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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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