excise duty = the mechanical mixing of polymer with heated bitumen does not amount to manufacture of a new commercially identifiable product and therefore, is not exigible to Excise duty under the Act. =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.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 4055-4056 OF 2009 COMMISSIONER OF CENTRAL EXCISE, -- APPELLANT BANGALORE-II VERSUS M/S OSNAR CHEMICAL PVT. LTD. -- RESPONDENT WITH CIVIL APPEAL NO. 5633 OF 2009 AND CIVIL APPEAL NO. 7142 OF 2010 JUDGMENT D.K. JAIN, J.: 1. This batch of appeals by the revenue, 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 1 passed by the Customs, Excise & Service Tax Appellate Tribunal South Zonal Bench, 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 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 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 "PMB"). We may note that in one of the appeals (C.A. 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 2 supply of PMB at their work site at Solur Village, Viswanathpura 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 1600C with the help of burners. To this hot 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. 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. 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: 3 "Tariff Item Description of goods 2713 Petroleum coke, petroleum bitumen and other residues of petroleum oil or of oils obtained from bituminous minerals. 2713 20 00 Petroleum bitumen 2715 Bituminous mixtures based on natural asphalt, on natural bitumen, on petroleum bitumen, on mineral tar or on mineral tar pitch (for example, bituminous mastics, cut backs) 2715 00 90 Other 3901 Polymers of ethylene, in primary forms 3901 90 Other " 4. The assessee had been paying Central Excise 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, Bangalore (hereinafter referred to as "the Commissioner"), demanding duty in respect of PMB 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 4 and vide Order-in-original, dated 23rd April 2007, held that the aforesaid process carried 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 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 use only in a molten condition, at a temperature around 1600C and resultantly cannot be stored unless kept in continuous agitated state @ 1000C 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 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 the process involved, PMB and CRMB are different from bitumen. According to the learned counsel, ordinary bitumen is heated 5 upto a temperature of 2000C, in the Polymer modification plant; to this heated mixture, polymer is added and samples are taken; if the samples, are found to be satisfactory, 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, 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, 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, satisfy the test of marketability which is one of the essential conditions for the purpose of levy of Excise duty, learned counsel commended us to the decisions of this Court in Medley Pharmaceuticals 6 Limited Vs. Commissioner of Central Excise & Customs, Daman1 and Nicholas Piramal India Ltd. Vs. Commnr. Of Central Excise, Mumbai2. It was also urged that Circular No. 88/1/87-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 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 would be chargeable on blown-grade bitumen. 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 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 1 2011 (263) E.L.T. 641 (SC) 2 2010 (260) E.L.T. 338 (SC) 7 perversity, the finding does not warrant any interference by this Court. In support of the proposition, learned senior counsel placed reliance on the decisions of this Court in Commissioner of Central Excise, Bangalore Vs. Ducksole (I) Ltd. & Ors.3 and Commissioner of Central Excise, Delhi-III Vs. Uni Products India Ltd. & Ors.4. 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, 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 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 3 (2005) 10 SCC 462 4 (2009) 9 SCC 295 8 both the articles remained the same. In support of the proposition, learned senior counsel commended us to a plethora of decisions of this Court, including M/s. Tungabhadra Industries Ltd. Vs. The Commercial Tax Officer, Kurnool5, Commissioner of Central Excise, Gujarat Vs. Pan Pipes Resplendents Limited6, Crane Betel Nut Powder Works Vs. Commissioner of Customs & Central Excise, Tirupathi & Anr.7 and Union of India & Ors. 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 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 to manufacture", the said provision would be applicable. However, wherever the legislature intended to give an extended or artificial meaning to the said expression in 5 1961 (2) SCR 14 : AIR 1961 SC 412 6 (2006) 1 SCC 777 7 (2007) 4 SCC 155 8 1977 (1) ELT (J199) (SC) 9 relation to any goods, it has clearly specified it. According to the learned counsel, since the addition of polymer or additives to the 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 of Central Excise, Jaipur10. 9. Relying on the two afore-mentioned Circulars, F.No. 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 Revenue, Ministry 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 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, 9 2005 (186) E.L.T. 385 (SC) 10 2004 (174) E.L.T. 145 (SC) 10 reliance was also placed on Circular No.623/14/2002-CX., dated 25th February, 2002, wherein the Central Board of Excise and Customs has clarified that the process of preparation of Hot Asphalt Mix used in making roads does not amount to manufacture as contemplated under Section 2(f) of the Act. 10. It was argued that merely because bitumen (the basic material) and PMB (the end material) are specified under two different headings, it cannot be presumed that the process of obtaining PMB 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 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 of Central Excise, Chennai-II Vs. Tarpaulin International11, Shyam Oil Cake Ltd. (supra), Commissioner of Central Excise, Mumbai Vs. Lalji Godhoo & Co.12, Commissioner of Central Excise Vs. 11 2010 (256) E.L.T. 481 (SC) 12 2007 (216) E.L.T. 514 (SC) 11 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 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. 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' have to be satisfied cumulatively. In support of the proposition, reliance was placed on the decisions of this Court in Hindustan Zinc Ltd. (supra), 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 manufacture and that the goods so manufactured are 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 13 (2006) 8 SCC 314 14 (2005) 2 SCC 662 12 Godhoo & Co. (supra), Metlex (I) (P) Ltd. Vs. Commissioner of Central Excise, New Delhi15; Hindustan Poles Corpn. Vs. Commissioner of Central Excise, Calcutta16 and HPL Chemicals Ltd. Vs. Commissioner of Central Excise, Chandigarh17. 12. Lastly, the learned counsel stressed that in the light of the decisions of this Court in Commissioner of Central Excise & Customs Vs. Tikatar Industries18, Commissioner of Central Excise, Navi Mumbai Vs. Amar Bitumen & Allied Products Private Limited19 and Commissioner of Central Excise, Mumbai Vs. Tikitar Industries20, the issue raised by the revenue in these appeals is no longer res-integra, and therefore, all the appeals deserved to be dismissed. 