Holding

Any operation that is integrally connected with the manufacturing sequence, even if it merely handles raw material, is a 'process in or in relation to manufacture' and, if carried out with power, defeats the exemption under Notification No.179/77 CE.

Summary

The Revenue appealed against orders of the Customs, Excise and Gold (Control) Appellate Tribunal that had allowed exemption from excise duty to Rajasthan State Chemical Works and Sunderson (Minerals) Ltd. under Notification No.179/77 CE, which exempts goods where no process is ordinarily carried on with the aid of power. The respondents used diesel‑driven pumps to transfer brine into salt pans and diesel‑driven lifts to raise raw materials to a kiln, and argued that these were merely preliminary handling steps that did not alter the raw material. The Revenue contended that such steps are part of the manufacturing process and, because they are performed with power, the exemption should not apply. The Supreme Court examined the meaning of "process in or in relation to manufacture" and held that any operation integral to the overall manufacturing sequence, even if it does not itself change the raw material, qualifies as a process in relation to manufacture. Consequently, the use of power for pumping or lifting makes the exemption inapplicable. The Court allowed the Revenue's appeals, denying the exemption to the respondents.

Issues considered

Whether the use of power for pumping brine or lifting raw materials constitutes a 'process in or in relation to manufacture' within the meaning of Notification No.179/77 CE.
Whether such processes, even if they do not effect a change in the raw material, disqualify the goods from the exemption under the notification.

Legislation cited

Central Excise Rules, 1944s. Rule 8(1)
Central Excises and Salt Act, 1944s. 2(f), s. 35L

Subjects

excise duty exemptionpower‑driven processmanufacturing processCentral Excisenotification interpretationcrude sodium sulphatelime manufacturing

Judgment

A COLLECTOR OF CENTRAL EXCISE, JAIPUR ETC. ETC.
v.
· RAJASTHAN STATE CHEMICAL WORKS DEEDW~A,
.f;• RAJASTHAN ETC.·:_ ETC.
I • I

1 -·
SEPTEMBER ,17, 199~
B
(S. RANGANATHAN, M. FATHIMA BEEVI AND ND. OJHA, JJ.).

Central Excises and Salt Act, 1944: Section 2(/), Item No. 68 of First
Schedule-Notificauon No.179/77, CE dated 18.6.1977 - Exemption in
relation to manufacture of which no process is carried on with the aid of
C power-Assessees using power. to lift raw materials- Whe~r falls within
'process of manufacture'- Exemption-Whether available.
"
Worm & Phrases: "Ma11ufacturing Process" - Meaning of.
I • 1l J ..

By way of notification dated.18.6.1977, the Central .Government
D exempted from duty all goods falling under Tariff Item No. 68 of the First
Schedule to·. the Central i;ccises and Salt Act, 1944 in or in relation to
manufacture of wbkh no process was ordinarily carried on with the aid of
+
power.
. . ·;
The respondents in the first set of appeals have been manufacturing
E crude sodium sulphate.·· Since the respondents used diesel pumps for
pumping brine into salt paiis, in the process ofnianufacture, the benefit of
the said notification was denied to them on the ground that the process of
manufacture was earried on with the aid of power. However, on appeal,
the Collector of Customs (Appeals) all~wed the benefit to the respondents.
F . Revenue preferred an appeal and the Tribunal affirmed the Collector's
order. ~ . • • - t ... •.. Jj.< - .
In the other appeals, the Respondents, manufacturer of lime, •Bed
to lift the raw materials to the platform at.the head of the kiln by the aid
of power and the raw materials were mixed.manually into the kiln. The
benefit of the said notification was denied to the Respondents by the As-
G sistant Collector. Even an appeal before the Collector of Appeals failed.
However, on appeal the Tribunal accepted the claim of the Respondents.
In all these matters the Tribunal took the view that the
manufacturing process started from the stage of feeding raw "!aterials
into the salt pan or the kiln as the case may be and the transferring of the
H raw materials was a stage prior to the manufacturing Pzocess and so the
124
C. C. E. v. . STATE CHEMICAL WORKS 125

use of power for such transfer would not disentitle the respondents from A
the benefit under the said notification.

