COMMISSIONER OF CENTRAL EXCISE, NAGPURversusS. GURUKRIPA RESINS PVT. LTD.

                        (2011] 8 S.C.R. 178


A      COMMISSIONER OF CENTRAL EXCISE, NAGPUR
                                 v.
                S. GURUKRIPA RESINS PVT. LTD.
                 (Civil Appeal No. 7627 of 2005.)
                           JULY 11, 2011
B
                [D.K. JAIN AND H.L. DATTU, JJ.]

        Central Excise Act, 1944:

c       S.2(f) - Manufacture of goods- 'Process' in or in relation
  to 'manufacture' of goods with the aid of power - Connotation
  of - Explained - Manufacture of "Turpentine oil" and "Rosin"
  from the raw material known as 'crude turpentine' through the
  process of distillation - Water lifted with the aid of electric
0 motor from the well to ground level storage tank and again
  from ground level to overhead tanks for sprinkling water on
  condensers for the purpose of distillation - HELD: The
  operation of lifting water from the well to the higher levels is
  so integrally connected with the manufacture of "Turpentine
E oil" and "Rosin" that without this activity it is impossible to
  manufacture the said goods and, therefore, the processing of
  the raw material in or in relation to manufacture of the final
  goods is carried on with the aid of power- Central Excise Tariff
  Act, 1985- First Schedule - Chapter Heading nos. 38.06 and
  38.05 - "Rosin" and "Turpentine oil" - Levy of excise duty.
F
        CIRCULARS:

       Circulars - Binding effect of- Held: The Tribunal has ·
  failed to notice and consider the effect and implication of
G Circular No. 38138194-CX dated 27.5.1994, issued by the
  Central Board of Excise and Customs, withdrawing all
  instructions/guidelines/tariff advices issued in respect of the
  erstwhile First Schedule to the Central Excises and Salt Act,
  1944, which obviously included the 19.78 clarification issued
H                                178
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 179
      S. GURUKRIPA RESINS PVT. LTD.
by the Ministry of Finance by lettf:Jr No. B-36/11fl7-TRU dated A
10th/16th January, 1978- Further- Circulars and instructions
issued by the Central B9ard of Excise and Customs are no
doubt binding in law on the authorities under the respective
Statutes but .when the Supreme Court or a High Court
declares the law on the question arising for consideration, it B
would not be appropriate for the Courts or the Tribunal, as the
case may be, to direct that the Board's Circular should be
given effect to and not the view expressed in a decision of
Supreme Court or a High Court - Precedent.

     PRECEDENT:
                                                                     c
    Decision of superior court - Heid: A decision is an
authority for what it actually and explicitly decides and no.t for
what logically flows from it.
                                                                D
     The assessee was engaged in the manufacture and
 clearance of "Rosin" and "Turpentine Oil. The goods
 were classifiable under Chapter Heading Nos. 38.06 and
 38.05 respectively of the First Schedule to the Central
 Excise Tariff Act, 1985. The assessee filed the requisite E
 classification declarations with the Deputy
 Commissioner, Central Excise, classifying the finished
 goods i.e. "Rosin" under the Sub-heading 3806.19 and
 "Turpentine Oil" under Sub-heading 3805.19, both
 bearing 'nil' rate of duty, on the ground that the said F
 goods were being manufactured without the aid of
 power. The Deputy Commissioner accepted the
 classifications, but treated the goods as "in or in relation
 to the manufacture of Yfhich any process is ordinarily
 carried on with the aid of power", attracting rate of duty
 @ 16%. It was held that the assessee was using 5 Hp G
 electric motor for lifting water from the well to the storage
 tank at the ground level; and again 2 Hp .electric motor
 was used for lifting water from ground level to overhead
 water tanks placed at a height of 30' ft. for sprinkling water
.on the condensers in order to get the final product, H
    180        SUPREME COURT REPORTS                   [2011] 8 S.C.R.

A namely, "Turpentine Oil" and "Rosin", by the process of
  distillation. The Commissioner (Appeals), affirmed the
  order. However, the appeals filed by the assessee, were
  allowed by the Customs, Excise and Service Tax
  Appellate Tribunal, placing reliance on the clarification
B issued by the Ministry of Finance by letter No. B-36/11/
  77 •TRU dated 10/16.1.978. The application filed by
  revenue for rectification of CESTAT order, pointing out
  that the decision of the Supreme Court in Rajasthan State
  Chemical Works1 was applicable to the facts of the instant
C case and the circular dated 16.1.1978 had been rescinded
  by Circular No. 38/38/94-CX dated 27.5.1994, was rejected
  by the Tribunal.

