2005 (11) TMI 114 - AT - Central Excise

Summary

Issues: Classification of "Crumb Rubber Powder" under excise law; applicability of Chapter Note 6; determination of manufacturing process.

Classification of "Crumb Rubber Powder" under excise law:
The Commissioner (Appeals) held that "Crumb Rubber Powder" is not excisable as no manufacturing activity can be said to have taken place. The appellants were involved in the process of obtaining crumb rubber powder from old tyres, cutting them into pieces, sieving, segregating small pieces, and crushing them to obtain the powder. The Revenue relied on Chapter Note 6 of Chapter 40 to classify crumb rubber powder under Chapter heading 40.04 for excise duty. However, the Commissioner observed that the process of obtaining crumb rubber powder did not align with the definition provided in Chapter Note 6, which refers to waste, parings, and scrap from rubber manufacturing not usable due to cutting-up, wear, or other reasons. The Commissioner cited a Supreme Court judgment emphasizing that the resultant waste must be distinct or different from the original input to constitute manufacturing. The Commissioner noted that the properties of the goods remained the same after crushing, with no chemical change occurring, indicating that merely changing the physical form does not amount to manufacturing.

Applicability of Chapter Note 6:
The Revenue contended, based on Chapter Note 6 of Chapter 40, that crumb rubber powder should be classified under Chapter heading 40.04 for excise duty. However, the Tribunal, supported by a Supreme Court observation, emphasized that the process of crushing old rubber into powder did not result in a new product. The Supreme Court dismissed the Revenue's appeal, affirming that the powder obtained through crushing old rubber did not undergo a chemical reaction to create a new product. The Tribunal's finding that the crushed product was not a new product was considered a factual determination. The Supreme Court precedent highlighted that the burden of proving manufacturing activity lies with the Revenue, and mere classification under a tariff entry does not automatically imply manufacturing.

Determination of manufacturing process:
The Tribunal upheld the Commissioner (Appeals) decision, stating that the view aligns with Supreme Court precedent, which requires the basic criteria of the goods resulting from manufacturing activity to be satisfied. The Tribunal reiterated that the process of crushing old rubber into powder does not constitute manufacturing, emphasizing that the absence of a chemical reaction to create a new product is crucial. The Tribunal cited a Supreme Court case to emphasize that the burden of proving manufacturing lies with the Revenue and that mere classification under a tariff entry is insufficient to establish manufacturing. Consequently, the Tribunal rejected the Revenue's appeal, affirming the Commissioner's decision regarding the non-excisability of crumb rubber powder.

This detailed analysis of the judgment addresses the issues of classification of "Crumb Rubber Powder" under excise law, the applicability of Chapter Note 6, and the determination of the manufacturing process, providing a comprehensive overview of the legal reasoning and precedents considered in reaching the decision.