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CASE NO.: Appeal (civil)  7814-7817 of 2004

PETITIONER: Commissioner of Central Excise,Hyderabad-II.                             

RESPONDENT: M/s Aldec Corporation & Others   

DATE OF JUDGMENT: 26/09/2005

BENCH: B.P. SINGH & S.H. KAPADIA

JUDGMENT: J U D G M E N T

KAPADIA, J.         The issue involved in these civil appeals under section  35L(b) of Central Excise Act, 1944 is \026 whether on the facts  and circumstances of the case, the Commissioner was right in  holding that the fragmented activities of M/s Aldec  Corporation, M/s Vitthaleshwara Painting Industries (VPI) and  M/s Srinivasa Rolling and Engineering Works (SREW) taken  individually or jointly resulted in "manufacture" of a separate,  independent and distinct identifiable product namely, painted  aluminium slat (PAS) for venetian blinds classifiable under  chapter sub-heading 7616.90.

       On 8.11.1994, while patrolling, officers of Central  Excise, Hyderabad inspected an auto-trolley bearing  registration No.AHT-8500.  On verification of the goods, being  transported by the above trolley and on verification of  documents produced by the driver, the officers found that the  goods in transit were PAS for venetian blinds.  The officers  found that the goods in transit did not suffer excise duty and  accordingly, they seized the vehicle on a reasonable belief that  the goods in transit were excisable goods under chapter sub- heading 7616.90.  On 9.11.1994, as a follow-up of the seizure,  the officers visited the premises of M/s Aldec Corporation and  also premises of M/s VPI and M/s SREW under the authority of  the search warrant.  As a follow-up, the department issued  show-cause notice on 27.3.1995 alleging purchase of  aluminium sheets from M/s Hindalco Industries Ltd. and paint  from M/s Goodlass Nerolac Paints Ltd., which, the department  alleged, was being used in the manufacture of PAS for venetian  blinds measuring 50mm x .23 mm and 25 mm x .23 mm,  running into mill length (over 100 ft.).   According to the show  cause notice, M/s Aldec Corporation bought aluminium sheets  in coil form measuring 472 mm x 2.03 mm and in turn  forwarded the said aluminium sheets to M/s VPI (job processor)  which in turn forwarded the aluminium sheets to SREW (job  processor) for slitting and re-rolling the above sheets into slats  of 50 mm x .23 mm and 25 mm x .23 mm running into more  than 100 ft.  M/s SREW thereafter returned back the slats to  VPI who after painting the slats returned them back to M/s  Aldec Corporation which then sold the said PAS as trader in the  market.  These PAS were used in the manufacture of venetian  blinds. According to the show-cause notice, M/s Aldec  Corporation paid excise duty on the aluminium sheets bought  from M/s Hindalco under tariff item 76.06.  According to the  show-cause notice, the department had examined the documents  seized including balance-sheets and on that basis, it was alleged

