2005 (10) TMI 14 - AT - Central Excise

Summary

Issues:
Whether blending lubricating oil with colouring material amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis:
The Commissioner held that blending oil with dye is essential for marketability, resulting in a distinct product with its own identity. The appellant availed Modvat credit on imported oil, leading to a duty demand of Rs. 6.57 lakhs. The Revenue supported this view.

The appellant argued that adding color for identification does not change the product's nature or use significantly. They cited examples where similar processes were not considered manufacturing. The Tribunal noted that the dyed oil remained fundamentally the same product, only with added color for identification, as per the appellant's explanation.

Referring to legal precedents, the Tribunal found that the process of blending oil with dyes did not create a new commercial commodity or ancillary to the completion of lubricating oils. Decisions by various High Courts and the Supreme Court supported this interpretation.

The Tribunal emphasized that for a process to be considered manufacturing, it must result in a new identifiable product. As the lubricating oil retained its essential characteristics after blending, the activity did not amount to manufacture.

Regarding Modvat credit and duty calculation discrepancies, the Tribunal directed the Commissioner to verify the facts at the original level. The duty amount for shortages of finished goods and raw materials was also remanded for reevaluation based on the appellant's contentions.

In conclusion, the Tribunal set aside the duty demand for blended lubricating oil and questioned the imposition of a penalty. The matter was remanded to the Commissioner for further adjudication on the duty demands and penalty applicability based on the reassessment of shortages of finished goods and raw materials.