          Allowing the appeals filed by the revenue, the Court

D      HELD: 1.1. 'Manufacture' is an end result of one· or
  more processes through which the original commodities
  are made to pass. The nature and extent of processing
  may vary from one case to another. There may be several
  stages of processing, different kinds of processing at
E each stage and with each process suffered, original
  commodity experiences a change but it is only when a
  change or series of changes that takes the commodity
  to the point where commercially it can no longer be
  regarded as an original commodity but instead is
F recognized as a new and distinct article that
  "manufacture" can be said to have taken place. It is trite
  that in determining what constitutes manufacture no hard
  and fast rules of universal application can be devised and
  each case has to be decided on its own facts having
G regard to the context in which the term is used in the
  provision under consideration, but some broad
  parameters have been laid down in the decisions of this
  Court. [Para 12] [189-C-G]

    1.   Central Excise, Jaipur v. Rajasthan State Chemical Works, Deedwana
H        Rajasthan (1991) 4 sec 473.
   COMMISSIONER OF. CENTRAL EXCISE, NAGPUR v. 181
          S. GURUKRIPA RESINS PVT. LTD.
f .·
      1.2. In the instant case, it is common ground that A
· without sprinkling of water. on the coils carrying. the
  vapours of Turpentine Oil, condensation - a crucial
  component of distillation is not possible. Thus, without
  the process of condensation, "Turpentine Oil", and
  "Rosin" the final product, cannot be obtained. Similarly, B
  without lifting water from the storage tanks at the ground ·
  level with the aid of electric motor to a higher level, the
  water cannot fall on the cooling coils with its gravitational
  force. In this fact situation, the operation of lifting of the
  water from the well to the higher levels, is so integrally c
  connected with the manufacture of "Turpentine Oil" and
  "Rosin", that without this activity it is impossible to
  manufacture the said goods and, therefore, the
  processing of the said raw material in or in. relation to
  manufacture .of the said final goods is carried on with the 0 .
  aid of power. [Para 17) [193-8-F] ·
        Impression Prints Vs. Commissioner of Central Excise,
   Delhi-1(2005) 7 SCC 497; Union of India & Anr. Vs. Delhi
   Cloth & General Mills Co. Ltd. 1963 Supp (1) S.C.R. 586 :
   AIR 1963 SC 791; Collector of Central Excise, Jaipur Vs.        E
   Rajasthan State Chemical Works, Deedwana, Rajasthan
   (1991) 4 SCC 473; M/s J.K. Cotton Spinning & Weaving Mills
   Co. Ltd. Vs. Sales Tax Officer, Kanpur & Anr. (1965) 1 S;C.R.
   900: AIR 1965 SC 1310 - relied on
                                                                 F
        2.1. The decision of the Tribunal in accepting the plea
   of the assessee that they could not be denied the benefit
   of the clarification issued by the Board by their letter
   dated 10th/16th January, 1978, despite the decision of
   this Court in Rajasthan State. Chemical Works is clearly G
  .fallacious for more than one reason. Firs~ly,.the Tribunal
· has failed to notice ami consider the effect and implication ·
   of Circular No. 38/38194-CX dated 27.5.1994, issued by the
 · Central .Board of Excise. and Customs, withdrawing all
 . instructions/guidelines/tariff advices issued in respect of H
   the erstwhile First Schedule to the Central Excises and
    182    . SUPREME COURT REPORTS             (2011) 8 S.C.R.


A S,alt Act, 1944, which obviously included the 1978
  c::larification. Secondly, and more importantly, it has also .
  erred in not appreciating the ratio decidendi of the
  decision in Rajasthan State Chemical Works. It is well
  settled proposition of law that a decision is an authority
B for what it actually and explicitly decides and not for what
  logically flows from it. [Para 18] [193-G-H; 194-A-C]
        Central Excise, Jaipur Vs. Rajasthan State Chemical
    Works, Deedwana, Rajasthan (1991) 4 SCC 473 - relied on.