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that M/s Aldec Corporation had paid excise duty under tariff  item 76.06 on behalf of so-called job processors, M/s VPI and  M/s SREW.  According to the show-cause notice, M/s Aldec  Corporation had paid excise duty which was passed on to the  customers in the past and on obtaining refund from the  department in the name of M/s VPI and M/s SREW, M/s Aldec  Corporation refunded the amounts received from the  department to its customers.  According to the show-cause  notice, M/s Aldec Corporation had two partners by the name,  Vinay Asar and Harish Asar, whose father Vallabdas  Purushottamdas Asar was a partner of a firm M/s Sunder Das &  Co.  According to the show-cause notice, M/s Sunder Das &  Co. had let out the premises to M/s Aldec Corporation.  On  behalf of M/s Sunder Das & Co., lease was signed by Vallabdas  Asar as lessor whereas the lease-deed was signed by Vinay  Asar as partner of M/s Aldec Corporation (lessee).  There was  also an agreement between M/s Sunder Das & Co. and M/s  VPI.  There was also an agreement between Sunder Das & Co.  and M/s SREW.  Both these agreements were for supply of  power, lighting and water to M/s VPI and M/s SREW.   According to the show-cause notice, the work assigned to M/s  VPI & M/s SREW was to convert aluminium sheets measuring  472 mm x 2.03 mm into 50 mm x .23 mm thickness and 25 mm  x .23 mm thickness.  It was further alleged that M/s SREW  collected job work charges not from M/s Aldec Corporation but  from M/s VPI for the work of re-rolling and slitting.  In the  light of the aforestated circumstances, the department alleged  that the entire control of all the aforestated activities vested in  M/s Aldec Corporation and with the intention to evade excise  duty, M/s Aldec Corporation called itself a "trader" and called  M/s SREW and M/s VPI as job processors.  According to the  show-cause notice, M/s Aldec Corporation was not a trader;  that it was in fact a processor and that M/s Aldec Corporation  had resorted to the aforestated modus operandi with the  intention to evade excise duty by fragmenting the aforestated  different and distinct activities which if taken together resulted  in the manufacture of an independent identifiable product,  namely, painted aluminium slat (PAS), classifiable as a separate  article under chapter sub-heading 7616.90.  From the show- cause notice, one finds that in the year 1986, M/s VPI was  asked by the Superintendent to apply for Central Excise  Licence and to follow central excise procedures.  Being  aggrieved, M/s VPI had filed a writ petition in the High Court  of Andhra Pradesh.   That writ petition was disposed-of on  10.6.1987 directing M/s VPI to approach the collector.  Similar  immunity was also claimed by M/s SREW.  The collector  upheld the contentions of M/s VPI and M/s SREW holding that  painting of aluminium sheets did not amount to "manufacture".   The additional collector also came to the conclusion that the  slitting of aluminium sheets did not amount to "manufacture".   Consequently, the additional collector took the view that the  aluminium sheets remained under tariff item 27(6) and there  was no new article produced or manufactured from such  aluminium sheets as a result of slitting and painting so as to fall  under tariff item 68 (as it then stood).  However, under the  impugned show-cause notice, the department contended that in  the earlier proceedings, notices were given only to M/s VPI and  to M/s SREW; that no notice was given to M/s Aldec  Corporation; that the earlier proceedings focussed on individual  activity of slitting and the individual activity of painting; that  the various different stages through which the original sheets  had undergone different processes at the behest of M/s Aldec  Corporation was not examined by the department; and that the  department had proceeded on the basis that M/s VPI and M/s  SREW were independent job processors.  According to the

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department, in the present case, on examination of the  documents and from subsequent recovery, the department  found that M/s Aldec Corporation was the processor and that  M/s VPI and M/s SREW were only its workmen/labourers and,  therefore, the impugned show-cause notice had called upon M/s  Aldec Corporation to show-cause why the above  activity/process taken together should not be treated as  "manufacture", both on first principles as well as under section  2(f) of the said Act, 1944.  The impugned show-cause notice,  therefore, did not accept M/s Aldec Corporation as a trader but  as a job processor/manufacturer.  In the circumstances, the  show-cause notice, in the present case, has alleged violation of  rule 174 of Central Excise Rules, 1944 read with section 6 of  the said Act, 1944.  By the said show-cause notice, the  department has called upon M/s Aldec Corporation to pay duty  amounting to Rs.1.51 crores (approximately) for the period  April 1990 to October 1994.  A similar show-cause notice was  also issued by the department on 5.7.1995 for recovery of an  amount of Rs.9.57 lacs (approximately) for the period  December 1994 to April 1995.  According to the show-cause  notice, the aluminium sheets bought by M/s Aldec Corporation  from M/s Hindalco was ten times thicker than the slats.  The  value of the slat was Rs.230/- per kg. and that these slats were  sold to different buyers whose names find place in the order of  the Commissioner.   

