FOUND THAT GALVANISATION HAS ADDED TO THE QUALITY OF THE PRODUCT. IT HAS INCREASED THE VALUE OF THE PIPES. HENCE, THE COSTS INCURRED BY THE ASSESSEE FOR GALVANISATION HAD TO BE LOADED ON TO THE SALE PRICE OF THE PIPES. THEREFORE, THE COST HAD TO BE INCLUDED IN THE ASSESSABLE VALUE OF MS GALVANISED PIPES. WE DO NOT FIND ANY ERROR IN THE REASONING OF THE ADJUDICATING AUTHORITY. 8. IT HAS INCREASED THE VALUE OF THE PIPES. HENCE, THE COSTS INCURRED BY THE ASSESSEE FOR GALVANISATION HAD TO BE LOADED ON TO THE SALE PRICE OF THE PIPES. THEREFORE, THE COST HAD TO BE INCLUDED IN THE ASSESSABLE VALUE OF MS GALVANISED PIPES. WE DO NOT FIND ANY ERROR IN THE REASONING OF THE ADJUDICATING AUTHORITY. 8. IN UNION OF INDIA V. BOMBAY TYRE INTERNATIONAL LTD.3 THIS COURT OBSERVED AS FOLLOWS: (SCC P. 506, PARA 50) THE PRICE OF AN ARTICLE IS RELATED TO ITS VALUE, AND INTO THAT VALUE ONE HAS TO POUR SEVERAL COMPONENTS, INCLUDING THOSE WHICH ENRICH THE VALUE OF THE PRODUCT AND WHICH GIVE TO AN ARTICLE ITS MARKETABILITY IN THE TRADE. THEREFORE, THE EXPENSES INCURRED ON ACCOUNT OF THE SEVERAL FACTORS, WHICH HAVE CONTRIBUTED TO THE VALUE OF THE PRODUCT UP TO THE DATE OF SALE, ARE LIABLE TO BE INCLUDED IN THE ASSESSABLE VALUE. 9. RECENTLY, THIS COURT IN PROCTER & GAMBLE HYGIENE & HEALTH CARE2, HAS OBSERVED AS FOLLOWS: (SCC PP. 273-74, PARAS 9-11) "9. THIS CASE RELATES TO VALUATION. AT THE OUTSET, WE WOULD LIKE TO CLARIFY CERTAIN CONCEPTS UNDER THE EXCISE LAW. THE LEVY OF EXCISE DUTY IS ON THE MANUFACTURE OF GOODS. THE EXCISABLE EVENT IS THE MANUFACTURE., THE LEVY IS ON THE MANUFACTURE. THE MEASURE OR THE YARDSTICK FOR COMPUTING THE LEVY IS THE NORMAL PRICE UNDER SECTION 4(1)(A) OF THE ACT. THE CONCEPT OF EXCISABILITY IS DIFFERENT FROM THE CONCEPT OF VALUATION. IN THE PRESENT CASE, AS STATED ABOVE, WE ARE CONCERNED WITH VALUATION AND NOT WITH EXCISABILITY. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT AMS CAME UNDER SUB-HEADING 3402.90 OF THE TARIFF. THERE IS NO DISPUTE IN THE PRESENT CASE THAT AMS WAS DUTIABLE UNDER SECTION 3 OF THE ACT. IN UNION OF INDIA V. BOMBAY TYRE INTERNATIONAL LTD.3 THIS COURT OBSERVED THAT THE MEASURE OF LEVY DID NOT CONCLUSIVELY DETERMINE THE NATURE OF THE LEVY. IT WAS HELD THAT THE FUNDAMENTAL CRITERION FOR COMPUTING THE VALUE OF AN EXCISABLE ARTICLE WAS THE PRICE AT WHICH THE EXCISABLE ARTICLE WAS SOLD OR WAS CAPABLE OF BEING SOLD BY THE MANUFACTURER. IN UNION OF INDIA V. BOMBAY TYRE INTERNATIONAL LTD.3 THIS COURT OBSERVED THAT THE MEASURE OF LEVY DID NOT CONCLUSIVELY DETERMINE THE NATURE OF THE LEVY. IT WAS HELD THAT THE FUNDAMENTAL CRITERION FOR COMPUTING THE VALUE OF AN EXCISABLE ARTICLE WAS THE PRICE AT WHICH THE EXCISABLE ARTICLE