Holding

Welding of duty‑paid steel pipes to form poles does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944, and the revenue’s reliance on the residuary entry is untenable.

Summary

Hindustan Poles Corporation imported duty‑paid electric‑resistant steel pipes and welded three pipes of different diameters together to form stepped transmission poles. The Central Excise authorities issued show‑cause notices asserting that this welding created a new product liable to excise under the residuary entry, and demanded duty and penalty. The corporation contended that the pipes retained their original character and that the process was merely joining, not manufacture as defined in Section 2(f) of the Central Excise Act, 1944. The Supreme Court examined the statutory definition of "manufacture" and held that manufacture requires a transformation resulting in a new article with a distinct name, character or use, which was absent here. The burden of proving manufacture lies on the revenue, and it failed to do so. Consequently, the residuary entry could not be invoked, the show‑cause notices were quashed and the appeal was allowed.

Issues considered

The process of welding three steel pipes to form poles constitutes "manufacture" within the meaning of Section 2(f) of the Central Excise Act, 1944.
Whether the Central Excise authorities can levy duty under the residuary entry when the product falls within a specific tariff item.
The burden of proof for establishing manufacture under the Central Excise Act.

Legislation cited

Central Excise Act, 1944s. 2(f)
Central Excise Rules, 1944s. Rule 8
Central Excise Tariff Act, 1985s. Item 68 (residuary), s. Tariff Item 26AA(iv), s. Tariff Item 7306.90, s. Tariff Item 7308.90

Subjects

Central ExciseManufactureSection 2(f)Residuary entryWeldingTariff classificationBurden of proofShow‑cause notice

Judgment

A
HINDUSTAN POLES CORPORATION
v.
COMMISSIONER OF CENTRAL EXCISE, CALCUTTA

MARCH 27, 2006 B
[DR. AR. LAKSHMANAN AND DAL VEER BHANDARI, JJ.]

Central Excises Act, 1944:
c
Section 2(/)-Manufacture-Process of "welding" of electric resistant
pipes/tubes of different diameters, which are duty paid, and purchased fi'om
the open market, results in a new product-Whether amounts to
"Manufacture "-Held, No.

Show-cause-notices issued by the Additional Collector of Central D
Excise, Calcutta have been challenged by the appellant in these appeals.
The said notice was issued on the ground that by the process of "welding"
of electric resistant pipes/tubes of different diameters, which are duty paid,
and purchased from the open market, results in a new product and, hence,
is liable to excise duty under the Residuary Entry i.e. erstwhile Tariff Item E
68 upto 27.2.1986, and thereafter under Tariff Item 7308 from 28.2.1986.
Collector of Central Excise, Calcutta-I upheld the notices 30. 7.1991.
Appeal against the abovesaid order filed before the CEGAT was also
dismissed. Hence, this appeal.

It was contended by the appellants that the process carried out is F
mere joining of three pipes of different diameters with one another to
obtain the desired length. This is done by a process of welding of pipes.
The pipes do not lose their original character, and get converted into
something, which is a commercially distinctive product. Pipes/poles do not
lose their original character and identity as pipes. The pipes retain their G
character as pipes, hence, no process of manufacture as per Section 2(1)
of the Central Excise Act is carried out. According to the appellants, the
duty paid pipes which are purchased by the appellants are classified under
Tariff Item 26AA (iv) upto 27.2.1986 and thereafter under Tariff Item
7306.90 as pipes from 28.2.1986 and as such no duty is payable by them.
461 H
462 SUPREME COURT REPORTS [2006] 3 S.C.R.

A It was also contended that the essence of manufacture is the transformation
of one item into another for marketable purpose.

