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2015 DIGILAW 195 (JK)

Sandeep Rohmetra v. Union of India

2015-04-17

DHIRAJ SINGH THAKUR, N.PAUL VASANTHAKUMAR

body2015
JUDGMENT : Dhiraj Singh Thakur, J. 1. Petitioner manufactures Steel Tubular Poles in Industrial Complex at Bari Brahmana, Jammu. Through the medium of the present petition, the petitioner seeks issuance of a writ of certiorari for quashing order dt. 10th April, 2013, issued by the Superintendent, Central Excise Range-III, Jammu, informing the petitioner that the process of manufacture of Steel Tubular Poles was a process which amounted to manufacture according to the Central Excise Act and, therefore, amenable to levy of excise duty. The aforementioned communication, in fact, appeared to be based upon a decision of the CESTAT (Customs, Excise and Service Tax Appellate Tribunal) dt. 4.7.2012, arising out of OIA No. 1-6/CE/Appl/Jal/09 dt. 6.1.2009, titled CCE, J&K, Jammu v. M/s. North Sun Enterprises Industrial Estate and others, wherein, relying upon the judgment of the Apex Court in the case of Prachi Industries v. Commissioner of Central Excise, Chandigarh, (2008) 12 SCC 783 , the CESTAT held all the manufacturing units amenable to central excise. 2. In reply to the aforementioned communication, a reply appears to have been sent by the petitioner dt. 12.4.2013, wherein it was sought to be highlighted that the activity undertaken by the petitioner in its unit for manufacture of steel tubular poles was one which would be covered by the judgment of the Apex Court in the case of Hindustan Poles Corpn. v. Commissioner of Central Excise, Calcutta, (2006) 4 SCC 85 , and not by Prachi Industries case supra. 3. In response to this letter, the Superintendent, Central Excise Range-III, Jammu, vide his letter dt. 16.4.2013, threatened the petitioner of action under Section 14 of the Central Excise Act, 1944, (here-in-after called the Act of 1944) by declaring that the petitioner was only indulging in time gaining tactics. 4. Counsel for the petitioner submitted that the petitioner could have availed of an alternate remedy of appeal, however, in view of the fact that the CESTAT had taken a view sending the petitioner back through the same process before the appellate authority, would be an exercise in futility in as much as in similar case, a view had already been taken which view would necessarily be repeated in the case of the petitioner as well and that, ultimately the issue which would fall for consideration before this court would be as to whether the petitioner is liable for payment of central excise duty or not. 5. In Hindustan Poles Corporation case supra, the Apex Court was dealing with a notice issued by the Central Excise authority served upon Hindustan Poles Corporation, which manufactured steel tubular poles treating the product as one falling within the meaning of definition "manufacture" as given in Section 2(f) as per the Act of 1944. In the said notice, following was the process noticed by the Apex Court in the manufacture of steel tubular poles: "17. 3(b)(i) In course of visit of works on 20.12.88 and from the statement dated 20.12.88 submitted by the said firm it was learnt that the said goods are manufactured from E.R.W. Tubes in three sections of suitable length and thereafter the higher and smaller dia pipes are made red hot and reduced to relevant smaller dia pipes through manual hammers. Electric power is also used for maintaining an uniformity during cutting of big size pipes into smaller ones. The higher dia pipes will be such that smaller dia pipes are allowed to enter and cool by natural process. The joints of the above pipes are swaged to give a circumferential grip at the joints and the step of each reduction shall be uniform and with a surface inclination of 45 degree at the transition point to shed water. This is a new product viz. "Steel Tubular Poles" has emerged out of the steel pipes (E.R.W. Tubes) as stated aforesaid which is a manufactured product within the meaning of definition of "manufacture" as given in Section 2(f) of the said Act." 6. In reference to the aforementioned process of manufacture of steel tubular poles, the Apex Court in paragraph 39, held as under: "39. We have heard learned counsel for the parties at length. We have also carefully perused the pleadings and examined a series of cases decided by this Court. The following conclusions are irresistible: 1. The process carried out by the appellants do not change the basic identity or original character of M.S. Welded Pipes to make it a new marketable product leading to manufacture as defined under Section 2(f) of the Central Excise Act, 1944. 2. The burden to prove manufacture is always on the Revenue. In the instance case the Revenue has completely failed to prove that the activity carried out by the appellant amounts to manufacturing. 