COMMISSIONER OF CENTRAL EXCISE, BANGALORE-IIversusM/S. OSNAR CHEMICAL P. LTD.

                   (2012] 2 S.C.R. 1035


 COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II                  A
                             v.
             M/S. OSNAR CHEMICAL P. LTD.
          (Civil Appeal Nos. 4055-4056 of 2009)

                    JANUARY 13, 2012
                                                               B
     [D.K. JAIN AND ASOK KUMAR GANGULY, JJ.)

      Central Excise Act, 1944 - s.2(f) - Addition and mixing
of polymers and additives to heated bitumen to get superior
quality bitumen viz. Polymer Modified Bitumen (PMB) or C
Crumbled Rubber Modified Bitumen (CRMB ) - If amounts
to manufacture of a new marketable commodity and as such
exigible to Excise duty - Held: In order to bring a process in
relation to any goods within the ambit of s. 2(f) of the Act, the
same is required to be recognised by the legislature as D
manufacture in relation to such goods in the Section notes
or Chapter notes of the First Schedule to the Tariff Act -
Therefore, in order to bring petroleum bitumen, falling under
CSH 27132000, within the extended or deemed meaning of
the expression 'manufacture', so as to fall under CSH E
27150090, the process of its treatment with polymers or
additives or with any other compound is required to be
recognised by the legislature as manufacture under the
Chapter notes or Section notes to Chapter 27 - No such
process or processes have been specified in the Section
notes or Chapter notes in respect of petroleum bitumen falling F
under Tariff Item 27132000 or even in respect of bituminous
mixtures falling under Tariff Item 27150090 to indicate that the
said process amounts to manufacture - Thus, the process of
adding polymers and additives to heated bitumen to get a
better quality bitumen, viz. PMB or CRMB, cannot be given G
an extended meaning under the expression manufacture in
terms of s.2(f)(ii) of the Act- PMB or CRMB cannot be treated
as bituminous mixtures falling under CSH 27150090 .and

                            1035
    1036    SUPREME COURT REPORTS                 [2012] 2 S.C.R.

A would classified under CSH 27132000 pertaining to tariff for
  petroleum bitumen - Central Excise Tariff Act, 1l185 -
  Chapter Sub-heading 27132000 and 27150090.
         Excise Laws - Manufacture - Test to determine -
  Held:"Manufacture". can be said to have taken place only when
8 there is transformation of raw materials into a new and different
  article having a different identity, characteristic and use -
  Mere improvement in quality does not amount to manufacture
  - It .is only when the change or a series of changes take the
  commodity tO a point where commercially it can no longer be
C regarded as the original commodity but is instead recognized
  as a new and distinct article that manufacture can be said to
  have taken place.
        Words and Phrases - Manufacture - Meaning of
D     The question which arose for consideration in the
  present appeals was whether the addition and mixing of
  polymers and additives to heated bitumen to get supE!rior
  quality bitumen viz. Polymer Modified Bitumen (PMS:) or
  Crumbled Rubber Modified Bitumen (CRMB) amounts to
E manufacture of a new marketable commodity and as such
  exigible to Excise duty under the Central Excise Act, 1!~44.
        Dismissing the appeals, the Court
       HELD:1.1. The expression 'manufacture' defined in
F Section 2(f) of the Central Excise Act, 1944, inter a/ia
  includes any process which is specified in relation to any
  goods in the Section or Chapter Notes of First Schedule
  to the Central Excise Tariff Act, 1985. It is manifest that in
  order to bring a process in relation to any goods within
G the an:ibit of Section 2(f) of the Act, the same is required
  to be recognised by the legislature as manufacture in
  relation to such goods in the Section notes or Chapter
  notes of the First Schedule to the Tariff Act. Therefore, in
  order to bring petroleum bitumen, falling under CSH
H 27132000, within the extended or deemed meaning of the
 COMMNR. OF CENTRAL EXCISE, BANGALORE-II v. 1037
          OSNAR CHEMICAL P. LTD.

  expression 'manufacture', so as to fall under CSH              A
· 27150090, the process of its treatment with polymers or
  additives or with any other compound is required to be
  recognised by the legislature as manufacture under the
  Chapter notes or Section notes to Chapter 27. [Para 15]
  [1049-F-H; 1050-A]                                             B
     1.2. In the present case, a plain reading of the
Schedule to the Act makes it clear that no such process
or processes have been specified in the Section notes
or Chapter notes in respect of petroleum bitumen falling
under Tariff Item 27132000 or even in respect of                 C
bituminous mixtures falling under Tariff Item 27150090 to
indicate that the said process amounts to manufacture.
Thus, it is evident that the said process of adding
polymers and additives to the heated bitumen to get a
better quality bitumen, viz. PMB or CRMB, cannot be given        D
an extended meaning under the expression manufacture
in terms of Section 2(f) (ii) of the Act. [Para 18] [1051-D-F]
     1.3. It is trite to state that "manufacture" can be said
to have taken place only when there is transformation of
raw materials into a new and different article having a          E
different identity, characteristic and use. It is well settled
that mere improvement in quality does not amount to
manufacture. It is only when the change or a series of
changes take the commodity to a point where
commercially it can no longer be regarded as the original        F
commodity but is instead recognized as a new and
distinct article that manufacture can be said to have taken
place. [Para 19] [1051-G-H; 1052-A]
    1.4. The process of mixing polymers and additives
with bitumen does not amount to manufacture. Both the            G
lower authorities have found as a fact that the said
process merely resulted in the improvement of quality of
bitumen. Bitumen remained bitumen. There was no
change in the characteristics or identity of bitumen and
only its grade or quality was improved. The said process         H
    1038    SUPREME COURT REPORTS                (2012] 2 S.C.R.

