Sukhdev Singh Kang, J.
1. Whether the repairs/reconditioning (reshelling) of the old, worn out and used Sugar Mill Rollers by the petitioner amounts to manufacture and is exigible to excise duty under Item No. 68 of Schedule I of the Central Excises and Salt Act, 1944 ('the Act' for short) is the spinal issue that has come up for adjudication in this writ petition.
2. The facts are not disputed and lie in a narrow compass. The Saraswati Industrial Syndicate Limited, Yamunanagar, District Ambala, Haryana ~ petitioner is a public limited company. The Indian Sugar and General Engineering Corporation, Yamunanagar, District Ambala, Haryana (hereinafter referred to as MSGEC) is its heavy engineering unit, which is engaged in the manufacture and production of heavy engineering machine! and plants for Sugar Mills etc. The petitioner is also running a foundary in the premises of ISGEC. The petitioner, receives old, used and worn ou Sugar Mill Rollers for the purpose of reshelling. The petitioner, however calls this process as repair or reconditioning of the Sugar Mill Rollers. Thi Sugar Mill Roller consists of two parts, i.e. 'shaft' and 'shell'. On receipt o the worn out roller, the shell which is made of cast iron is broken into pieces The shaft, however, is left absolutely untouched. The broken pieces of th cast-iron are melted after addition of nominal material to compensate fo the worn out and lost part of the shell and to account for burning/meltin] losses during the actual casting opsrations. This material is recast and shrunl on the shaft. This process involves heating of the shell and inserting the shaf vertically. On coiling the shell the casting grips the shaft. Thereafter the shell is machined and grooved. Then this Sugar Mill Roller is delivered t the customer. According to the petitioner, the price of Sugar Mill Rolle ranges between Rs. 1,60,000/- to Rs. 2,50,000/- depending on the size The cost of reshelling services rendered by the petitioner is generally betweei Rs. 11,000/- added by the petitioner to make up the deficiency as mentions above.
3. The controversy between the parties relates to as to whether th process undertaken by the petitioner to render old, worm out Sugar Mil Roller into serviceable one is 'manufacture' as contemplated by Section 2(f) of the Act, and Tariff Item 68 of Schedule I to the Act. Th petitioner-firm contends that it only reconditions the shell of the old wor out Sugar Mill Roller and it does not manufacture the latter. The same ol Sugar Mill Roller after necessary repairs and reconditioning is returned to th customers. No change is carried out in the character, quality or user < the old Sugar Mill Roller. The petitioner-firm does not produce any new c distinct marketable article. It does not turn out a commercially differei article from the one received by it.
4. On the other hand, the respondents contend that the petitione firm manufactures the old worn out Sugar Mill Rollers into new ones. Tl process carried out by the petitioner amounts to 'manufacture'. The old woi out Sugar Mill Roller is nothing but iron scrap. It can no longer be used i the Sugar Mills. The petitioner transforms the iron scraps into serviceab Sugar Mill Rollers. By the efforts of the petitioner, a totally new and different article emerges.
5. To better appreciate the rival contentions, it will be beneficial read the statutory provisions at this stage.
Central Excises and Salt Act, 1944 :
'Section 2(f) 'Manufacture' includes any process incidental or ancillary completion of a manufactured product; and
(i) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff;
(ia) in relation to manufactured tobacco, includes the labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer ;
(ii) in relation to salt, includes collection, removal, preparation, steeping, evaporation, boiling, or any one or more of these processes, the separation or purification of salt obtained in the manufacture of saltpetre, the separation of salt from earth or other substance so as to produce alimentary salt, and the excavation or removal of natural saline deposits or efforescence ;
(iii) in relation to patent or proprietary medicines as defined in Item No. 14-E of the First Schedule and in relation to cosmeties and toilet preparations as defined in Item No. 14-F of that Schedule, includes the conversion of powder into tablets or capsules, the labelling or re-labelling of containers intended for consumers and re-packing from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumers ;
(v) in relation to goods comprised in Item No. 18-A of the First Schedule, includes sizing, beaming, warping, wrapping, winding or reeling, or any or more of these processes, or the conversion of any form of the said goods into another form of such goods ;
and the word 'manufacture' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.'
Section 3. Duties specified in the First Schedule to be levied. (1)
There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India, as, and at the rates, set forth in the First Schedule.
(1-A) The provisions of Sub-section (1) shall apply in respect of all excisable goods other than salt which are produced or manufactured in India by, or on behalf of Government, as they apply in respect of goods which are not produced or manufactured by Government.
(2) The Central Government may; by notification in the official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles anumerated, either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force.