C      2.2. In Rajasthan State Chemical Works, it has been
  held that any activity or operation, which is an essential
  requirement and is so integrally connected with further
  operations for production of ultimate goods that but for
  that process, the manufacture of the final product is ·
D impossible, would be a process in or in relation to
  manufacture. In fact, in the said judgment the contention
  of the assessee that since the stage at which the power
  is used does not bring about any· change in the raw
  material, it cannot be said that such process is carried on
E with the aid of power, was specifically rejected. Therefore,
  the observations of the Tribunal in the instant case, to the
  effect that since it is nobody's case that water that is
  pumped upto the overhead tank is a raw material used
  in the manufacture of "Rosin", are not only misplaced but
F are irrelevant also for deciding the issue at hand. [Para
  18] [194-E-H]
       2.3. When the law on the question at issue before the
  Tribunal had already been declared by this Court, the
  Tribunal should not have based its decisions on the
G clarification issued by the Board, which otherwise stood
  rescinded, on the specious ground that the said
  clarification issued by the Board was binding on the
  Deputy Commissioner as also on the Commissioner
  (Appeals). It is well settled proposition of law that Circulars
H and instructions issued by the Central Board of Excise
.....   COMMISSION~R OF CENTRAL EXCISE, NAGPUR v. 183
                ·• S. GURUKRIPA RESINS PVT. LTD.
        and Customs are no doubt binding in law on the.              A
        authorities under the respective Statutes but when this
        Court or the High Court declares the law on the question
        arising for consideration, it would not be appropriate for
        the Courts or the Tribunal, as the case may be, to direct
        that the Board's Circular should be. given effect to and     B
        not the view expressed in a decision of this Court or a
        High Court. [para 19) [195-A-C]

            3. The decisions of the Tribunal, impugned in these
        appeals, cannot be sustained and, as such are set aside.     C
        [para 20] [195-D-E]

            Collector of Central Excise, Vadodara Vs. Dhiren
        Chemical Industries {2002) 10 SCC 64; Commissioner of
        Central Excise, Bolpur Vs. Ratan Melting & Wire Industries
        (2008) 13 sec 1 ... cited.                                   o
                            Case Law. Reference:
            c2002} 10 sec 64               cited        para 5·
            (1991 > 4 sec 473              relied on    para 5       E
            (2005) 1 sec 497               relied on    para 8
            (2008) 13 sec 1                cited        para 8
            1963 Supp (1) S.C.R. 586 relied on          para 8
                                                                     F
            (1965) 1 S.C.R. 900 ·          relied on    para 14
            CIVIL APPELLATE JURISDICTION : Civil Appeal No.
        7627 of 2005.

            From the Judgment & Order dated 14.1.2004 of the         G
        Customs, Excise and Service Tax appellate. Tribunal, West
        Regional Bench at Mumbai in Appeal No. E/1050103-Mum,

                                    WITH
                                                                     H


                                            •
    184       SUPREME COURT REPORTS               [2011) 8 S.C.R.


A   C.A. Nos. 5809 of 2007 and 46634665 of 2008.

        Devdatt Kamat, Arijit Prasad, D.L. Chidanand, B. Krishna
    Prasad, P. Parmeswaran for the Appellant.

     Ajay Majthia, Rajesh Kumar, Dr. Kailash Chand for the
B Respondent.

          The Judgment of the Court was delivered by

       D.K. JAIN, J. 1. The Commissioner of Central Excise has
C preferred this batch of Civil Appeals under Section 35-L(b) of
  the Central Excise Act, 1944 (for short "the Act"), questioning
  the correctness of the orders passed by the Customs, Excise
  and Service Tax Appellate Tribunal, West Regional Bench at
  Mumbai (for short "the Tribunal") whereby the appeals filed by
  the respondent-assessee (for short "the assessee") have been
D allowed and the applications filed by the Commissioner for
  rectification of mistakes in the main orders have been
  dismissed.