Aggrieved by the orders of the Tribunal, the Revenue has preferred
the present appeals.

Before this Court, the Revenue contended that pumping the brine , B
into the pan or lifting the raw materials to the kiln head was a process in
relation to the manufacture of the final product and since that process
~ with the aid of power was integrally connected with the manufacture, the
exemption would not apply.

The Respondents contended that if the p~ocess carried on with the c
aid of power does not bring about any change in the raw materials, it
cannot be said that any process in or in relation to the manufacture of an
article has been carried on with the aid of power and, therefore, mere
transfer of raw materials by the use of power cannot be considered as a
process of manufacture. D
-t- Allowing the appeals, this Court,
HELD: 1. Process in manufacture or in relation to manufacture
implies not only the production but the various stages through which the
raw material is subjected to change by different operations.· It is the
cumulative effect of the various processes to which the raw materials is E
subjected to the manufactured product emerges. Therefore, each step
towards such production would be a process in relation to manufacture.
Where any particular process is so integrally connected with the ultimate
production of goods that but for that process manufacture of processing
of goods would be impossible or commercially inexpedient, tb~t process is
one in relation to the manufacture. (130 E-F). F
2.1 The natural meaning of the word 'process' is a mode of
treatment of certain materials in order to produce a good result, a species
of activity performed on the subject-matter in order to transform or
reduce it to a certain stage. There is nothing in the natural meaning of the
word 'process' to exclude its application to handling. There ml!y be G
process which consists only in handling and there may be a process which
involves no handling or not merely handling but also use. It may be a
process involving the handling of the material and it need not be a process
involving the use of material. The activity may be subordinate but one in
relation to the further process of manufacture. [130G, 131 A-BJ H
126 SUPREME COURT REPORTS [1991) SUPPi 1 S. C.R.

A 2.2 A process is a manufacturing process when it b~gs out a
complete transformation for the whole components so as to produce a
commercially different article or a commodity. But, that process itself
may consist or 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 or a
B commercially different article. Therefore, ariy 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. The word
'process' in the context in which it appears in the notification includes an
C . operation or activity in relation to manufacture. (1328, 133 A-BJ
J.K Cotton Mills v. S. T. Officer, [1965 ] 1 SCR 900; Union of India v.
Delhi Qofh & General Mills, (1963] Supp.1 S CR 586, relied on.

3.1 The transfer of raw material to the reacting vessel is a
D preliminary operation but it is part or a continuous process _but for which
the manufacture would be impossible; The handling of the raw materials
. for the purpose of such transfer is then integrally connected with the +
process or manufacture. The handling for the purpose or transfer may be
manual or mechanical but if power is used for such operation, it cannot be
E denied that an activity has been carried on with the aid of power in the
manufacturing process. The use or diesel pump sets to fill the pans with
brine is an activity with the aid of power and that activity is in relation to
the manufacture. It is not correct to say that the process or manufacture
starts only when evaporation starts. The preliminary steps like pumping
brine and filling ~e salt .pans form integral part or the manufacturing
F process even though the change in the raw material commences only when
evaporation takes place. The preliminary activity cannot be disintegrated
from the rest of the operations in the whole process of manufacture.
Similarly, when coke and lime are taken to the platform in definite
proportions for the purpose of mixing, such operation is a step in the
G manufacturing process. It precedes the feeding of the mixture into the kiln
where the burning takes place. The whole process is an integrated one
consisting of the lifting of the raw materials to the platform mixing coke
and lime and then feeding into the kiln and burning. These operations are
so interrelated that without anyone of these operations manufacturing
process is impossible to be completed. Therefore, if power is used in ·
.H
C. C. E. v. SfATE CHEMICAL WORKS (FA1HIMA BEEVJ, J.) 127

anyone of these operations or anyone of the operations is carried on with A
the aid of power, it is a case where in or in relation to the manufacture the
process is carried on with the aid of power. (133 C-G]

3.2 'Processing' may be an intermediate stage in manufacture and
until some change has taken place and the commodity retains a continuing B
substantial identity through the processing stage, one cannot say that it
has been manufactured. That doeS not, however, mean that any operation
in the course of such process is not in relation to the manufacture. (136 E]

Dy. Commissioner, Sales Tax, Emakulam v. Pio Food Packers, AIR
1980 SC 1227; UniOn of India v. Delhi Cloth & General Mills, [1963) Suppl. C
1 SCR 586; Standard Fireworks Industries v. Collector, 1987 (28) ELT-56
(SC), relied on.

