2018 (7) TMI 1595 - AT - Central Excise

Manufacture - process of cleaning of scrap rubber to crumb rubber - whether the process amounting to manufacture or not? - Held that - If conversion of old rubber into crumb rubber powder does not amount to manufacture, a process of manufacturing crumb rubber from scrap rubber should not be an act of manufacture. Moreover, in the appellant s case, they are drawing the scrap rubber from rubber tree laces and cup lumps which are collected from the tree as a post-harvest practice. The activity undertaken by the appellants is more in the nature of segregation of different types of rubber produced naturally and to convert it into crumb rubber. The burden to prove that there is manufacture is not discharged by the department beyond reasonable doubt - whereas the appellants have produced the certificate issued by the Rubber Board but the department has not produced any evidence to negate the certificate thus issued. The conversion of scrap rubber into rubber powder does not amount to manufacture as the department s basic contention on the manufacture itself does not flows water other arguments - appeal allowed - decided in favor of appellant.

Issues:
- Whether the process of cleaning scrap rubber to crumb rubber amounts to manufacture for excise duty purposes.
- Whether crumb rubber is an excisable product under Notification No.8/2003.
- Burden of proof on the department to establish manufacturing process.
- Whether the process undertaken by the appellants qualifies as manufacture under the Central Excise Act.
- Applicability of penalties under Section 11AC of the Central Excise Act.

Analysis:

Issue 1: Process of cleaning scrap rubber to crumb rubber as manufacture
- The Central Excise department alleged that converting scrap rubber to crumb rubber constituted manufacture. The Commissioner upheld this view, stating that processes like cleaning, blending, reduction of size, drying, and packing involved in the conversion qualified as manufacture under the Central Excise Act.
- The department argued that crumb rubber, a value-added product distinct from raw scrap, was commercially different and marketable. The Commissioner emphasized that the product's commercial identity and marketability supported the manufacturing classification.
- However, the appellants contended that the process did not amount to manufacture, citing precedents where similar activities were not considered manufacturing. They relied on expert opinions and certificates from the Rubber Board to support their claim.
- The Tribunal agreed with the appellants, emphasizing that the burden of proof lay with the department. They found that the department failed to provide evidence to counter the appellants' expert opinions. Ultimately, the Tribunal ruled that the conversion process did not qualify as manufacture under the Central Excise Act.

Issue 2: Excisability of crumb rubber under Notification No.8/2003
- The appellants argued that crumb rubber should not be treated as an excisable product under Notification No.8/2003. They contended that even if the conversion was considered manufacturing, the differential duty payable would be lower than claimed by the department.
- The Tribunal did not delve into this issue as they ruled in favor of the appellants on the manufacturing aspect, rendering further deliberation unnecessary.

Issue 3: Burden of proof and expert opinions
- The appellants stressed the importance of expert opinions, especially the certificate from the Rubber Board, in determining whether the conversion process constituted manufacture. They cited legal precedents where expert evidence played a crucial role in decision-making.
- The Tribunal concurred with the appellants, highlighting the significance of expert opinions in cases where the department failed to provide contrary evidence. They emphasized that the department's arguments lacked substantial proof to establish manufacturing.

Issue 4: Penalties under Section 11AC of the Central Excise Act
- The appellants argued that penalties under Section 11AC should not apply as they believed in good faith that the conversion process did not amount to manufacture. They contended that there was no deliberate intention to evade duty payment.
- The Tribunal did not address this issue explicitly in the judgment as they ruled in favor of the appellants on the manufacturing aspect, leading to the appeal's allowance without further penalty considerations.

In conclusion, the Appellate Tribunal CESTAT Bangalore ruled in favor of the appellants, determining that the process of converting scrap rubber to crumb rubber did not constitute manufacture under the Central Excise Act. The decision was based on the lack of substantial evidence provided by the department to counter the appellants' expert opinions and certificates. The Tribunal highlighted the importance of expert evidence in such cases and emphasized the burden of proof on the department to establish manufacturing processes. Consequently, the appeal was allowed, granting the appellants consequential relief.

← Previous Next →