       2. As all the appeals involved a common question of law,
E pertaining to the same assessee, these were heard together
  and are being disposed of by this common judgment. However,
  in order to appreciate the issue involved and the rival stands
  thereon, for the sake of convenience, we shall advert to the facts
  emerging from C.A. No. 7627 of 2005 arising out of Tribunal's
F order in appeal No. E/1050/03-Mum and E/Rom-691/04-Mum.
       3. The assessee, a body Corporate, is engaged in the
  manufacture and clearance of "Rosin" and "Turpentine Oil". As
  per some literature placed on record, "Rosin" is the resinous
  constituent of the Oleo-resin exuded by various species of pine,
G known in commerce as crude turpentine. The separation of the
  Oleo-resin into the essential oil-spirit of turpentine and common
  Rosin is effected by distillation in large copper stills. "Rosin"
  and "Turpentine Oil" are classifiable under Chapter Heading
  Nos. 38.06 and 38.05 respectively of the First Schedule to the
H Central Excise Tariff Act, 1985 (for short "the Tariff Act"). The
.......   COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 185
           S. GURUKRIPA RESINS PVT. LTD. [D.K. JAIN, J.]
      assessee filed the requisite classification declarations with the      A
      Deputy Commissioner, Central Excise, classifying their finished
      goods i.e. "Rosin" under the Sub-heading 3806.19 and
      "Turpentine Oil" under Sub-heading 3805.19, both bearing 'nil'
      rate of duty, on the ground that the said goods were being
      manufactured by them without the aid of power. The Deputy              B
      Commissioner accepted the classifications under the said
      Sub-headings but treated the said goods as "in or in relation
      to the manufacture of which any process is ordinarily carried
      on with the aid of power", attracting rate of duty @ 16% ..
      According to the Deputy Commissioner the assessee is using             c
      5 Hp electric motor for lifting water from the well for storage tank
      at the ground level; the main raw material namely, Oleo-pine
      Rosin !s lifted to the manufacturing platform by manually
      operated chain pulley block; the raw material is heated in a
      melting tank - a "Bhatti" fired with coal; the molten raw material     D
      is then transferred to settling tanks where it is kept in the liquid
  · · form and stirred by manually operated agitators so that.the
      impurities may settle down; the impurities are separated and
      purified raw material is transferred in the main tank (Distillery)
      where it is again heated upto 1800C; at this temperature, the
      vapours of turpentine oil are formed and finally the "Turpentine       E
      Oil" is collected by the process of distillation through the
      condensers by sprinkling water on the condensers from the
      water storage tanks installed at a height of 30 ft.; water for the
      tanks is lifted from the storage tanks at the ground level by using
      2 Hp electric motor. "Rosin" which settles down in the Distillery,     F
      is collected separately. The Deputy Commissioner was of the
      view that the water being an important input for the
       manufacturing process of "Rosin" and ''Turpentine Oil", its further
      lifting upto the height of 30 ft. with the aid of an electric motor
      for the purpose of condensing the vapours of Turpentine Oil, it        G
       cannot be said that the said goods were being manufactured
      without the aid of power. He accordingly held that the assessee
      was liable to pay Central Excise duty at the aforesaid rate.
             4. Being aggrieved, the assessee preferred appeal to the
                                                                             H
    186         SUPREME COURT REPORTS               [2011] 8 S.C.R.

                                         ..           .       .
A Commissioner of Customs and Central Excise (Appeals). The
  Commissioner (Appeals), affirmed the view taken by the
  Deputy Commissioner, observing that the water stored in the
  overhead tank being pumped in the first instance by using
  electricity to operate pump before it falls on the condensers by
B gravity, it was clear that certain processes are undertaken in
  or in relation to the manufacture of the said products with the
  aid of power.
          5. Being dissatisfied with the order passed by the
    Commissioner (Appeals), the assessee carried the matter in
C   further appeal to the Tribunal. The Tribunal, placing reliance on
    the clarification issued by the Ministry of Finance vide letter No.
    8-36/11/77-TRU dated 10th/16th January, 1978, wherein it was
    clarified that so long as the use of power is limited to drawing
    water jrlto a cooling tank through which condensation coils
D   pass, manufacture of Rosin cannot be said to be with the aid
    of power, for the purpose of Notification No. 179/77-CE dated
    18th June, 1977, came to the conclusion that the said
    clarification was binding on the revenue, including the
    Commissioner (Appeals), the same being a Circular beneficial
E   to the assessee. Drawing support from the decision of this
    Court in Collector of Central Excise, Vadodara Vs. Dhiren
    Chemical lndustries1, the Tribunal came to the conclusion that
    in light of the said clarification the decision of this Court in
    Collector of Central Excise, Jaipur Vs. Rajasthan State
F   Chemical Works, Deedwana, Rajasthan 2 cannot be relied
    upon by the revenue. Accordingly, the appeal preferred by the
    assessee was allowed by the Tribunal.
       6. Thereafter, the revenue filed an application before the
  Tribunal for rectification of the said order. In the said application
G it was pointed out that apart from the fact that the decision of
  this Court in Rajasthan State Chemical Works (supra) was
  applicable on the facts of this case, the aforenoted Circular