Ninna Chemical Works & Ors. v. Union of India & Ors., 1981ELT617
(Guj.); Clrowgule & Co. Pvt.Ltd. v. Union of India, AIR 1981 SC 1014, D
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 3593-
t- 94 of 1989. -

From the Order dated 26.5.1988 of the Customs Excise and Gold E
(Control) Appellate Tribunal, New Delhi in 545-546/88-C in Appeal No.
E/COD/699/87-C in Appeal No. E/847/84-C with E/1/85-C.
WITH
Civil Appeals Nos. 642-643/91, 1723-1731/91.

-- ----1 A. K. Ganguli, Ms. Sushma Suri, P ~ Parmeshwaran and A. Subba F
Rao for the Appellant.

Rajinder Sachar, Aruneshwar Gupta, Manu Mridu~ P.I. Jose and
Sanjay Parekh for the Respondents. -
G
The Judgment of the Court was delivered by

FATHIMA BEEVI, J. These appeals by the Revenue under Section
_l---- 35L of the Central Excises and Salt Act, 1944 involve the interpretation of
the Notification No. 179177 CE dated 18.6.1977. The Notification read
thus:
"In exercise of the powers conferred by sub-rule (1) of rule 8 of H
128 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R

A the Central Excise Rules, 1944, the Central Government
hereby exempts all goods falling under Item No. 68 of the First
Schedule to the Central Excises and Salt Act, 1944 (1of1944)
m or in relation to the manufacture of which no process is
ordinarily carried on with the aid of power, from whole of the
duty of excise leviable thereon".
B
Tariff Item 68 during the relevant period read: -

"All other goods, not elsewhere specified, manufactured in a
factory but excluding..." ' ' · ·
c
M/s. Rajasthan State Chemical Works, the respondents in Civil Ap-
peals Nos. 3593-94 of 1989, are manufacturers of crude sodium sulphate.
In the process of manufacture of common salt from brine, in the salt pans
in which the process of evaporation takes place some quantities of sodium
D sulphate present in the brine also crystalise and settle at the bottom as
crust. The sodium sulphate is thus obtained as a bye-product."· For the
purpose of the manufacture, brine is pumped into salt pans using diesel
pumps. ..,. ,. ,,, 1 :n , .r .; ., .~ ,\, " :·
.,
The benefit of the aforesaid notification was not given to these
E respondents as pumping of brine into the pans was carried on with the aid
of power. The claim for exemption though denied by the original authority,
was allowed by the Collect~r of Customs (Appeals) and that order was
affir!lled by the Tribunal. . . 1 ')....

F M/s. Sunderson (Minerals) Ltd., the respondents in Civil Appeals
Nos. 642-643 of 1991 and '1723-1731 of 1991 are manufacturers of lime from
coke and lime stone; The raw materials are lifted to the platform at the
head of the kiln by the aid of power. At the kiln head, the raw materials
are mixed manually and fed into the kiln. Since power is used for lifting the
!aw mate!ials, at the kiln ,he~d, thes~ 1 responde!J.t~ ,were denied.the benefit
G of the.not~cation .by the .Assistant_ ~ollector ..._The appeal before the Col-
lector .of. Appeals was dismissed. ;T4e 1'.!ibunal, -however;. accepted the
claim of the respondents. ·

'· Th~ Revenue being aggneved has challenged the respective orders of
H the Tribunal in these appeals.
C. C. E. v. SI'ATE CHEMICAL WORKS [FATHIMA BEEVI, J.) 129

In both these set of cases, the view taken by the Tribunal is that the A
manufacturing process starts from the stage of feeding raw materials into
the salt pan or the kiln as the case may be. The transportation of the raw
materials to the platform at the kiln head and the pumping of brine into the
salt pan is a stage prior to the commencement of manufacturing process.
Therefore, the transferring of the raw materials is not a part of the process
of manufacture and the use of power for such transfer would not disentitle B
the respondents from the benefit under the notification.