A did ·hot result in transformation of bitumen into a new
  product having a different identity, characteristic anid use.
  The end use also remained the same, namely for 1nixing
  of aggregates for constructing the roads. [Para 23] [1054-
    E-G]
B        1.5. PMB or CRMB, therefore, cannot be treated as
    bituminous mixtures falling under CSH 27150090 and
    shall continue to be classified under CSH 271 :32000
    pe1rtaining to tariff for petroleum bitumen. [Para 25] 1[1055-
    E]
c      Shyam Oil Cake Ltd. v. Collector of Central Excise,
  Jaipur 2004 (174) E.L.T. 145 (SC); Commissioner of Central
  Excise, New Delhi-I v. S.R. Tissues Pvt. Ltd. 2005 (186)
  E.L.T. 385 (SC); Mis. Tungabhadra Industries Ltd. 1/. The
  Commercial Tax Officer, Kumool, 1961 (2) SCR 14; Union
0 of India & Ors. v. Delhi Cloth & General Mills Co. Ltd. & Ors.
  1977 (1) ELT (J199) (SC); Deputy Commissioner Sales Tax
  (Law), Board of Revenue (Taxes), Emakulam v. Pio Food
  Packers 1980 (6) E.L.T. 343 (SC) and Commissioner of
  Central Excise & Customs v. Tikatar Industries 2006 (202)
E E.L.T. 215 (S.C.) - relied on.
       Medley Pharmaceuticals Limited v. Commissioner of
  Central Excise & Customs, Daman 2011 (263) E.L.T . 641
  (SC); Nicholas Piramal India Ltd. v. Commnr. Of Cemtral
F Excise, Mumbai 2010 (260) E.L.T. 338 (SC); Commissioner
  of Central Excise, Bangalore v. Ducksole (/) Ltd. & Ors. (~~005)
  10 SCC 462; Commissioner of Central Excise, Delhi-//1 v. Uni
  Products India Ltd. & Ors. (2009) 9 SCC 295: 2009 (14) SCR
  199; Commissioner of Central Excise, Gujarat v. Pan Pipes
G Resplendents Limited (2006) 1 SCC 777; Crane Betel Nut
  Powder Works v. Commissioner of Customs & Central
  Excise, Tirupathi & Anr. (2007) 4 SCC 155: 2007 (4) :SCR
  109; Commissioner of Central Excise, Chennai-11 v. Tarpaulin
  International 2010 (256) E.L.T. 481 (SC); Commissiom~r of
  Central Excise, Mumbai v. La/ji Godhoo & Co. 2007 (216)
H E.L.T. 514 (SC); Commissioner of Central Excise v. Indian
COMMNR. OF CENTRAL EXCISE, BANGALORE-II v. 1039
         OSNAR CHEMICAL P. LTD.
Aluminium Co. Ltd. (2006) 8 SCC 314: 2006 (6) Suppl. SCR      A
886; Hindustan Zinc Ltd. v. Commissioner of Central Excise,
Jaipur (2005) 2 SCC 662: 2005 (2) SCR 391; Met/ex (/) (P)
Ltd. v. Commissioner of Central Excise, New Delhi (2005) 1
SCC 271; Hindustan Poles Corpn. v. Commissioner of
Central Excise, Calcutta (2006) 4 SCC 85: 2006 (3) SCR        8
461; HPL Chemicals Ltd. v. Commissioner of Central Excise,
Chandigarh (2006) 5 SCC 208: 2006 (1) Suppl. SCR 125;
Commissioner of Central Excise, Navi Mumbai v. Amar
Bitumen & Allied Products Private Limited 2006 (202) E.L.T.
213 (S.C.); Commissioner of Central Excise, Mumbai v.         c
Tikitar Industries, 2010 (253) ELT 513 (SC); Col/ec~or of
Central Excise, Vadodara v. Tikitar Industries 2000 (118)
E.L.T. 468 (Tri.) - referred to.
      McNico/ & Anr. v. Pinch 1906 (2) K.B. 352 - referred
to.                                                           D

                     Case Law Reference:
 2011 (263) E.L.T. 641 (SC)     referred to   Para 5
 2010 (260) E.L.T. 338 (SC)     referred to   Para 5          E
  (2005) 1o sec 462             referred to   Para 6
 (2009) 9 sec 295               referred to   Para 6
 1961 (2) SCR 14                relied on     Para 7,19
                                                              F
 (2006) 1 sec 111               referred to   Para 7
 (2001) 4 sec 155               referred to   Para 7
 1977 (1) ELT (J199) (SC)       relied on     Para 7, 20
                                                              G
 2005 (186) E.L.T. 385 (SC)     relied on     Para 8,10,
                                              17,21
 2004 (174) E.L.T. 145 (SC)     relied on     Para 8,16
 2010 (256) E.L.T. 481 (SC)     referred to   Para 10
                                                              H
    1040   SUPREME COURT REPORTS                    [2012] 2 S.C.R.