13. Mr. Laxmi Kumaran, learned counsel appearing for the assessee in Appeal No.7142 of 2010, while adopting the arguments advanced by Mr. Bagaria, emphasised that apart from the fact that in his case the assessee was mixing the additives at the site and not in a factory, the percentage of 15 (2005) 1 SCC 271 16 (2006) 4 SCC 85 17 (2006) 5 SCC 208 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.) 13 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 support, learned counsel referred to McNicol & Anr. Vs. Pinch21, wherein Darling J., delivering the concurring majority opinion observed that: "You can only make one thing out of another. I think the 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 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 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 21 1906 (2) K.B. 352 14 temperature, bitumen and polymer get separated and revert to their original state, which shows that 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 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 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 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 or additives or with any other compound is required to be recognised by the 15 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 Act in Shyam Oil Cake Ltd. (supra), this Court had held as under :- "16. Thus, the amended definition enlarges the scope of manufacture by roping in processes which may or may not 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 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 relation to any goods. XXX XXX XXX XXX XXX XXX XXX XXX 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 cannot, be brought into play in the 16 absence of it being specifically stated that the process amounts to manufacture." 17. Then again, in S.R. Tissues Pvt. Ltd. (supra), a question arose whether slitting and cutting of toilet tissue paper on aluminium foil amounted to manufacture under Section 2(f) of the Act. Answering the question in the negative, this Court had observed thus :- "15.....In order to make Section 2(f) applicable, the process of cutting/slitting is required to be recognized by 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. 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." 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 Item 27150090 to indicate that the said process amounts to 17 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. 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 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 regarded as the original commodity but is instead recognized 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 Industries (supra) are quite apposite : "In our opinion, the learned Judges of the High Court laid an undue emphasis on the addition by 18 way of the absorption of the hydrogen atoms in the process of hardening and on the consequent inter-molecular changes in the oil. The addition of the hydrogen atoms was effected 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 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 oil and if so it does not seem to accord with logic that when the 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) 20. In Delhi Cloth & General Mills Co. Ltd. (supra), yet another Constitution Bench, exploring the concept of manufacture echoed the following views : "14......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. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American judgment. The passage runs thus:- "Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of 19 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." (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 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 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 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 tissues." (Emphasis supplied by us) 20 22. In Deputy Commissioner Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. Pio Food Packers22, a three 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:- "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 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 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 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 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 22 1980 (6) E.L.T. 343 (SC) 21 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 did not result in transformation of bitumen into a new product having a different identity, characteristic and use. The end use also remained the same, namely for mixing of aggregates for 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 the revenue against the decision of the Tribunal in the case of Collector of Central Excise, Vadodara Vs. Tikitar Industries23. 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 bitumen into air blown bitumen. In revenue's appeal the Tribunal had inter-alia held as under : 23 2000 (118) E.L.T. 468 (Tri.) 22 "19. The duty paid bitumen received by the Assessee is boiled so that foreign substances like sand and stone settle down; thereafter the air is blown into the material for 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 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). 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 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 23 appeals, being bereft of any merit, are dismissed accordingly, with no order as to costs. ........................................... (D.K. JAIN, J.) ............................................ (ASOK KUMAR GANGULY, J.) NEW DELHI; JANUARY 13, 2012. RS 24

the benefit of Modvat credit= The assessee filed declarations and availed of the benefit of Modvat credit in respect of the Flexible Laminated Plastic Film in roll form & Poly Paper used for testing the F&S machine. On 4th March, 1993, a notice was issued to the assessee to show cause as to why the benefit of Modvat credit 4 =the process of testing the customised machines is integrally connected with the ultimate production of the final product viz. the F&S machines and therefore, that process is one in relation to the manufacture, falling within the sweep of Rule 57A of the Rules.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7152 OF 2004 M/S FLEX ENGINEERING LIMITED -- APPELLANT VERSUS COMMISSIONER OF CENTRAL EXCISE, -- RESPONDENT U.P. WITH CIVIL APPEAL NO.429 OF 2012 (Arising out of S.L.P. (C) No. 875 of 2008), CIVIL APPEAL NO.430 OF 2012 (Arising out of S.L.P. (C) No. 10759 of 2010) AND CIVIL APPEAL NO.431 OF 2012 (Arising out of S.L.P. (C) No. 6501 of 2011) J U D G M E N T D.K. JAIN, J.: 1 1. Leave granted in S.L.P. (C) Nos. 875 of 2008, 10759 of 2010 and 6501 of 2011. 2. This batch of appeals, by grant of leave, arises out of judgments dated 26th August, 2002 in C.E.R. No. 11 of 2001, 11th April, 2007 in C.E.A. No. 10 of 2004, 8th September, 2009 in C.E.A. No. 6 of 2003 and 25th October, 2010 in C.E.R. No. 51 of 2002 passed by the High Court of Judicature at Allahabad. By the impugned judgments, rendered in the reference applications filed by the assessee, under Section 35H of the Central Excise Act, 1944 (for short "the Act"), the questions referred by the Customs, Excise and Gold (Control) Appellate Tribunal, as it then existed, (for short "the Tribunal") have been answered in favour of the revenue. 