2019 (9) TMI 274 - AT - Central Excise

Process amounting to manufacture or not - processes of melting, purifying, re-packing of the Bees wax and synthetic wax - section 2(f) of CEA,1944 - classification - rate of tax - fatty acids. HELD THAT - Merely because of some processes are carried out on the raw Bees Wax to make the product in a presentable and better marketable form, without significant change in the character and use between the raw Bees wax and the cleaned/purified Bees Wax,the processes under taken resulted into manufacture - More or less in similar circumstance the Tribunal in the case of COMMR. OF C. EX., CHANDIGARH VERSUS MAHAVIR SPINNING MILLS LTD. 2000 (11) TMI 552 - CEGAT, NEW DELHI while considering the question whether the process of producing Wax washers from duty paid paraffin Wax resulted into manufacture has held that no knew or different article or commodity is thus manufactured by them. The process adopted by them for changing the form of the wax from lump to washers cannot be equated to the process of manufacture. Also, there is no Section/Chapter Note, specifying such processes amounting to manufacture under Chapter 15 of Central Excise Tariff Act, 1985. Merely because the product Bees wax is mentioned under Chapter Sub-Heading 1507, it cannot be considered that the processes carried out on the raw Bees Wax resulted into manufacture within the definition of Sec. 2(f) of CEA,1944. Thus, Bees Wax cleared by the Appellant cannot be said to be manufactured by subjecting the raw Bees waxinto the processes of melting, purifying, re-packing into bags of 25/50kgs. Also, the learned Commissioner, while examining the dutiability in relation to mineral waxes has held that the simple processes of re-melting and packing would not bring into existence a new product. Thus, a different yard stick cannot be applied to Bees wax. The impugned Order is modified to the extent of setting aside confirmation of duty, interest and penalty, directing confiscation imposition of personal penalty relating to processing of Bees Wax - appeal allowed in part.

Issues Involved:
1. Whether the processes applied to Bees wax constitute 'manufacture' under Section 2(f) of the Central Excise Act, 1944.
2. Classification and rate of duty applicable to industrial fatty acids.
3. Determination of duty liability and penalties imposed on the appellants.
4. Eligibility for SSI exemption and computation of aggregate value of clearances.
5. Validity of the demand based on the average sale price and limitation period.

Detailed Analysis:

1. Whether the processes applied to Bees wax constitute 'manufacture' under Section 2(f) of the Central Excise Act, 1944:
The core issue was whether the processes of melting, purifying, repacking Bees wax amounted to 'manufacture'. The Commissioner concluded that these processes resulted in a new and distinct commodity, making the wax commercially marketable, thus constituting 'manufacture'. However, the Tribunal disagreed, noting that the processes did not significantly change the character and use of the Bees wax. The Tribunal cited the case of Mahavir Spinning Mills Ltd., where the transformation of wax into washers did not amount to 'manufacture' as no new product emerged. The Tribunal found no specific Section/Chapter Note in Chapter 15 of the Central Excise Tariff Act, 1985, indicating that such processes amounted to 'manufacture'. They referred to the Supreme Court's decision in Shyam Oil Cake Ltd., which emphasized that merely listing a process in the tariff does not make it excisable unless it is specified that the process amounts to 'manufacture'.

2. Classification and rate of duty applicable to industrial fatty acids:
The Commissioner classified 'Sizole', an industrial fatty acid, under Chapter Heading No. 1505 of the Central Excise Tariff Act, 1985, attracting a 'Nil' rate of duty. This classification was not contested in the appeals, and the Tribunal upheld this finding.

3. Determination of duty liability and penalties imposed on the appellants:
The Commissioner confirmed a demand of ?17,19,948/- and imposed penalties and fines on the appellants. The Tribunal, however, set aside the confirmation of duty, interest, and penalties related to the processing of Bees wax, as it did not amount to 'manufacture'. Consequently, the penalties and fines associated with this finding were also set aside.

4. Eligibility for SSI exemption and computation of aggregate value of clearances:
The appellants argued that the clearances of industrial fatty acids and synthetic waxes, which were held to be non-manufactured or exempt from duty, should not be included in computing the aggregate value for SSI exemption under Notification No. 1/93-CE. The Tribunal agreed, noting that the value of such clearances should be treated as 'Nil' and excluded from the aggregate value of clearances.

5. Validity of the demand based on the average sale price and limitation period:
The appellants contended that the Department's calculation of the average sale price of Bees wax at ?143/- per kg was incorrect, as the actual average price was around ?70/- per kg. The Tribunal did not delve deeply into this issue, as they had already concluded that the processes did not amount to 'manufacture'. Additionally, the appellants argued that the demand was barred by limitation due to the absence of suppression of facts or misdeclaration. The Tribunal's decision to set aside the duty demand rendered this argument moot.

Conclusion:
The Tribunal ruled that the processes applied to Bees wax did not constitute 'manufacture' under Section 2(f) of the Central Excise Act, 1944, and thus, the resultant product was not liable to duty. The classification of industrial fatty acids under Chapter Heading No. 1505, attracting a 'Nil' rate of duty, was upheld. The Tribunal set aside the duty demand, interest, and penalties related to Bees wax processing and clarified the computation of aggregate value for SSI exemption. The appeals were disposed of accordingly.

← Previous Next →