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PETITIONER: COLLECTOR OF CENTRAL EXCISE, JAIPUR ETC. ETC.

       Vs.

RESPONDENT: RAJASTHAN STATE CHEMICAL WORKS DEEDWANA, RAJASTHAN ETC. ETC.

DATE OF JUDGMENT17/09/1991

BENCH: FATHIMA BEEVI, M. (J) BENCH: FATHIMA BEEVI, M. (J) RANGNATHAN, S. OJHA, N.D. (J)

CITATION:  1991 AIR 2222            1991 SCR  Supl. (1) 124  1991 SCC  (4) 473        JT 1991 (4)     6  1991 SCALE  (2)602

ACT:     Central  Excises and Salt Act, 1944: Section 2(f),  Item No. 68 of First Schedule--Notification No. 179/77, CE  dated 18.6.1977--Exemption in relation to manufacture of which  no process is carried on with the aid of power--Assessees using power  to lift raw materials--Whether fails within  ’process of manufacture’-- Exemption--Whether available. Words & Phrases: "Manufacturing Process"- Meaning of.

HEADNOTE:     By  way  of notification dated  18.6.1977,  the  Central Government exempted from duty all goods falling under Tariff item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 in or in relation to manufacture of which  no process was ordinarily carried on with the aid of power.     The  respondents in the first set of appeals  have  been manufacturing  crude sodium sulphate. Since the  respondents used  diesel pumps for pumping brine into salt pans, in  the process of manufacture, the benefit of the said notification was  denied to them on the ground that the process of  manu- facture  was carried on with the aid of power.  However,  on appeal,  the  Collector  of Customs  (Appeals)  allowed  the benefit to the respondents. Revenue preferred an appeal  and the Tribunal affirmed the Collector’s order.     In  the other appeals, the Respondents, manufacturer  of lime, used 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  Assistant 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 materials  into the salt pan or the kiln as the case may  be and the transferring of the raw materials was a stage  prior to the manufacturing process and so the 125 use  of  power for such transfer would  not  disentitle  the respondents from the benefit under the said notification.

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   Aggrieved by the orders of the Tribunal, the Revenue has preferred the present appeals.     Before  this Court, the Revenue contended  that  pumping the  brine 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 process carried on with the 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. 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 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, that process is  one in relation to the manufacture. [130 E-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 may be 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-B] 126        2.2  A  process is a manufacturing  process  when  it brings  out a complete transformation for the  whole  compo- nents so as to produce a commercially different article or a commodity.  But, that process itself may consist of  several processes  which  may or may not bring about any  change  at every  intermediate stage. But the activities or the  opera- tions  may be so integrally connected that the final  result is  the  production  of a  commercially  different  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.  The word ’process’ in the context in which it appears in the notification includes an operation or activi- ty in relation to manufacture. [132H, 133 A-B]     J.K.  Cotton  Mills v.S.T. Officer, [1965]  1  SCR  900; Union of lndia v. Delhi Cloth & General Mills, [1963]  Supp. 1 SCR 586, relied on.     3.1  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 manufacture would be  impossible. The  handling of the raw materials for the purpose  of  such transfer  is then integrally connected with the  process  of

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manufacture. The handling for the purpose of transfer may be manual  or mechanical but if power is used for  such  opera- tion, 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. 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  proc- ess  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 manufacturing  process. It precedes the feeding of the  mix- ture 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.  There- fore, if power is used in 127 anyone  of these operations or anyone of the  operations  is carried on with the aid of power, it is a case when 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  manu- facture  and until some change has taken place and the  com- modity retains a continuing substantial identity through the processing  stage, one cannot say that it has been  manufac- tured.  That does not, however, mean that any  operation  in the  course of such process is not in relation to the  manu- facture. [136 E]         Dy.  Commissioner, Sales Tax; Ernakulam v. Pio  Food Packers,  AIR 1980 SC 1227; Union of India v. Delhi Cloth  & General  Mills, [1963] Suppl. 1 SCR 586; Standard  Fireworks Industries v. Collector, 1987 (28) ELT 56 (SC), relied on.     Nirma  Chemical Works & Ors. v. Union of India  &  Ors., 1981  ELT 617 (Guj.); Chowgule & Co. Pvt. Ltd. v.  Union  of India, AIR 1981 SC 1014, referred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.  359394 of 1989.     From the Order dated 26.5.1988 of the Customs Excise and (;old   (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.     A.K.  Ganguli, Ms. Sushma Suri, P. Parmeshwaran  and  A. Subba Rao for the Appellant.     Rajinder  Sachar,  Aruneshwar Gupta, Manu  Mridul,  P.I. Jose and Sanjay Parekh for the Respondents. The Judgment of the Court was delivered by     FATHIMA  BEEVI,  J. These appeals by the  Revenue  under Section  35L of the Central Excises and Salt Act,  1944  in- volve  the interpretation of the Notification No. 179/77  CE dated 18.6.1977. The Notification read thus:               "In  exercise of the powers conferred by  sub-

