Supreme Court of India
M/S. PRACHI INDUSTRIESversusCOMMISSIONER OF CENTRAL EXCISE, CHANDIGARH
- Citation
- 2008 INSC 417
- Decided
- 28 March 2008
- Disposal
- Dismissed
- Bench
- S H KAPADIA
Holding
Swaging is a manufacturing process and amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.
Summary
M/S. Prachi Industries, a small‑scale unit, purchased duty‑paid mild steel (MS) tubes classified under heading 73.06 and processed them by cutting to length and then subjecting them to swaging on a rotary machine fitted with various dies. The Revenue argued that the swaged product remained the same entry and therefore no additional excise duty was payable, while the assessee contended that swaging constituted manufacture under Section 2(f) of the Central Excise Act, 1944. The Supreme Court examined the amended definition of "manufacture" in the 1985 Act, holding that any incidental or ancillary process that results in a finished product with a distinct shape, size and use, and imparts a lasting character, amounts to manufacture. It found that swaging changes the physical identity of the MS tube, producing a new hollow profile used for decorative items or auto‑rickshaw grips, and therefore qualifies as manufacture. Consequently, the Court dismissed the appeals, confirming that swaging is a manufacturing process liable to excise duty.
Issues considered
- Whether swaging of MS tubes amounts to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944
Legislation cited
Subjects
manufactureswagingcentral exciseSection 2(f)definition of manufactureCENVAT creditexcise dutymetal forminghollow profiles
Judgment
[2008] 5 S.C.R. 560
.,._
A M/S. PRACH! INDUSTRIES
V.
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH
(Civil Appeal Nos. 3621-25 of 2002)
MARCH 28, 2008
B
(S.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ.)
Central Excise Act, 1944; s. 2(f):
Manufacture - Swaging of tubes whether amounts to
c manufacture - Held: Manufacture of a product means any
process incidental/ancillary to the completion of manufacturing
of a product - Finished product so obtained must be of
distinguishable identity in the form of physical shape, size and
use - In the present case, swaging imparts a change of lasting
D character to the plane MS-tubes - It undergoes a change both
in terms of form/shape and user - MS tubes being used to ~
carry water whereas work piece, the product obtained after
swaging of MS tubes, used as decorative item/in auto-rikshaw
- Hence, the process of swaging amounts to manufacture ul
E s. 2(f) of the Act- Central Excise and Tariff Act, 1985 - Heading
73.06.
Words and Phrases:
'Metal Forming' and 'swaging' - Meaning of, in the
F context of s. 2(f) of the Central Excise Act, 1944.
Assessee buys duty-paid MS tubes, cut into requisite }; '
lengths and put in the swaging machine in which dies
are fitted which imparts "folds" to the flat surface of the
tube. The question which arose for determination in these
G appeals was as to whether swaging constitutes
manufacture in terms of Section 2(f) of the Central Excise
Act, 1944.
Dismissing the appeals, the Court -+'
H 560
MIS. PRACH! INDUSTRIES v. COMMNR. OF CENTRAL 561
- EXCISE, CHANDIGARH
HELD: 1.1 With the introduction of the Central Excise A
and Tariff Act, the definition of "manufacture" has been
substituted to include "any process - incidental or
ancillary to the completion of a manufactured product".
Therefore, on analyzing Section 2(f) of the Central Excise
Act, 1944 it becomes clear that the word "process" must B
be in relation to manufacture. (Para - 8) [565-G; 566-A]
1.2 Incidental process must be an integral part of
manufacture resulting in a finished product which has to
be of a different physical shape, size and use. The said
process must impart a change of lasting character to the c
original product or raw-material. After the process, a new
finished product must come into existence. It comes into
existence only when it acquires a distinguishable identity.