A    2007 (216) E.L.T. 514 (SC)       referred to     Para 10
     (2006) 8 sec 314                 referred to      Para 10,11

     (2005) 2 sec 662                 referred to      Para 10,11,
                                                       16
B
     (2005) 1 sec 211                 referred to      Para 11

     (2006) 4 sec 85                  referred to      Para 1 ·1

     (2006) 5 sec 208                 referred to      Para 1'1
c    2006 (202) E.L.T. 215 (S.C.)     relied on        Para 12, 24
     2006 (202) E.L.T. 213 (S.C.)     referred to      Para 1~!
     2010 (253) E.L.T. 513 (S.C.)     referred to      Para 1~~

D    1906 (2) K.B. 352                referred to      Para 13;
     1980 (6) E.L.T. 343 (SC)         relied on        Para 22
     2000 (118) E.L.T. 468 (Tri.)     referred to      Para 24

      CIVIL APPELLATE JURISDICTION : Civil Appeal No.
E 4055-4056 of 2009.

      From the Judgment & Order dated 25.09.2008 of
  Customs, -Excise, and Service Tax Appellate Tribunal, South
  Zonal Bench at Bangalore in Appeal Nos. E/522 & 523 of
F 2007.
                                    WITH
    C.A. Nos. 5633 of 2009 & 7142 of 2010.

       Mukul Gupta, Arijit Prasad, Som Prakash, Shipra Gh1:ise,
G Anil Katiyar, B. Krishna Prasad for the Appellant.

       S.K. Bagaria, Meenakshi Arora, Vaishnavi, V. Lakshmi
    Kumaran, Alok Yadav, M.P. Devanath for the Respondent.

        The Judgment of the Court was delivered by
H
  COMMNR. OF CENTRAL EXCISE, BANGALORE-II v.1041
           OSNAR CHEMICAL P. LTD.

      D.K. JAIN, J.: 1. This batch of appeals by the revenue,         A
 under Section 35L(b) of the Central Excise Act, 1944 (for short
 "the Act") arises out of final orders dated 23rd December, 2008
 in Appeal No. E/379/2007; 25th September, 2008 in Appeal
 Nos. Excise/522 & 523/2007 and 28th October, 2009 in
 Appeal No. E/225/2009 passed by the Customs, Excise &                B
 Service Tax Appellate Tribunal South Zonal Bemch, Bangalore
 (for short "the Tribunal"). By the impugned orders in cross-
 appeals by the revenue and the assessee, the Tribunal has held
 that the mechanical mixing of polymer with heated bitumen
 does not amount to manufacture of a new commercially                 c
 identifiable product and therefore, is not exigible to Excise duty
 under the Act.
      2. Since these three appeals involve a common question
 of law, these are being disposed of by this common judgment.
 However, in order to appreciate the controversy, the facts           D
 emerging from C.A. Nos. 4055-4056 of 2009, which was treated
 as the lead case, are being adverted to.
        The respondent in this appeal (for short "the assessee")
  is engaged in the supply of Polymer Modified Bitumen (for
  short "PMS"). We may note that in one of the appeals (C.A.          E
  No.5633/2009), the assessee additionally supplies Crumbled
  Rubber Modified Bitumen (for short "CRMB"), stated to be a
  different kind of modifier. The assessee entered into a contract
  with one M/s Afcons Infrastructure Ltd. (for short "Afcons") for
  supply of PMS at their work site at Solur Village, Viswanathpura    F
  Post, Bangalore. As per the agreement, the base bitumen and
  certain additives were to be supplied by Afcons to the
  assessee directly at the site, where the assessee, in its mobile
  polymer modification plant, was required to heat the bitumen
  at a temperature of 160?C with the help of burners. To this hot     G
  bitumen, 1% Polymer and 0.2% additives were added under
. constant agitation, for improving its quality by increasing its
  softening point and penetration. The process of agitation was
  to be continued for a period of 12 to 18 hours till the mixture
  becomes homogenous and the required properties were met.            H
     1042       SUPREME COURT REPORTS                 [2012] 2 S.C.R.