It was contended by the respondents that the process undertaken by the
appellants was merely joining pipes of three different diameter, one with the
other to desired length whereby no new goods and/or article other than pipes
B does emerge out inasmuch as even after such process of joining the pipes
one with the other they do not lose their identity as M.S. Welded pipes and
thus does not attract the mischief of Section 2(1) of the Act, since the process
of mere welding of pipes of three different diameter one with the other is not
a process of manufacture within the meaning of Section 2(1) of the Act.
c Allowing the appeal, the court

HELD: 1.1. The process carried out by the appellants do not change
the basic identity or original character of M.S. Welded Pipes to make it a
new marketable product leading to manufacture as defined under Section
D 2(f) of the Central Excise Act, 1944. And as such the activity of the
appellants of merely joining of three pipes, one with other, of different
dimensions to obtain a desired length can by no stretch of imagination be
brought within the category of 'manufacture'. [475-8, C, Fl

Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur, (20051
E SCC 264; Union of India v. Delhi Cloth and General Mill Co. Ltd., AIR
(1963) SC 791; Devi Dass Gopal Krishnan and Ors. v. The State of Punjab
and Ors., Sales Tax Cases XX (1967) page 430; Empire Industries Ltd. v.
Union of India, AIR (1986) SC 662; Mis Ujagar Prints and Anr. v. Union of
India and Ors., AIR (1989) SC 516; Commissioner of Sales Tax, Orissa and
F Anr. v. Jagannath Cotton Company and Anr., (19951 5 SCC 527; Gramophone
Co. of India Ltd. v. Collector of Customs, Calcutta, (20001 1 SCC 549; CCE
v. Markfed Vanaspati and Allied Industries, [20031 4 SCC 184; CCE v.
Technoweld Industries, (2003[ 11 SCC 798; Metlex (I) (P) Ltd., (2005) 1
SCC 271; Aman Marble Industries (P) Ltd v. CCE, )2005) 1 SCC 279 and
Rajasthan SEB v. Associated Stone Industries, [2000) 6 SCC 141, referred
G to.

Indian Metals and Ferro Alloys v. CCE, [1991) Supp 1 SCC 125 and
Bharat Forge and Press Industries v. CCE, [1990) l SCC 532, relied upon.

2.1. The burden to prove manufacture is always on the Revenue. In
H the instance case the Revenue has completely failed to prove that the
HINDUSTAN POLES CORPN. " COMMR. OF CENTRAL EXCISE. CALCUTTA (DAL VEER BHANDARI, J.] 463

activity carried out by the appellant amounts to manufacturing. It is settled A
law that when one particular item is covered by one specified entry, then the
Revenue is not permitted to travel to residuary entry. 1475-C, DJ

3.1. The residuary entry is meant only for those categories of goods
which clearly fall outside the ambit of specified entries.Unless the Department
can est~blish that the goods in question can by no conceivable process of B
welding be brought under any of the tariff items, resort cannot be had to the
residuary item.1475-D, EJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5572-557312000.

From the Order dated 21.1.2000 The Customs, Excise and Gold (Control) C
Appellate Tribunal, Calcutta in Appeal Nos. E(SB) 571/91 and 582/91.

Ms. Indu Malhotra, Ms. lnklee Barooah and Ms. Bina Gupta for the
Appellant.
D
Mohan Parasaran, Rudreshwar Singh, P.Parmeswaran and Chidananda
D.L. Gaurav Dhingra for the Respondents.

The Judgment of the Court was delivered by

DALVEER BHANDARI, J. A short question involved in these appeals E
is whether the process undertaken by the appellants for bringing into existence
the resultant Stepped Transmission Poles amounts to manufacture under the
provisions of the Section 2(f) of the Central Excises Act, 1944.

Section 2(f) of the said Act reads as under :
F
"Manufacture" includes any process-

(i) incidental or ancillary to the completion of 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, G
1985 (5 of 1986) as amounting to [manufacture; or]

The word "manufacture" is a compound word of Latin origin derived
from the words "manu," by hand and "facere," to do, to make, to form; but
the meaning is not confined to that which is done by hand alone, but by
H
464 SUPREME COURT REPORTS [20061 3 S.C.R.

A machinery as well. (In re Tecopa Min. Etc., Co. 110 Fed 120, 121.)

The following passage in the Permanent Edition of Words and phrases
was referred to with approval in Delhi Cloth and General Mills, AIR ( 1963)
SC 791 at page 795 :

B '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.

c Our endeavour in the instant case would be to examine the activity of
the appellant in the light of legislative intention as encompassed in the said
definition.