2. The burden to prove manufacture is always on the Revenue. In the instance case the Revenue has completely failed to prove that the activity carried out by the appellant amounts to manufacturing. It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to residuary entry. 3. The residuary entry is meant only for those categories of goods which clearly fall outside the ambit of specified entries. Unless the Department can establish that the goods in question can by no conceivable process of welding be brought under any of the tariff items, resort cannot be had to the residuary item." 7. Subsequently, in Prachi Industries Case supra, the Apex Court was dealing with a case where the issue that fell for determination was whether 'swaging' constituted manufacture in terms of Section 2(f) of the Act of 1944 or not. In that case, M/s. Prachi Industries was a small scale industry which got duty paid MS. tubes from its manufacturers. The said tubes were subsequently cut into requisite lengths and put in the swaging machine in which dies were fitted which imparted "folds" to the flat surface of the MS. tube/pipe. 8. The Apex Court in the aforementioned case held that the rotary swaging machine, used by the manufacturer imparted a change of lasting character to the plain pipe or tube and that a work-piece having distinguishable identity came into being depending on the shape of the die and the punch used and, therefore, held the process of swaging a "manufacture" under Section 2(f). Reference was also made to a case reported as Bharat Forge & Press Industries (P) Ltd. V. CCE, (1990) 1 SCC 532 , in which case it was held that a mere change in the length, size or shape does not bring into existence a new product and the same was not dutiable and that pipe fittings made out of pipes and tubes continued to be pipes and tubes. This case was distinguished on the ground that the assessee in Prachi Industries case supra, was carrying out a process by which the shape of MS. pipe changes and what emerges is a work piece of desired configuration after passing through swaging machine and that what emerged from swaging machine was a profile of a workpiece. 9. This case was distinguished on the ground that the assessee in Prachi Industries case supra, was carrying out a process by which the shape of MS. pipe changes and what emerges is a work piece of desired configuration after passing through swaging machine and that what emerged from swaging machine was a profile of a workpiece. 9. In Prachi Industries case, the judgment in Hindustan Poles Corporation's case was distinguished as under: "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. 21. 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." 10. On a perusal of the order impugned, it appears that the authorities are under a misconception of law as if Prachi Industries case over-rules the ratio of the judgment in Hindustan Poles Corporation case which, in fact, is not the case. On a perusal of the order impugned, it appears that the authorities are under a misconception of law as if Prachi Industries case over-rules the ratio of the judgment in Hindustan Poles Corporation case which, in fact, is not the case. With a view to determine as to whether the case of the petitioner fell within the ratio of the judgment in Hindustan Poles Corporation or not, it was necessary for the official respondents to go in detail through the process by which steel tubular pole was manufactured by the petitioner. It would have to be determined as to whether swaging undertaken by the petitioner was one similar to imparting folds etc., as was the case in Prachi Industries supra. 11. The basis of the order for issuance of communication impugned is the order passed in the case of M/s. North Sun Enterprises, which although notices the case of Hindustan Poles Corporation but yet gives no plausible explanation to distinguish the facts with a view to make in-applicable the said judgment. 12. We are of the view that the authorities as also the CESTAT ought to have gone specifically into the issue of the process involved in the manufacture of steel tubular poles undertaken by the petitioner unit and other similarly situate units with a view to determine as to whether the process undertaken by the said units was one falling within the scope of ratio of judgment in Hindustan Poles Corporation or that of Prachi Industries case. For the reasons mentioned above, communication impugned dt. 10.4.2013 is quashed. The Central Excise authorities shall first determine, with reference to the process involved in the manufacture of steel tubular poles and the judgments in the Hindustan Poles Corporation and Prachi Industries case and return a finding as to whether the said process amounts to manufacture and leviable to duty under the Central Excise. The order of CESTAT dt. 4.7.2012, passed in the case of M/s. North Sun Enterprises, shall not alone be made the basis for declaring the process undertaken by the petitioner's unit to be a process of manufacture within the meaning of Section 2(f) of the Act of 1944. Disposed of accordingly.