3. In order to comprehend the controversy at hand, a few material facts may be noticed. At the outset, it may be noted that these appeals relate to the period between August 1992 to June 1996. 2 The appellant -assessee, a body corporate, claiming to be pioneers in the concept of flexible packaging, is engaged in the manufacture of various types of packaging machines, marketed as Automatic form fill and seal machines (for short "F&S machines"), classified under chapter heading 8422.00 of the Schedule to the Central Excise Tariff Act, 1985 (for short "the Tariff Act"). The literature placed on record shows that the assessee has prototype models of F&S machines with technical details like web width, Roll diameter, Core diameter, typical material range, the type of material to be packed, etc. According to the assessee, the machines are `made to order', inasmuch as all the dimensions of the packaging/sealing pouches, for which the F&S machine is required, are provided by the customer. The purchase order contains the following inspection clause: "Inspection/Trial will be carried out at your works in the presence of (sic) our Engineer before dispatch of equipment for the performance of the machine." 3 Flexible Laminated Plastic Film in roll form & Poly Paper which are duty paid, falling under chapter headings 3920.38 and 4811.30 of the Schedule to the Tariff Act, are used for testing, tuning and adjusting various parts of the F&S machine in terms of the afore-extracted condition in the purchase order. As the machine ordered is customer specific, if after inspection by the customer it is found deficient in respect of its operations for being used for a particular specified packaging, it cannot be delivered to the customer, till it is re-adjusted and tuned to make it match with the required size of the pouches as per the customer's requirement. On completion of the above process and when the customer is satisfied, an entry is made in the RG 1 register declaring the machine as manufactured, ready for clearance. 4. The assessee filed declarations and availed of the benefit of Modvat credit in respect of the Flexible Laminated Plastic Film in roll form & Poly Paper used for testing the F&S machine. On 4th March, 1993, a notice was issued to the assessee to show cause as to why the benefit of Modvat credit 4 on the above goods be not denied, on the ground that they have used the said material for the purpose of testing the final product i.e. the F&S machine which cannot be treated as inputs as stipulated in Rule 57A of the Central Excise Rules, 1944 (for short "the Rules"). On a similar ground, a number of show cause notices were issued to the assessee covering the period from August 1992 to June 1996. The assessees' reply to the show cause notices did not find favour with the adjudicating authority, who accordingly, denied the benefit of Modvat credit on the said items. Appeals preferred by the assessee before the Commissioner (Appeals) and the Tribunal were also dismissed. 5. Aggrieved thereby, the assessee filed applications seeking reference to the High Court on the questions proposed. However, having failed to persuade the Tribunal that its orders gave rise to questions of law, the assessee moved the Allahabad High Court, praying for a direction to the Tribunal for reference. 5 6. The High Court partly allowed the application and directed the Tribunal to draw a statement of the case and refer the following questions of law for its opinion: "Q1) Whether, in the circumstances of the present case, facts of which are not in dispute, duties paid on material, namely, plastic films/poly paper used for testing machines for forming commercial/technical opinion as to their marketability/ excisability would be eligible to be taken as credit (sic) under rule 57-A read with relevant notification? Q2) Whether such use of material in testing in view of the purposes mentioned above, could be said to be used (sic) in the manufacture of or use in relation to the manufacture of the final products viz., Machines as assembled?" 7. As aforesaid, the High Court has answered both the questions in the negative, opining that testing the performance of a final product is not a process of manufacture and therefore, materials used for testing the performance of the F&S machine cannot be termed as `inputs' for the purpose of allowing Modvat credit. According to the High Court, anything required to make the goods marketable must form a 6 part of the manufacture and any raw material or any materials used for the same would be a component part of the end product. It has observed that materials used after manufacture of the final product, viz. the F&S machine, is complete, is only to detect the deficiency in the final product and therefore, could not be the goods used in or in relation to the manufacture of the final product within the meaning of Rule 57A of the Rules. Hence the present appeals by the assessee. 8. Assailing the opinion of the High Court, Mr. Rajesh Kumar, learned counsel appearing on behalf of the assessee submitted that the expression "in or in relation to" used in Rule 57A of the Rules is very wide and is used to expand the scope, meaning and content of the expression `inputs' so as to include all inputs so long as these are used "in or in relation to the manufacture" of finished excisable goods. It was argued that since the machines are tailor made, as per the specifications provided by a customer to achieve a distinct and different result, it is of no use to any other 7 customer. Therefore, unless each individual machine is tested by using the flexible plastic films in the presence of the customer or his representative, as per the terms of the contract, to satisfy him that it is capable of being used for a particular packing as specified by him, the process of manufacture of the final product cannot be said to be complete. It was contended that the testing of the machine being an integral process of the manufacture and marketability of the final product, particularly in terms of the specific condition in the contract, the claim for Modvat credit was admissible on flexible plastic films consumed in the testing of the F&S machines. It was stressed that to avail of the Modvat credit in respect of an input, it is not necessary that such input must be physically present in the finished product. 9. In support of the proposition that the material used in testing, for the purpose of verification of certain characteristics of the final product, is an input in or in relation to the manufacture, learned counsel placed reliance on the decisions of this 8 Court in Commissioner of Income Tax, Kerala, Vs. Tara Agencies1, Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III2, National Leather Cloth Manufacturing Company Vs. Union of India & Anr.3 and a decision of the Bombay High Court in Tata Engineering & Locomotive Co. Ltd. Vs. Commr. Of C. Ex., Pune4. 10. Per contra, Mr. Mukul Gupta, learned senior counsel appearing for the revenue, supporting the decision of the High Court, contended that Modvat credit is available only on the inputs which are actually used in the manufacture of the final product. According to the learned counsel, testing of a machine can take place only after the manufacture of the machine is complete and therefore, any goods used in a process subsequent to the completion of the process of manufacture cannot be termed as inputs within the meaning of Rule 57A of the Rules. 