       In reply to the show-cause notice, M/s Aldec Corporation  submitted that the basis of the show-cause notice was erroneous  because it ignored the previous binding orders of the additional  collector and the commissioner (appeals) stating that the  activities carried by M/s VPI and M/s SREW did not amount to  "manufacture".  It was contended that M/s Aldec Corporation  was a trader in aluminium strips in the coil form and that the  department was always aware of its activities as a trader.    According to M/s Aldec Corporation, there was no difference  between tariff item 27(6) and tariff item 68 (which existed prior  to 28.2.1986) on one hand and tariff item 76.06 as well as  chapter sub-heading 7616.90 under the Central Excise Tariff  Act, 1985 on the other hand  and,  therefore,  the  decision   taken by the department in 1986 was irreversible.  In the reply,  M/s Aldec Corporation contended that M/s VPI and M/s SREW  were job processors, which position was accepted by the  department in its earlier decisions in 1986/1987 and, therefore,  it was not open to the department in the year 1995 to contend  that the slats were now classifiable under sub-heading 7616.90.     According to M/s Aldec Corporation, the business of the  corporation was trading and, therefore, it was not required to  obtain licence or registration under the Central Excise Act,  1944.  According to M/s Aldec Corporation, the department had  accepted that the activities of M/s VPI and M/s SREW were  non-manufacturing activities and in fact refunds were  sanctioned in favour of these units and, therefore, it was not  open to the department now to allege evasion of excise duty by  M/s Aldec Corporation, as indicated in the show-cause notice,  w.e.f. April 1990.  M/s Aldec Corporation, therefore, submitted  that they were traders of aluminium strips in the form of coils  and, therefore, there was no question of payment of excise duty  on such trading activity.  However, in reply to the impugned  show-cause notice, vide para 14(h), M/s Aldec Corporation  submitted that they were not concerned with the show-cause  notices given to M/s VPI and M/s SREW.  The tenor of the  reply of M/s Aldec Corporation indicates that M/s Aldec  Corporation was a trader whereas M/s VPI and M/s SREW  were job processors whereas according to the department, in  view of the complete control of all the activities by M/s Aldec

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Corporation, the real processor was M/s Aldec Corporation and  not M/s VPI or M/s SREW.  In reply, M/s Aldec Corporation  submitted that the excise duty was on the activity of  ’manufacture’;  the duty of excise was to be imposed on  manufacture of goods; that in the case of M/s Ujagar Prints etc.  v. Union of India & Others reported in 1988 (38) ELT 535, it  has been held by this Court that in the case of processing- houses, duty was leviable on the processors not because they  were owners of the goods but because they caused the  manufacture of the goods.  M/s Aldec Corporation submitted  that they did not cause the manufacture of the goods in the  present case and, therefore, they were not liable.  According to  the reply, the ownership of the goods or owners of the plant or  machinery was not relevant.  According to M/s Aldec  Corporation (respondent herein), what was relevant was the  nature of the activity and not the nature of the ownership. M/s  Aldec Corporation denied the charge of fragmentation of the  activities.  In any event, it was submitted that the facts relating  to the alleged fragmentation were known to the department at  all material times including in the earlier adjudication and,  therefore, it was not open to the department to claim duty  amount retrospectively.

       By order dated 30.11.1999, the commissioner confirmed  the demands raised by the department in the show-cause  notices.  It was held that at the relevant time, the aluminium  sheets measuring 472 mm x 2.03 mm thickness were  classifiable under chapter sub-heading 7606.20 whereas other  articles of aluminium as final product were classifiable under  chapter sub-heading 7616.90.  According to the commissioner,  the process of slitting, rolling and trimming by M/s SREW  constituted "manufacture" because at that stage, the width of  the original aluminium sheets bought from M/s Hindalco was  slitted to smaller sizes and reduced in thickness as indicated in  the above dimensions, which resulted in a separate, independent  identifiable product known in the market as aluminium slats.   According to the commissioner, M/s Aldec Corporation had  used slitting and rolling machines in the course of the  aforestated activities, which resulted manufacture of a finished  product known as ’painted aluminium slat’ for venetian blinds.   The commissioner further found that the real manufacturer of  the aforestated processes was M/s Aldec Corporation and not  M/s VPI and M/s SREW.  The commissioner examined various  documents, balance-sheets, income expenditure statements etc.  and came to the conclusion that M/s VPI and M/s SREW had  partners who were wage earners/employees of M/s Aldec  Corporation; and that M/s VPI and M/s SREW were dummies  created for the purposes of fragmenting the various  activities/processes with the idea of evading excise duty.   According to the commissioner, M/s Aldec Corporation had  fragmented the various processes referred to above involved in  the manufacture of PAS for venetian blinds with the intention  to evade duty; that the customers were approaching M/s Aldec  Corporation for job work and that these customers did not  approach M/s VPI or M/s SREW for job work; that in fact M/s  Aldec Corporation was the job worker or in any event, M/s  Aldec Corporation controlled all the activities.  According to  the commissioner, in the present case, if one was to look to the  totality of all the processes, the same would come within  section 2(f) of the Act, 1944 and that PAS for venetian blinds  would emerge as an independent product under chapter sub- heading 7616.90.  The commissioner further held that the  earlier decision of the department was not conclusive because  in the earlier proceedings, no notice was given to M/s Aldec  Corporation; that the decisions of the commissioner in the

