1990 (10) TMI 78 - HC - Central Excise

Issues Involved:
1. Classification of aluminium nickel powder under the Central Excises and Salt Act, 1944.
2. Whether the process of converting ingots into powder constitutes "manufacture" under the Act.
3. Applicability of the exemption notification to aluminium nickel powder.

Issue-wise Detailed Analysis:

1. Classification of Aluminium Nickel Powder:
The primary issue was whether aluminium nickel powder falls under Tariff Item No. 27(a)(i) of the First Schedule to the Act, which pertains to aluminium in any crude form. The petitioner argued that the powder should be classified under this item as it is a crude form of aluminium. However, the court concluded that aluminium nickel powder cannot be considered as aluminium in any crude form. The court noted that the ingots, bars, blocks, etc., are treated as in crude form by an artificial definition under Tariff Item No. 27(a)(i). The ingots come into existence by combining aluminium and nickel, and this process is liable to duty under Tariff Item No. 27. However, once the ingots undergo further processing to become powder, they no longer fit the definition of "crude form" as understood in common parlance. The court emphasized that the powder is a distinct and different article from the ingots and is known as such in the market. Therefore, aluminium nickel powder does not fall under Tariff Item No. 27(a)(i) but rather under Tariff Item No. 68, which is a residuary item.

2. Process of Converting Ingots into Powder as "Manufacture":
The second issue was whether the process of converting ingots into powder constitutes "manufacture" under the Act. The petitioner contended that merely pulverizing the ingots does not amount to manufacture. However, the court disagreed, stating that the process involves more than just breaking the ingots into smaller pieces. The ingots are broken into lumps and then pulverized in a jaw-crusher machine, resulting in aluminium nickel powder. The court held that this process amounts to manufacture, as it transforms the ingots into a new and distinct product. The court referenced previous decisions but concluded that whether a process constitutes manufacture depends on the specific facts and circumstances of each case. In this case, the authorities correctly determined that the process of converting ingots into powder is a manufacturing process liable to excise duty.

3. Applicability of Exemption Notification:
The third issue was whether the exemption notification applied to aluminium nickel powder. The exemption notification exempts aluminium in any crude form from excise duty if it is manufactured from old aluminium scrap, waste or scrap obtained from virgin metal, or virgin aluminium in any crude form on which appropriate duty has been paid. The petitioner argued that the powder should be exempt under this notification. However, the court found that the exemption applies only to aluminium in crude form as defined under Tariff Item No. 27(a)(i). Since aluminium nickel powder is not considered as aluminium in crude form, the exemption notification does not apply. The court concluded that the authorities were correct in holding that the manufacture of aluminium nickel powder attracts duty under Tariff Item No. 68 and not under Tariff Item No. 27(a)(i).

Conclusion:
The court upheld the decisions of the authorities below, concluding that aluminium nickel powder is not classified under Tariff Item No. 27(a)(i) as aluminium in any crude form, the process of converting ingots into powder constitutes manufacture, and the exemption notification does not apply to aluminium nickel powder. The petition was dismissed, and the rule was discharged with no order as to costs.

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