V.K. Agrawal, Member (T)
1. In this appeal, preferred by the Revenue, the issue involved is whether the process of weather proof treatment/anti corrosion treatment carried out by M/s. P.S.L. Corrosion Control Ltd. on steel rebars with the help of epoxy powder amounts to manufacture under Central Excise Act.
2.1 Shri Jagdish Singh, learned D.R., submitted that the Respondents are engaged in the manufacture of epoxy coated steel bars/rebars supplied by different parties which are classifiable under sub-heading 7215.90 of the Schedule to the Central Excise Tariff Act; that the Commissioner (Appeals) under the impugned Order has held that the process of epoxy coating is more or less similar to the process of galvanization which does not amount to manufacture. The learned D.R., further, submitted that the process of epoxy coating is very much elaborate, precise and ultra modern; that epoxy powder is applied by electrostatic spray on the hot steel bar at preset temperature level at 232C; that the bar is machine blasted, using steel shot and grits as abrasives, prior to heating on an electric induction heating system; that the coated bars are cured and force-cooled by water spraying to enable handling and testing; that the automatic conveyorised coating plant has appropriate process controls to ensure uniform quality for thickness, adhesion and continuity of coating, batch after batch; that temperature is checked and monitored not only by tempilisticks but also by infra-red camera besides the built-in electrical controls; that the coated bars are rigorously tested for chemical resistance, abrasion resistance, impact, salt spray, applied current and cathodic disbondment, etc., on a continuing basis. The learned D.R. then emphasised that the manufacturing process is a substantial and elaborate one and after the process an entirely new product viz. fusion epoxy coated bar emerges and the value is enhanced by 45% to 55%; that the difference between the ordinary bar and the epoxy coated bar is that the life is very long and the life of the concrete structure built by using the impugned epoxy coated bar is phenomenally increased.
2.2 He relied upon the decision of the Supreme Court in the case of Laminated Packings (P) Ltd. v. CCE, 1990 (49) E.L.T. 326 (S.C.) wherein it has been held that the process of lamination of kraft paper with polyethylene amounts to manufacture as different goods come into being. He also placed reliance on the decision of the Tribunal in the case of Decorative Laminates (India) Ltd. v. CCE, 1990 (46) E.L.T. 506 wherein it has been held that process of application of Phenol formaldehyde resin on plywood and pressing it with hand roller at 100C amounts to manufacture resulting in a new weather proof product; that the Supreme Court has affirmed the decision as reported in 1997 (89) E.L.T. A40. Reliance has also been placed on the following decisions : -
(i) CCE, Bombay v. S.D. Fine Chemicals, 1995 (77) E.L.T. 49 (S.C.)
(ii) Brakes India Ltd. v. Superintendent of Central Excise, 1998 (101) E.L.T. 241 (S.C.)
(iii) Union of India v. J.G. Glass, 1998 (97) E.L.T. 5 (S.C.)
(iv) CCE v. D.K. Electricals Industries, 1994 (74) E.L.T. 272 (T)
2.3 The learned D.R. also mentioned that the impugned products are prepared for distinct, separate and different use in the construction of bridges, flyovers, jellies sewage and water treatment plants, chemical plants, marine out falls, caroling towers, coastal and under water constructions; that uncoated steel bars/zinc coated steel bars can not be used and they are not allowed to be used in the construction of the said projects as the usage of epoxy coated steel bars is made mandatory by the customers. Finally the learned D.R. drew our attention to Memorandum of Appeal wherein the differences between Galvanizing Process and Epoxy Coating Process have been mentioned to emphasize the plea that both the processes are not similar as observed by the Commissioner (Appeals) in the impugned Order.