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earlier round in favour of M/s VPI and M/s SREW indicate that  the point of classification alone was put in issue.  According to  the commissioner, in the earlier round of litigation, M/s VPI  and M/s SREW had contended that the aluminium sheets  bought from M/s Hindalco came under tariff item 27(6) and  that the slats continued to remain aluminium sheets under item  27(6) and did not constitute a separate product under the tariff  item 68 and, therefore, the question of manufacture under  section 2(f) did not arise for determination.  Consequently, the  commissioner confirmed the demand raised in the show-cause  notice.         Aggrieved by the aforesaid decision of the commissioner,  the matter was carried in appeal by M/s Aldec Corporation  (respondent herein) to the Customs, Excise & Service Tax  Appellate Tribunal (hereinafter referred to as "the tribunal").   By the impugned decision, the tribunal came to the conclusion  that in the present case, the aluminium sheets bought by M/s  Aldec Corporation (respondent herein) were cut to aluminium  strips by M/s SREW; that the thickness was reduced to .23 mm;  and that slitting of sheets into strips did not amount to  "manufacture".  The tribunal further held that M/s VPI did  painting on strips which did not amount to manufacture.  The  tribunal found that the issue involved in the present case stood  decided as far back as 27.8.1987 vide order of the  commissioner holding that the painting activity carried out by  M/s VPI did not amount to "manufacture".  Similarly, as far  back as 26.11.1986, the collector had held that the activity of  slitting and rolling did not amount to "manufacture".   According to the tribunal, both the decisions dated 26.11.1986  and 27.8.1987 were accepted and, therefore, the department has  no authority to claim recovery of duty from M/s Aldec  Corporation commencing from April 1990.  In the impugned  judgment, the tribunal held that the earlier decisions dated  26.11.1986 and 27.8.1987 did not change with the introduction  of the new tariff w.e.f. 28.2.1986 particularly when the  processes carried out since 1985 remained unchanged.  The  tribunal observed that in the impugned decision of the  commissioner, there is no discussion as to how painted  aluminium slats for venetian blinds fell under chapter sub- heading 7616.90 and, therefore, the tribunal came to the  conclusion that no new excisable product came into existence  classifiable under chapter sub-heading 7616.90.  In the  circumstances, the appeals were allowed by the tribunal and the  demand raised by the department was set aside.  Hence, these  civil appeals.

       Shri K. Radha Krishnan, learned senior counsel  appearing on behalf of the department submitted that the  commissioner had examined the balance-sheets, income and  expenditure statements, the lease-agreements and other  documents while coming to the conclusion that the entire  modus-operandi adopted by M/s Aldec Corporation (respondent  herein) was to evade liability to pay excise duty.  It was urged  that the partners of M/s VPI and M/s SREW were workmen and  employees of M/s Aldec Corporation; that they received  salaries from M/s Aldec Corporation; that the expenses of M/s  VPI and M/s SREW were borne by M/s Aldec Corporation; that  the customers treated M/s Aldec Corporation as job processors;  that excise duty was collected by M/s Aldec Corporation on  behalf of M/s VPI and M/s SREW and, therefore, M/s VPI and  M/s SREW were dummy companies.  Learned counsel  submitted that the real job worker was M/s Aldec Corporation  and not M/s VPI or M/s SREW.  It was urged that on  examination of the documents, the commissioner correctly  found that M/s Aldec Corporation was statutorily obliged to

