- Bookmark
- Share
- CaseIQ
Collector Of Central Excise, Madras v. M/S Kutty Flush Doors & Furniture Co. (P) Ltd. .
Factual and Procedural Background
This matter is an appeal under Section 35-L(b) of the Central Excise and Salt Act, 1944, directed against an order of the Customs Excise and Gold (Control) Appellate Tribunal (CEGAT).
The respondent filed a classification list on March 16, 1982 seeking approval of sawn timber and dried timber as non-excisable, contending that timber logs were only sawn into sizes and that this did not amount to “manufacture.” The Assistant Collector, Madras, rejected this position, holding that conversion of timber logs into sawn timber amounted to manufacture because it involved a transformation resulting in a new and different article with a distinct name, character, or use. On that basis, duty at 8% ad valorem under Tariff Item 68 of the erstwhile Central Excise Tariff was held leviable.
The respondent’s appeal to the Collector (Appeals) was dismissed, with the Collector (Appeals) concurring with the Assistant Collector. The respondent then appealed to the CEGAT, which allowed the appeal, concluding that no new product emerges by sawing timber into several sizes. The present appeal was filed against the CEGAT’s decision.
Legal Issues Presented
- Whether the activity of sawing timber logs into sawn timber of various sizes constitutes “manufacture” so as to attract central excise duty, i.e., whether a new and different article emerges having a distinct name, character, and use.
Arguments of the Parties
- The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sanghvi Enterprises v. Collector of Central Excise (1984) 16 ELT 317 (Tribunal) | Relied upon by CEGAT for the conclusion that sawing timber into sizes does not produce a new product. | The Supreme Court noted that the Tribunal relied on this decision in allowing the respondent’s appeal. |
| Y. Moideen Kunhi v. Collector of Central Excise, Bangalore (1986) 23 ELT 293 (Kant) | Relied upon by CEGAT in support of the view that no new product emerges by sawing timber into sizes. | The Supreme Court recorded this reliance as part of the Tribunal’s reasoning leading to the impugned conclusion. |
| Union of India v. Delhi Cloth & General Mills, 1963 Supp (1) SCR 586, AIR 1963 SC 791 | Excise duty is chargeable only when a new and different article emerges having a distinct name, character and use; “manufacture” requires transformation, not every change. | The Court treated this as settling the governing test and assessed the Tribunal’s conclusion as consistent with this principle. |
| South Bihar Sugar Mills Ltd. v. Union of India (1968) 3 SCR 21, AIR 1968 SC 922 | Reiterated the “distinct name, character and use” test for determining whether a new product emerges for excise purposes. | Used to reinforce that the applicable principle is well settled in deciding whether the Tribunal’s fact-based conclusion should be disturbed. |
| Allenburry Engineers Pvt. Ltd. v. Ramakrishna Dalmia (1973) 1 SCC 7, (1973) 2 SCR 267, AIR 1973 SC 425 | Explained the use/meaning of the expression “manufacture.” | Cited as part of the doctrinal framework for understanding “manufacture” in assessing the Tribunal’s approach. |
| State of Orissa v. Titaghur Paper Mills Co. Ltd., 1985 Supp SCC 280, (1985) 3 SCR 26, AIR 1985 SC 1293 | Considered, in the sales tax context, whether planks/cut sizes sawed out of logs are different from logs in their nascent state. | Referenced to illustrate that the “new product” question may be fact-sensitive and has been examined in relation to timber/logs and cutting into sizes. |
Court's Reasoning and Analysis
The Court reiterated the settled principle that excise duty becomes chargeable only when, as a result of an activity, a new and different article emerges having a distinct name, character, and use. It emphasized that “manufacture” implies change, but every change is not manufacture; something more is required—namely, transformation resulting in a new and different article with a distinct name, character, or use.