In these appeals. the appellants have challenged the show-cause-notice
D issued by the Additional Collector of Central Excise, Calcutta 1. The said
notice was issued on the ground that by the process of ··welding" of electric
resistant pipes/tubes of different diameters, which are duty paid, and purchased
from the open market, results in a new product and, hence. is liable to excise
duty under the Residuary Entry i.e. erstwhile Tariff Item 68 upto 27.2.1986, and
thereafter under Tariff Item 7308 the period from 28.2.1986.
E
In pursuance to the Finance Minister's Budget speech of 1984, a Study
Group was constituted to review the Central Excise Tariff with a view to
rationalize it. The Study Group in its report has mainly recommended:-

(I) To rationalize the Central Excise Tariff to make it more scientific
F and detailed one duly supported by formal Rules of Interpretation
and clarificatory notes so as to avoid classification disputes;

(2) To omit non-specific Tariff Item 68 and to re-classify the
goods covered by it under the respective class of goods of new
Tariff:
G
(3) To incorporate the concept of 'Manufacture' in the selective
Tariff entries, wherever needed;

(4) To minimize the multiplicity of effective rates of duty;

H (5) To extend Proforma Credit/Set-off procedure to all products
HINDUSTAN POLES CORPN. '· COMMR. OF CENTRAL EXCISE. CALCUTTA [DAL VEER BHANDARI, J.] 465

with few exceptions; A
(6) To devise long term flawless scheme for exemption to Small
Scale Sector;

(7) To provide for the issue of administrative rulings on
classification of goods;
B
(8) Change in the departmental stand on classification of goods
to have prospective effect only; and

(9) Change in Excise procedures to make them more simplified
with a view to avoid complications and disputes.

Based on these recommendations of the Technical Study Group, the
c
Central Excise Tariff has been delinked from the Central Excise Act and is
an independent enactment.

The main features of the new Excise Tariff are:-

(a) Central Excise Tariff has been made more detailed and D
comprehensive after taking into account all Technical and Legal
aspects.

(b) It is based on a system of classification derived from
international convention of 'Harmonised Commodity Description'
and 'Coding System' (HSN) with such "Contractions or E
Modifications" as are necessary to fall within the scope of levy
of Central Excise Duty.

(c) Goods of the same class have been grouped together to enable
parity in treatment.
F
(d) It contains Section/Chapter notes giving detailed explanation
as to the scope and ambit of the respective Section/Chapter.
These notes have been given statutory backing and have been
incorporated at the top of each Section/Chapter.

(e) Special provision has been incorporated in respective Chapters G
in relation to the goods which poses problem in the matter of
levy of excise duty.

(f) General residuary Tariff Item 68 has been dispensed with and
instead residuary items have been provided separately for each
class of goods under each Chapter. H
466 SUPREME COURT REPORTS (2006] 3 S.C.R.

A (g) Interpretative rules have also been provided to serve as
statutory guideline for interpreting the Tariff Schedule.
(h) To preserve by and large the existing duty structure to the
extent possible.

(i) Government will have, for the first time, the power to raise duty
B through notification in certain circumstances but subject to limits
provided in the proposed enactment.
U) To continue the present practice of granting exemption from
duty under Rule 8 of the Central Excise Rules.

C The other salient feature of the new Central Excise Tariff is that it
adopts the principle of classifying all goods beginning with the raw materials
and ending with the finished products within the same Chapter. Thus for the
purpose of grouping various products, the New Tariff does not distinguish
between the raw materials and semi-manufactured products and finally
manufactured products except for a few exceptions. The New Tariff is designed
D to group all goods relating to the same industry and all the goods obtained
from the same raw material under one Chapter in a progressive manner.

These appeals arise out of two following show-cause-notices:

E
SHOW CAUSE NOTICE

17.11.80
PERIOD

1.8.85 to 31.1.89
AMOUNT

Rs. 2,41,333.98
--
11.1.90 1.2.89 to 31.3.89 Rs. 64,666

According to the appellants, the process carried out is mere joining of
F three pipes of different diameters with one another to obtain the desired
length. This is done by a process of welding of pipes. The pipes do not lose
their original character, and get converted into something, which is a
commercially distinctive product. Pipes/poles do not lose their original
character and identity as pipes. The pipes retain their character as pipe5,
G hence, no process of manufacture as per Section 2(t) of the Central Excise
Act is carried out. According to the appellants, the duty paid pipes which are
purchased by the appellants are classified under Tariff Item 26AA (iv) upto
27.2.1986 and thereafter under Tariff Item 7306.90 as pipes from 28.2.1986.