It has been contended before us on behalf of the appellant that
pumping the brine into the pan o: lifting the raw materials to the kiln head
is a process in relation to the manufacture of the final product and since
that process with the aid of power is integrally connected with the C
manufacture, the exemption would not apply. On the other hand, it is
reiterated for the respondents that if the process carried on with the aid of
power does not bring about any change in the raw material, it cannot be
said that any process in or in relation to the manufacture of an article has
been carried on with the aid of power and, therefore, mere transfer of raw D
materials by the use of power cannot be considered as a process of
manufacture.
+
. The Central Government has exempted all goods falling under Item
No. 68 of the First Schedule to the Act in or in relation to the manufacture
of which no process is ordinarily carried on with the aid of power from the E
whole of the duty of excise leviable thereon. The exemption under this
notification is available only when the goods are manufactured without the
aid of power at any stage of the process. Where manufacture involves
series of processes and if anyone of such processes is carried on with the
aid of power, the case is taken out of the purview of the notification.
F
We have to consider what activity amounts to process in or in rela-
tion to manufacture of goods for the application of the notification. The
word 'manufacture' has been defined in Section 2(f) of the Central Excises
and Salt Act, 1944, thus: -

"2(f). 'Manufacture' includes any process- (i) incidental or an- G
cillary to the completion of a manufactured product; and

(ii) which is specified in relation to any goods in the Section or
Chapter notes of the Schedule to the Central Excise Tariff Act,
1985 as amounting to manufacture".
H

y
130 SUPREME COURT REPORTS [1991) SUPP. 1 S. C. R

A Clause (t) gives an inclusive definition of the term 'manufacture'~
According to the dictionary, the term 'manufacture' means a process which
results in an alteration or change in the goods which are subjected to the
process of manufacturing leading to the production of a commercially new
article. In determining what constitutes 'manufacture' no hard and fast
rule can be applied and each case must be decided on its own facts having
B ·regard to· the eontext in which the term is used in the provision under
consideration.

Manufacture implies a change but every change is not manufacture,
yet every change of an article is ·the result of treatment, labour and
x
manipulation. Naturally, manufacture is the end result of one or more
C processes through which the original commodities are lllade to pass. The
nature and extent of processing may vary from one class to another. There
may be several stages of processing, a different kind of processing at each
stage. With each process suffered the original commodity experiences a
change. Whenever a commodity undergoes a change as a result of some
D operation performed on it or in regard to it, such operation would amount
to processing of the commodity. But it is only when the change or a series
of changes take the commodity to the point where commercially it can no
longer be regarded as the original commodity but instead is recognised as a
new and distinct article that a manufacture can be said to take place.

E Manufacture thus involves series of processes. Process in manufac-
ture or in relation to manufacture implies not only the production but the
various stages through which the raw material is subjected to change by
different operations. It is the cumulative effect of the various processes to
which the raw material is subjected to, manufactured product emerges.
Therefore, each step towards such p~oduction would be a process in rela-
F tion to the manufacture. Where any particular process is so integrally
connected with the ultimate production of goods that but for that process
manufacture of processing of goods would be impossible or commercially
inexpedient, that process is one in relation to the manufacture.

The natural meaning of the word 'process' is a mode of treatment of
G certain materials- in order to produce a good result, a species of activity
performed on the subject-matter in order to transform or reduce it to a
certain stage. According to Oxford Dictionary one of the meanings of the
word 'process' is "a continuous and regular action or succession of actions
taking place or carried on in a definite manner and leading to the ac-
complishment of some result." The activity contemplated by the definition
H
C. C. E. v. SfATE CHEMICAL WORKS (FATHIMA BEEVI, J.) 131

is perfectly g~neral requiring only the continuous or quick succession. It is A
not one of the requisites that the activity should involve some operation on
some material in order to its conversion to some particular stage. There is
nothing in the natural meaning of the word 'process' to exclude its applica-
tion to handling. There may be a process which consists only in handling
and there may be a process which involves no handling or not merely
handling but use or also use. It may be a process involving the handling of B
the material and it need not be a process involving the use of material. The
activity may be subordinate but one in relation to the further process of
manufacture.