A The said bitumen in its hot agitated condition was mixed with
  stone aggregates which was then used for road construction.
  The resultant product was considered to be a superior quality
  binder with enhanced softening point, penetration, ductility,
  viscosity and elastic recovery.
B        3. 'Bitumen' is classifiable under Chapter Sub Heading
     271320.00 and 'Polymers' are classifiable under Chapter Sub
     Heading 390190.00 of the Central Excise Tariff Act, 1985
    · (hereinafter referred to as "the Tariff Act"). The relevant tariff
      items read as follows:
c            "Tariff Item    Description of goods
             2713            Petroleum coke, petroleum
                             bitumen and other residues of
       ' i
                             petroleum oil of oils obtained
D                            from bituminous minerals.
             271132000       Petroulem bitumen

             2715            Bituminous mixtures based on1
                             natural asphalt, on natural
E                            bitumen, on petroleum bitumen, on
                              mineral tax or on mineral tar pitch
                             (for example, bituminous mastic,
                             cut backs)

             27150090        Other
F
             3901            Polymers of ethylene, in primary
                             forms
             3901 90         Other"
G
               4. The assessee had been paying Central Excis13 duty
               on the PMB processed at their factory in Mumbai but
               had not paid the same for the conversion done at the
               work site. Consequently, a show cause notice was
               issued to them by the Commissioner of Central Excise,
H              Bangalore (hereinafter referred to as "the
· COMMNR. OF CENTRAL EXCISE, BANGALORE-II v.1043
     OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]

       Commissioner"), demanding duty in respect of PMB                A
       falling under sub-heading 271500.90 of the Tariff Act, for
       the period from 18th· August 2004 to 19th September
       2006. The Commissioner adjudicated upon the said
       show cause notice and vide Order-in-original, dated
       23rd April 2007, held that the aforesaid process carried        B
       out by the assessee amounted to manufacture of PMB
       in terms of Section 2(f) of the Act, irrespective of the fact
       whether such process was carried out on their own
       account or on job work basis and therefore, was
       dutiable. He accordingly, confirmed the demand                  c
       indicated in the show cause notice. Aggrieved thereby,
       the assessee filed an appeal before the Tribunal.
       Reversing the decision of the Commissioner, the
       Tribunal has come to the conclusion that since PMB
       cannot be bought and sold in the market as it is fit for
                                                                       0
       use only in a molten condition, at a temperature around
       160?C and resultantly cannot be stored unless kept in
       continuous agitated state @ 100?C so as to avoid
       separation of polymer and bitumen; the process carried
       out by the assessee does not amount to manufacture.
       A similar view has been expressed by the Tribunal in            E
       other orders which are the subject matter of these
       appeals by the revenue.

     5. Mr. Arijit Prasad, learned counsel appearing for the
revenue, vehemently argued that having regard to the nature of         F
the process involved, PMB and CRMB are different from
bitumen. According to the learned counsel, ordinary bitumen is
heated upto a temperature of 200?C, in the Polymer
modification plant; to this heated mixture, polymer is added and
samples are taken; if the samples, are found to be satisfactory,       G
additives are added and the PMB is either stored or
dispatched. It was submitted that the end products, viz. PMB
and CRMB are different from bitumen, inasmuch as polymers
and additives are the raw materials consumed in the process
of manufacture of the said final products and are therefore,           H
    1044      SUPREME COURT REPORTS               [2012) 2 S.C.R.


A  covered by the definition of the term "manufacture" in Section
   2(f) of the Act. To buttress his submission that PMB and CRMB
   are exigible to Excise duty, both falling under a specific entry,
   learned counsel referred to the Tariff Act, whereunder, while
   bitumen is classifiable under Chapter Sub heading 271320.00,
B and polymer is classifiable under Chapter Sub Heading
   390190.00, the finished products, PMB and CRMB are
   classifiable under Chapter Sub Heading 271500.90. In support
   of his submission that PMB and CRMB are commercially
   known in the market for being bought and sold and therefore,
c  satisfy the test of marketability which is one of the ess;ential
   conditions for the purpose of levy of Excise duty, learned
   counsel commended us to the decisions of this Court in
   Medley Pharmaceuticals Limited Vs. Commissioner of
   Central Excise & Customs, Daman 1 and Nicholas Piramal
   India Ltd. Vs. Commnr. Of Central Excise, Mumbai2. It was
0
  ·also urged that Circular No. 8811/87-CX.3, dated 16th .June,
   1987, issued by the Department of Revenue, Ministry of
   Finance, clarifying that a slight modification of the grade or
   quality of bitumen, brought about by the process of air blowing
   to duty paid bitumen did not amount to manufacture, was
E wrongly relied upon by the Tribunal as it had subsequently been
   modified by Circular No. 88/1/88-CX.3, dated 1st July, 1988,
   wherein the said department had clarified that duty wou!d be
   chargeable on blown-grade bitumen.