Tariff Item 26AA(iv) reads as under:
H
HINDUSTAN POLES CORPN. "· COMMR. OF CENTRAL EXCISE. CALCUTTA [DAL VEER BHANDARI, J] 467

"Item No. 26AA(iv): Pipes and tubes (including blanks therefore) A
all sorts, whether rolled, forged, spun, cast, drawn, annealed, welded
or extruded."

After 28.2.1986, the said pipes were classified under Sub-heading 7306.90 of
the Schedule, which reads as under:
B
"Heading No. 73.06: Other tubes, pipes and hollow profiles (for
example, open seam or welded, riveted or similarly closed) of iron or
steel."

According to the appellants, the essence of manufacture is the
transformation of one item into another for marketable purpose. C

The appellants submitted that the Additional Collector of Central Excise,
Calcutta has erroneously relied upon the judgment of the Central Excise &
Gold (Control) Appellate Tribunal (for short CEGAT) in the case of Associated
Strips Pvt. ltd. v. Collector of Central Excise. This judgment has been
overruled by a judgment of this Court dated 22. 7 .1991 passed in Civil Appeal D
No. 6212 of 1990 filed by the Associated Strips Pvt. Ltd. The respondent
Department is seeking to classify the poles manufactured by the appellants
under Tariff Item 7308.90 which is a Residuary Entry under Heading 73.08
pertaining to Structures. According to the appellants, the respondent
Department has not discharged the burden of proving how the poles fall E
under Residuary Entry of Structures by mere process of welding. The burden
to prove manufacture is always on the Revenue, as has been held by this'
Court in a series of cases and reiterated in a recently decided case Shyam Oil
Cake Ltd. v. Collector of Central Excise, Jaipur reported in (2005] 1 SCC
264.
F
Reverting to the facts of this case, the relevant part of the show-cause-
notice was sent by the respondent-Additional Collector of Central Excise,
Calcutta to the appellants on 11.1.1989 reads as under :-

"It appears that Mis. Hindustan Poles Corporation, a partnership
firm having their office at 4A, Marcus Square, Calcutta-7 and works G
- at 120A, Manicktola Main Road, Calcutta-54 (hereinafter referred to
as the 'said firm') manufacturer of "Steel Tubular Poles" (hereinafter
referred to as the "said goods") classifiable under Chapter Sub-heading

-
No. 7308.90 of the Schedule to the Central Excise Tariff Act, 1985
(5 of 1986) and which was classifiable under Tariff Item 68 of the H
468 SUPREME COURT REPORTS (2006] 3 S.C.R.

A erstwhile Central Excise Tariff before the introduction of the Central
Excise Tariff Act, 1985 have contravened the provision of Section 6
of the Central Excises & Salt Act, 1944 (hereinafter referred to as the
.. said Act") read with rule 174 and the provisions of rule 9(1), 1738,
I73C, 173G(I) and (2) read with rules 52A, and I 73G(4) read with rules
53 and 54 and 226 of the Central Excise Rules 1944 (hereinafter referred
B to as the 'said rules') with the intent to evade payment of Central
Excise duty leviable on the said goods by suppressing material fact
relating to production and clearance of the said goods and by abusing
the concession granted under Notification No. 178/85 dated 1.8.85 and
No. 175/86 dated 1.3.86 as amended in as much as the said company
C manufactured in and removed from their works at 120A, Manicktola
Main Road, Calcutta-54."

It was further mentioned in the notice as under:

"3(b)(i) In course of visit of works on 20.12.88 and from the
0 statement dated 20.12.88 submitted by the said firm it was learnt that
the said goods are manufactured from E.R. W. Tubes in three sections
of suitable length and thereafter the higher and smaller dia pipes are
made red hot and reduced to relevant smaller dia pipes through manual
hammers. Electric power is also used for maintaining an uniformity
during cutting of big size pipes into smaller ones. The higher dia
E pipes will be such that smaller dia pipes are allowed to enter and cool
by natural process. The joints of the above pipes are swaged to give
a circumferential grip at the joints and the step of each reduction shall
be uniform and with a surface inclination of 45 degree at the transition
point to shed water. This is a new product viz. "Steel Tubular Poles"
F has emerged out of the steel pipes (E.R.W. Tubes) as stated aforesaid
which is a manufactured product within the meaning of definition of
"manufacture" as given in Section 2(t) of the said Act."