1 (2007) 6 SCC 429 2 (2009) 9 SCC 193 : 2009 (240) E.L.T. 641 (S.C.) 3 (2010) 12 SCC 218 : 2010 (256) E.L.T. 321 (S.C.) 4 2010 (256) E.L.T. 56 (Bom.) 9 11. Before analysing the rival submissions, it would be appropriate to refer to the relevant statutory provisions. 12. The Modvat scheme, introduced with effect from 1st March 1986, was aimed at allowing credit to the manufacturers for the excise duty paid by them in respect of the inputs used in the manufacture of the finished product. Rules 57A and 57C of the Rules, which make a manufacturer eligible to avail of the credit for the duty paid on the inputs read as follows: "RULE 57A : Applicability.- (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the "final products") as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the "specified duty") paid on the goods used in or in relation to the manufacture of the said final products whether directly or indirectly and whether contained in the final product or not (hereinafter referred to as the "inputs") and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the notification: 1 Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted. Explanation.--For the purposes of this rule, "inputs" includes-- (a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products, (b) paints and packaging materials, (c) inputs used as fuel, (d) inputs used for generation of electricity, used within the factory of production for manufacture of final products or for any other purpose, and (e) accessories of the final product cleared alongwith such final product, the value of which is included in the assessable value of the final product, but does not include-- (i) machines, machinery, plant, equipment, apparatus, tools, appliances or capital goods as defined in rule 57Q used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products; (ii) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products; (iii) packaging materials or containers, the cost of which is not included in the assessable value of the final products under section 4 of the Act; and 1 (iv) crates and glass bottles used for aerated waters. (2) Notwithstanding anything contained in sub-rule (1), the Central Government may, by notification in the official Gazette, declare the inputs on which declared duties of excise or additional duty (hereinafter referred to as `declared duty') paid shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification and allow the credit of such declared duty deemed to have been paid in such manner and subject to such condition as may be specified in the said notification even if the declared inputs are not used directly by the manufacturer of final products declared in the said notification, but are contained in the said final products. Explanation. - For the purposes of this sub-rule, it is clarified that even if the declared inputs are used directly by a manufacturer of final products, the credit of the declared duty shall, notwithstanding the actual amount of duty paid on such declared inputs, be deemed to be equivalent to the amount specified in the said notification and the credit of the declared duty shall be allowed to such manufacturer. Rule 57C. Credit of duty not to be allowed if final products are exempt.--No credit of the specified duty paid on the inputs used in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export- Oriented Unit) or to a unit in an Electronic Hardware Technology Park or to a unit in Software Technology Parks or supplied to the United Nations or an international organisation for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excises, dated the 28th August, 1995 shall be allowed if the final 1 product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty." 13. It is manifest that Rule 57A of the Rules entitled a manufacturer to take credit of the Central Excise duty paid on the inputs used in or in relation to the manufacture of the final product provided that the input and the finished product are excisable goods and fall under any of the specified chapters in the tariff schedule. It is pertinent to note that vide Notification No.28/95-C.E. (N.T.), dated 29th June 1995, the said Rule was amended and the phrase "whether directly or indirectly and whether contained in the final product or not" was inserted. There is no dispute that in the instant case, both the F&S machines and the flexible laminated plastic film and poly paper are excisable. Therefore, the short question for consideration is whether the said material on which Modavt credit is claimed by the assessee, not physically used in the manufacture of the said machine but used for testing the F&S machines would be covered within the sweep of the expression "in or in relation to the manufacture of the final 1 products", as appearing in Rule 57A of the Rules. In short, the bone of contention is as to what meaning is to be assigned to the expression "in relation to the manufacture of final products." 14. In our opinion, apart from the fact that the amended Rule itself contemplates that physical presence of the input, in respect of which Modvat credit is claimed, in the final product is not a pre-requisite for such a claim, even otherwise this issue is no longer res-integra. In Collector of Central Excise & Ors. Vs. Solaris Chemtech Ltd. & Ors.5, this Court while examining the scope and purport of the expression "in or in relation to the manufacture of the final products" observed that these words have been used to widen and expand the scope, meaning and content of the expression "inputs" so as to attract goods which do not enter into finished goods. Speaking for the Bench, S.H. Kapadia, J. (as his Lordship then was) held as follows: "11. Lastly, we may point out that in order to appreciate the arguments advanced on behalf of 5 (2007) 7 SCC 347 : 2007 (214) E.L.T. 481 (S.C.) 1 the Department one needs to interpret the expression "in or in relation to the manufacture of final products". The expression "in the manufacture of goods" indicates the use of the input in the manufacture of the final product. The said expression normally covers the entire process of converting raw materials into finished goods such as caustic soda, cement, etc. However, the matter does not end with the said expression. The expression also covers inputs "used in relation to the manufacture of final products". It is interesting to note that the said expression, namely, "in relation to" also finds place in the extended definition of the word "manufacture" in Section 2(f) of the Central Excises and Salt Act, 1944 (for short "the said Act"). It is for this reason that this Court has repeatedly held that the expression "in relation to" must be given a wide connotation. 12. The Explanation to Rule 57-A shows an inclusive definition of the word "inputs". Therefore, that is a dichotomy between inputs used in the manufacture of the final product and inputs used in relation to the manufacture of final products. The Department gave a narrow meaning to the word "used" in Rule 57-A. The Department would have been right in saying that the input must be raw material consumed in the manufacture of final product, however, in the present case, as stated above, the expression "used" in Rule 57-A uses the words "in relation to the manufacture of final products". 