1991 (9) TMI 73 - SC - Central Excise

Whether the operation constitutes processing ? Held that - If any operation in the course of manufacture is so integrally connected with the further operations which result in the emergence of manufactured goods and such operation is carried on with the aid of power, the process in or in relation to the manufacture must be deemed to be one carried on with the aid of power. In this view of the matter, we are unable to accept the contention that since the pumping of the brine into the salt pans or the lifting of coke and lime stone with the aid of power does not bring about any change in the raw material, the case is not taken out of the notification. The exemption under the Notification is not available in these cases. Accordingly, we allow these appeals

Issues Involved:
1. Interpretation of Notification No. 179/77-C.E., dated 18-6-1977.
2. Definition and scope of the term "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944.
3. Determination of whether the use of power in preliminary operations disqualifies a product from excise duty exemption.

Issue-wise Detailed Analysis:

1. Interpretation of Notification No. 179/77-C.E., dated 18-6-1977:
The key issue is the interpretation of Notification No. 179/77-C.E., which exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, provided that no process in relation to their manufacture is ordinarily carried out with the aid of power. The Tribunal had previously ruled that the manufacturing process starts from the stage of feeding raw materials into the salt pan or kiln, and that the use of power for transferring raw materials does not disqualify the goods from the exemption.

2. Definition and scope of the term "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944:
Section 2(f) defines "manufacture" to include any process incidental or ancillary to the completion of a manufactured product. The Court emphasized that "manufacture" involves a series of processes that result in a commercially new article. It was noted that the term "process" includes any operation or activity in relation to manufacture, and should not be limited to those that bring about a change in the raw material.

3. Determination of whether the use of power in preliminary operations disqualifies a product from excise duty exemption:
The Court examined whether the use of power in preliminary operations, such as pumping brine into salt pans or lifting raw materials to the kiln head, disqualifies the goods from the exemption. The Court concluded that these preliminary operations are integral parts of the manufacturing process. It was held that if power is used in any operation that is essential and integrally connected to the manufacturing process, the exemption under the notification does not apply.

Conclusion:
The Court ruled that the use of power in any stage of the manufacturing process, even in preliminary operations, disqualifies the goods from the excise duty exemption under Notification No. 179/77-C.E. Consequently, the appeals by the Revenue were allowed, and the orders of the Tribunal were set aside. The Court emphasized that the exemption is not available when power is used in any operation that is part of or related to the manufacturing process. No order as to costs was made.

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