2016 (12) TMI 1127 - AT - Central Excise

Manufacture - crushing, grinding, gravity separation of High Carbon Ferro Chrome (HCFC) Slag by jigging in water - whether activities carried out by the main Appellant amounts to manufacture or not? - levy of duty along with interest and penalty - Held that - The main point here is that the raw material namely HCFC Slag is classifiable under different Chapter and whereas HCFC, which is the outcome product of the assessee Appellant is in different Chapter Heading of Central Excise Tariff. The issue is whether by the processes undertaken by the assessee, a new identifiable, marketable product comes into existence - When the HCFC Slag is an altogether different product, which is subjected to different processes like crushing, grinding, watering etc. and resultant product is only HCFC, which has got separate existence in relation to its raw material namely HCF) and is an identifiable product, having independent marketability, then the yardstick of definition of manufacturing given in Section 2(f) of the Central Excise Act, 1944 is satisfied. It is clear that subject process has not been free from doubt regarding its coverage under the definition of manufacturing under Section 2(f) of the Central Excise Act, 1944 - The matter was not free from doubt, the non-payment of duty of Central Excise by the assessee is a bona fide mistake and there cannot be imposition of any penalty on the Noticees in this regard. Therefore all the penalties imposed on the Noticee Appellants are hereby set aside. The for quantifying the liability of duty of Central Excise against the Appellant assessee for the period of 1(one) year - appeal allowed by way of remand.

Summary

Issues Involved:
Whether activities of separating High Carbon Ferro Chrome from Slag amount to manufacture under Section 2(f) of the Central Excise Act, 1944.

Detailed Analysis:

Issue 1: Activities of Separation Amounting to Manufacture
The main issue in the appeal was whether the activities undertaken by the appellant, involving the separation of High Carbon Ferro Chrome (HCFC) from Slag, constituted "manufacture" as per Section 2(f) of the Central Excise Act, 1944. The appellant argued that they did not manufacture HCFC in their factory but simply separated metals from the Slag, which already contained the metal. They contended that no new or distinct commodity came into existence after processing the raw material. The Revenue, however, treated the entire process as manufacturing and levied duty, interest, and penalties on the appellant.

Issue 2: Interpretation of Chapter Note 4
A key contention was the addition of Note 4 to Chapter 26 of the Central Excise Tariff, stating that the process of converting ores into concentrates amounts to "manufacture." The appellant highlighted that this note was added after the period in question (12.6.2009 to 12.10.2010) and argued that their activities should not be considered manufacturing. However, the Revenue argued that the outcome product, HCFC, was distinct from the raw material Slag and thus qualified as a new identifiable and marketable product, satisfying the definition of manufacturing under Section 2(f).

Issue 3: Liability of Central Excise Duty
The Tribunal analyzed whether the appellant's activities met the criteria for manufacturing under Section 2(f) and noted that there was doubt regarding the coverage of the process. As a result, the Revenue could only charge duty for a period of one year from the date of the show cause notice, not beyond. The Tribunal also emphasized that the non-payment of duty was a bona fide mistake, leading to the setting aside of all penalties imposed on the appellant.

Conclusion:
The Tribunal partially allowed the appeal by remanding the matter to the original authority for quantifying the duty liability for one year and directed the determination within four months. The decision highlighted the importance of the definition of manufacturing, the interpretation of tariff notes, and the limitations on the imposition of penalties in cases of doubt.