The appellants immediately had sent reply to the said notice. The relevant
portion of the reply reads as follows:
G "2.4. It was ascertained from a statement given by us on 20.12.1988
that the process of manufacture of the Poles is as follows:- ..
E.R.W. Tubes of different dia reduced at one end to require
smaller dia by red hot heat where-in the tube of the smaller dia

H
is inserted through manual hammering in three section, where-
--
HINDUSTAN POLES CORPN. '· COMMR. OF CENTRAL EXCISE, CALCUTTA [DAL VEER BHANDARI, J] 469

after the joints at the entering points are swaged to give a A
circumferential grip with a surface inclination of 45° to shad water.
Power is used in cutting the pipes of bigger length into smaller
lengths. The resultant product, via, Pole thus emerges out as a
new article involving process of manufacture within the meaning
of Section 2(f) of the Act.
B
2.5. Even though the joints of the three sections of the Pole are
welded during the course of making the joints and the resultant Pole
is painted by using of paints and varnishes before delivery, nothing
was mentioned about the using of electric arc welding used for welding
the joints as also of paints and varnishes used for painting, although C
it was found on scrutiny of the Balance Sheet that a re gu Jar and
recurring expenses is incurred by us for (a) cutting and welding, and
(b) paints and varnishes for painting."

In this reply, it is also mentioned that the process undertaken by the appellants
was merely joining pipes of three different dias one with the other to desired D
length whereby no new goods and/or article other than pipes does ~merge out
inasmuch as even after such process of joining the pipes one with the other
they do not lose their identity as M. S. Welded pipes and thus does not attract
the mischief of Section 2(f) of the Act, since the process of mere welding of
pipes of three different dias one with the other is not a process of manufacture
within the meaning of Section· 2(f) of the Act. E
According to the order of the Collector of Central Excise, Calcutta-I
dated 30.7.1991 the process which had been undertaken by the appellants is
that the poles are brought out under the new Tariff Item No. 7308.90 and the
appellants are under an obligation to pay duty and penalty.
F
The appellants, aggrieved by the order of the Collector of Central Excise,
Calcutta, preferred Appeal Nos. E-SB-571 and E-SB-582 of 1991 before the
CEGA T. CEGAT, while affirming the judgment of the Collector of Central
Excise, stated that the essence of manufacture is transformation of one item
into another for marketable purpose. The resultant product, in the instant G
case, is having a distinct name, character and use. The same is the result of
transformation by application of labour. According to the CEGAT, pipes and
poles are two different and distinct items known in the market. As such, it
cannot be said that there is no process of manufacture involved.

The appellants aggrieved by the said judgment have approached this H
470 SUPREME COURT REPORTS [2006] 3 S.C.R.

A Court. The appellants submitted that the impugned order of the CEGA T is
contrary to a series of judgments of this Court. Reference has been made to
the case of Indian Metals and Ferro Alloys v. C'CE, reported in [1991) Supp
I SCC 125. The facts of that case are very akin to the facts of the case in
hand. In the said case. the appellant is a manufacturer of pipes, tubes and
poks made of iron and steel. These products are generally used by the
B telephone and telegraph departments of the Government of India, but can
also be used for purposes of transmission and lighting. After Tariff Item 26-
AA was introduced w.e.f. 24.4.1962 in the First Schedule to the Central
Excise and Salt Act. 1944 the Government of India issued a notification
dated 1.3.1963 under Rule 8 of the Central Excise Rules by which "telegraph,
C telephone and electric lighting and transmission poles falling under Item 26-
AA of the First Schedule of the Act" were declared completely exempt from
the duty. Accordingly, the appellant was not allowed to pay duty on the
goods right from 1962 till 1975. On 1.3.1975, the legislature introduced
Tariff Item 68 in the First Schedule to the Act covering "goods not elsewhere
pn:scribed". Thereafter, the Superintendent of Central Excise took the view
D that the poles in question manufactured by the appellant were classifiable not
under Item 26-AA but under Item 68 of the Central Excise Tariff and that,
therefore. the appellant was liable to pay duty on all goods manufactured by
it from I. l.1975 till the date of the notice.