(Para - 8) [566-B, C]
D
~
1.3 Once the process amounts to manufacture, the
fact that the goods belong to the same entry would not
be relevant. In the present case, the swaging machine
contains dies of different sizes and patterns. Swaging is
a process which imparts a change of lasting character to
the plane MS pipe or tube by use of dies which exists in E
the machine. After the process of swaging the identity of
the plane MS pipe or tube undergoes a change both in
terms of form, shape and user. (Para - 8) [566-C, 0, E]
2.1 According to Production Technology, Metal F
'·,>,. Forming is a manufacturing process by which the size or
shape of plane pipe or tube is changed by the application
of forces that produce stress in the part of tube or pipe
which is greater than the yield strength and less than the
fracture strength of the material. (Para - 9) [566-E, F]
G
2.2 Forming Operation in which the diameter of bars
i or tubes is changed by repeated blows of shaped
·+ hammers is called as "Swaging". (Para -10) [567-A, B]
Production Technology by O.P. Khanna - referred to.
H
562 SUPREME COURT REPORTS [2008] 5 S.C.R.
A 2.3 Production Swaging Operations are commonly
-
performed on rotary swaging machines. Swaging has
proved to be an economical-production method for
forming shapes confined to a portion of the total length
of a given pipe or tube, by tapering, pointing, reducing or
B sizing. Swaging provides a pattern or contour, with peaks
and valleys, depending upon the desired configuration.
Therefore, even in matter of classification, distinction is
made between pipes and tubes on one hand and hollow
profile on other hand. (Paras - 12 &13) [567-F; 568-A, BJ
C Dictionary of Technical Terms by F.S. Crispin - referred
to.
2.4 In the present case, the assessee has assigned
distinct code numbers and distinct design numbers for
different shapes of profiles (pattern or contours). This
0
aspect has not been considered by the adjudicating
authority which decided the matter in favour of the
assessee. (Para - 14) [568-C, DJ
2.5 The rotary swaging machine with different dies
E therein imparts a change of lasting character to the plane
pipe or tube by use of dies. That, a workpiece having a
distinguishable identity comes into being depending on
the shape of the die and the punch used. On facts, it is
found that after undergoing the swaging process a
F workpiece of a different shape and user emerges and,
therefore, the process of swaging amounts to
manufacture under Section 2(f) of the Act. (Para - 15)
[568-D, E, FJ
2.6 MS plane pipe/tube can carry water to the
G overhead tank whereas the workpiece produced in the
present case is useful as a decorative item or as an item
which provides a strong grip in the case of auto-rickshaw.
Therefore, a distinguishable identity is acquired of a
lasting character imparted to a plane MS pipe/tube by use
H of dies and presses. (Para - 16) [568-F, GJ
M/S. PRACHI INDUSTRIES v. COMMNR. OF CENTRAL 563
EXCISE, CHANDIGARH [KAPADIA, J.]
.,... Bharat Forge & Press Industries (P) Ltd. vs. Collector of A
Central Excise - 1990 (45) E.L.T. 525 (SC) and Hindustan
Poles Corpn. vs. Commissioner of Central Excise, Calcutta -
2006 (4) sec 85 - held inapplicable.
3. The issue as to entitlement of the assessee to the
benefit of CENVAT credit and SSI exemption was not B
..i raised by the assessee before the Tribunal. However, it is
clarified that no opinion has been expressed on the
entitlement of the assessee in that regard. However, this
order will not preclude the assessee from making the claim
for such entitlement in accordance with law. (Para - 19) c
[569-F, G]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
3621-25 of 2002.
From the final Order Nos. dated 3-7/2002-B dated D
04.01.2002 of the Customs, Excise and Gold (Control)
A-.
Appellate Tribunal, New Delhi in Appeal Nos. E/2042-2046/
2001-B.
WITH
E
Civil Appeal No. 5401 of 2004.
S.K. Bagaria, V. Lakshmi Kumaran, Alok Yadav, Rajesh
Kumar, Ajay Kumar Jain, Seema Jain, M .P. Vi nod, Balbir Singh,
Deepak, Rajesh Kumar, Rupinder Singh and Sarabjot Walia
for the Appellant. F
'~ Vikas Sharma and B.V. Bala ram Das for the Respondents.
