Definition of manufacture – there is no “and” – CBEC in yet another wrong clarification!
The CBEC has written a letter to all Chief Commissioners clarifying that there is no extra “and” in the definition of manufacture in Section 2(f) of the Central Excise Act, 1944. The letter reads as follows,
2. A number of departmental and private publications of Central Excise Act, 1944, published from time to time after 1986, contain (ed) an extra word 'and' at the end of section 2(f) (i) and before section 2(f) (ii) Similarly, a number of publications of Central Excise Tariff Act, 1985 also contain the word 'and' in section 4(b) which provides the definition of manufacture.
3. While making some inquiries in connection with a court case, it is noticed that in the Official Gazette, the word 'and' was not there between section 2(f) (i) and section 2(f) (ii), as substituted vide section 4(b) of Central Excise Tariff Act, 1985 (5 of 1986). Moreover, the word 'and' has not been inserted later by any corrigenda or subsequent amendment to Central Excise Act, 1944.
4. The correct section 2 (f) of the Central Excise Act, 1944 reads as under:-
2(f) "manufacture" includes any process, -
(i) incidental or ancillary to the completion of a manufactured product; (Board says there is no “and” here)
(ii) 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 to manufacture; or
(iii) Which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alternation of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer,and the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;
5. You may advice the field staff suitably to safeguard revenue.
But is the Board right? As usual the clarification is more confusing than the original confusion. Let’s delve into history to know the reality.
It all started with THE CENTRAL EXCISE TARIFF ACT, 1985. This Tariff Act strangely amended the Central Excise Act too. Section 4 of the Tariff Act read as follows
4.Consequential amendments of, and construction of references to the First Schedule to Act 1 of 1944. - In the Central Excise Act, 1944, -
(a) Xxxxxx
(b) in section 2, for clause (f), the following clause shall be substituted; namely :-
‘(f) “manufacture” includes any process, –
(i) incidental or ancillary to the completion of a manufactured product; and (this and was very much required and so was rightly there. This was the first time that and was put there and it remained there forever. If and was not correct there should have been an or)
(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,
So Section 2(f) had two sub clauses, i and ii. A third sub clause was added by Section 132 of the Finance Act 2002 which reads as
132. Amendment of Section 2. -In the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act), in section 2, in clause (f), -
(i) in sub-clause (ii), for the word “manufacture,”, the words “manufacture; or” shall be substituted;
(ii) after sub-clause (ii), the following sub-clause shall be inserted, namely :–
“(iii) which is specified in relation to any goods by the CentralGovernment, by notification in the Official Gazette, as amounting to manufacture,”.
So after the amendment the definition would read thus
‘(f) “manufacture” includes any process, –
(i) incidental or ancillary to the completion of a manufactured product;