2002 (7) TMI 137 - AT - Central Excise

Summary

Issues:
1. Whether the treatment of rubber wood using chemicals amounts to a process of manufacture?
2. Can the resultant product be classified as densified wood under Heading 4409.00 of Central Excise Tariff Act?
3. Was the Department justified in invoking the larger period to raise the demand?

Analysis:

Issue 1: Treatment of rubber wood using chemicals as a process of manufacture
The appellant argued that the chemical treatment of rubber wood did not amount to a process of manufacture under the Central Excise Act. They cited a Tribunal decision and a Supreme Court case to support their contention. The Tribunal had previously held that mere chemical treatment did not transform the wood into a new commercial product. The appellant relied on this precedent to argue against the levy under the Central Excise Act.

Issue 2: Classification of treated rubber wood as densified wood
The appellant presented expert evidence to contest the classification of the treated rubber wood as densified wood. They highlighted that densification required compression apart from chemical impregnation, which was not present in their process. The Commissioner had classified the product based on increased density and strength after treatment, but the appellant argued that mechanical strength or resistance improvement was crucial as per the HSN notes. The appellant emphasized that the Commissioner should have considered the HSN notes and presented sufficient evidence for the classification, which was lacking in this case.

Issue 3: Time limitation on raising the demand
The appellant contended that the demand was time-barred as similar cases had been adjudicated in favor of other entities engaging in the same activities. They pointed out instances where proceedings were dropped against other parties engaged in identical processes, indicating that the Department was aware of such activities. The appellant argued that invoking the larger period for raising the demand was unjustified due to the precedent set by previous adjudications.

The Tribunal considered the arguments presented by both sides. They noted the discrepancies in the Commissioner's classification based on density increase and the lack of consideration for mechanical strength or resistance improvement as per the HSN notes. The Tribunal agreed with the appellant that sufficient evidence was required for classification, which was not adequately provided by the Commissioner. Consequently, the Tribunal allowed the appeal based on the merits of the classification issue, rendering further discussion on other raised issues unnecessary. The appeal was allowed in favor of the appellant.