2023 (6) TMI 951 - AT - Central Excise

Process amounting to manufacture - SSI exemption benefit - demand with interest and equal penalty - Period involved in the dispute is November 1987 to February 1994. Process amounting to manufacture - processes of recrystallisation and distillation did not bring in any new excisable product - HELD THAT - Distillation is a process of evaporation and re-condensation used for separating liquids into various fractions according to their boiling points or boiling ranges. Fractional distillation is a distillation process for the separation of the various components of liquid mixtures. At different temperatures, various components of liquid mixtures emerge at different stages of fractional distillation process. Such components arising in course of fractional distillation process can be distinctly different from the parent raw materials. The emergent products can have different name, character and use. However, the processes of recrystalisation and distillation undertaken by the Appellant cannot be called fractional distillation. There is no evidence available on record to show that various components of liquid mixtures emerged at different stages in the process undertaken by the Appellant - the findings of the adjudicating authority in the impugned order is not supported by any evidence. It is also observed that the appellant did not avail MODVAT Credit as per the decision of the Department that their processing of Coal Tar does not amount to manufacture as persection 2(f) of the Central Excise Act. 1944 - thus the processes undertaken by the Appellant would not amount to manufacture within the meaning of Section 2(f) of Central Excise and Salt Act, 1944 and hence the finished goods are not leviable to Central Excise duty. Accordingly, the demand made in the impugned order is liable to be set aside. Eligibility of SSI Exemption - HELD THAT - The department contended that the benefit of SSI exemption has been allowed while working out aggregate value of clearances in each financial year during the material period. However, since the processes undertaken by the Appellant does not amount to manufacture and the demand itself is not sustainable, the eligibility of SSI Exemption would not make any difference. Appeal allowed.

Summary

Issues Involved:
The judgment deals with the issue of whether the processes undertaken by the Appellant amount to manufacture and whether the Appellant is eligible for the SSI benefit.

Manufacture and SSI Benefit:
The Appellant engaged in processing Coal Tars, Solvent Naptha, Tar Acid, Light Creosote Oil, and other products, primarily undertaking distillation, refining, blending, and repacking. The Appellant claimed the processed materials did not change the original properties and were sold under different codes. The Central excise authorities canceled the C.T.-2 License on the basis that the process did not amount to manufacture. Multiple show cause notices were issued, and the Appellant contended that the value of manufactured products did not exceed the SSI exemption limit. The Adjudicating authority confirmed demands, but the Tribunal set aside the order directing consideration of the SSI exemption benefit. The Appellant argued that their processes did not amount to manufacture and the demand was time-barred. The Tribunal observed that the processes did not result in new excisable products and did not amount to manufacture under Section 2(f) of the Central Excise Act, setting aside the demands.

Judicial Interpretation:
The Tribunal found that the processes of distillation and purification undertaken by the Appellant did not result in new products, aligning with previous decisions. The Ld Commissioner's distinction of cases based on the emergence of goods with distinct names was deemed insufficient. The Tribunal upheld decisions stating that processes like distillation and purification do not constitute manufacture. The Appellant's processes were compared to those in a previous case, where similar processes were deemed not to amount to manufacture. The Tribunal held that the Appellant's processes did not amount to manufacture under the Central Excise and Salt Act, setting aside the demand for Central Excise duty.

SSI Exemption Eligibility:
The department argued that SSI exemption had been considered in calculating clearances, but since the processes did not amount to manufacture, the SSI exemption eligibility was irrelevant. The Tribunal allowed the appeal, setting aside the demand due to the processes not constituting manufacture.

Conclusion:
The Tribunal ruled in favor of the Appellant, holding that the processes undertaken did not amount to manufacture under the Central Excise Act. The demand for Central Excise duty was set aside, and the SSI exemption eligibility was deemed inconsequential due to the non-manufacture finding.