2003 (6) TMI 277 - AT - Central Excise

Summary

Issues:
1. Whether the processes undertaken by the appellant on synthetic diamond powder amount to manufacture.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Mumbai revolves around determining whether the processes conducted by the appellant on imported synthetic diamond powder constitute manufacturing. The processes involve heating the powder with caustic soda, washing it, treating it with hydrochloride solution, and drying it. The Commissioner classified the resulting product as diamond powder used for cutting and polishing gem-quality diamonds under Heading 3405.40. The appellant argues that the processes aim to enhance the powder's cutting function and do not change its physical or mechanical properties significantly. The department contends that the processes result in a new product distinct from the original synthetic diamond powder, emphasizing the removal of impurities like cobalt, iron, and tungsten that render the product unsuitable for cutting diamonds.

The Tribunal analyzes the processes and their impact on the product. It notes that the appellant's actions aim to eliminate impurities rather than fundamentally alter the product's nature, composition, or use. The product was initially described as synthetic industrial diamond powder in import documentation and classified under specific tariff headings. The Tribunal cites technical data indicating the product's intended application for polishing stones and highlights that the removal of impurities does not fundamentally change its suitability for diamond polishing. The Commissioner's assertion that the impurities scratched diamonds during cutting is refuted with a reference to scientific literature stating that only diamond dust can cut diamond crystals. Therefore, the Tribunal concludes that the processes do not result in a new product with distinct characteristics, name, or use, and hence do not amount to manufacturing.

In light of the above analysis, the Tribunal rules that the processes undertaken by the appellant do not constitute manufacturing. Consequently, there is no basis for imposing penalties on the appellant or its associates. The judgment emphasizes that the processes primarily aim to remove impurities and do not lead to the emergence of a new product with altered characteristics. The classification of the product is not delved into, as the fundamental question of manufacturing is resolved in favor of the appellant.