F      6. Per contra, learned counsel appearing on behalf of the
  assessees, led by Mr. S.K. Bagaria, senior advocate, while
  supporting the decision of the Tribunal, fervently submitted that
  based on the documents, evidence and materials on record,
  the :Tribunal has found, as a fact, that the process of mixing an
G insignificant dose of polymer with duty paid bitumen only
  enhanced the quality of bitumen and did not amount to
  manufacture and therefore, in the absence of any plea of
  perversity, the finding does not warrant any interference by this
    1.   2011 (263) E.L.T. 641 (SC)
H 2. 2010 (260) E.L.T. 338 (SC)
 COMMNR. OF CENTRAL EXCISE, BANGALORE-II v.1045
    OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]

Court. In support of the proposition, learned senior counsel          A
placed reliance on the decisions of this Court in Commissioner
of Central Excise, Bangalore Vs. Ducksole (/) Ltd. & Ors. 3 and
Commissioner of Central Excise, Delhi-Ill Vs. Uni Products
India Ltd. & Ors. 4 •
                                                                      B
      7. Learned senior counsel vehemently argued that the
mechanical process of adding polymer and additives to heated
bitumen to bring into existence the so-called new substance,
known as PMB, did not amount to 'manufacture' in terms of
Section 2(f) of the Act. It was explained that by the said process,   C
only the grade or quality of bitumen is improved by raising its
softening point and penetration, for improving the quality of the
road; but even with the improved quality, bitumen remained
bitumen with the same end use. It was the say of the learned
counsel that a mere improvement in the quality did not amount
to manufacture, as 'manufacture' takes place only when there          D
is a transformation of raw materials into a new and different
article, having a distinctive name, character and use, which is
not the case here as the end use of both the articles remained
the same. In support of the proposition, learned senior counsel
commended us to a plethora of decisions of this Court,                E
including Mis. Tungabhadra Industries Ltd. Vs. The
Commercial Tax Officer, Kumool5, Commissioner of Central
Excise, Gujarat Vs. Pan Pipes Resplendents Limited, 6 Crane
Betel Nut Powder Works Vs. Commissioner of Customs &
Central Excise, Tirupathi & Anr. 7 and Union of India & Ors.          F
Vs. Delhi Cloth & General Mills Co. Ltd. & Ors. 8 .

    8. It was contended that since the period involved in these
appeals is post substitution of clause (f) in Section 2 of the Act
3.   c2005J 10 sec 462.                                               G
4.   (2009) 9 sec 295.
5.   1961 (2) SCR 14: AIR 1961 SC 412.
6.   (2006) 1 sec 777.
1.   c2001i 4 sec 155.
8.   1977 (1) ELT (J199) (SC).                                        H
    1046       SUPREME COURT REPORTS              [2012] 2 S.C.R.


A by Act 5 of 1986, which gives an extended meaning to the .
  expression "manufacture" by including in terms of sub-clause
  (ii) to clause (f), any process "which is specified in relation to
  any goods in the Section or Chapter notes of the First Schedule
  to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting
B to manufacture", the said provision would be applicable.
  However, wherever the legislature intended to give an extEmded
  or artificial meaning to the said expression in relation to any
  goods, it has clearly specified it. According to the learned
  counsel, since the addition of polymer or additives to the
c bitumen has not been specified in the Section or Chapter notes
  of the Tariff Schedule as amounting to manufacture, the
  amended definition is of no avail to the revenue. In support of
  the contention, heavy reliance was placed on the decisions of
  this Court in Commissioner of Central Excise, New Delhi-I Vs.
  S.R. Tissues Pvt. Ltd. 9 and Shyam Oil Cake Ltd. Vs. Collector
0
  of· Central Excise, Jaipur10•

       9. Relying on the two afore-mentioned Circulars, F.N10. 88/
  1/87-CX:3, dated 16th June 1987 and F.No.88/1/88-CX.3,
  dated 1st July 1988, issued by the Department of Rev1anue,
E Mihistry of Finance, clarifying that blown grade bitumen
  produced by oxidation of straight grade bitumen is not liable
  to duty; learned senior counsel submitted that the present case
  is on a much better footing than the blown grade bitumen,
  inasmuch as, unlike oxidation, where chemical change takes
F place, in the mixing of polymer and bitumen, no chemical
  change in bitumen takes place, and therefore, PMB cannot be
  subjected to Excise duty as a new commercial commodity.
  Additionally, reliance was also placed on Circular No.623/14/
  2002-CX., dated 25th February, 2002, wherein the Contra!
G Board of Excise and Customs has clarified that the proce!SS of
  preparation of Hot Asphalt Mix used in making roads does not
  amount to manufacture as contemplated under Section ~~(f) of
  the Act.
    9.   2005 (186) E.L.T. 385 (SC)
H   10. 2004 (174) E.L.T. 145 (SC).
COMMNR. OF CENTRAL EXCISE, BANGALORE-II v.1047
   OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]
      10. It was argued that merely because bitumen (the basic A
material) and PMB (the end material) are specified under two
different headings, it cannot be presumed that the process of
obtaining PMS automatically constituted manufacture, unless
in fact there has been a transformation of bitumen into a new
and different product or alternatively, the Section Notes or 8
Chapter Notes created a deeming fiction by providing an
artificial or extended meaning to the expression 'manufacture'
in respect of the goods in question. In support of the
proposition, learned counsel placed reliance on the decisions
of this Court in S.R. Tissues Pvt. Ltd (supra), Commissioner C
of Central Excise, Chennai-11 Vs. Tarpaulin lnternationa/1 1,
Shyam Oil Cake Ltd. (supra), Commissioner of Central
Excise, Mumbai Vs. Lalji Godhoo & Co. 12, Commissioner of
Central Excise Vs. Indian Aluminium Co. Ltd. 13 and Hindustan
Zinc Ltd. Vs. Commissioner of Central Excise, Jaipur14 ,
wherein it was held that merely because the raw materials and D
the finished product fall under two different tariff entries, it
cannot be presumed that the process of obtaining the finished
product from such raw materials automatically constituted
manufacture.
                                                                    E
      11. Learned counsel also strenuously urged that even if it
is assumed that the said process amounted to manufacture,
still PMB cannot be subjected to excise as it is not
commercially marketable. It was argued that for levy of Excise
duty, the twin conditions of 'manufacture' and 'marketability'      F
have to be satisfied cumulatively. In support of the proposition,
reliance was placed on the decisions of this Court in Hindustan
Zinc Ltd. (supta), Indian Aluminium Co. Ltd. (supra) and Lalji
Godhoo & Co. (supra). Learned counsel also contended that
the burden to prove that the process in question constitutes        G
manufacture and that the goods so manufactured are
11. 2010 (256) E.L.T. 481 (SC)
12. 2007 (216) E.L.T. 514 (SC)
13. (2006) a sec 314.
14. c2005) 2 sec 662.                                               H
    1048      SUPREME COURT REPORTS                (2012] 2 S.C.R.

