2003 (6) TMI 297 - AT - Central Excise

Summary

Issues Involved:
1. Whether the process of converting camphor powder to tablets amounts to manufacture.
2. Whether the demand for duty can be enforced over an extended period under proviso to Section 11A of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Whether the process of converting camphor powder to tablets amounts to manufacture:

The Commissioner, in his independent orders, held that the process of converting camphor powder to tablets does not amount to manufacture and no new goods come into existence. This conclusion was based on the premise that the addition of coconut oil was merely for lubricating the machine and did not alter the character, name, or nature of camphor powder when converted into tablets. The Commissioner referenced Trade Notice No. 88 (MP)/Camphor/10/1971 and a letter from the Collectorate of Central Excise, Bombay-I, which clarified that camphor tablets made from duty-paid camphor do not constitute manufacture.

The respondents argued that the process undertaken involved only a change in the physical form of camphor powder and did not result in a new product. They cited several judgments, including the Supreme Court's decision in Vee Kayan v. Commissioner of Central Excise, Chandigarh, which held that mere change of physical form is not sufficient to constitute manufacture. The Tribunal in Reckitt and Coleman v. Collector of Central Excise, Bangalore, also held that converting enzyme powder into tablets does not amount to manufacture.

The Commissioner concluded that the process did not bring into existence any new commodity with a distinct name, character, or use. The final product, camphor tablets, retained the same characteristics as the raw material, camphor powder. Therefore, the process did not constitute manufacture under Section 2(f) of the Central Excise Act.

2. Whether the demand for duty can be enforced over an extended period under proviso to Section 11A of the Central Excise Act, 1944:

The Commissioner held that there was no suppression of facts by the respondents and that they held a bona fide belief that the goods were not dutiable, based on the department's own circulars and trade notices. The Commissioner referenced several Supreme Court judgments, including Cosmic Dye Chemicals v. CCE, Bombay, and Tamilnadu Housing Board v. CCE, Madras, which established that demands would be time-barred in the absence of conscious or deliberate withholding of information and intentional evasion of duty.

The respondents argued that the clarification issued by the Collector of Central Excise, Bombay-I, and the absence of duty payment by other manufacturers led them to believe that their goods were not dutiable. They cited Supreme Court judgments to support their claim that mere failure to pay duty is not sufficient to invoke the extended period for demand under Section 11A.

The Tribunal agreed with the respondents, noting that the Revenue had not provided any grounds challenging the Commissioner's finding on the addition of coconut oil not altering the camphor powder. The Tribunal also referenced the Supreme Court judgment in CCE Chandigarh-I v. Markfed Vanaspati & Allied Industries, which held that the burden to prove manufacture and the emergence of new goods is on the Revenue. The Tribunal concluded that the Commissioner's findings were correct and that the extended period for demand could not be invoked.

Conclusion:

The Tribunal, after considering the arguments and perusing the records, concluded that the Revenue did not have a case. The process of converting camphor powder to tablets did not amount to manufacture, and there was no suppression of facts or intention to evade duty by the respondents. The appeals filed by the Revenue were rejected, and the Commissioner's orders were upheld.