    1.   (2002) 10 sec 64.
H   2.   (1991) 4 sec 473.
 COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 187
  S. GURUKRIPA RESINS PVT. LTD. [D.K. JAIN, J.]
 relied upon by it had already been rescinded vide Circular No.            A
 38/38/94-CX. dated 27th May, 1994. However, distinguishing
 the decision in Rajasthan State Chemical Works (supra}, and
 affirming its earlier view that the 1978 Circular still held the field,
 the Tribunal dismissed the application. Hence the present
 appeals by the Commissioner.                                              B

       7. We have heard learned counsel for the parties.

         8. Mr. Devadatt Kamat, learned counsel appearing on
  behalf of the revenue, strenuously urged that the decisions of
  the Tribunal are clearly erroneous in as much as it failed to C
  appreciate that: (i) withotit the process of condensation of
  vapours, the final products i.e. "Turpentine Oil" & "Rosin" cannot
  be manufactured; (ii) condensation is not possible without
  sprinkling of water on the copper stills/coils containing vapours
  of Turpentine and (iii) for sprinkling of water lifting of water to a D
. particular height With -the aid of an  electric motor is essential,
  otherwise water would notfall on the coils by the force of gravity.
  It was thus, argued that water being an integral part of the
  manufacturing process, Which would include all stages and all
  processes which are necessary for the final product, its lifting E
  to the overhead tank is a process in relation to the manufacture
  of the final product and since that process requiring the aid of
  power is integrally connected with the manufacture, the
  assessee is not entitled to exemption from duty. It was asserted
  that the clarification issued in the year 1978, having been F
  rescinded vide Circular dated 27th May, 1994, the Tribunal was
  not justified in relying on the same, more so, when the issue
  before the Tribunal stood concluded by the decisions of this
  Court in Rajasthan State Chemical Works (supra) as also
  Impression Prints Vs. Commissioner of Central Excise, Delhi- G
   13 • Placing reliance on the decision of the Constitution Bench
  of this Court in Commissioner of Central Excise, Bolpur Vs.
  Ratan Melting & Wire Industries", leamed counsel contended

 3.   (2005) 1 sec 497.
 4.   (2ooa) 13 sec 1.                                                     H
     188       SUPREME COURT REPORTS                   [2011) 8 S.C.R.


 A that the Circulars issued by the revenue department cannot be
   given primacy over the decisions of the Courts. In order to
   substantiate his point that it is not necessary that power should
   be used in all the processes involved in the manufacture of
   finished goods, learned counsel placed reliance on the decision
 B rendered by the Constitution Bench of this Court in Union of
   India & Anr. Vs. Delhi Cloth & General Mills Co. Ltd. 5• It was
   thus, stressed that in light of the settled legal position on the
   issue by this Court, the impugned decisions deserve to be set
   aside.
 c     9. Per contra, Mr. Ajay Majithia, learned counsel appearing
  for the assessee, supporting the decisions of the Tribunal,
  argued that the water lifted with the aid of power and used for
  cooling the coils containing Turpentine vapours cannot be said
  to be an integral part of the manufacture of the final product
D because it does not bring about any change in the raw material
  Le~ Olio-pine-Rosin. According to the learned counsel what is
  relevant for deciding the issue is the stage at Which the aid of
  power is required .and therefore, in the present case once the
  water is lifted and stored in the storage tanks, no further use of
E power is required as the water falls on the coils by the force of
  gravity.

          10. The short question in issue is whether or not the
     process of lifting of water with the use of power, to the extent
 F   and for the purpose mentioned above, constitutes a process
     in or in relation to manufacture of goods, viz. "Rosin" and
     "Turpentine Oil", with the aid of power?