In J.K. Cotton Mills v. S. T. Officer, (1965] 1 S.C.R 900, this Court
'in construing the expression 'in the manufacture of goods' held thus: - C
"But there is no warrant for limiting. the meaning of the expres-
sion 'in the manufacture of goods' to the process of production
of goods only. The expression 'in the manufacture' takes in
within its compass, all processes which are directly related to D ,
the actual production".

+ The Court further held thus: -
"The expression 'in the manufacture of goods' would normally
encompass the entire process carried on by the dealer of con-
verting raw materials into finished goods. Where any par- E
ticular process is so integrally connected with the ultimate
production of goods that but for that process, manufacture or
processing of goods would be. commercially inexpedient, goods
required in that process would, in our judgment, fall within the
expression 'in the manufacture of goods'."
F
In that case, the assessee carrying on the business of manufacturing
textile goods claimed that certain goods namely drawing material etc. ~ere
used in the manufacture. The Court said that if the process of designing is
so integrally connected with the process of manufacturing of cloth, there is
no reason to regard the process of designing as not being a part of the
process of manufacture. The process of designing may be distinct from the G
actual process of turning out finished goods but, there is no warrant for
limiting the meaning of the expression 'in the manufacture of goods' to the
process of production of goods only. The expressions' 'in the manufacture
of goods' takes within its encompass all processes which are directly re-
lated to the actual production. ··
H
132 SUPREME COURT REPORTS [1991) SUPP. 1 S. C. R

A In Union of India v. Delhi Cloth & General Mills, (1963] Supp. 1
S.C.R. 586, this Court held thus: -

"The definition of 'manufacture' as in s. 2 (t) puts it beyond any
possibility of controversy that if power is .used for any of the
numerous processes that are required to turn the raw material
B into 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 mariufacture using the word in its ordinary
sense, will not be available."

In that case, it was contended that manufacture is complete as soon
C as by the application of one or more processes the raw material undergoes
some change .. In answering the contention, the Court stated thus: -

''We are unable to agree with the learned Counsel Uiat by in-
serting this definition of the word "manufacture" ins. 2 (f) the
legislature intended to equate "processing" to "manufacture"
D and intended to make mere "processing" as distinct from
"manufacture" in the same sense of bringing into existence of a
new substance known to the market, liable to duty. The sole
. purpose of inserting this definition is to make it clear that at
certain places in the Act the word 'manufacture' has been used
to mean a process incidental to the manufacture of the article..
E Thus in the very item under which the excise duty is claimed in
these cases, we find the words: "in or, in relation to the
manufacture of which any process is ordinarily carried on with
the aid of power". The definition of 'manufacture' as ins. 2 (t)
puts it beyond any possibility of controversy that if power is
used for any of the numerous processes that are required to
F turn the raw material into 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. It is only
·with this limited purpose that the legislature, in our opinion,
inserted this definition of the word 'manufacture' in the defini-
G tion section and not with a view to make the mere "processing"
of goods as liable to excise duty."

A process is a manufacturing process when it brings out a complete
transformation for the whole components so as to produce a commercially
H different article or a commodity. But, that process itself may consist of
C. C. E. v. STATE CHEMICAL WORKS [FATillMA BEEVI, J.] 133

.......Lseveral processes which may or may not bring about any change at every A
intermediate stage. But the activities or the operations may be so integral-
ly connected that the final result is the production of a commercially dif-
ferent article. 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 B
'process' in the context in which it appears in the aforesaid notification
""'- includes an operation or activity in relation to manufacture.