13. The words "in relation to" which find place in Section 2(f) of the said Act have been interpreted by this Court to cover processes generating intermediate products and it is in this context that it has been repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the 1 final product. Therefore, the words "in relation to the manufacture" have been used to widen and expand the scope, meaning and content of the expression "inputs" so as to attract goods which do not enter into finished goods. 14. In J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO6 this Court has held that Rule 57-A refers to inputs which are not only goods used in the manufacture of final products but also goods used in relation to the manufacture of final products. Where raw material is used in the manufacture of final product it is an input used in the manufacture of final product. However, the doubt may arise only in regard to use of some articles not in the mainstream of manufacturing process but something which is used for rendering final product marketable or something used otherwise in assisting the process of manufacture. This doubt is set at rest by use of the words "used in relation to manufacture". (Emphasis supplied by us) 15. In Collector of Central Excise, Jaipur Vs. Rajasthan State Chemical Works, Deedwana, Rajasthan7, to which a reference was made in Solaris Chemtech Limited (supra), this Court had held that any operation which results in the emergence of the manufactured goods would come within the ambit of the term manufacture. This is because of the 6 AIR 1965 SC 1310 7 (1991) 4 SCC 473 : 1991 (55) E.L.T. 444 (S.C.) 1 words used in Rule 57A, namely, goods used in or in relation to the manufacture of final products. 16. At this juncture, it would also be apposite to refer to Circular No.33/33/94/CX.8, dated 4th May 1994, issued by the Central Board of Excise and Customs, relating to the Modvat scheme. The relevant part of the Circular reads as under: "Subject: Instruction regarding Modvat Scheme. 1..... 2. With a view to consolidate the instructions and streamline of procedures, the following instructions are issued in supersession of all the instructions issued on or before 31st December, 1993, in relation to Modvat - (i) Modvat credit is available for all excisable goods used as inputs in or in relation to the manufacture of finished goods. It is, therefore, clarified that the input credit is admissible whether such input is physically present in the finished excisable goods or not so long such inputs are used in or in relation to the manufacture of finished excisable goods. In this connection definition of the term manufacture as propounded by the Supreme Court in the Empire Industry's case-1985 (20) E.L.T. 179 and C.C.E. v. Rajasthan State Chemical case - 1991 (55) E.L.T. 444, 448 (S.C.) are quite relevant. (Emphasis supplied)" 1 17. It is trite to state that "manufacture" takes place when the raw materials undergo a series of changes and transformation that result in the formation of a commercially distinct commodity having a different name, character and use. It is equally well settled that physical presence of an input in the final finished excisable goods is not a pre-requisite for claiming Modvat credit under Rule 57A of the Rules. It may very well be indirectly related to manufacture and still be necessary for the completion of the manufacture of the final product. It needs little emphasis that the process of manufacture is complete only when the product is rendered marketable. Thus, manufacture is intrinsically integrated with marketability. In this regard it would be profitable to refer to the following observations of this Court in Union of India & Ors. Vs. Sonic Electrochem (P) Ltd. & Anr.8: "8. We do not consider it necessary to discuss the cases on the question of marketability, as this Court has dealt with all relevant cases in A.P. SEB case9. In that case, the question was whether electric poles manufactured with cement and steel for the appellant Board were marketable. After considering 8 (2002) 7 SCC 435 9 (1994) 2 SCC 428 1 various cases on the question of marketability of goods, Jeevan Reddy, J., speaking for the Court, summed up the position thus: (SCC p. 434, para 10) "10. It would be evident from the facts and ratio of the above decisions that the goods in each case were found to be not marketable. Whether it is refined oil (non-deodorised) concerned in Union of India v. Delhi Cloth and General Mills Co. Ltd.10 or kiln gas in South Bihar Sugar Mills Ltd. v. Union of India11 or aluminium cans with rough uneven surface in Union Carbide India Ltd. v. Union of India12 or PVC films in Bhor Industries Ltd. v. CCE13 or hydrolysate in CCE v. Ambalal Sarabhai Enterprises (P) Ltd.14 the finding in each case on the basis of the material before the Court was that the articles in question were not marketable and were not known to the market as such. The `marketability' is thus essentially a question of fact to be decided on the facts of each case. There can be no generalisation. The fact that the goods are not in fact marketed is of no relevance." 9. It may be noticed that in the cases referred to in the passage, quoted above, the reasons for holding the articles "not marketable" are different, however, they are not exhaustive. It is difficult to lay down a precise test to determine marketability of articles. Marketability of goods has certain attributes. The 10 AIR 1963 SC 791 11 AIR 1968 SC 922 12 (1986) 2 SCC 547 13 (1989) 1 SCC 602 14 (1989) 4 SCC 112 1 essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought a nd sold. T he fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The plastic body of EMR does not satisfy the aforementioned criteria. There are some competing manufacturers of EMR. Each is having a different plastic body to suit its design and requirement. If one goes to the market to purchase the plastic body of EMR of the respondents either for replacement or otherwise one cannot get it in the market because at present it is not a commercially known product. For these reasons, the plastic body, which is a part of EMR of the respondents, is not "goods" so as to be liable to duty as parts of EMR under para 5(f) of the said exemption notification." (Emphasis supplied by us) 18. In Collector of Central Excise, Calcutta-II Vs. M/s Eastend Paper Industries Ltd.15, the assessee was manufacturing different kinds of paper. A question arose whether the wrapping paper manufactured and used for wrapping the finished product is a part of manufacture. It was held that wrapping of finished product by wrapping paper is process incidental and ancillary to completion of the manufactured product under Section 2 (f) of Act. Thus, the Court held that, 15 (1989) 4 SCC 244 2 anything required to make goods marketable, must form a part of manufacture and any raw material or any material used for same would be a component part of the final product. 19. In Dharampal Satyapal Vs. Commissioner of Central Excise, Delhi-I, New Delhi16, the term marketable has been held to mean saleable, as under: "18......Marketability is an attribute of manufacture. It is an essential criteria for charging duty. Identity of the product and marketability are the twin aspects to decide chargeability. Dutiability of the product depends on whether the product is known to the market. The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges. Marketable means saleable. The test of classification is, how are the goods known in the market. These tests have been laid down by this Court in a number of judgments including Moti Laminates (P). Ltd. v. CCE17, Union of India v. Delhi Cloth & General Mills Co. Ltd.18 and Cadila Laboratories (P) Ltd. v. CCE19." 