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obtain registration and licence for the manufacture of painted  aluminium slats for venetian blinds and by not getting itself  registered, breach of rule 174 took place for which M/s Aldec  Corporation was liable.  Learned counsel urged that in the  entire decision of the tribunal, there is not a single word on this  issue and consequently, the matter needs to be remitted to the  tribunal.  Learned counsel urged that in the past, notices were  given by the department to M/s VPI and M/s SREW in which it  was alleged that the work of painting constituted "manufacture"  and, therefore, the said PAS came within the then tariff item 68.   Similarly, in the past, the show-cause notices were given to M/s  SREW, in which it was alleged by the department that the work  of slitting resulted in a new product classifiable under item 68  and, therefore, in the past, according to the learned counsel,  focus was put on individual activities of individual units, which  in the present case is not there.  In the present case, according to  the department, if one looks to the totality of all the above  activities taken, individually and/or jointly, would result in the  manufacture of a different, independent identifiable product  known in the market as PAS for venetian blinds.  According to  the learned counsel, in view of the aforestated circumstances,  the decisions earlier taken in 1986/1987 by the department were  not binding on the department.  It was urged that in the present  case, we are concerned with the concept of "manufacture" both  on first principles as well as under section 2(f) of the Act,  which has not been examined at all by the tribunal.  Learned  counsel submitted that the issue of classification was different  from the issue of excisability.  Learned counsel submitted that  this difference has not been looked into by the tribunal.   Therefore, learned counsel urged that the impugned decision is  erroneous and liable to be set aside.  Learned counsel submitted  that the thickness of aluminium sheets was ten times more than  the thickness of the strips; that there is value-addition in case of  PAS for venetian blinds; that the process of slitting, trimming  and re-rolling changed the structure of the original aluminium  sheets resulting in a distinct identifiable commodity known in  the market as PAS.  Reliance was also placed on the names of  the buyers of PAS referred to in the decision of the  commissioner to show that PAS was an independent product  both in terms of manufacture and in terms of marketability.

       Shri Vellapally, learned senior counsel appearing on  behalf of the assessee on the other hand submitted that the  combined activity of slitting, trimming, re-rolling and painting  of PAS did not result in production of a new article of  aluminium falling under chapter sub-heading 7616.90.  In this  connection, it was submitted that if two different processes,  neither of which by itself amounts to manufacture, are carried  on individually in different factories, no new product comes  into existence.  If two factories are owned by one individual, it  will make no difference.  Learned counsel submitted that in the  present case, the nature of the process and the nature of the  finished item in contra-distinction to the aluminium sheets  purchased from M/s Hindalco had to be decided and that  question has not been decided by the commissioner.  According  to the learned counsel, "article of aluminium" is an expression  used in chapter 76 to distinguish a finished product made of  aluminium from commodity of aluminium which is used as a  raw-material to manufacture various articles.  Learned counsel  submitted that in the present case, the evidence produced by  M/s Aldec Corporation (respondent herein) clearly shows that  the strips sold by them was a raw-material suitable for  manufacture of venetian blinds, decorative, lamps etc. and,  therefore, it remained under tariff item 76.06 and it did not  come out of that item into chapter sub-heading 7616.90.  

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Learned counsel submitted that the process of rolling and  slitting followed by painting did not result in production of a  new article.  According to the learned counsel, what M/s Aldec  Corporation purchased was an "aluminium strip" and,  irrespective of the ownership of the processing units, the output  namely PAS still remained an aluminium strip falling under  chapter heading 76.06 as no new item emerged by reason of the  above activities.  Learned counsel submitted that painted  aluminium slats are capable of being put to use not just for  venetian blinds but also for making false ceilings, lamps etc.  and, therefore, in common parlance, PAS is known as "painted  slats for venetian blinds".  It was urged that the onus of  establishing "manufacture" as also "classification" was on the  department; that the department had failed to discharge its onus;  that the commissioner had made repeated assertions without  any supporting evidence.  Learned counsel submitted that the  prior history of adjudication in this regard shows that the  burden was on the department in the present case on the heavier  side to show that the slitting, rolling and painting resulted in  emergence of a new product, both in terms of "manufacture"  and in terms of "marketability".  Reliance was also placed on  chapter note (d) to chapter 76 which indicated that the  aluminium strip remained classified under heading 76.06  notwithstanding the processing of such strip in the manner  contemplated by the note.  Learned counsel submitted that the  strips sold by M/s Aldec Corporation continued to be classified  under heading 76.06 and became an article of aluminium only  when the venetian blinds were manufactured by the buyers.   Learned counsel urged that the tariff heading made no  difference between a polished or a coated strip vis-‘-vis  unpolished or uncoated strip and, therefore, the commissioner  had erred in holding that the process adopted by the respondent  constituted "manufacture".  Lastly, the learned counsel urged  that the department had accepted orders dated 26.11.1986 and  dated 27.8.1987 passed in favour of M/s SREW and M/s VPI  holding that the process of trimming, slitting, re-rolling and  painting etc. did not amount to "manufacture" and, therefore, it  was impermissible for the department now to contend that it  was in the dark about relevant facts.  Learned counsel submitted  that the entire issue was based on the nature of the activities and  when the tribunal came to the conclusion that the different  processes taken individually or jointly did not amount to  "manufacture", it was not necessary for the tribunal to go into  the question of ownership of the processing units.  Learned  counsel submitted that whether M/s Aldec Corporation was the  real processor or whether M/s VPI or M/s SREW were the real  processors was not the relevant question and, therefore, the  tribunal was right in not deciding that question in the present  case.  In the above circumstances, the learned counsel urged  that no interference is called for in the present case.