The Judgment of the Court was delivered by
KAPADIA, J. These civil appeals are filed by the assessee G
under Section 35-L of the Central Excise Act, 1944 (for short,
"1944 Act") and are against Final Order No.3-7/2002-B dated
i
4.1.2002 in Appeal No.E/2042-2046/2001-B and Final Order
-+ No.120/04-B dated 19.1.04 in Appeal No.E/1558/03-B passed
by CEGAT. By the impugned orders CEGAT has allowed
H
564 SUPREME COURT REPORTS [2008] 5 S.C.R.
A appeals filed by the Revenue. By the impugned decision CEGAT
has held that the process of swaging undertaken by the assessee
on swaging machine on duty paid MS tubes falling under
Heading 73.06 of the Schedule to the Central Excise and Tariff
Act, 1985, amounts to "manufacture" within the meaning of
B Section 2(f) of the 1944 Act.
·~
2. For the sake of convenience we reproduce hereinbelow
facts mentioned in Civil Appeal Nos. 3621-25 of 2002 (lead
matter).
c paid MS
3. Mis. Prachi Industries is the small scale unit. It buys duty-
tubes from its manufacturers. The said MS tubes are
classified under Heading 73.06 of the Schedule to the Central
Excise and Tariff Act, 1985 (for short, "1985Act"). After receiving
MS tube from the manufacturers, the assessee cuts the same
into requisite lengths. The cut MS tube is thereafter put in the
D
swaging machine in which dies are fitted which imparts "folds"
to the flat surface of the MS tube/pipe. .... '
4. The short question which arises for determination in this
batch of civil appeals is :
E "Whether swaging constitutes manufacture in terms of
Section 2(f) of the 1944 Act?"
5. At the outset, it may be reiterated that MS tubes bought
by the assessee from its manufacturers falls under Heading
F 73.06 and the Revenue seeks to demand duty once again
under the same heading by treating the process of swaging
as "manufacture". Accordingly, we quote herein below Chapter
Note 3 in Chapter 73 which covers "Articles of Iron and
""
Steel" :
G "In relation to pipes and tubes of heading Nos.73.04, 73.05
and 73.06, the process of drawing or redrawing shall
amount to 'manufacture'."
I
6. We quote hereinbelow the Heading 73.06 which reads -t
as follows:
H
M/S. PRACHI INDUSTRIES v. COMMNR. OF CENTRAL 565
EXCISE, CHANDIGARH [KAPADIA, J.]
Heading Sub- Description of goods Rate of A
No. heading Duty
No.
( 1) (2) (3) (4) .
73.06 Other tubes, pipes and B
hollow profiles (for example,
open seam or welded,
riveted or similarly closed),
of iron or steel
c
7306.10 Of iron 15%
7306.90 Other 15%
7. We also quote herein below the distinction between
"tubes and pipes" and "hollow profiles" as indicated in HSN, D
..... Vol.3, which reads as under:
"Tubes and pipes
Concentric hollow products, of uniform cross-section with
only one enclosed void along their whole length, having E
their inner and outer surfaces of the same form. Still tubes
are mainly of circular, oval, rectangular (including square)
cross-sections but in .addition may include equilateral
triangular and other regular convex polygonal cross-
sections .... F
"'.'.),, Hollow profiles
,,
Hollow products not conforming to the above definition
and mainly those not having their inner and outer surfaces
of the same form."
G
(emphasis supplied)
I_,,....
8. At the outset we may clarify that our judgment in this
case is based on interpretation of the word "manufacture" as
defined in Section 2(f) of 1944 Act. With the introduction of 1985
Act, the definition of "manufacture" has been substituted to H
566 SUPREME COURT REPORTS [2008] 5 S.C.R.
A include "any process - incidental or ancillary to the completion
ofa manufactured product". Therefore, on analyzing Section 2(f),
it becomes clear that the word "process" must be in relation to
manufacture. By this definition, it is made clear that the process
must be incidental to the completion of the manufactured product.