The transfer of raw material to the reacting vessel is a preliminary
operation but it is part of a continuous process but for which the manufac-
ture would be impossible. The handling of the raw materials for the pur- c
pose of such transfer is then integrally connected with the process of
manufacture. The handling for the purpose of transfer may be manual or
mechanical but if power is used for such operation, it cannot be denied that
an activity has been carried on with the aid of power in the manufacturing
process. The use of diesel pump sets to fill the pans with brine is an activity
.+- with the aid of power and that activity is in relation to the manufacture. D
It is not correct to say that the process of manufacture starts only when
evaporation starts. The preliminary steps like pumping brine and filling
the salt pans form integral part of the manufacturing process even though
the change in the raw material commences only when evaporation takes
place. The preliminary activity cannot be disintegrated from the rest of the E
operations in the whole process of manufacture. Similarly, when coke and
lime are taken to the platform in definite proportions for the purpose of
--{ mixing, such operation is a step in the manufacturing process. It precedes
the feeding of the mixture into the kiln where the burning takes place. The
whole process is an integrated one consisting of the lifting of the raw
materials to the platform mixing coke and lime and then feeding into the F
kiln and burning. These operations are so interrelated that without anyone
of these operations manufacturing process is impossible to be completed.
Therefore, if power is used in anyone of these operations or anyone of the
operations is carried on with the aid of power, it is a case where in or in
relation to the manufacture the process is carried on with the aid of power.
G
Le<trned counsel for the appellant relying on the decision of the
Gujarat High Court in Ninna Chemical Works & Ors. v.U11io11 of India &
Ors., 1981 E.L.T. 617 (Guj.), submitted that process means an operation
which brings about some change in the raw material. That in the present
case, the operation of putting the raw materials, namely, coke and lime H
134 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R.

A stone on the kiln head does not bring about any change in the raw material -1.-.
but the raw materials remain in the same shape as they were when they
were brought in the truck and were dumped separately on the ground and,
therefore, this operatio_n can be termed only 'transportation' and cannot be
called a 'process'. The Gujarat High Court in Ninna Chemical Works
(supra) said:-
B
"It must be made clear that it is only at the stage of transferring
liquid raw materials from the motor tanker to the storage tank
that power is used and at no subsequent stage is any power
used.

c If no change is brought about in the raw material until it
reaches the re-action vessel, then no process of manufacture
can be said to have taken place until the raw matt;;rials are
taken to the re-action vessel. Till then they are all preparations
made but the raw materials continue to be the same raw
materials. Until sulphuric acid and alkyd benzene start re-ac-
D . ting on each other, no change takes place in .the raw materials.
Merely because the goods are stored in one place, may be at an
elevated place above the ground, it cannot be said that a
process of manufacture which would convert the raw material
by different stages into the final product has been undergone.
In view of the decision in Chowgule & Co. 's (supra) as to what
is meant by processing, it is clear that unless and until some
change takes place in the raw material of the original com-
modity, no process can be said to have been gone through.
Before any operation can be characterised as a process, the
commodity must, as a result of the operation, experience some
change."
F
Counsel for the respondents submitted that a process in or in rela-
tion to the manufacture commences as soon as the change is brought about
in the raw material and ends till the manufactured product is marketed.
Until some change physical or chemical is brought about in the raw
material, there is no process in or in relation to the manufacture. Mere
G collecting, storing or dealing with the raw material are operations and/or ·-A.
activities prior to the beginning ofprocess. Mere physical alteration of the
site or placement of raw materials or stacking, storing the same cannot be
said to be a process in relation to manufacture. In the case of preearation
of sodium sulphate, it is said that the process in or in relation to nianufac-
H ture commences after the brine is placed in the salt pans. The counsel
C. C. E. v. STAIB CHEMICAL WORKS [FATIIIMA BEEVI, J.) 135

submits that if every operation and/or activity and/or action is treated as a A
'process' in or in relation to manufacture then power is used in (i) erection
of factory where steel, cement, bride~ etc.- ·are'- used, (ii) day-to-day
transportation and (iii) use of electricity for lights, fans etc. These argu-
ments are far-fetched. The activity in relation to which power is used is not
to be considered into isolation where the activity is such that it forms an
integral part of the whole process. The Gujarat High Court in interpreting . B
the word 'process' has assumed that 'process' is synonymous to 'processing'
and has drawn support from the observations of this Court in Chowgule &
Co. Pvt. Ltd. v..Union of India, A.LR: 1981 SC 1014. We are afraid, the
observations had not been properly understood or applied in drawing in-
ference that process when used in relation to manufacture must be one that
produces a change in the commodity. It has been made clear in Dy. Com- c
missioner, Sales Tax, Emakulam v. Pio Food Packers, A.LR. 1980 SC 1227
that:~

