2002 (1) TMI 155 - AT - Central Excise

Summary

Issues Involved:
1. Marketability and excisability of "Chelate compound."
2. Whether the process of preparing "Chelate compound" amounts to manufacture.
3. Inclusion of recoating charges in the assessable value of re-coated anodes.
4. Applicability of the extended period for demand due to alleged suppression of facts.

Detailed Analysis:

1. Marketability and Excisability of "Chelate Compound":
The core issue was whether the "Chelate compound" prepared by the assessee was marketable and hence excisable. The Commissioner, after de novo consideration, accepted the expert's evidence and the Divisional Assistant Commissioner's market survey report, which concluded that the "coating solution" could not be marketed due to its restricted shelf life. Consequently, the proceedings initiated against the assessee for allegedly manufacturing and marketing the "Chelate compound" without paying duty were dropped. The Commissioner held that "since no manufacture is involved and further the goods themselves are not marketable, I hold that 'chelate solution' is not an excisable product."

2. Whether the Process of Preparing "Chelate Compound" Amounts to Manufacture:
The Commissioner found that the process of dissolving metal chlorides in Iso Propyl Alcohol/Butanol did not result in any new product involving manufacture. The characteristics of the original metal chlorides remained intact without undergoing any change. The Commissioner relied on the Tribunal's judgment in Punjab Power Packs Ltd. v. CCE, Chandigarh, which supported the view that mere dilution does not constitute manufacture. The Board contended that the Commissioner failed to appreciate the manufacturing process and erroneously applied certain CEGAT judgments. However, the Tribunal upheld the Commissioner's findings, noting that the process did not bring into existence a new product with a different character, use, and name.

3. Inclusion of Recoating Charges in the Assessable Value of Re-coated Anodes:
The Commissioner (Appeals) confirmed the duty demand on recoated anodes towards recoating charges, despite acknowledging that recoating does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. The Tribunal found this contradictory, as once it is accepted that recoating does not amount to manufacture, adding such charges to the assessable value is not justified. The Tribunal referred to the Board's Circular No. 3/92, which clarified that recoating of anodes does not amount to manufacture. Therefore, the demand for including recoating charges in the assessable value was set aside.

4. Applicability of the Extended Period for Demand Due to Alleged Suppression of Facts:
The Tribunal upheld the Commissioner's finding that the demands were barred by time, as there was no suppression of facts. The department was aware of the manufacturing process, and earlier proceedings had culminated in the assessee's favor. The Tribunal referred to the Apex Court's judgment in Pushpam Pharmaceuticals, which laid down that the extended period cannot be invoked unless suppression is proved.

Conclusion:
The Tribunal rejected all the Revenue appeals and allowed the party's appeal, setting aside the orders impugned therein. The Tribunal concluded that the "Chelate compound" was not marketable and hence not excisable, the process of preparing it did not amount to manufacture, and recoating charges could not be included in the assessable value of recoated anodes. The demands were also found to be time-barred due to the absence of suppression.