M/S. POONAM SPARK (P) LTD. Vs COMMNR. OF CENTRAL EXCISE, NEW DELHI
Bench: A.K. SIKRI,N.V. RAMANA
Case number: C.A. No.-006692-006692 / 2004
Diary number: 15573 / 2004
Advocates: RAJESH KUMAR Vs
ANIL KATIYAR
Page 1
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6692 OF 2004
M/S POONAM SPARK (P) LTD. .....APPELLANT(S)
VERSUS
COMMISSIONER OF CENTRAL EXCISE, NEW DELHI
.....RESPONDENT(S)
WITH
CIVIL APPEAL NO. 2684 OF 2012
J U D G M E N T
A.K. SIKRI, J.
The question of law which arises for consideration in the present
case is whether the activity of mounting of Water Purification and
Filteration System (WPFS) on a base frame carried out by M/s Poonam
Spark (P) Ltd. amounts to manufacture or not. The aforesaid issue is
to be determined in the following factual background:
One M/s Perfect Drug Limited (PDL) had been
purchasing/importing various components of WPFS classifiable under
Tariff Heading 8421. PDL, after importing these materials, supplied the
same to the appellant herein. Job work was assigned to the appellant
for the assembly of WPFS on behalf of PDL. Appellant takes job
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charges from PDL. Various parts which were supplied by the PDL to
the appellant were as follows:
i) Filter Housing & Cartridge
ii) UV Units
iii) Timer
iv) Mounting Plate & screws
v) Tubings and Fittings
2. According to the Department of Revenue, the aforesaid work
being carried out by the appellant, namely, assemble of the
components resulted into a new product known as WPFS having
different name and character and it amounted to “manufacture”
as per Section 2(f) of the Central Excise Act, 1944 and, therefore,
appellant was liable to pay excise duty. Show cause notice dated
13.05.1998 was served upon the appellant.
3. The appellant submitted its reply taking the defence that it was
only carrying out the job work of WPFS on the base frame and,
therefore, it did not amount to manufacture of any new product.
The appellant also submitted that WPFS are of three types:
i) WPFS with Dual Cartridges
ii) WPFS with Single Cartridge
iii) WPFS with Single cartridge & Electronic Control Unit
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The filter housing and cartridge are imported by PDL through M/s
Cuno Asia Pte Ltd, Singapore and UV based Filteration and Purification
unit from Rathi Brothers/ IWT Poona.
The following types of Cartridges are used for the above:
i) Dirt and Rust Filteration Cartridge
ii) Triple Action activated Carbon cartridge.
It was submitted that the choice of cartridge depends upon the
basis of filteration, the operating conditions and the customer's ability to
afford the particular type of cartridge etc.
4. The explanation of the appellant was that this WPFS imported
and mounted on a base plate by the appellants are used in
various post mix vending machines installed at different locations
by the customers. The water, before it is mixed with the soft drink
concentrate, is passed through this WPFS and thereafter, this
goes in the post mix vending machine where it gets mixed with
the soft drink concentrate and thereafter, flows out of the vending
machines as soft drink. Various items imported by PDL and sold
to their customers can be mounted on a wall, near the water
supply point, and connected to get the desired quality of water.
However only to avoid the inconvenience to the customers and
avoid damage to the plaster on the wall these are mounted on a
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base frame and interconnected by simple method of tightening
nuts. The customer is to simply place or affix the base frame
near the water supply point and connect the WPFS to the tap to
get the desired quality of water. This is akin to fixing a water filter
on the Kitchen Wall near the tap.
5. The aforesaid explanation was not accepted by the Adjudicating
Authority which passed Order-in-Original dated 30.11.1999
thereby confirming the demand raised in the show cause notice
which was in the sum of Rs.6,04,624/- and a penalty was also
imposed on the appellant. Appellant preferred an appeal to the
Commissioner (Appeals) against the aforesaid order which was,
however, dismissed by the Commissioner on 28.02.2002. This
order was challenged by the appellant before Custom Excise and
Service Tax Appellate Tribunal (CESTAT). CESTAT has also
dismissed the appeal of the appellant. Still not satisfied with the
outcome, present appeal is preferred by the appellant under
Section 35L(b) of the Central Excise Act, 1944 questioning the
correctness of the order passed by the Tribunal.