"Commonly manufacture is the end result of one or more
processes through which the original commodity is made to
pass. The nature and extent of processing may vary from one
D
case to another, and indeed there may be several stages of
processing and perhaps a different kind of processing at each
stage. With each process suffered, the original commodity ex-
periences a change. But it is only when· the change, or a series
of changes, take the commodity to the point where commer-
E
cially it can no longer be regarded as the original commodity
but instead is recognised as a new and distinct article that a
manufacture can be said to take plac.e."

It has been made clear in Union of India v. Delhi Cloth & General
Mills (supra) that the definition of the word 'manufacture' in Section 2 (f) F
puts it beyond any possibility of controversy that if the power is used for
any of the numerous processes that are required to turn the raw materials
into a finished article known to the market, it would be a case where in or
in relation to manufacture process has ordinarily been carried on with the
aid of power.
G
It is, therefore, wrong to conclude that every operation in the course
of the manufacture should bring about a change and if any operation with
the aid of power does not result in a change, it cannot be an integral part of
the process in or in relation to manufacture. In Cliowgule & Co. Pvt. Ltd.
case, w~at this Court said is that: -
H
136 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A "Wherever a commodity undergoes a change as a result of
some operation performed on it or in regard to it, such opera-
tion would amount to processing of the commodity."

What is necessary in order to characterise an operation as "process-
ing" is that the commodity must, as a result of the operation, experience
B some change. The question is not whether there is manual application of
energy or there is application of mechanical force. Whatever be the means
employed for the purpose of carrying out the operation, it is the effect of K
the operation on the commodity that is material for the purpose of deter-
mining whether the operation constitutes "processing". In drawing the dis-
C tinCtion between 'processing' and 'manufacture', this Court observed in
Delhi Cloth Mills case thus: -

"To say this is to equate "processing" to "manufacture" and for
this we can find no warrant in law. The word "manufa<,:ture"
used as a verb is generally understood to mean as "bringing
D into existence a new substance" and does not mean merely "to
produce some change in a substance", however minor in conse- +-
quence the change may be."

Thus "processing" may be an intermediate stage in manufacture and
until some change has taken place and the commodity retains a continuing·
E substantial identity through the processing stage, we cannot say that it has
been manufactured. That does not, however, mean that any operation in
the course of such process is not in relation to the manufacture. While
interpreting the same exemption notification in Standard Fireworks In- -)---
dustlies v. Collector, 1987 (28) E.L.T. 56(SC), it was held that manufacture
F of fireworks requires cutting of steel wires and the treatment of papers
and, therefore, it is a process for manufacture of goods in question. The
Notification purports to allow exemption from duty only when in relation
to the manufacture of goods no process is ordinarily carried on with the aid
of power. It was observed that cutting of steel wires or the treatnient of the
papers is a process for the manufacture of goods in_ question.
G ~
We are, therefore, of the view that if any operation in the course of
manufacture is so integrally connected with the further operations which
result in the emergence of manufactured goods and such operation is car-
ried on with the aid of power, the process in or in relation to the man\lfac-
H ture must be deemed to be one carried on with the aid of power. In this
C. C. E. v. STATE CHEMICAL WORKS , (FATHIMA BEEVI, J.j 137

.. --..A._ view of the matter, we are unable to accept the contention that since the A
pumping of the brine into the salt pans or the lifting of coke and lime stone
with the aid of power does not bring about any change in the raw material,
the case is not taken out of the Notification. The exemption under. the
Notification is not available in these cases. Accordingly, we allow these
appeals. In the facts and circumstances of the case, we make no order as B
to costs.

·,,.z__ G. N. Appeals allowed.