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             rule (1) of rule 8 of               128               the  Central Excise Rules, 1944,  the  Central               Government  hereby exempts all  goods  failing               under Item No. 68 of the First Schedule to the               Central Excises and Salt Act, 1944 (1 of 1944)               in 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".               Tariff  Item  68 during  the  relevant  period               read:-               "All  other  goods, not  elsewhere  specified,               manufactured in a factory but excluding..."      M/s. Rajasthan State Chemical Works, the respondents in Civil  Appeals  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  proc- ess  of  evaporation takes place some quantities  of  sodium 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.      The benefit of the aforesaid notification was not given to  these 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 Collector  of Customs (Appeals) and that order was  affirmed by the Tribunal.       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 raw materials at the kiln head,  these  re- spondents were denied the benefit of the notification by the Assistant  Collector.  The appeal before  the  Collector  of Appeals was dismissed.  The Tribunal, however, accepted  the claim of the respondents.      The Revenue being aggrieved has challenged the  respec- tive orders of the Tribunal in these appeals.   129     In both these set of cases, the view taken by the Tribu- nal is that the 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  manu- facturing  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  the respondents from the benefit under the notification.     It has been contended before us on behalf of the  appel- lant 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  manufac- ture,  the exemption would not apply. On the other hand,  it is  reiterated for the respondents that if the process  car- ried  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 materials by the use of power cannot be

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considered as a process of manufacture.     The  Central Government has exempted all  goods  failing under Item No. 68 of the First Schedule to the Act in or  in relation to the manufacture of which no process is ordinari- ly  carried on with the aid of power from the whole  of  the duty  of excise leviable thereon. The exemption  under  this notification  is available only when the goods are  manufac- tured 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.     We have to consider what activity amounts to process  in or  in relation to manufacture of goods for the  application of the notification. The word ’manufacture’ has been defined in  Section 2(1) of the Central Excises and Salt Act,  1944, thus:-               "2(1). ’Manufacture’ includes any process- (i)               incidental or ancillary 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". 130     Clause  (f)  gives an inclusive definition of  the  term ’manufacture’, According to the dictionary, the term  ’manu- facture’  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 regard to the  context  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 manipulation. Naturally,  manufacture is the end result of one or more processes through which the original  commodities  are  ’made 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 commodi- ty  undergoes  a change as a result of some  operation  per- formed 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.     Manufacture  thus involves series of processes.  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 material is subjected to, manufactured product emerges. Therefore, each step towards such production  would be  a  process in relation 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 certain materials in order to produce  a  good

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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  defi- nite  manner and leading to the accomplishment of  some  re- sult." The activity contemplated by the definition 131 is perfectly general requiring only the continuous or  quick succession. It is not one of the requisites that the activi- ty  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 application  to handling. There may be a process which  con- sists  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  the material  and it need not be a process involving the use  of material.  The activity may be subordinate but one in  rela- tion 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:-               "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 expression ’in  the  manufac-               ture’  takes in within its compass, all  proc-               esses which are directly related to 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  converting  raw               materials  into  finished  goods.   Where  any               particular 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  judg-               ment,  fail  within  the  expression  ’in  the               manufacture of goods’."     In  that case, the assessee carrying on the business  of manufacturing  textile  goods  claimed  that  certain  goods namely  drawing material etc. were used in the  manufacture. The Court said that if the process of designing is so  inte- grally 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 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 related to the actual  produc- tion. 132     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               (13 puts it beyond any possibility of  contro-               versy  that  if power is used for any  of  the               numerous  processes that are required to  turn               the raw material into a finished article known               to  the market the clause will be  applicable;

