1984 (10) TMI 229 - AT - Central Excise

Summary

Issues Involved:

1. Whether the process of upgrading copper, molybdenum, and magnetite from ore constitutes "manufacture" under excise law.
2. Whether copper concentrate is a distinct marketable commodity subject to excise duty under Tariff Item 68 of the Central Excise Tariff.
3. Whether there is double taxation on copper concentrate and copper metal.

Detailed Analysis:

1. Whether the process of upgrading copper, molybdenum, and magnetite from ore constitutes "manufacture" under excise law:

The appellants argued that the recovery of copper, molybdenum concentrate, and magnetite minerals from uranium ore did not involve any manufacturing operation as understood and contemplated in the Excise Law. They contended that the process of upgrading the minerals from low to high percentage did not change their characteristics and no new product emerged, thus it should not be considered as "manufacture". The appellants cited judicial pronouncements, including the British King's Bench and the Supreme Court in Union of India v. Delhi Cloth & General Mills Limited, to support their argument that mere processing does not amount to manufacture. The Tribunal noted that the essence of "manufacture" involves changing one object into another for making it marketable, and the definition under Section 2(f) of the Central Excises and Salt Act, 1944 implies a transformation resulting in a new and different article. The Tribunal concluded that the process adopted by the appellants did not result in a new product and thus did not constitute "manufacture".

2. Whether copper concentrate is a distinct marketable commodity subject to excise duty under Tariff Item 68 of the Central Excise Tariff:

The Department argued that copper concentrate is a distinct entity for commercial purposes and is marketable, as evidenced by the appellants selling it to M/s. Hindustan Copper Limited. The Department maintained that copper concentrate, with a higher copper content than the ore, is a different product and thus subject to excise duty under Item 68. The Tribunal acknowledged that copper concentrate is a marketable commodity and has a distinct name and character from the ore. The Tribunal found that the product in dispute, copper concentrate, contained 25% copper, whereas the ore contained only 1-2% copper. The Tribunal concluded that copper concentrate is a product that has come into existence out of the ore and is thus liable to excise under Item 68.

3. Whether there is double taxation on copper concentrate and copper metal:

The appellants argued that there would be double taxation since M/s. Hindustan Copper Limited pays excise duty on the finished product, i.e., copper metal. The Department countered that there is no double taxation because copper concentrate and copper metal are two different commodities subject to excise levy under different tariff items. The Tribunal agreed with the Department, noting that copper concentrate and copper metal are distinct commodities with separate excise liabilities.

Separate Judgment by H.B. Syiem:

H.B. Syiem dissented, arguing that copper concentrate is not a product different from copper ore and thus should not be assessed under Item 68. He emphasized that the concentrate is obtained by a mechanical process, not a chemical one, and remains an ore with a higher metal content. Syiem pointed out that both the ore and the concentrate have markets and are sold, and the marketability does not make the concentrate a different commodity. He argued that the concentrate does not have a utility not possessed by the raw ore and that the process of concentrating does not convert it into a non-ore. Syiem concluded that the concentrate has not acquired excise liability and remains a copper ore.

Conclusion:

The majority decision of the Tribunal found no reason to interfere with the findings of the lower authority and rejected the appeal, holding that copper concentrate is a distinct marketable commodity subject to excise duty under Item 68. However, H.B. Syiem dissented, arguing that the concentrate remains an ore and should not be subject to excise duty under Item 68.