2017 (6) TMI 214 - AT - Central Excise

Manufacture - manufacture of Foots oil, Pressed Wax and Pressed Paraffin Wax classifiable under Tariff item No.27129090, 27122090 of Central Excise Tariff Act - whether the process amounts to manufacture or not? - Held that - the Respondent imported the materials under CTH 27129090 27129090 amongst others and the Revenue also classified the processed material under the same tariff item. We find that the entire process undertaken by the Respondent-assessee is mainly a manual process and there is a marginal use of hydraulic pressure in the process. The imported Slack Wax, Residue Wax is in semi-solid form in drums. Foots Oil is part of Residue Wax or Slack Wax being lighter comes up on surface and siphoned by tilting the drums. The thinner Slack Wax called Foots Oil is thus separated. The pressure created by liquid through orifice for the purpose of exit is known as the hydraulic pressure. Basically, processed materials are emerging from the imported materials and the Revenue classified the processed material under the same Tariff Heading CTH. The Hon ble Supreme Court and the Tribunal in various decisions held that such process cannot be treated as manufacture under Section 2(f) of the CEA, 1944. The declaration before the Income Tax authorities would not determine the excisability of the goods unless it is covered under the Central Excise law. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Jurisdiction of the Assistant Commissioner of Central Excise.
2. Whether the process undertaken by the respondent amounts to manufacture under Central Excise law.
3. Appealability of the communication/order dated 02.01.2007.
4. Marketability and classification of the processed products.
5. Relevance of declarations made to other authorities (e.g., Income Tax) in determining excisability under Central Excise law.

Detailed Analysis:

1. Jurisdiction of the Assistant Commissioner of Central Excise:
The respondent challenged the jurisdiction of the Assistant Commissioner of Central Excise, arguing that they did not carry on any manufacturing activity. The Hon’ble Calcutta High Court directed the Assistant Commissioner to decide on this preliminary objection. The Assistant Commissioner concluded that the respondent was involved in manufacturing processes and required registration under Central Excise laws. This decision was communicated on 02.01.2007, which the respondent appealed before the Commissioner (Appeals).

2. Whether the Process Amounts to Manufacture:
The core issue was whether the process of separating Foots Oil from Slack Wax and Residue Wax amounts to manufacture. The respondent argued that the process merely involved separating components without changing the fundamental nature of the materials. The Commissioner (Appeals) agreed, stating that no new product emerged from the process, and the burden to prove manufacture was not met by the Revenue. The Tribunal upheld this view, noting that the process did not result in a new and distinct article, as required under Section 2(f) of the Central Excise Act, 1944.

3. Appealability of the Communication/Order Dated 02.01.2007:
The Revenue contended that the communication dated 02.01.2007 was not an order and thus not appealable. However, the Tribunal found that the Assistant Commissioner’s decision on jurisdiction, communicated on 02.01.2007, was indeed an order affecting the respondent’s civil consequences and was therefore appealable under Section 35 of the Central Excise Act, 1944.

4. Marketability and Classification of the Processed Products:
The Revenue failed to provide evidence of the marketability of the processed products. The Tribunal emphasized that the burden of proof regarding marketability lies with the department. The respondent’s process was primarily manual, with minimal use of hydraulic pressure, and did not result in a product with a different identity or classification. The Tribunal cited various precedents, including Hindustan Poles Corporation and Shyam Oil Cake Ltd., to support the view that mere processing without a significant transformation does not constitute manufacture.

5. Relevance of Declarations Made to Other Authorities:
The Revenue argued that the respondent’s declaration to Income Tax authorities, describing their business as manufacturing, indicated that the process amounted to manufacture. The Tribunal dismissed this argument, stating that definitions and criteria for manufacturing can vary across different statutes and contexts. The Tribunal relied on the Supreme Court’s judgment in D.N. Banerjee v. P.R. Mukherjee, which held that the same words might mean different things in different contexts.

Conclusion:
The Tribunal concluded that the process undertaken by the respondent did not amount to manufacture under Central Excise law. The appeal against the communication/order dated 02.01.2007 was maintainable, and the Revenue failed to prove the marketability of the processed products. The declarations made to other authorities were irrelevant in determining excisability under Central Excise law. Consequently, the appeal filed by the Revenue was dismissed.