WAS SOLD OR WAS CAPABLE OF BEING SOLD BY THE MANUFACTURER. IT WAS FURTHER HELD THAT THE PRICE OF AN ARTICLE WAS RELATED TO ITS VALUE, AND IN THAT VALUE WE HAVE SEVERAL COMPONENTS, INCLUDING THOSE COMPONENTS WHICH ENHANCE THE COMMERCIAL VALUE OF THE ARTICLE AND WHICH GIVE TO THE ARTICLE ITS MARKETABILITY IN THE TRADE. THEREFORE, THE EXPENSES INCURRED ON SUCH FACTORS INTER ALIA HAVE TO BE INCLUDED IN THE ASSESSABLE VALUE OF THE ARTICLE UP TO THE DATE OF THE SALE, WHICH WAS THE DATE OF DELIVERY. 10. IN THE CASE OF SIDHARTHA TUBES LTD. V. CCEI THIS COURT HELD THAT A THE PROCESS OF GALVANISATION, THOUGH DID NOT AMOUNT TO MANUFACTURE, RESULTED IN VALUE ADDITION AND, THEREFORE, THE GALVANISATION CHARGES WERE INCLUDIBLE IN THE ASSESSABLE VALUE OF THE MS BLACK PIPE. 11. THE CONCEPTS OF MANUFACTURE AND VALUATION ARE TWO DIFFERENT AND DISTINCT CONCEPTS. IN THE PRESENT CASE, WE ARE CONCERNED WITH VALUATION, VALUE IS THE FUNCTION OF PRICE UNDER SECTION 4(1)(A) OF THE SAID ACT." 10. IN HINDUSTAN POLYMERS V. CCE4 THIS COURT HAS HELD THAT THE NORMAL ONCE FOR WHICH GOODS ARE SOLD AT THE FACTOR) GATE HAS TO BE TAKEN AS THE ASSESSABLE VALUE AND ADDITION THERETO HAS TO BE MADE WHERE, IN ADDITION TO THE PRICE, THE MANUFACTURER LEVIED A CHARGE FOR AN ITEM WHICH WAS INTRINSICALLY NECESSARY TO PLACE THE MANUFACTURED GOODS ON THE MARKET. 11. IN THE PRESENT CASE, WE FIND THAT THE PRODUCT CLEARED FROM THE FACTORY WAS MS GALVANISED PIPES. GALVANISATION HAD GIVEN VALUE ADDITION TO THE MS PIPES. THE PROCESS OF GALVANISATION WAS INCIDENTAL TO THE MANUFACTURE OF THE MS GALVANISED PIPES AND, THEREFORE, THE COST OF THAT PROCESS WAS RIGHTLY INCLUDED IN THE ASSESSABLE VALUE. WE DO NOT FIND ANY ERROR IN THE CONCURRENT FINDINGS RECORDED BY THE COMMISSIONER AND BY THE TRIBUNAL. 12. BEFORE CONCLUDING, WE MAY POINT OUT THAT IN, THE PRESENT CASE, A PENALTY OF RS 10 LAKHS WAS IMPOSED BY THE COMMISSIONER. ON APPEAL, IT HAS BEEN REDUCED TO RS 7.5 LAKHS. NO .REASONS HAVE BEEN GIVEN FOR IMPOSING THE PENALTY. WE DO NOT FIND ANY ERROR IN THE CONCURRENT FINDINGS RECORDED BY THE COMMISSIONER AND BY THE TRIBUNAL. 12. BEFORE CONCLUDING, WE MAY POINT OUT THAT IN, THE PRESENT CASE, A PENALTY OF RS 10 LAKHS WAS IMPOSED BY THE COMMISSIONER. ON APPEAL, IT HAS BEEN REDUCED TO RS 7.5 LAKHS. NO .REASONS HAVE BEEN GIVEN FOR IMPOSING THE PENALTY. THE MATTER HAS ARISEN AT THE STAGE OF ASSESSMENT. THE APPELLANT HAS SUCCEEDED IN SHOWING THAT THE COST OF RUBBER RINGS (PP RINGS) WAS NOT INCLUDIBLE IN THE ASSESSABLE VALUE OF THE MS GALVANIZED PIPES. THE MATTER WAS, THEREFORE, ARGUABLE. HENCE, WE SET ASIDE THE PENALTY OF RS 7.5 LAKHS. 13. ACCORDINGLY, THE APPEALS ARE PARTLY ALLOWED, WITH NO ORDER AS TO COSTS.