Tariff Item 26-AA was introduced w.e.f. 24.4.1962 in the First Schedule
E
to the Act. On 1.1.1975, the legislature introduced Tariff Item 68 in the First
Schedule to the Act covering "goods not elsewhere prescribed". Even
thereafter, the appellant filed classification lists showing the poles as falling
under Item 26-AA and eligible for exemption under the relevant notification
(which had taken the place of the notification of 1.3.1963). These classification
F lists were approved and the appellant continued to clear its goods without
paying duty till August 1982.

According to the findings of this Court. the appellant was rightly
classified under 26-AA before 1.3.1975. The introduction of Item 68 makes
a difference to the interpretation of Item 26-AA. As observed by this Court,
G Item 68 was only intended as a residuary item. It covers goods not expressly
mentioned in any of the earlier items. If, as assumed by the Tribunal, the
poles manufactured were rightly classified under Item 26-AA, the question of
revising the classification cannot arise merely because Item 68 is introduced

-
to bring into the tax net items not covered by the various items set out in the
H schedule. This Court further observed that the real question, therefore, is
HINDUSTAN POLES CORPN. v. COMMR. OF CENTRAL EXCISE, CALCUTTA [DAL VEER BHANDARl,J.] 47 J

whether the goods manufactured by the appellant can be classified under A
Item 26-AA. The answer should be in the affirmative. This Court also observed
as under:

"The language of Tariff Item 26-AA is very wide. It covers iron and
steel products of the descriptions set out therein. The sum and
substance of the description given by the Assistant Collector in the ~-B
assessment order is only (a) that the poles produced by the appellant
are not ordinary pipes and tubes which convey a fluid from one place
to another and (b) that they are manufactured by a very elaborate and
sophisticated process. So far as the first point is concerned, it will be
appreciated that, just as pipes and tubes are generally intended to C
carry a fluid from one place to anotber, the poles with which we are
concerned enable wires to be passed through them for the transmission
of electric energy, a function not very very different in nature from
that of other ordinary pipes and tubes. That apart, even tubes and
pipes are not always necessarily used for such purpose. They can be
used as flag masts or .for purposes of scaffolding or other purposes D
where they do not serve as a medium for the transmission of a fluid.
This is not, therefore, a sound objection. In regard to the second
point, it is perhaps sufficient to point out that sub-item (iv) of Item
26-AA refers to pipes and tubes (including blanks thereof) all sorts,
whether rolled, forged, spun, cast, drawn, annealed, welded or E
extruded. It is comprehensive enough to take in all sorts of pipes and
tubes and even those obtained by the processes of forging, drawing
and so on. The ultimate product in the present case is. merely a set of
pipes or tubes of different diameters attached to one another by
different methods. The so-called manufacture is nothing but the putting
together of a number of pipes or tubes by one or other of the processes F
mentioned in the tariff item. The goods produced, therefore, do not
cease to be iron and steel products or pipes and tubes of the description
mentioned in Item 26-AA(iv). It may not be also con-ect to characterize
them as a different commercial commodity. Some of them are called
poles, an expression which means "a long slender piece of metal or G
wood commonly tapering and more or less rounded". Electric poles,
being hollow ones, are not much different from pipes or tubes. The
statement that they are commercially distinct commodities is merely
based on their being called 'poles'. They are also available in the
same market in which.normally pipes and tubes are otherwise available.
Neither the circumstance that certain processes are applied to the H
472 SUPREME COURT REPORTS (2006] 3 S.C.R.

A "mother" pipes or tubes nor the fact that, in order to identify the
particular type of tube or pipe one needs, one may use different
names is sufficient to treat the article as a commercially different
commodity."

This Court came to the conclusion that the goods of the appellant in
B question were assessable to duty under Tariff Item 26-AA.