3.1 On the other hand, Shri V. Lakshmikumaran, learned Advocate, submitted that they receive duty paid steel bars on which they undertake epoxy coating and return the same; that in respect of their sister concern M/s. PSL Holding Ltd. who are also carrying out the weather proof-anti-corrosion treatment on the steel rebars, the Superintendent under-letter dated 25-6-90 clarified that after processing the basic nature of bars did not undergo any transformation and as such the coating process was exempt from excise licensing control; that the Appellants are carrying out the same coating process on the goods of Chapter 72 and as there is no change in Section/Chapter Notes since 1990, the weather proof process undertaken by them does not become excisable; that only in the year 2002, Note 4 has been inserted in Chapter 73 of the Central Excise Tariff wherein the process of galvanization has been claimed to be the process of manufacture. The learned Counsel, further, submitted that the bars have identical chemical composition and physical properties; that as rebars remain rebars even after weather proof anti-corrosion-epoxy coating treatment, there is no manufacture of a new commodity; that the issue has been examined by the Supreme Court in the case of Gujarat Steel Tubes Ltd. v. State of Kerala, 1989 (42) E.L.T. 513 (S.C.) wherein it has been observed by the Supreme Court that "The purpose of galvanizing a pipe is merely to make it weather-proof. It remains a steel tube. By being put through the process of galvanizing it is made rust-proof. Neither its structure nor function is altered. As a commercial item it is not different from a steel tube......Merely because the steel tube has been galvanized does not mean that it ceases to be a steel tube.....The limited purpose of galvanization does not, it seems to us, bring a new commodity into existence.
3.2 The learned Advocate, also mentioned that the decision in the case of Laminated Packings is not applicable as the use to which kraft paper is put to is completely different from polyethylene coated paper. He also relied upon the decision in the case of CCE, Bombay-II v. A.1 Bright, 2001 (130) E.L.T. 896 (T), wherein it has been held that the process of electroplating of duty paid M.S. wire does not amount to manufacture as no new commodity comes into existence and contended that the concept of galvanization not amounting to process of manufacture was extended by the Tribunal to electroplating. Reliance has also been placed on the decision in the case of CCE, Mumbai-1 v. Clad Material System, 2001 (131) E.L.T. 249 (T). The learned Advocate also referred to the Board's Circular No. 17/88, dated 1-6-1988 wherein it was clarified that the process of cement mortar coating on the outside and epoxy bitumen painting inside of steel pipes known as 'Guniting' carried out during the construction of water supply pipeline does not amount to manufacture. He also referred to the following two Circulars issued by the Board :
(i) 526/22/2000, dated 19-4-2000
(ii) 19/19/1994, dated 9-2-1994.
3.3 In reply the learned D.R. mentioned that process of epoxy coating is different from galvanization as epoxy coated bars are prepared for distinct, separate and different use.
4. We have considered the submissions of both the sides. The Central Excise duty is leviable on the activity of manufacture. The Supreme Court has held in the case of Union of India v. Delhi Cloth & General Mills, 1977 (1) E.L.T. (J 199) that manufacture implies a change, but every change is not manufacture. "But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." The Supreme Court has laid down a twofold test in the case of UOI v. J.G. Glass Industries Ltd., 1998 (97) E.L.T. 5 (S.C), for deciding whether the process is that of "manufacture" as under : "First, whether by the said process a different commercial commodity comes
into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will
serve no purpose but for the said process."
Applying these tests to the facts of the present matter, it cannot be
said that a different commercial commodity comes into existence as a result of the process of epoxy coating undertaken by the Respondents. The steel bars/rebars, after being coated with epoxy powder remains bars/rebars only. The only difference which is caused by the process of epoxy coating is that the product becomes anti-corrosive. There is nothing on record to show that the bars/rebars after the process of coating ceases to be bars/rebars and a different commercial commodity comes into existence. The process undertaken by the respondents imparts the quality of anti-corrosion to the bars/ rebars as the process of galvanization is to make the product weather-proof. The Supreme Court in Gujarat Steel Tube Ltd., supra, has given the reasoning as to why the process of galvanizing the pipe does not amount to manufacture by observing that "the galvanization is done on steel tubes or pipes as a protective measure." There may be difference between the processes of galvanization and epoxy coating. But the difference in both process is not material for deciding whether the process is that of manufacture. The test remains as to whether there is a transformation; a new and different article has emerged having a distinctive name, character or use. The Revenue itself has mentioned in the Memorandum of Appeal that the difference caused by the process is that the life of impugned bar is very long and the life of the concrete structure built by using such bar is phenomenally increased. The Revenue has also emphasized that as the manufacturing process is a substantial and elaborate one, it amounts to manufacture. For a process being held to be amounting to manufacture, it is not necessary that it should be elaborate one. It has been held by the Supreme Court in Empire Industries Ltd. v. UOI, 1985 (20) E.L.T. 179 (S.C.) that "the degree of transformation and labour and skill spent are irrelevant." The ratio of the decision in the case of Decorative Laminates is not applicable as the process undertaken therein resulted into emergence of a new product whereas in the present matter no new product emerges. We, therefore, reject the appeal filed by the Revenue.