2001 (4) TMI 122 - AT - Central Excise

Summary

Issues:
1. Duty demand on aluminium billets captively consumed for manufacturing exempt products.
2. Classification of extrusion ingots as a new commercial commodity.
3. Whether the process of converting ingots into extrusion ingots amounts to manufacture.
4. Interpretation of Tariff Heading 76.01 regarding ingots and billets as different commodities.
5. Comparison of chemical composition and physical characteristics of ingots and billets.

Analysis:
1. The appeal concerned a duty demand of Rs. 44,35,637 on aluminium billets used for manufacturing exempt irrigation pipes, with an additional penalty of Rs. 5 lakhs. The dispute pertained to the period from June to December 1995.

2. The appellants manufactured aluminium products using ingots obtained locally or through imports. The process involved melting ingots, adding alloying material, and casting them into extrusion ingots for further processing into pipes. The Department argued that this process created a new commercial commodity, billets, subject to duty as they were used in manufacturing exempt products.

3. The appellant's advocate contended that converting ingots into extrusion ingots did not constitute manufacturing, citing legal precedents where changes in shape or form did not amount to manufacturing. The Tribunal found support in these arguments, emphasizing that the extrusion ingots were still unwrought aluminium, albeit in a different shape suitable for extrusion.

4. The Department argued that billets were distinct from ingots due to differences in chemical composition, physical features, and usage, relying on legal precedents supporting the classification of similar items as different commodities for duty purposes.

5. The Tribunal analyzed technical definitions and standards to conclude that the process of converting ingots into round ingots for extrusion did not amount to manufacturing. The chemical composition of ingots and billets was found to be the same, supporting the finding that the taxable commodity remained unchanged despite the alteration in form. The Tribunal referred to IS Standards and technical literature to support their decision.

6. Consequently, the Tribunal held that the conversion process undertaken by the appellants did not constitute manufacturing, leading to no duty liability. The impugned order was set aside, and the appeal was allowed based on the determination that the taxable commodity remained the same despite the change in physical form.