In Bharat Forge and Press Industries v. CCE reported in (1990] I SCC
532, this Court observed that Tariff Item 26-AA(iv) encompasses all sorts of
pipes and tubes. It calls for no distinction between pipes and tubes
manufactured out of sheets, rods, bars, plates or billets and those turned out
C from larger pipes and tubes. It is of no consequence whether the pipes and
tubes are manufactured by rolling, forging, spinning, casting, drawing,
annealing, welding or extruding. The expression 'pipe fittings' merely denotes
that it is a pipe or tube of a particular length, size or shape. 'Pipe fittings' do
not cease to be pipes and tubes, they are only a species thereof. They are
D merely intended as accessories or supplements to the larger pipes and tubes.
They are pipes and tubes made out of pipes and tubes. There is no change
in their basic physical properties and there is no change in their end use. It
cannot be said that pipe fittings, though they may have a distinctive name or
badge of identification in the market, are not pipes and tubes. This use of the
words "all sorts" and the refe~ence to the various processes by which the
E excisable item could be manufactured set out in the tariff entry are
comprehensive enough to sweep within their fold the pipe fittings in question.

This Court further held that the goods in question fell under Item 26-
AA(iv). Tariff Item 68 is a residuary entry. Unless the Department can establish
F that the goods in question can by no conceivable· process of reasoning be
brought under any of the tariff items, resort cannot be had to the residuary
item. The Department's anxiety to invoke the residuary entry was held to be
improper.

A Constitution Bench of this Court in Union of India v. Delhi Cloth
G and General Mill Cu. Ltd.. AIR 1963 SC 791 had attempted to decide the
meaning of expression 'manufacture'. The Court held that 'manufacture'
which is liable to excise duty under the Central Excise and Salt Act, 1944,
must therefore be the "bringing into existence of a new substance known to
the market".
•.
H In another Constitution Bench of this Court in Devi Dass Gopal Krishnan
HINDUSTAN POLES CORPN. "· COMMR. OF CENTRAL EXCISE, CALCUTTA [DAL VEER BHANDARJ. l.] 473

& Ors. v. The State of Punjab & Ors. reported in Sales Tax Cases XX (1967) A
page 430, the Court relied on the dictionary meaning of 'manufacture' and
according to Court 'manufacture' means 'transform or fashion raw materials
into a changed form for use'. The Court observed that if by a process a
different identity comes into existence then it can be said to be 'manufacture'.

B
In Empire-Industries ltd. v. Union of India, AIR ( 1986) SC 662, it was
observed that manufacture is complete as soon as by the application of one
or more processes, the raw material undergoes some change. If a new substance
is brought into existence or if a new or different article having a distinct name,
character or use result from particular process, such process or processes C
would amount to manufacture. Whether in a particular case manufacture has
resulted by process or not would depend on the facts and circumstances of
the particular case.

A Constitution Bench of this Court in Mis Ujagar Prints and Anr. v.
Union of India & Ors., AIR (1989) SC 516 - followed the earlier decision in D
Empire Industries Ltd. v. Union of India (supra). While following the earlier
judgment it was held that if there should come into existence a new article
with distinct character and use as a result of the process, the essential condition
justifying manufacture of good is. satisfied.

This Court in Commissioner of Sales Tax, Orissa and Anr. v. Jagannath E
Cotton Company and Anr., [1995] 5 SCC 527 - mentioned that manufacture
in its ordinary connotation, signifies emergence of new and different goods
as understood in relevant commercial circles.

In Gramophone Co. of India ltd. v. Collector of Customs, Calcutta,
[2000] I SCC 549, this Court examined earlier cases of this Court and held F
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 is necessary and there must be
transformation; a new and different article must emerge having a distinctive
name, character and use. In this case, the word 'manufacture' has various G
shades of meaning but unless defined under the Act it is to be interpreted in
the context of the object and the language used in the sections. It would not
be applicable in cases where only processing activity is carried out. Further,
such production activity must be by an industrial undertaking.

In CCE v. Markfed Vanaspati & Allied Industries, reported in [2003] H
474 SUPREME COURT REPORTS [2006] 3 S.C.R.

A 4 sec 184, this Court clearly held that the burden to prove that there is
manufacture is on the Revenue. In that case, the question arose was whether
the goods became excisable merely because it fell within a Tariff Item. "Spent
earth" was "earth" on which duty had been paid It remained earth even after
the processing. Thus, if duty was to be ievied on it again, it would amount
B to levying double duty on the same product. This Court further observed that
merely because an item falls under Tariff Entry, it cannot be presumed or
deemed that there is manufacture.