20. Thus, if a product is not saleable, it will not be marketable and consequently the process of manufacture would not be 16 (2005) 4 SCC 337. 17 (1995) 3 SCC 23 18 (1997) 5 SCC 767 19 (2003) 4 SCC 12 2 held to be complete and duty of excise would not be leviable on it. The corollary to the above is that till the time the step of manufacture continues, all the goods used in relation to it will be considered as inputs and thus, entitled to Modvat credit under Rule 57A of the Rules. In the present case, as aforesaid, each machine is tailor made according to the requirements of individual customers. If the results are not in conformity with the order, then the machine loses its marketability and is of no use to any other customer. Thus, the process of manufacture will not be said to be complete till the time the machines meet the contractual specifications and that will not be possible unless the machines are subjected to individual testing. Even though the revenue has alleged that the process of manufacture is complete as soon as the machine is assembled, yet it has not discharged the onus of proving the marketability of the machines thus assembled, prior to the stage of testing. Moreover, as has been held in the case of Hindustan Zinc Ltd. Vs. Commissioner of Central Excise, Jaipur20, the burden of proving whether a 20 (2005) 2 SCC 662; 2 particular product is marketable or not is on the department and in the absence of such proof it cannot be presumed to be marketable. In the absence of the revenue having adduced any such evidence or contorted the assessee's claim that the machines cannot be sold unless testing is done with some alternative evidence as to their marketability, the stand of the revenue cannot be accepted. 21. Thus, in our opinion the process of testing the customised F&S machines is inextricably connected with the manufacturing process, in as much as, until this process is carried out in terms of the afore-extracted covenant in the purchase order, the manufacturing process is not complete; the machines are not fit for sale and hence not marketable at the factory gate. We are, therefore, of the opinion that the manufacturing process in the present case gets completed on testing of the said machines and hence, the afore-stated goods viz. the flexible plastic films used for testing the F&S machines are inputs used in relation to the manufacture of the 2 final product and would be eligible for Modvat credit under Rule 57A of the Rules. 22. In view of the aforegoing discussion, the opinion rendered by the High Court on the questions referred by the Tribunal cannot be sustained. We hold that the process of testing the customised machines is integrally connected with the ultimate production of the final product viz. the F&S machines and therefore, that process is one in relation to the manufacture, falling within the sweep of Rule 57A of the Rules. Consequently, the appeals are allowed and the impugned orders are set aside, leaving the parties to bear their own costs. ........................................... (D.K. JAIN, J.) ............................................ (ASOK KUMAR GANGULY, J.) NEW DELHI; JANUARY 13, 2012. ARS 2 2

service matter =extension in service beyond the age of the 50 years=We have given our thoughtful consideration to the material taken into consideration by the Screening Committee before passing the impugned order dated 1.9.2005. Besides the gradual deterioration in his career-graph noticeable from the last 7 years of his service (before the impugned order was passed), wherein 4 annual reports assessed the work and conduct of the petitioner as "average". It is also apparent that punishment orders were passed against the petitioner on 3 occasions within the last 4 years. These punishments were ordered because of negligence and irregularity in granting tenders; delay in work, excess payment, financial irregularity and mis-utilization of funds, lack of administrative control; and death of 6 labourers because of lack of

"REPORTABLE" IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION SPECIAL LEAVE PETITION (C) Nos. 13896-13897 of 2008 Om Prakash Asati .... Petitioner Versus State of U.P. & Ors. .... Respondents J U D G M E N T JAGDISH SINGH KHEHAR, J. 1. The petitioner herein, having qualified the B.E. examination, came to be appointed as Assistant Engineer, in the Local Self Engineering Department of the State of Uttar Pradesh, on 3.3.1974. The Uttar Pradesh Water Supply and Sewerage Act was enacted in 1975. The aforesaid enactment resulted in the creation of the Uttar Pradesh Jal Nigam (hereinafter referred to as, the Jal Nigam). In 1976 the services of the petitioner came to be allocated to the Jal Nigam, where the petitioner was absorbed against the post of Assistant Engineer, on regular basis. While in the employment of the Jal Nigam, the petitioner came to be promoted to the post of Executive Engineer, on 1.6.1996. 2 2. It is the claim of the petitioner, that on the eve of his attaining the age of 50 years in January 2001, his claim for retention in service was placed before a Screening Committee. The Screening Committee found the petitioner fit to continue in service. It is therefore, that the petitioner remained in the employment of the Jal Nigam beyond the age of 50 years. The instant stance adopted by the petitioner is seriously contested at the hands of the respondents. It is the assertion of the respondents, that the Screening Committee did not evaluate the claim of the petitioner for extension in service beyond the age of the 50 years, on account of the fact that a departmental inquiry was pending against him. The position adopted by the respondents in our considered view is wholly unjustified. Even after the culmination of the departmental proceedings, the petitioner was permitted to continue in service. It is therefore apparent, that the petitioner satisfied the standards adopted by the Jal Nigam, for continuation in service beyond the age of 50 years, and as such, his continuation thereafter must be deemed to have been with the implied approval of his employer, the Jal Nigam. 3. By orders dated 1.9.2005, several employees of the Jal Nigam, including the petitioner, were prematurely retired from service. The aforesaid order (pertaining to the petitioner) is available on the record of this case as Annexure P1. A perusal thereof reveals, that the retirement of the petitioner had been ordered, in exercise of powers emerging from 3 the amended provisions of Fundamental Rule 56(c) of the Financial Handbook, Volume II (Parts II to IV). The instant provision is being extracted hereunder : "56(c) Notwithstanding anything contained in clause (a) or clause (b), the appointing authority may, at any time by notice to any Government servant (whether permanent or temporary), without assigning any reason, require him to retire after he attains the age of fifty years or such Government servant may by notice to the appointing authority voluntarily retire at any time after attaining the age of forty five years or after he has completed qualifying service of twenty years". 