A marketable as new goods, known to the market, lies on the
  revenue and the same has not been discharged in the present
  case. To support the contention, reliance was placed on Lalji
  Godhoo & Co. (supra), Met/ex.(/) (P) Ltd. Vs. Commissioner
  of Central Excise, New Delhi1 5; Hindustan Poles Corpn. Vs.
B Commissioner of Central Excise, Ca/cutta 16 and HPL
  Chemicals Ltd. Vs. Commissioner of Central Excise,
  Chandigarh 17•
        12. Lastly, the learned counsel stressed that in the light of
  the .decisions of this Court in Commissioner of Central Excise
C & Customs Vs. Tikatar lndustries 18, Commissioner of. Central
  Excise, Navi Mumbai Vs. Amar Bitumen & Allied Products
  Private Limited 19 and Commissioner of Central Excise,
  Mumbai Vs. Tikitar lndustries 20, the issue raised by the revenue
  in these appeals is no longer res-integra, and therefore, all the
D appeals deserved to be dismissed.
       13. Mr. Laxmi Kumaran, learned counsel appearing for the
  assessee in Appeal No. 7142 of 2010, while adoptin!g the
  arguments advanced by Mr. Bagaria, emphasised that apart
  from the fact that in his case the assessee was mixing the
E additives at the site and not in a factory, the percentage of
  polymer or additives added to bitumen was inconsequential for
  determination of the issue at hand, as the predominant test was
  whether the treated bitumen underwent any change in its
  characteristics so as to acquire a new commercial identity. In
F support, learned counsel referred to McNicol & Anr. Vs.
  Pinch 21 , wherein Darling J., delivering the concurring majority
  opinion observed that:
    15. c2005) 1 sec 211.
G 16. c2006) 4 sec 85.
    11. c2006) 5 sec 2008.
    18. 2006 (202) E.L.T. 215 (S.C.).
    19. 2006 (202) E.L.T. 213 (S.C.)
   20. 2010 (253) E.L.T. 513 (S.C.).
H 21. 1906 (2) K.B. 352.
COMMNR. OF CENTRAL EXCISE, BANGALORE-II v. 1049
   OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]

     "You can only make one thing out of another. I think the         A
     essence of making or of manufacturing is that what is
     made shall be different thing from that out of which it is
     made."
In other words, the counsel submitted that the same test
                                                                      8
namely, whether the product that emerges is something
different from the goods with which it is made, was observed
to be the determining factor. If bitumen, after its processing with
additives and modifiers, remains bitumen; although it is known
as PMB, then no new product emerges. It was asserted that in
the present case, the revenue had failed to prove that with the       C
addition of polymer or additives, bitumen had undergone any
change in its chemical composition and commercial identity.
According to the learned counsel, if the treated bitumen is not
kept at a particular temperature, bitumen and polymer get
separated and revert to their original state, which shows that        D
no chemical reaction takes place when both the commodities
are mixed.                                                    ·
     14. Thus, the question which falls for consideration in all
these appeals is whether the addition and mixing of polymers          E
and additives to base bitumen results in the manufacture of a
new marketable commodity and as such exigible to Excise
duty?
    . 15. The expression 'manufacture' defined in Section 2(f)
of the Act, inter alia includes any process which is specified in     F
relation to any goods in the Section or Chapter Notes of First
Schedule to the Tariff Act. It is manifest that in order to bring a
process in relation to any goods within the ambit of Section 2(f)
of the Act, the same is required to be recognised by the
legislature as manufacture in relation to such goods in the           G
Section notes or Chapter notes of the First Schedule to the
Tariff Act. Therefore, in order to bring petroleum bitumen. falling
under CSH 27132000, within the extended or deemed
meaning of the expression 'manufacture', so as to fall under
CSH 271500900, the process of its treatment with polymers             H
     1050    SUPREME COURT REPORTS                  [2012] 2 S.C.R.