B In other words, incidental process must be an integral part of
manufacture resulting in a finished product which has to be of a
different physical shape, size and use. The said process must
impart a change of lasting character to the original product or
raw-material. After the process, a new finished product must
c come into existence. It comes into existence only when it
acquires a distinguishable identity. For example, in the case of
blending of ore what emerges after the process of blending is
an ore but of different type. Once the process amounts to
manufacture, the fact that the goods belong to the same entry
would not be relevant. In the present case, the swaging machine
0
contains dies of different sizes and patterns. Swaging is a
process which imparts a change of lasting character to the plane
MS pipe or tube by use of dies which exists in the machine.
After the process of swaging the identity of the plane MS pipe
or tube undergoes a change both in terms of form, shape and
E user.
9. According to Production Technology, Metal Forming is
a manufacturing process by which the size or shape of plane
pipe or tube is changed by the application of forces that produce
F stress in the part of tube or pipe which is greater than the yield
strength and less than the fracture strength of the material. The
applied forces may be compressive, bending, sharing or a
combination of all. In Metal Forming the sheet metal is strained
beyond its yield point so that it takes a permanent new shape
G which is retained for all times. Metal Forming is one of the
most important of the manufacturing processes. It is the fastest
way to change the shape of the iron pipe or tube. There are
I
various types of Metal Forming
-+-
Operations. These Operations are performed on Presses
H and Hammers. They are also performed on rolls. Open and
MIS. PRACHI INDUSTRIES v. COMMNR. OF CENTRA.L 567
EXCISE, CHANDIGARH [KAPADIA, J.]
-r- closed-die forging, coining, forward extrusion, embossing, A
swaging etc. are Forming Operations performed on Presses
and Hammers.
10. According to Production Technology by O.P. Khanna,
Forming Operation in which the diameter of bars or tubes is
changed by repeated blows of shaped hammers is called as B
~ "Swaging":
11. It is important to note that in the mechanics of Forming
Processes, the mechanics of rolling is different from the
mechanics of forging, which is different from mechanics of c
-I
I drawing, which is different from mechanics of bending and which
is different from mechanics of extrusion. The shape that is
formed on the metal sheet depends upon the shape of the punch
and the shape of the die used to produce the workpiece.
Depending upon the nature of the desired configuration, the
D
. formed shape may be developed over a series of operations
or it may be simultaneously formed. A wide variety of punches
and dies are used in the swaging machine. The dies are of
different shapes, namely, V-dies, W-dies, u~dies, rotary dies
etc. The use of these dies would largely depend upon the
desired production rate and volume. In rotary swaging the final E
shape is round because the dies rotate around the workpiece
while the operation is being performed.
12. Swaging is a general term which is applied to a number
of Metal Forming Operations. Production Swaging F
Operations are commonly performed on rotary swaging
'>- machines. Swaging has proved to be an economical-production
method for forming shapes confined to a portion of the total
length of a given pipe or tube, by tapering, pointing, reducing or
sizing. Swaging process is also used for joining and fastening
G
operations. It is also used in assembling two or more
components by joining a bushing to a shaft, swaging of rings
onto wire for use as electrical connectors, and for attaching
t
-.-- fittings to tubes.
13. According to Dictionary of Technical Terms by F.S. H
568 SUPREME COURT REPORTS [2008] 5 S. C.R.
A Crispin, the word "swage" is defined to mean a form of die used
as an aid in forming forged work. According to the said
Dictionary the word "profile" refers to an outline or contour.
Swaging provides a pattern or contour, with peaks and valleys,
depending upon the desired configuration. Therefore, even in
B matter of classification, distinction is made between pipes and
tubes on one hand and hollow profile on other hand.
14. Applying the above tests, we are of the view that the
MS tube/pipe after insertion in the swaging machine receives
"folds" on a portion of the plane MS tube/pipe depending upon
c the die in the swaging machine. It is the die which gives accurate
shape to the workpiece. In the present case, the assessee has
assigned distinct code numbers and distinct design numbers
for different shapes of profiles (pattern or contours). rhis aspect
has not been considered by the adjudicating authority which
D decided the matter in favour of the assessee.