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             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."     In  that  case,  it was contended  that  manufacture  is complete as soon as by the application of one or more  proc- esses  the raw material undergoes some change. In  answering the contention, the Court stated thus:--                        "We  are  unable to  agree  with  the               learned Counsel that by inserting this defini-               tion of the word "manufacture" in s. 2 (f) the               legislature intended to equate "processing" to               "manufacture"   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. 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               in s. 2 (f) 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 into a finished  article               known  to  the market the clause will  be  ap-               plicable;  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  pur-               pose  that  the legislature, in  our  opinion,               inserted this definition of the word ’manufac-               ture’ in the definition 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 different article or  a  commodity. But, that process itself may consist of 133 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 of a commercially different  arti- cle.  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 ’process’ in the context in which it appears in the aforesaid  notifi- cation  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 manufacture would  be  impossible.  The handling of the raw materials for the purpose of such trans- fer  is then integrally connected with the process of  manu- facture.  The  handling for the purpose of transfer  may  be manual  or mechanical but if power is used for  such  opera- tion, it cannot be denied that an activity has been  carried on  with the aid of power in the manufacturing process.  The

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use  of diesel pump sets to fill the pans with brine  is  in activity  with  the  aid of power and that  activity  is  in relation  to the manufacture. 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  proc- ess  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 manufacturing  process. It precedes the feeding of the  mix- ture 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.  There- fore,  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  manufac- ture the process is carried on with the aid of power.     Learned  counsel for the appellant relying on the  deci- sion  of  the Gujarat High Court in Nirma Chemical  Works  & Ors.  v.  Union  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 ,red lime 134 stone  on the kiln head does not bring about any  change  in the  raw material 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 operation can be termed only ’transportation’ and cannot  be called a ’process’.  The Gujarat High Court in Nirma  Chemi- cal Works (supra) said:-               "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.               If  no  change  is brought about  in  the  raw               material  until it reaches the re-action  ves-               sel,  then  no process of manufacture  can  be               said to have taken place until the raw materi-               als  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-acting 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  mate-               rial  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 commodity, no               process can be said to have been gone through.               Before any operation can be characterised as a

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             process,  the commodity must, as a  result  of               the operation, experience some change."     Counsel for the respondents submitted that a process  in or  in relation 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  collecting, storing or dealing with the  raw  material are  operations and/or activities prior to the beginning  of process.  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  preparation  of  sodium sulphate, it is  said  that  the process in or in relation to manufacture commences after the brine is placed in the salt pans. The counsel 135 submits  that  if  every operation  and/or  activity  and/or action is treated as a ’process’ in or in relation to  manu- facture then power is used in (i) erection of factory  where steel, cement, bricks etc. are used, (ii) day-to-day  trans- portation and (iii) use of electricity for lights, fans etc. These arguments 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 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.I.R. 1981 SC 1014. We are afraid, the observations had not been  properly  understood or applied in  drawing  inference 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. Commissioner, Sales Tax; Ernakulam v.  Pio Food Packers, A.I.R. 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 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               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 is recognised as a  new               and  distinct article that manufacture can  be               said to take place?     It has been made clear in Union of India v. Delhi  Cloth &  Genera,  Mills (supra) that the definition  of  the  word ’manufacture’ in Section 2 (f) puts it beyond any possibili- ty  of controversy that if the power is used for any of  the numerous processes that are required to turn the raw materi- als 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.     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 Chowgule & Co. Pvt.  Ltd. case, what this Court said is that:- 136

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             "Wherever a commodity undergoes a change as  a               result of some operation performed on it or in               regard  to it, such operation would amount  to               processing of the commodity."     What is necessary in order to characterise an  operation as  "processing" is that the commodity must, as a result  of the  operation, experience 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 the operation on the  commodity  that  is material  for the purpose of determining whether the  opera- tion  constitutes "processing". In drawing  the  distinction 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 "manufacture" used as               a  verb  is generally understood  to  mean  as               "bringing into existence a new substance"  and               does  not mean merely "to produce some  change               in a substance", however minor in  consequence               the change may be."     Thus "processing" may be an intermediate stage in  manu- facture  and until some change has taken place and the  com- modity retains a continuing substantial identity through the processing  stage, we cannot say that it has  been  manufac- tured.  That does not, however, mean that any  operation  in :he  course of such process is not in relation to the  manu- facture. While interpreting the same exemption  notification in  Standard  Fireworks Industries v. Collector,  1987  (28) E.L.T.  56(SC),  it was held that manufacture  of  fireworks requires cutting of steel wires and the treatment of  papers red, 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 treatment of the  papers  is a process for the manufacture  of  goods  in question.     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 carried on with the aid of power, the process in or in relation to the  manufac- ture  must  be deemed to be one carried on with the  aid  of power. In this 137 view  of the matter, we are unable to accept the  contention that  since the 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  cir- cumstances of the case, we make no order as to costs. G.N.                        Appeals allowed. 138