A    or additives or with any other compound is required to be
     recognised by the legislature as manufacture under the Chapter
     notes or Section notes to Chapter 27.
          16. Dealing with the aspect of extended or artificial
     meaning of the expression 'manufacture' in Section 2(f) of the
8    Act in Shyam Oil Cake Ltd. (supra), this Court had hetd as
     under:-
          "16. Thus, the amended definition enlarges the scope of
           manufac~ure by roping in processes which may or may not

C·        strictly amount to manufacture provided those processes
           are specified in the Section or Chapter notes of the Tariff
           Schedule as amounting to manufacture. It is clear that the
           Legislature realised that it was not possible to put in an
          exhaustive list of various processes but that some
         , methodology was required for declaring that a particular
D
          process amounted to manufacture. The language of the
           amended Section 2(f) indicates that what is required is not
          just specification of the goods but a specification of the
          process and a declaration that the same amounts to
           manufacture. Of course, the specification must bE~ in
E          relation to any goods.
               xxx xxx xxx xxx
               xxx xxx xxx xxx
                                                                  .
F        24. In this case, 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
         the refining, it remains edible vegetable oil. As actual
         manufacture has not taken place, the deeming provision
G
         cannot, be brought into play in the absence of it being
         specifically stated that the process amounts to
         manufacture."
      17. Then again, in S.R. Tissues Pvt. Ltd. (supra), a
H question arose whether slitting and cutting of toilet tissue paper
 COMMNR. OF CENTRAL EXCISE, BANGALORE-II v.1051
    OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]

 on aluminium foil amounted to manufacture under Section 2(f)           A
 of the Act. Answering the question in the negative, this Court
 had observed thus :-
      "15 ..... ln order to make Section 2(f) applicable, the
      process of cutting/slitting is required to be ~cognized by
                                                                        8
      the legislature as a manufacture under the chapter note or
      the section note to Chapter 48. For example, the cutting
      and slitting of thermal paper is deemed to be
      "manufacture" under Note 13 to Chapter 48. Similarly, Note
      3 to Chapter 37 refers to cutting and slitting as amounting
      to manufacture in the case of photographic goods.                 C
      However, slitting and cutting of toilet tissue paper on
      aluminium foil has not been treated as a manufacture by
      the legislature. In the circumstance, Section 2(f) of the Act
      has no application."
                                                                        D
       18. In the present case, a plain reading of the Schedule
  to the Act makes it clear that no such process or processes
  have been specified in the Section notes or Chapter notes in
· respect of petroleum bitumen falling under Tariff Item 27132000
  or even in respect of bituminous mixtures falling under Tariff        E
  Item 27150090 to indicate that the said process amounts to
  manufacture. Thus, it is evident that the said process of adding
  polymers and additives to the heated bitumen to get a better
  quality bitumen, viz. PMB or CRMB, cannot be given an
  extended meaning under the expression manufacture in terms
  of Section 2(f) (ii) of the Act.                                      F

       19. We may now examine whether the process in question,
 otherwise amounts to manufacture under the expansive Section
 2(f) of the Act. It is trite to state that "manufacture" can be said
 to have taken place only when there is transformation of raw           G
 materials into a new and different article having a different
 identity, characteristic and use. It is well settled that mere
 improvement in quality does not amount to manufacture. It is
 only when the change or a series of changes take the
 commodity to a point where commercially it can no longer be            H
    1052    SUPREME COURT REPORTS                    [2012] 2 S.C.R.


A regarded as the original commodity but is instead reco!~nized
  as a new and distinct article that manufacture can be said to
  have taken place. In this behalf the following observations by
  the Constitution Bench of this Court in Tungabhadra lndostries
  (supra) are quite apposite :
B      "In our opinion, the learned Judges of the High Court laid
         an undue emphasis on the addition by way l)f the
         absorption of the hydrogen atoms in the procE~ss of
         hardening and on the consequent inter-molecular changes
         in the oil. The addition of the hydrogen atoms was effected
c        in order to saturate a portion of the oleic and linoleic
         constituents of the oil and render the oil more stable thus
       . improving its quality and utility. But neither mere
         absorption of other matter, nor inter-molecular changes
         necessarily affect the identity of a substance as ordinarily
D        understood ............ The change here is both additive and
       . inter-molecular, but yet it could hardly be said that rancid
         groundnut oil is not groundnut oil. It would undoubtedly be
         very bad groundnut oil but still it would be groundnut ()ii and
         if so it does not seem to accord With logic that whEm the
E        quality of the oil is improved in that its resistance to the
         natural processes of deterioration through oxidation is
         increased, it should be held not to be oil."
                                          (Emphasis supplied by us)

F       20. In Delhi Cloth & General Mills Co. Ltd. (supra), yet
    another Constitution Bench, exploring the conce!pt of
    manufacture echoed the following views :
         "14 ...... The word 'manufacture' used as a ve1rb is
         generally understood to mean as "bringing into existence
G      . a new substance" and does not mean merely "to produce
         some change in a substance", however minor in
        consequence the change may be. This distinction is well
        brought about in a passage thus quoted in Permanent
        Edition of Words and Phrases, Vol. 26, from an AmE~rican
H       judgment. The passage runs thus:-
  COMMNR. OF CENTRAL EXCISE, BANGALORE-II v.1053
     OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]