In the case of CCE v. Technowe/d Industries, reported in (2003] 11
sec 798, the question was whether drawing of wires wire rods amounted to
C manufacture. It was held that both the products were wires and merely because
they were covered by two separate entries did not mean that the product was
excisable. I! was held that in the absence of any manufacture the product did
not become excisable merely because there were two separate entries.

In the case of Met/ex(!) (P) ltd. v. CCE reported in (2005] I SCC 271,
D this Court observed that the entry makes no distinction between ordinary film
and film which is lacqm:red or metallised or laminated. The Court arrived at
a definite conclusion that a film remained a film and no new or distinct product
has come into existence.

In Aman Marble Industries (PJ Ltd. v. CCE. reported in (2005] I SCC
E 279, the question arose whether cutting of marble slabs amounted to
manufacture for the purpose of Central Excise Act. This Court observed that
after the activity is completed a marble would remain marble. Therefore, this
activity did not attract the tax.

In Rajasthan SEB v. Associated Stone Industries, reported in (2000] 6
F sec 141, this Court observed that the word 'manufacture' generally and in
the ordinary parlance in the absence of its definition in the Act should be
understood to mean bringing to existence a new and different article having
a distinctive name, character or use after undergoing some transformation.
When no new product as such comes into existence, there is no process of
G manufacture. Cutting and polishing stones into slabs is not a process of
manufacture for the obvious and simple reason that no new and distinct
commercial product came into existence as the end product still remained
stone and thus its original identity continued. Ultimately, this Court held that
it was also not possible to accept that excavation of stones and thereafter
cutting and polishing them into slabs resulted in any manufacture of goods.
H
HINDUSTAN POLES CORPN '· COMMR OF CENTRAL EXCISE. CALCUTTA [DAL VEER BHANDARI, J.] 475

The question for consideration in Shyam Oil Cake Ltd. 's case (supra) A
was whether processing of the edible oil, manufactured by the appellant,
resulted in manufacture. This Court held that neither in the section note nor
in the chapter note nor in the tariff item do we find any indication that the
process indicated is to amount to manufacture. To start with, the product was
edible vegetable oil. Even after refining, it remained edible vegetable oil. As B
actual manufacture has not taken place, the deeming provision cannot be
brought into play in the a?sence of it being specifically stated that the process
amounts to manufacture.

We have heard learned counsel for the parties at length. We have also
carefully perused the pleadings and examined a series of cases decided by C
this Court. The following conclusions are irresistible:

(I) The process carried out by the appellants do not change the basic
identity or original character of M.S .. Welded Pipes to make it a
new marketable product leading to manufacture as defined under
Section 2(f) of the Central Excise Act, 1944. D
(2) The burden to prove manufacture is always on the Revenue. In
the instance case the Revenue has completely failed to prove that
the activity carried out by the appellant amounts to manufacturing.
It is settled law that when one particular item is covered by one
specified entry, then the Revenue is not permitted to travel to E
residuary entry.

(3) The residuary entry is meant only for those categories of goods
which clearly fall outside the ambit of specified entries. Unless
the Department can establish that the goods in question can by
no conceivable process of welding be brought under any of the F
tariff items, resort cannot be had to the residuary item.

In view of the settled legal position the activity of the appellants of
merely joining of three pipes, one with other, of different dimensions to
obtain a desired length can by no stretch of imagination be brought within
the category of 'manufacture'. G
Consequently, these appeals are allowed and show cause notices are
quashed and the impugned judgment of the Tribunal and Commissioner of
Central Excise are set aside. In the facts and circumstances of the case, we
direct the parties to bear their own costs.
H
476 SUPREME COURT REPORTS [2006] 3 S.C.F..

A Before we part with this case we would like to impress upon the
respondent authorities that before issuance of show cause notices the Revenue
must carefully take into consideration the settled law which has been crystallized
by a series of judgments of this Court. The Revenue must make serious
endeavour to ensure that all those who ought to pay excise duty must pay
B but in the process the Revenue must refrain from sending of indiscriminate
show cause notices without proper application of mind. This is absolutely
imperative to curb unnecessary and avoidable litigation in Courts leading to
unnecessary harassment and waste of time of all concerns including Tribunals
and Courts.

B.K. Appeal allowed.