Scope of manufacture extended in chapters 68 and 76 of Central Excise Tariff Act, 1985 with immediate effect

By TIOL News Service

NEW DELHI, FEB 26, 2010: NO Union Budget would be complete without a retrospective legislation or with a new chapter note enlarging the definition of manufacture under the Central Excise Act, 1944.

We take a look at the winners of this year’s manufacturing contest.

The Ninth Schedule to the Finance Bill, 2010 [clause 74 refers] has joint winners and they are –

(A) In chapter 68, the following note 3 has been inserted –

“3. In relation to products of headings 6802 and 6810, the process of cutting or sawing or sizing or polishing or any other process, for converting stone blocks into slabs or tiles, shall amount to “manufacture”.”

(B) In chapter 76, after numbering the existing note as note 1, a new note 2 is inserted and it reads –

“2. In relation to products of heading 7608, the process of drawing or redrawing shall amount to “manufacture”.”

Background

(A) In the case of Rajasthan State Electricity Board v. Associated JT 2000 (6) S.C. 522,the Supreme Court has held that cutting and polishing stone into slabs did not amount to any manufacture of goods. These were the observations of the Bench -

"....This a part excavation of stones from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. 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 distinctive name, character or use after undergoing some transformation. When no new product as such comes into existence, there is no process of manufacture. The cutting and polishing stones into slabs is not a process of manufacture for 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...It is not possible to accept that excavation of stones and thereafter cutting and polishing them into slabs resulted in any manufacture of goods."

Incidentally, in the case of Aman Marble Industries [2003-TIOL-18-SC-CX], the Apex Court after relying on the above decision held that “Cutting marble blocks into slabs and polishing them doesn't amount to manufacture.”

Later, So, if “marble” could get such a chapter note, “Stone blocks” were not far away and thus products of heading 6802 and 6810 also get covered by the recent amendment made by the Finance Bill, 2010.

(B)As for amendments in Chapter 76 of the Central Excise Tariff, if others viz. drawing or redrawing of pipes and tubes of headings 7304, 7305 and 7306 could get the benefit of being anointed as a manufacturing activity, chapter 76 was not far.

Therefore, chapter 76 also gets a chapter note notifying that in relation to products of heading 7608, the process of drawing or redrawing shall amount to manufacture.

Last but not the least, these amendments come into immediate effect as the relevant clause 74 has been declared under the Provisional Collection of Taxes Act, 1931.

Welcome to the gang - Lucky - oye, Oye – lucky!