       Before dealing with the rival contentions of the parties,  we reproduce hereinbelow the relevant headings of Chapter 76  of the Central Excise Tariff Act, 1985: CHAPTER 76: ALUMINIUM & ARTICLES THEREOF Heading  No. Sub- Heading  No. Description of Goods 1 2 3 76.06

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Aluminium plates, sheets (including circles)  and strip, of a thickness exceeding 0.2 mm.

7606.20 Of aluminium alloys. 76.16

Other Articles of Aluminium

7616.10. Nails, tacks, staples, screws, bolts, nuts etc.

7616.90 Others

       The basic question which needs to be answered in the  present case is \026 whether M/s Aldec Corporation, M/s VPI and  M/s SREW were engaged in the manufacture of an independent  identifiable distinct product, in terms of manufacture and  marketability.  Chargeability is different from liability to pay  duty.  Chargeability arises on manufacture under section 3 of  the said 1944 Act.  Liability to pay excise duty depends on  classification.  Therefore, there is a difference between the  concept of "chargeability" and the concept of "classification".   Levy is a constitutional concept as held in the case of Union of  India & others v. Bombay Tyre International Ltd. reported in  AIR 1984 SC 420.  Therefore, under the excise law,  chargeability, classification, valuation and exemption are  different and distinct concepts.  In the case of Moti Laminates  Pvt. Ltd. v. Collector of Central Excise, Ahmedabad reported  in 1995 (76) ELT 241, this Court has held that section 3 levies  duty on all excisable goods, provided they are manufactured or  produced.  Therefore, where the goods are specified in the  schedule, they are excisable goods but whether such goods can  be subjected to duty would depend on whether they were  produced or manufactured by the person on whom duty is  proposed to be levied.  The expression "produced or  manufactured" has been explained to mean that the goods so  produced must satisfy the test of marketability.  Therefore, it is  open to an assessee to prove that even though the goods in  which he is carrying on business is excisable, being mentioned  in the schedule, it could not be subjected to duty if it does not  constitute "goods", either because they are not produced or  manufactured or if they have been produced or manufactured,  they were not marketed or capable of being marketed.  In short,  the twin test contemplated by the excise law is that the goods  must not only be manufactured but they also should be capable  of being marketed.  In the case of Commissioner of Central  Excise, Goa and Chennai v. M.R.F. Ltd., Chennai reported in  (2005) 2 SCC 733, this court held that although the basic  commodity was a tyre cord and the final product was a  rubberised nylon tyre cord, the intermediate product, namely,  dipped nylon tyre cord, could constitute a separate identifiable  product in terms of manufacture and marketability.  In that case,  on the question of marketability, the matter had to be remitted  to the commissioner (adjudication).  In the case of Hindustan  Zinc Ltd. v. Commissioner of Central Excise Jaipur reported  in 2005 (181) ELT 170, this Court held that emergence of silver  chloride by filtering sulphates from mixture of zinc chloride  was a process which amounted to manufacture.  However, no  evidence was led by the department to show that the silver  chloride which emerged out of the said process was capable of  being sold in the market and, therefore, although the department  succeeded in making out a good case on manufacture, it failed