        11. In order to answer the question, it would be necessary
  to determine as to what activity amounts to a process in or in
G relation to manufacture of goods? Clause (t) of Section 2 .of the
  Act, as it existed at the relevant time, defines the word
  "manufacture" as follows:-

           "2(f} "manufacture"'includes any pro.cess~
. H 5.   1963 Supp (1} S.C.R. 586 : AIR 1963 SC 791.
 COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 189
  S. GURUKRIPA RESINS PVT LTD. [D.K. JAIN, J.]
      (i) incidental or ancillary to the completion Of a                A
      manufactured product;

      (ii) which is specified in relation to any goods in the section
      or Chapter notes of the First Schedule to the Central
      Excise Tariff Act, 1985 (5 of 1986) as amounting to
                                                                        B
      manufacture;"

         12. It is manifest that clause (f) gives an inclusive definition
  of the term "manufacture". According to the Dictionary meaning
 ·the term "manufacture" means a process which results in an
  alteration or change in the goods which are subjected to the C
  process of manufacturing leading to the production of a
  commercially new article, Therefore, manufacture is an end
  result of one or more processes through which the original
  commodities are made to pass. The nature and extent of·
  processing rriay vary from one case fo another. There may be D
  several stages of processing, different kinds of processing at ·
  each stage and with each process suffered,. original
  commodity experiences a change butJt is only when a change
  or series of changes that takes the commodity to the point
  where commercially it can no longe(be regarded as an original E
  commodity but instead iS recognized as a new and distinct
  article that "manufacture" can be said to have taken place. It
  is trite that in determining what constitutes manufacture no hard
  and fast rules of universal application can be devised and each
  case has to be decided on its own facts having regard to the F
  context in which the term is used in the provision under
  consideration, but some broad parameters laid down in the
  earlier decisions dealing with the question could be applied
  to determine the question whether a particular process carried
  on in relation to the final product amounts to manufacture of G
 ·that product.

       13. In Delhi Cloth & General Mills .Co. Ltd. (supra), a
   question arose whether the ass.essee was liable to pay Excise
.. duty on the m.anufacture of refined oil which fell within item 23
  ·otthe FirstSCheduleto the CehtralExcises and Salt Act, 1944,         H·
    190       SUPREME COURT REPORTS               [2011] 8 S.C.R.
                                                                        .-..
A bearing the description of "vegetable non-essential oils, all
  sorts, in or in relation to the manufacture of which any process
  is ordinarily carried on with the aid of power"? Negativing the
  contention that the definition of the term "manufacture" in
  Section 2(f) of the Act included mere processing, a Constitution
B Bench oJ this Court held that processing was distinct from
  manufacture and that for a commodity to be excisable it must
  be new product known to the market as such. It was held that
  the definition of "manufacture" as in Section 2(f) puts it beyond
  any possibility of controversy that if power is used for any of
c the numerous processes that are required to turn the raw
  material in a finished article known to the market, the clause
  will be applicable; and an argument that power is not used in
  the whole process of manufacture using the word in its ordinary
  sense, will not be available.
D       14. In Mis J.K. Cotton Spinning & Weaving Mills Co. Ltd.
    Vs. Sales Tax Officer, Kanpur & Anf'., ·it was held that where
  any particular process is so integrally connected with the
  ultimate production of goods that but for that process,
  manufacture or processing of goods would be commercially
E inexpedient, the goods required in that process would fall within ·
  the expression "in the manufacture or.

       15. In Rajasthan State Chemical Works (supra), on which
  heavy reliance was placed on behalf of the revenue, a bench
F of three learned Judges of this Court was considering the
  question whether the two assessees therein were entitled to the
  benefit of an exemption notification, which was available only
  to the goods "in or in relation to the manufacture of which no
  process is ordinarily carried on with the aid of power''. In that
G case one of the assessees was manufacturing common salt
  and for its manufacture, brine was pumped into salt pans by
  using a diesel pump and then lifted to a platform by the aid of
  power. In the second case for manufacturing lime from coke
  and limestone, the raw materials were lifted to a platform at the
H 6. (1965) 1 S.C.R. 900: AIR 1965 SC 1330.
COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 191
 S. GURUKRIPA RESINS PVT. LTD. [D.K. JAIN, J.]
head of the kiln with the aid of power. The question was as to         A
whether lifting of salt pans to a platform by the aid of power and
the lifting of raw material to a platform at the head of the kiln
with the aid of power constituted process in or in relation to
manufacture? Referring to earlier decisions of this Court,
including Delhi Cloth & General Mills Co. Ltd {supra) and Ml           B
s J.K. Cotton Spinning & Weaving Mills Co. Ltd. (supra) the
Court observed thus:

       "20. A process is a manufacturing process when it brings
       out a complete transformation for the whole components C
       so as to produce a commercially different article or a
       commodity. But, that process itself may consist of several
       processes which may or may not bring about any change
       at every intermediate stage. But the activities or the
       operations may be so integrally connected that the final .
   · . result is the production of a commercially different article. · D .·
       Therefore, any activity or operation which .is the essential ·
       requirement and is so related to the further operations for ·
       the end result would also be a process in or in relation to
       manufacture to attract the relevant clause in the exemption
       notification. In our view, the word 'process' in the context E
       in which it appears in the aforesaid notification includes
       an operation or activity in relation to manufacture".

     xxxx xxxx                       xx xx           . xxxx
      26. We are, therefore, of the view that if any operation in      F
      the course of manufacture is so integrally connected with
      the further operations which result in the emergence of
      manufactured goods and such operation is carried on with
      the aid of power, the process in or in relation to the
      manufacture must be deemed to be one carried on with             G
      the aid of power. In this view of the matter, we are unable
      to accept the contention that since the pumping of the brine
      into the salt pans or the lifting of coke and limestone with
    . the aid of power does not bring about any change in the
      raw material, the case is not taken out of the notification.     H
    192       SUPREME COURT REPORTS                [2011] 8 S.C.R.


A         The exemption under the notification is not available in
          these cases. Accordingly, we allow these appeals."

          16. A similar question came up for consideration of this
    Court in Impression Prints (supra}, again .strongly relied upon
    by learned counsel for the revenue. In that case the assessee
8
    was manufacturing printed bed sheets, bed covers and pillow
    covers, and for that purpose the colour was mixed with the help
    of colour mixing machine, which was operated with the aid of
    power. The question arose whether the said goods were
    manufactured with the aid of power. While holding that the
C   activity of printing and colouring being integrally connected to
    the manufacture of printed bed sheets, bed covers etc., the
    manufacture of these goods was with the aid of power, the
    Court culled out the following parameters from the earlier
    pronouncements, which could be applied for determining the
D   question whether a particular process carried on in respect of
    the final product amounts to manufacture of that product: (i) the
    term "manufacture" in Section 2(f) of the Act includes any
    process incidental or ancillary to the completion of a
    manufactured product; (ii) if power is used for any of the
E   numerous processes that are required to turn the raw material
    into the finished articles then the "manufacture" will be with the
    use of power; (iii) if power is used at any stage then the
    argument that power is not used in the whole process of
    manufacture, using the word in its ordinary sense, will not be
F   available; (iv) the expression "in the manufacture" would
    normally encompass the entire process carried on for
    converting raw material into goods; (v) if a process or activity
    is so integrally connected to the ultimate production of goods
    that but for that process, manufacture or processing of goods
G   is impossible or commercially inexpedient then the goods
    required in that process would be covered by the expression
    "in the manufacture of'; (vi) it was not necessary that the word
    "manufacture" would only refer to the stage at which ingredients
    or commodities are used in the actual manufacture of the final
H   product and (vii} the word "manufacture" does not refer only to
 COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 193
  S. GURUKRIPA RESINS PVT. LTD. [D.K JAIN, J.)
the using of ingredients which are directly and actually needed         A ·
for making the goods.

        17. Having considered the present case on the touchstone
  of the aforenoted parameters, we are of the opinion that the
  activity of the assessee in first lifting the water for filling up of 8
  the storage tank at the ground level and then lifting it further to
  the overhead water storage tanks with the aid of electric motors
  are so integrally connected to the ultimate manufacture of
  "Turpentine Oil" and "Rosin" that but for the said activity the
  processing of Oleo-pine Rosin for manufacture of Turpentine C
  Oil and Rosin would not be possible. It is common ground that
  without sprinkling of water on the coils carrying the vapours of
  Turpentine Oil, condensation - a crucial component of distillation
  which brings about the change of the physical state of matter
  from gaseous phase into liquid phase, is not possible. In other ·
  words without the process of condensation, Turpentine Oil, the D
· final product, cannot be obtained. Similarly, without lifting water
  from the storage tanks at the ground level with the aid of electric
  motor to a higher level, the water cannot fall on the cooling coils
  with its gravitational force. In this fact situation, we hold that the
  operation of lifting of the water from the well to the higher levels, E
  is so integrally connected with the manufacture of "Turpentine
 -Oil" and "Rosin", that without this activity it is impossibleAo
  manufacture the said goods and therefore, the processing of
  the said raw material in or in relation to manufacture of the said
  final goods is carried on with the aid of power.                       F