6. As is clear from the aforesaid narration of the facts, the appellant
has lost before all the fora below who have concurrently held that
the activity undertaken by the appellant amounts to 'manufacture'.
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7. Dubbing the aforesaid decision of the Authorities below as
erroneous, it was argued that each WPFS used by the appellant
independently fulfills the function described in Heading 8421. The
appellant only undertakes job work of mounting the imported
WPFS on base frame which can also be undertaken by the
customers at their end. It was pleaded that interconnection done
by the appellant merely facilitates use of filteration system by the
customers, otherwise, WPFS retains the same characteristics as
that of various items which have been imported by PDL and,
therefore, there is no change in the characteristics of various
imported items under Heading 8421. Our attention was drawn to
the definition of 'manufacture' contained in Section 2(f) of the
Central Excise Act, 1944 as well as recent judgment dated
18.03.2015 in Civil Appeal No.8958 of 2003 rendered by this
Court in the case of M/s Satnam Overseas Ltd. v.
Commissioner of Central Excise, New Delhi1 as also in the
case of Servo-Med Industries Pvt. Ltd. v. Commissioner of
Central Excise, Mumbai2. It was submitted that this Court
considered various earlier judgments and culled down the
principle that a duty of excise is levied on the manufacture of
1 2015-TIOL-66-SC-CX 2 2015 (319) E.L.T. 578 (S.C.)
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excisable goods. 'Excisable goods' brings in the concept of
goods that are marketable, i.e. goods capable of being sold in the
market. On the other hand, manufacture is distinct from
saleability, which takes place on the application of one or more
processes. This Court clarified that each process may lead to a
change in the goods, but every change does not amount to
manufacture. There must be something more namely
transformation by which new and different article emerges which
has distinctive name, character or use.
8. We may remark that learned counsel for the appellant may have
rightly stated the proposition of law predicated on the aforesaid
judgments. In fact, we find that the Tribunal was conscious of this
very principle and, therefore, the entire inquiry surrounded the
issue as to whether new product, different from earlier one had
come into existence after the process that was undertaken by the
appellant.
9. The Tribunal has recorded the finding that PDL supplied the
following materials to the appellant:
(i) Filter Housing Cartridges
(ii) U.V. Units
(iii) Timer
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(iv) Mounting Plate & Screws
(v) Tubings and Fittings
The appellants then make the following types of Water
Purification & Filteration System (WPFS):
(i) WPFS with Dual Cartridges,
(ii) WPFS with Single Cartridge,
(iii) WPFS with Single Cartridge & Electronic Control Unit.
It is also pointed out that Filter Housing and Cartridges are
imported by PDL through M/s Cuno Asia Pte Ltd, Singapore and
UV based Filteration and Purification unit from Rathi Brothers/
IWT Poona. The choice of cartridge depends upon the basis of
filteration, the operating conditions and the customer's ability to
afford the particular type of cartridge, etc. The appellants
undertake the job of assembling all the items received from M/s.
Perfect Drug Ltd. on a base plate and thus brings into existence a
new and commercially different commodity known as Water
Purification & Filteration System.
10. It is on this basis, a finding of fact is arrived at by all the three
Authorities that the activity undertaken by the appellant amounts
to “manufacture” within the meaning of Section 2(f) of the Central
Excise Act, 1944, since the end result of the process or activity
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resulted in new and different commercial product. We, thus, are
of the opinion that on the basis of the aforesaid findings which are
concurrent findings of all the Courts below, the correct legal
principle has been applied.
11. Accordingly, no merit is found in these appeals, which we hereby
dismiss with cost.
.............................................J. (A.K. SIKRI)
.............................................J. (N.V. RAMANA)
NEW DELHI; JULY 29, 2015.
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