      "Manufacture implies a change, but every change is not             A
      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."                                                 B
                                       (Emphasis supplied by us)
      21. In S. R. Tissues Pvt. Ltd. (supra), the issue for
 consideration was whether the process of unwinding, cutting
 and slitting to sizes of jumbo rolls into toilet rolls, napkins and     c
 facial tissue papers amounted to manufacture. While holding
 that the said process did not amount to manufacture this Court
 inter-alia, held as under :
      "12 ..... However, the end-use of the tissue paper in the
      jumbo rolls and the end-use of the toilet rolls, the table         D
      napkins and the facial tissues remains the same, namely,
      for household or sanitary use, The predominant test in
      such a case is whether the characteristics of the tissue
      paper in the jumbo roll enumerated above is different from
      the characteristics of the tissue paper in the form of table       E
      napkin, toilet roll and facial tissue. In the present case,
      the Tribunal was right in holding that the characteristics of
      the tissue paper in the.jumbo roll are not different from the
      characteristics of the tissue paper, after slitting and cutting,
      in the table napkins, in the toilet rolls and in the facial        F
      tissues."
                                       (Emphasis supplied by us)
      22. In Deputy Commissioner Sales Tax (Law), Board of
  Revenue (Taxes), Ernaku/am Vs. Pio Food Packers 22, a three            G
  Judge Bench of this Court, while deciding whether conversion
  of pineapple fruit into pineapple slices for sale in sealed cans
. amounted to manufacture, observed as follows:-

 22. 1980 (6) E.L.T. 343 (SC).                                           H
    1054    SUPREME COURT REPORTS                 [2012] 2 S.C.R.

A         "4 ...... 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 processin~1 may
          vary from one case to another, and indeed there may be
          several stages of processing and perhaps a different kind
B         of processing at each stage. With each process suffered,
          the original commodity experiences a change. 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
c        is recognized as a new and distinct article that a
          manufacture can be said to take place. Where there is no
          essential difference in identity between the original
          commodity and the processed article it is not possible
          to say that one commodity has been consumed in the
          manufacture of another. Although it has undergone a
D
          degree of processing, it must be regarded as still .
         retaining its original identity.
                                       (Emphasis supplied by us)"
        23. Having considered the matter on the touchstone of the
E aforesaid legal position, we are of the view that the process of
  mixing polymers and additives with bitumen does not amount
  to manufacture. Both the lower authorities have found as a fact
  that ·the said process merely resulted in the improvement of
  quality of bitumen. Bitumen remained bitumen. There was no
F change in the characteristics or identity of bitumen and only its
  grade or quality was improved. The said process did not re!sult
  in transformation of bitumen into a new product havinig a
  different identity, characteristic and use. The end use. also
  remained the same, namely for mixing of aggregates for
G constructing the roads.
         24. We also find substance in the contention urged on
   behalf of the assessee that the answer to the issue at hand
   stands concluded by the dismissal of the Civil Appeals filed by ·
-H the revenue against the decision of the Tribunal in the case of
COMMNR. OF CENTRAL EXCISE, BANGALORE-II v. 1055
   OSNAR CHEMICAL P. LTD. [D.K. JAIN, J.]

Collector of Central Excise, Vadodara Vs. Tikitar lndustries 23 •   A
In that case the dispute was whether the process relating to
improvement of the quality of bitumen by raising its softening
point and penetration amounted to manufacture of a new and
different commodity. The process involved in improving the
quality of bitumen was oxidation, which converted straight grade    B
bitumen into air blown bitumen. In revenue's appeal the Tribunal
had inter-alia held as under :
      "19. The duty paid bitumen received by the Assessee is
      boiled so that foreig_n substances like sand and stone settle ·
      down; thereafter the air is blown into the material for C
      improving the quality of the bitumen by raising the
      softening point and penetration; this makes the bitumen
      suitable for intended application. It is seen from the
      process undertaken by the Assessees that only the quality
      of the product which has already suffered duty is D
      improved ...... "
                                     (Emphasis supplied by us)
As aforesaid, revenue's appeal was dismissed by this Court
vide order dated 2nd August, 2006 in Tikatar Industries (supra).
                                                                    E
     25. We therefore, hold that PMB or CRMB cannot be
treated as bituminous mixtures falling under CSH 27150090
and shall continue to be classified under CSH 27132000
pertaining to tariff for petroleum bitumen.
    26. In view of the opinion expressed above, we deem it          F
unnecessary to deal with the other grounds urged on behalf of
both the sides.
     27. For the foregoing reasons, no ground is made out for
our interference with. the impugned orders passed by the
Tribunal in all the appeals mentioned in paragraph 1 supra. The     G
appeals, being bereft of any merit, are dismissed accordingly,
with no order as to costs.
B.B.B.                                     Appeals dismissed.

23. 2000 (118) E.L.T. 468 (Tri).                                    H