The Court described this determination as a question of fact depending on the relevant material. It specifically noted the Tribunal’s status as the final fact-finding authority. Having regard to the facts found by the Tribunal and the principles applied by it (which the Court considered correctly applied), the Court held that, on the facts of this case, the Tribunal’s conclusion that no new product emerges by sawing timber into several sizes was “unassailable.”
Holding and Implications
DISMISSED: The Court found no merit in the appeal and dismissed it.
The direct effect is that the CEGAT’s order in favour of the respondent stands, i.e., on the Tribunal’s fact findings, sawing timber logs into sawn timber of various sizes did not amount to manufacture in this case. The opinion applies settled principles on “manufacture” and does not indicate that any new precedent or broader rule was laid down beyond affirming the Tribunal’s fact-based conclusion.
Sabyasachi Mukharji, J.— This is an appeal under Section 35-L(b) of the Central Excise and Salt Act, 1944 (hereinafter called “the Act”). The appeal is directed against the order of the Customs Excise and Gold (Control) Appellate Tribunal (hereinafter called “the CEGAT”).
2. The respondent herein filed a classification list on March 16, 1982 seeking approval of sawn timber and dried timber as non-excisable. The submission of the respondent was that timber logs were only sawn into sizes and these did not tantamount to any manufacture. However, the Assistant Collector, Madras, held that the conversion of timber logs into sawn timber satisfied the conditions of manufacture insofar as the conversion of timber logs into sawn timber involves transformation whereby a new and different article with a distinct name, character or use emerges which is different from timber logs. It was held accordingly that excise duty @8 per cent ad valorem under Tariff Item 68 of the erstwhile Central Excise Tariff was leviable.
3. The respondent filed an appeal before the Collector of Appeals who concurred with the Assistant Collector upholding the duty. Aggrieved thereby the respondent filed an appeal before the CEGAT. The Tribunal in the judgment under appeal, relied on its decision in the case of Sanghvi Enterprises v. Collector of Central Excise (1984) 16 ELT 317 (Tribunal) and the Karnataka High Court in the case of Y. Moideen Kunhi v. Collector of Central Excise, Bangalore (1986) 23 ELT 293 (Kant) and came to the conclusion that no new product emerges by sawing of timber into several sizes. In the premises the Tribunal allowed the appeal of the respondent. Hence, this appeal.
4. It is well settled that excise duty becomes chargeable only when a new and different article emerges having a distinct name, character and use. See in this connection the observations of this Court in Union of India v. Delhi Cloth & General Mills 1963 Supp (1) SCR 586, AIR 1963 SC 791 and South Bihar Sugar Mills Ltd. v. Union of India (1968) 3 SCR 21, AIR 1968 SC 922. This principle is well settled. This is a question of fact depending upon the relevant material whether as a result of activity, a new and different article emerges having a distinct name, character and use. The use of expression “manufacture” was explained in the case of Allenburry Engineers Pvt. Ltd. v. Ramakrishna Dalmia (1973) 1 SCC 7, (1973) 2 SCR 267, AIR 1973 SC 425. In State of Orissa v. Titaghur Paper Mills Co. Ltd. 1985 Supp SCC 280, (1985) 3 SCR 26, AIR 1985 SC 1293 which was a decision on the Orissa Sales Tax Act, this question was considered in the background of the fact whether planks, cut into sizes, etc., sawed out of logs, are different from logs in its nascent state.
5. It may be worthwhile to note that “manufacture” implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation; a new and different article must emerge having a distinct name, character or use. See Union of India v. Delhi Cloth Mills 1963 Supp (1) SCR 586, AIR 1963 SC 791 at p. 596 of the report. Having regard to the facts found in this case by the Tribunal, which ultimately is the final fact finding authority, we are of the opinion that regard being had to the principles for determining the questions which were correctly applied in the decision of the Tribunal, in the facts of this case, the conclusion of the Tribunal is unassailable.
6. In the premises there is no merit in this appeal and the same is accordingly dismissed.
Alert