4. It is the case of the petitioner, that the Screening Committee which evaluated the case of the petitioner for continuation in service, had adopted a criterion for screening the claim of the employees of the Jal Nigam. Under the said criterion, marks were awarded to the employees falling in the zone of consideration. The afore stated criterion provided for deduction of one mark for every adverse entry, as well as, for every punishment awarded during the course of employment. Marks were awarded keeping in mind the employees annual assessment. It is also the contention of the learned counsel for the petitioner, that the criterion framed by the Screening Committee also postulated, that an employee who had been awarded a punishment of recovery, as also, an employee who had deposited any amount towards recovery, as a result of some fault/mistake committed by him in the discharge of his duties, would be a valid ground for the employee to be prematurely retired. It is also the 4 contention of the learned counsel for the petitioner, that based on the criterion adopted by the Jal Nigam, an employee belonging to the general category would be entitled to continue in service only if he was awarded 9 or more marks. For an employee belonging to the reserved categories, the Jal Nigam had prescribed a minimum of 6 marks for retention in service. 5. The first and foremost contention advanced at the hands of the learned counsel for the petitioner was, that the criterion adopted by the Jal Nigam was illegal and unacceptable in law, as the same was in complete derogation of Fundamental Rule 56(c). It was therefore prayed, that the impugned order be set aside on account of the fact, that while passing the same the respondents had taken the decision on the petitioners suitability by applying a criterion which was wholly illegal and unsustainable in law. In order to substantiate his contention, learned counsel for the petitioner invited our attention to a decision rendered by a Division Bench of the High Court of judicature at Allahabad (Lucknow Bench) in Mahesh Chandra Agrawal vs. State of U.P. and Ors. (Writ Petition No.1888 (S/B) of 2005, decided on 27.3.2006), as well as, on another judgment rendered by the same Division Bench in Naresh Kumar Aggarwal vs. State of U.P. and Ors. (Writ Petition No.1955 (S/B) of 2005, decided on 19.7.2006). Relying on the aforesaid two judgments, it was the contention of the learned counsel for the petitioner, that the criterion relied upon to pass the impugned order against the petitioner (in the instant case) had been 5 considered by the Division Bench which decided the aforesaid two cases, and the same had been set aside as being unsustainable in law. It is also brought to our notice by the learned counsel for the petitioner, that the orders dated 27.3.2006 and 19.7.2006 passed by the High Court of judicature at Allahabad (Lucknow Bench) were assailed before this Court, but the petitions for special leave to appeal, were dismissed. It is therefore the contention of the learned counsel for the petitioner, that the determination rendered by the High Court of judicature at Allahabad (Lucknow Bench) on the issue of validity of the criterion adopted by the Jal Nigam in prematurely retiring its employees under Fundamental Rule 56(c) had attained finality. Based on the aforesaid assertions, it is the submission of the learned counsel for the petitioner, that the impugned order of premature retirement, passed in the instant case against the petitioner on 1.6.1996, was also liable to be set aside. 6. Insofar as the first contention of the learned counsel for the petitioner is concerned, it would be relevant to notice, that the petitioner assailed the impugned order dated 1.9.2005 before the High Court of judicature at Allahabad by filing Civil Miscellaneous Writ Petition No.64396 of 2005. The aforesaid writ petition came to be dismissed by a Division Bench of the High Court on 3.5.2006. Dissatisfied with the impugned order dated 3.5.2006, the petitioner preferred Civil Miscellaneous Review Application No.144184 of 2006. The said Review Application was also 6 dismissed on 29.2.2008. The orders dated 3.5.2006 and 29.9.2008 rendered by the High Court of judicature at Allahabad besides the order of premature retirement dated 1.9.2005, have been assailed by the petitioner through this petition. 7. In order to repudiate the first contention advanced at the hands of the learned counsel for the petitioner, learned counsel for the respondents vehemently contended, that the petitioner is not entitled to raise the instant issue before this Court on account of the fact, that the criterion adopted by the Screening Committee which had led to the passing of the impugned order of premature retirement dated 1.9.2005, had not been assailed by the petitioner before the High Court. It is also contended, that the evaluation of the record of the petitioner independently of the criterion adopted by the Screening Committee would also establish, that the Jal Nigam was fully justified in passing the impugned order of premature retirement dated 1.9.2005. 8. We have given our thoughtful consideration to the first contention at the hands of the learned counsel for the petitioner. In our considered view in the judgments rendered by the Division Bench of the High Court of judicature at Allahabad (Lucknow Bench) in Writ Petition No.1888 (S/B) of 2005 and Writ Petition No.1955 (S/B) of 2005 it was held, that the criterion adopted by the Screening Committee for prematurely retiring the employees of the Jal Nigam was illegal and not in consonance with law. A 7 plea of the nature canvassed at the hands of the learned counsel for the respondents (as has been noticed in the foregoing paragraph), is no longer available to the respondents to defeat the claim of the petitioner. The validity of the criterion adopted by the Jal Nigam for prematurely retiring its employees is a pure question of law. The same having attained finality against the respondents, is liable to be respectfully adhered to. We therefore, hereby, deprecate the action of the respondents in canvassing the instant proposition. Once a challenge raised at the hands of the respondents to the judgments relied upon by the learned counsel for the petitioner remained futile before this Court, the same should have been accepted without any further protestation. We, therefore, hereby reject the contention advanced at the hands of the learned counsel for the respondents that the criterion adopted by the Jal Nigam was enforceable against the petitioner herein. 