2012 (6) TMI 731 - AT - Central Excise

Duty demand - Whether blending of ordinary petrol or HSD with MFA and selling the blended product under brand names Power and Turbo Jet at a higher price amounts to manufacture, and whether branded petrol and branded HSD would be liable to duty once again under Sub-heading 2710.11 and 2710.19 respectively - Held that - appellants bring duty paid Petrol and HSD to their depot where part of such Petrol and HSD is blended with Multifunction Additives and said products are sold at higher price under the brand names Power / Turbo Jet respectively - blending of Petrol and HSD with Multifunction Additives does not bring about a new distinct product and such process cannot be treated as manufacture - Following decision of HINDUSTAN PETROLEUM CORPN. LTD. Versus COMMR. OF C. EX, DELHI & ROHTAK 2008 (9) TMI 154 - CESTAT, NEW DELHI - Decided in favour of assessee.

Summary

Issues:
- Duty demand confirmation under Section 11A of the Central Excise Act
- Imposition of penalty
- Whether blending of petrol/HSD with Multifunctional Additives and selling under brand names "Power" and "Turbo Jet" amounts to manufacture
- Liability of duty on branded petrol and branded HSD

Analysis:
1. Duty Demand Confirmation and Penalty Imposition:
The appeal challenged the Order-in-Original confirming a duty demand of Rs.1,68,17,565.10 against the appellants under Section 11A of the Central Excise Act and imposing a penalty of an equal amount. The jurisdictional Commissioner upheld the duty demand and penalty after the appellants contested the show cause notice.

2. Manufacture of Blended Products:
The core issue revolved around whether blending ordinary petrol/HSD with Multifunctional Additives and selling the blended product under brand names "Power" and "Turbo Jet" at a higher price constitutes manufacture. The department argued that the blending created a new branded product subject to excise duty, while the appellants contended that the process did not change the basic character of petrol and HSD, and therefore, did not amount to manufacture.

3. Legal Precedents and Interpretation:
The Tribunal referred to a previous case where it was held that blending petrol and HSD with additives did not result in a new distinct product with different characteristics or usages. The Tribunal emphasized that the blending process only enhanced the quality of petrol and HSD without altering their fundamental attributes. Citing Supreme Court judgments, the Tribunal reiterated that for a process to constitute manufacture, it must lead to the emergence of a new product with distinct characteristics, name, and usage, which was not the case with the blended petrol and HSD in question.

4. Decision and Rationale:
The Tribunal concluded that the blending of petrol and HSD with Multifunctional Additives did not amount to manufacture based on the established legal principles and the lack of substantial change in the blended products. Upholding the precedent set by the Coordinate bench of the Tribunal, the appeal was allowed, and the impugned order confirming the duty demand and penalty was set aside.

In summary, the judgment addressed the duty demand confirmation, penalty imposition, and the crucial issue of whether blending petrol/HSD with additives and selling under specific brand names constituted manufacture. By analyzing legal precedents and applying established principles, the Tribunal ruled in favor of the appellants, emphasizing that the blending process did not result in the creation of a new product warranting additional excise duty.