       18. We may now examine the ancillary question as to
 whether the Tribunal was correct in law in accepting the plea
 of the assessee that they could not be denied the benefit of the
 clarification issued by the Board vide their letter dated 10th/16th G
 January, 1978, despite the decision of this Court in Rajasthan ·
 State Chemical Works (supra}. We are of the view that the
 decisions of the Tribunal on this aspect are clearly fallacious
 for more than one reason. Firstly, the Tribunal has failed to notice
 and consider the effect and implication of Circular No. 38/38/ H
    194        SUPREME COURT REPORTS                [2011] 8 S.C.R.


A 94-CX dated 27th May, 1994, issued by the Central Board of ·
  Excise and Customs, withdrawing all instructions/guidelines/
  tariff advices issued in respect of the erstwhile First Schedule
  to the Central Excises and Salt Act, 1944, which, obviously
  included the 1978 clarification. Secondly, and more importantly,
B it has also erred in not appreciating the ratio decidendi of the
  decision in Rajasthan State Chemical Works (supra). It is well
  settled proposition of law that a decision is an authority for what
  it actually and explicitly decides and not for what logically flows
  from it, the precise exercise the Tribunal undertook in the instant
c case for distinguishing the said decision, by observing thus :
          "We observe that the Supreme Court in that case deals
          with the use of power while handling the raw material prior
          to the commencement of process of production. It is
          nobody's case in the present application that the water that
D         is pumped to the overhead tank is a raw material used in
          the manufacture of "Rosin"."

    In Rajasthan State Chemical Works (supra), the question of
    law for determination was as to what kind of "process" carried
E   on in respect of particular goods constituted "process" in or in
    relation to "manufacture" for the purposes of and within the
    meaning of Section 2(f) of the Act. It was held that any activity .
    or operation, which is an essential requirement and is so
    integrally connected with further operations for production of
F   ultimate goods that but for that process the manufacture of the
    final product is impossible, would be a process in or in relation
    to manufacture. In fact, it is manifest from the afore-extracted
    paragraph of the judgment that the contention of the assessee
    that since the stage at which the power is used does not bring
G   about any change in the raw material, it cannot be said that
    such process is carried on with the aid of power, was
    specifically rejected. Therefore, the observations of the Tribunal,
    extracted above, to the effect that since it is nobody's case that
    water that is pumped upto the overhead tank is a raw material
    used in the manufacture of "Rosin", are not only misplaced,. in
H   our opinion, these are irrelevan! for deciding the issue at hand.
  COMMISSIONER OF CENTRAL EXCISE, NAGPUR v. 1gs--
  .· S. GURUKRIPA RESINS PVT LTD. [D.K. JAIN, J.]
      19. In that view of the matter, when the law on the question          A·
 at issue before the Tribunal had already been declared by this
 Court, the Tribunal should not have based its decisions on the
 clarification issued by the Board, which otherwise stood
 rescinded, on the specious ground that the said clarification
 issued by the Board was binding on the Deputy Commissioner                 B
 as also on the Commissioner (Appeals). It is well settled
 proposition of law that Circulars and instructions issued by the
 Central Board of Excise and Customs are no doubt binding in
 law on the authorities under the respective Statutes but when
 this Court or the High Court declares the law on the question              c
 arising for consideration, it would not be appropriate for the
 Courts or the Tribunal, as the case may be, to direct that the
  Board's Circula.r should be given effect to and not the view
 expressed in a decision of this Court or a High Court. [(See:
  Ratan Melting & Wire Industries (supra)].
                                                                            D
        20. If) the final analysis, in light of the foregoing discussion,
·· the decisions of the Tribunal, impugned in these appeals,
  · cannot be sustained. Resultantly, all the appeals are_ allowed
    and the orders passed by the Tribunal are set aside, leaving
    the parties to bear their own costs.                                    E

  R.P.                                              Appeals allowed.