9. The question which still arises for consideration is, whether the setting aside of the criterion adopted by the Screening Committee would ipso facto result in the negation of the impugned order dated 1.9.2005 (by which the petitioner was prematurely retired from service)? According to the learned counsel for the respondents, even if the criterion adopted by the Screening Committee (for the sake of arguments), is accepted as invalid in law, the impugned order of premature retirement dated 1.9.2005 will have to be independently examined in the light of the material taken 8 into consideration by the Screening Committee. According to the learned counsel for the respondents the impugned order dated 1.9.2005, if so evaluated, would stand the scrutiny of law. 10. During the course of consideration of the present controversy, we had the occasion of going through the judgments rendered by the High Court of judicature at Allahabad (Lucknow Bench) in Writ Petition No.1888 (S/B) of 2005, and in Writ Petition No.1955 (S/B) of 2005. In both the aforesaid decisions, after the High Court accepted the contention of the respective petitioner therein, and set aside the criterion adopted by the Selection Committee, the Court shorn of the parameters laid down in the said criterion, independently evaluated the veracity of the impugned orders of premature retirement. This exercise was sought to be carried out on the basis of the record taken into consideration by the Screening Committee in arriving at the conclusion that the petitioner deserved to be retired prematurely. The High Court therefore examined at its own, whether there were sufficient reasons for passing the impugned orders of premature retirement against the concerned petitioners. We are of the view, that the course adopted by the High Court in both the aforesaid cases, was just an appropriate. We, therefore, hereby uphold the instant contention at the hands of the learned counsel for the respondents, that the impugned order dated 1.9.2005 passed by the Jal Nigam, prematurely retiring the petitioner from its employment, cannot be set aside merely because the criterion 9 adopted by the Jal Nigam has been set aside. The veracity of the impugned order will have to be examined independently of the criterion so as to determine, whether or not the impugned order is sustainable on the basis of the record taken into consideration by the Screening Committee. 11. It is the aforesaid determination at our hands, that prompted the learned counsel for the petitioner to raise the second contention, namely, that the material taken into consideration for prematurely retiring the petitioner did not justify the passing of the impugned order dated 1.9.2005. Insofar as the instant contention is concerned, learned counsel for the rival parties invited out attention to Annexure R/4 (appended to the counter affidavit filed on behalf of the Jal Nigam), i.e. a compilation of the service profile of the petitioner. A perusal thereof reveals, that the entries recorded in the Confidential Reports of the petitioner for the preceding 10 years were outlined therein. The entries taken into consideration were for the years 1994-1995 to 2003-2004. Shorn of further details it would be relevant to mention, that out of the aforesaid entries the work and conduct of the petitioner for the years 1997-1998, 1998-1999, 1999-2000 and 2002-2003 were recorded as "satisfactory". Entries for the year 1996- 1997, 2000-2001, 2001-2002 and 2003-2004 were recorded as "good". For the remaining two entries, the one for the year 1994-1995 was recorded as "very good" and for a part of the year of 1995-1996 the work of the petitioner was assessed as "excellent". It is therefore apparent from 1 the Annual Confidential Report of the petitioner, that over the last decade, preceding the impugned order dated 1.9.2005, there has been a regular and consistent deterioration from "excellent" and "very good" to "satisfactory". In fact in as many as 4 of the preceding 7 years, the work and conduct of the petitioner was evaluated as "satisfactory". The compilation Annexure R/4 also outlines the various orders of punishment inflected on the petitioner. The orders of punishment taken into consideration were dated 18.4.2002, 23.11.2004 and 4.1.2005. The petitioner was punished 3 times in the preceding 4 years. Details in respect of the orders of punishment were mentioned in the counter affidavit filed on behalf of the respondents. Its summary was also made available for our consideration. The said summary, pertaining to the orders of punishment, is being extracted hereunder: "That the case of the petitioner was also screened and the petitioner has earned only 5.59 marks out of 30 marks which shows that his performance during last 10 years was not satisfactory. Besides this, vide Office Order dated 18.4.2002 in respect of irregularities inviting in tenders it has been found that the petitioner has not compared the rate offered by the contractor with Schedule G and H which is a gross negligence, hence he should be given a warning to be more cautious in future (Annexure R/1). That again vide office order dated 23.11.2004 it has been found that respondent while posted as Executive Engineer at Lalitpur did not reside at Lalitpur and used to come from Jhansi which is against the Rules. Further it has been found that there has been delay in work, excess payment, financial irregularity and mis-utilization of funds because the petitioner could not had administrative control while discharging his responsibilities which is proved, hence a warning to 1 this effect has been issued to the petitioner and it is directed that the order be kept in his personal file and character roll (Annexure R/2). That again vide Officer Order dated 04.01.2005 after completion of an enquiry against the respondent and relevant documents it has been found that all the charges against him is proved regarding the incident at Kanpur while he was working as Project Manager in Ganga Pollution Control Unit in which 6 labourers have died and the Corporation had to pay compensation in respect of their death. Hence he has been awarded censor entry and his two increments were withheld. It was further directed that the said order be kept in his character roll and personal file (Annexure R/3)". From the above it is apparent, that the claim of the petitioner was considered by the Screening Committee on the basis of the annual entries in his service record and the punishments suffered by him during the recent past. 12. We have given our thoughtful consideration to the material taken into consideration by the Screening Committee before passing the impugned order dated 1.9.2005. Besides the gradual deterioration in his career-graph noticeable from the last 7 years of his service (before the impugned order was passed), wherein 4 annual reports assessed the work and conduct of the petitioner as "average". It is also apparent that punishment orders were passed against the petitioner on 3 occasions within the last 4 years. These punishments were ordered because of negligence and irregularity in granting tenders; delay in work, excess payment, financial irregularity and mis-utilization of funds, lack of administrative control; and death of 6 labourers because of lack of 1 supervision by the petitioner which resulted in huge financial loss by way of compensation which had to be paid to the families of the deceased labourers. Based on the aforesaid, it would not be incorrect to conclude, that there was a gradual deterioration in the overall performance of the petitioner. In the aforesaid view of the matter, it is not possible for us to find fault with the impugned order of premature retirement dated 1.9.2005. We are therefore satisfied, that the service record of the petitioner was objectively evaluated. Thus viewed, the passing of the impugned order cannot be described as arbitrary or unfair in any manner. The deliberations adopted by the Jal Nigam while passing the impugned order dated 1.9.2005 are, therefore, not liable to be interfered with. 13. For the reasons recorded hereinabove we are of the view, that the impugned orders dated 27.3.2006 and 19.7.2006 passed by the High Court, upholding the order dated 1.9.2005, were fully justified and call for no interference. 14. Dismissed. ..................................J. (Asok Kumar Ganguly) ..................................J. (Jagdish Singh Khehar) New Delhi; January 13, 2012. 1