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on marketability for want of evidence.  In the said case, this  court found that silver chloride was an independent identifiable  product.  However, the department had failed to lead evidence  as to whether the silver chloride which was sold in the market  having 75% silver content and the silver chloride which  emerged as a by-product in filtering sulphate from mixture of  zinc chloride had the same quantity of pure silver.  It was found  that the silver chloride which emerged by filtering sulphate  from zinc chloride had only 50-53% silver whereas silver  chloride sold in the market had 75% content of silver.  Since the  department had failed to prove marketability, this Court did not  accept the contention of the department that a new product had  emerged.  Further, whether an article as envisaged by section  2(f) has been manufactured or not solely depends on whether  the article in question satisfies the test as laid down in the  relevant chapter heading or sub-heading and is known as such  in the commercial community.  The coverage of the respective  chapter headings has to be determined in the light of the section  notes and chapter notes.  Further, when an article is specified  with reference to the raw material like "Articles of  Aluminium", the general use to which an article is capable of  will be relevant. [See: Airgrill Industries v. Commissioner of  Central Excise reported in 2001 (132) ELT 646 (T) affirmed by  this Court in 2002 (141) ELT A90].  Lastly, the question  whether a process, taken singly or jointly, constitutes  "manufacture" on first principles or under section 2(f) has to be  determined having regard to the facts and circumstances of each  case.  The definition of "manufacture" as per section 2(f)  includes any process incidental or ancillary to the completion of  a manufactured product.   For example, painting of steel  furniture is incidental or ancillary to the manufacture of  steel  furniture.  But if the steel furniture is sold without painting and  if painting is done after the furniture is sold then painting will  not amount to manufacture.   

       Applying the above tests to the facts of the present case,  we find that Note 2 to section XV, under which chapter 76 falls,  has not been considered.  Similarly, section 2(b) of section XVI  of the HSN has not been considered.  Further, the functional  utility of PAS as deflector of air-flow has not been considered.   The issue as to whether the PAS in question was for general  purpose or was user specific was not considered.  In the present  case, the commissioner has not discussed the difference  between the old tariff items 27(6) and 68 vis-‘-vis chapter  heading 76.06 and sub-heading 7616.90 of the Tariff Act, 1985.   Even on marketability, there is no evidence as to the type of  PAS (with particulars of dimension) being sold in the market.   In the circumstances, we do not wish to interfere in the matter.   

       Ordinarily, we would have remitted the matter to the  commissioner.  However, in this case, we find that the  department has accepted the decisions of the Commissioner  (Appeals) and Additional Collector passed in 1986 and 1987  holding that each of the above process do not constitute  "manufacture".  The respondent herein has acted on that basis  for at least ten years.  Hence, we do not find any intention to  evade duty on the part of the respondent.  We cannot expect the  respondent to collect duty from its customers for the last ten  years.   

       In the present case, it was vehemently urged on behalf of  M/s Aldec Corporation that ownership of the goods or  ownership of the plant or machinery was not relevant.  That  what was relevant was the nature of the activity and not the  nature of the ownership.  It was urged that it was not necessary

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for the tribunal to go into the question of ownership as it had  taken the view that the activities did not constitute manufacture.   We do not find any merit in this argument.  The question of  ownership was directly relatable to the clearances made in the  names of M/s VPI and M/s SREW and, therefore, the tribunal  ought to have adjudicated upon the question as to whether the  clearances were made in the name of dummy firms.

       Before concluding, we may state that the tribunal should  have examined the effect of bifurcation of activities by M/s  Aldec Corporation; it should have examined the processes  involved either jointly or singly in the light of the above section  notes, chapter notes, notes to HSN etc.  as also the functional  utility of the product.  For example, painting after slitting, re- rolling etc. and before sale of PAS may have a different result  vis-‘-vis painting as an activity per se.  Learned counsel for the  respondent, on instruction, says that M/s Aldec Corporation  will get itself registered under protest and without prejudice to  its rights and contentions that the said process, taken jointly  and/or singly, will not constitute manufacture under section 2(f)  and will not make PAS classifiable under sub-heading 7616.90.   We take the above statement on record and accordingly, we are  not examining the question whether the bifurcation impugned  was with the intention to evade duty.     

       Subject to above, these civil appeals are dismissed, with  no orders as to costs.