(3) Different tariff values may be fixed
(a) for different classes or description of the same excisable goods ; or
(b) for excisable goods of the same class or description :
Provided that in fixing different tariff values in respect of excisable goods falling under sub-clause (i) or sub-clause (ii), regard shall be had to the sale prices charged by the different classes of producers or manufacturers or, as the case may be, the normal practice of the wholesale trade in such goods.
Sch. I. Item 68. All other goods, not elsewhere specified, but excluding-
(a) alcohol, all sorts, including alcoholic liquors for Eight per cent human consumptions ; ad valorem.
(b) opium, Indian hemp and other narcotic drugs and narcotics ; and
(c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).
6. The definition given in Secttion 2(f) of the Act, is inclusive and inclusive and illustrative. The expression 'manufacture' is generally taken to mean as bringing into existence a new substance and does not mean mere production or introduction of some change in a substance. The definition of expression 'manufacture' used in the American Jurisprudence has been approved by the Final Court in Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. - AIR 1963 Supreme Court 791. That passage reads thus : -
'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 is necessary and there must be transformation ; a new and different article must emerge having a distinctive name, character or use.'
This view was reiterated by the final Court in P.C. Cherivan v. Mst. Barfi Devi, 1979 E.L.T. (J 593) ; Union of India v. Hindu Undivided Family Business known as Ramalal Manshkhrai, Pewari and Anr., A.I.R. 1971 Supreme Court 2333 ; Bihar Sugar Mills Ltd. v. Union of India, A.I.R. 1968 S.C. 922 and Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v PIO Food Packers, (1980) 46 S.T.C. 63. It is now well-settled that a crucial test as to whether an article produced is regarded in the Trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. It was observed in PIO Food Packers' case (Supra) :-
'* * * * *The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and there may be several stages of processing and a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. ... ...'
7. If these tests are applied then it cannot legitimately be said that the petitioner manufactures the Sugar Mill Rollers. The old and worn out Sugar Mill Rollers are received by the petitioner. The outer case shell is broken. The resultant cast iron is melted. A requisite quantity of the metal is added thereto and the same is cast into a shell which is mounted on the shaft. This roller is then machined and grooved. No doubt, the old roller passes through, a number of processes and suffers from series of changes, but ultimately what emerges is a Sugar Mill Roller. The only change made is that unserviceable roller is turned into a roller which can be used in a Sugar Mill Roller. However, no new or distinct article emerges. Commercially the old and worn out roller is also known as Sugar Mill Roller. Similar is the position of the Sugar Mill Roller which is delivered to the customer after its reconditioning. The plea of Shri H.S. Brar that the old worn out roller is only an iron scrap and is a distinct commodity from a serviceable roller, is not acceptable. Any article which is rendered unserviceable by its use does not change its nature or character. It remains the same and is known by the same name in the commercial world. When it is repaired or reconditioned, no new commercial commodity comes into being. Even after undergoing a degree of processing it still retains its original identity.
8. Mr. Brar argued that after the de-shelling of the cast iron shell, a shaft is left. That shaft is a distinct article. By a number of processes, this is turned into a serviceable Sugar Mill Roller which is entirely different from the shaft. This argument cannot be accepted because it is based on a wrong premises. The petitioner does not receive shafts of rollers from the customers. What is received is a worn out Sugar Mill Roller. So, this article is reconditioned and made serviceable. It is not the shaft that is handed over to the petitioner for being turned into a serviceable Sugar Mill Roller. If that were so, then perhaps the process will be manufactured. That is not the position. The petitioner only reconditions the old worn out rollers.
9. Even if it be accepted that the shell which is ultimately mounted on the shaft is manufactured by the petitioner, even then this process will not suffer any excise duty. The shell is only an intermediate product. The customer does not place order for the manufacture of a shell. The shell is not sold separately in the market.
10. In a recent case the Bombay High Court in Century Spinning and Manufacturing Company Limited v. Union of India-1981 E.L.T. 676 held that merely because the worn out spinnerettes were melted or repaired, it cannot be said that new product was manufactured, which was liable to payment of duty. It could not be said that the spinnerettes had lost their identity because of melting or repairing abroad and had become a different product.
11. For the foregoing reasons, the reconditioning of old worn out Sugar Mill Roller does not amount to manufacture as envisaged in the Act and the Schedule and the question posed in the very beginning of the writ petition is answered in the negative. 1 further hold that the petitioner is not liable to pay excise duty on reconditioning of old worn out Sugar Mill Rollers. I quash the impugned orders (Annexures P-7, P-9, P-15 and P-20). There shall be oo order as to costs.