15. Applying the above tests in the context of Section 2(f) • &..
of the 1944 Act, we are of the view that in the present case the
rotary swaging machine with different dies therein imparts a
change of lasting character to the plane pipe or tube by use of
E dies. That, a workpiece having a distinguishable identity comes
into being depending on the shape of the die and the punch
used. On facts, we find that after undergoing the swaging process
a workpiece of a different shape and user emerges and,
therefore, in our view, the process of swaging amounts to
F manufacture under Section 2(f).
16. Before concluding, we may mention that MS plane .....
pipe/tube can carry water to the overhead tank whereas the
workpiece produced in the present case is useful as a decorative
item or as an item which provides a strong grip in the case of
G
auto-rickshaw. Therefore, in our view a distinguishable identity
is acquired of a lasting character imparted to a plane MS pipe/
tube by use of dies and presses.
17. In the case ot Bharat Forge & Press Industries (P)
...
H Ltd. V. Collector of Central Excise - 1990 (45) E.L.T. 525
M/S. PRACHI INDUSTRIES v. COMMNR. OF CENTRAL 569
EXCISE, CHANDIGARH [KAPADIA, J.]
--+-- (SC), this Court held that a mere change in length, size or shape A
does not bring into existence a new product and the same is
not dutiable: Merely because the good(s) after processing
becomes different commercial commodity or having a distinct
name, would not result in any change in excise classification if
they continue to be goods of same specie. This court held that B
- ~
pipe fittings made out of pipes and tubes continued to be pipes
and tubes. In our view, the judgment of this Court in Bharat Forge
(supra) has no application. In this case, we are not concerned
with pipe fittings. In this case, the assessee is carrying out the
process by which shape of the MS· pipe changes and what
emerges is a workpiece (desired configuration) after passing
c
through swaging machine. That, after going through the swaging
machine what emerges is a profile of a workpiece.
,
'
18. According to Chambers Science and Te,chnology
Dictionary the word "profiling" means producing the profile of a D
~ die or other workpiece, with a grinding machine or a milling
.~
machine, incorporating a tracing mechanism. In the present
case, we are concerned with rotary swaging machine which is
based on rotary hammering process. The important thing to be
noted is that the die is an important segment of that machine E
and that is why in the present case, as stated above, the
assessee has been assigning different, distinct code/design
numbers for different shapes/types of hollow profile (See: page
132, Vol. II, of the Civil Appeal paper book).
19. Before us, it has been urged that in any event the F
assessee is entitled to the benefit of CENVAT credit and SSI
".>- exemption. This point was not raised by the assessee before
'l' the Tribunal. However, we make it clear that we express no
opinion on the entitlement of the assessee in that regard.
"1. However, our ,order will not preclude the assessee from making
the claim for such entitlement in accordance with law.
20. Before concluding we may clarify that the judgment of
I
-r this Court in case of Hindustan Poles Corpn. v.
.Commissioner of Central Excise, Calcutta - 2006 (4) SCC
570 SUPREME COURT REPORTS [2008) 5 S.C.R.
A 85 has no application to the facts of the present case. In the
case of Hindustan Poles (supra) the question which arose for
determination before this Court was : whether joining of duty-
paid pipes of different diameters by the assessee by welding
would amount to manufacture. It was held that even after welding
B there is no change in the basic identity or original character of
MS welded pipes so as to make the same a marketable product.
It is important to note that in that matter the original item was
MS welded pipes. It was a case of connecting duty-paid pipes
of different diameters. It was not the case where "folds" were to
C be imparted on to the plane MS pipes which is the case herein.
Further, ·in Hindustan Poles (supra) swaging machines were
used. However, various functions are performed by swaging
machines, welding is one of them. In numerous cases swaging
machines are used by which the sizes of two pipes are welded
through that machine. However, welding is not the only function
0
of swaging machine. Imparting of folds on to the plane pipes
through the swaging machine containing dies of different shapes
and sizes is the other function of that machine. That function
was not for consideration in the case of Hindustan Poles
(supra). Therefore, that judgment has no application to the facts
E of the present case.
21. Accordingly, the above civil appeals filed by the
assessee are dismissed with no order as to costs.
S.K.S. Appeals dismissed.
F
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