2005 (10) TMI 134 - AT - Central Excise

Summary

Issues involved:
Whether blending lubricating oil with colouring material amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.

Detailed Analysis:

1. Manufacture under Section 2(f) of the Act:
- The Commissioner held that blending oil with dye is essential for marketability, leading to the conclusion that it amounts to manufacture.
- The appellant argued that the addition of dye does not change the nature of the product significantly, as the lubricating oil is already fully manufactured and marketable without the dye.
- The Tribunal noted that the addition of dye does not create a new product with a distinct name, use, or character, as the basic nature of the lubricating oil remains unchanged.

2. Precedents and Legal Interpretations:
- Referencing decisions by various High Courts and the Supreme Court, the Tribunal found that processes like colouring paper or metallising polyester film do not result in the emergence of a new commercial commodity.
- Applying these precedents, the Tribunal concluded that blending lubricating oil with dyes does not create a new identifiable product, and thus, does not amount to manufacture.

3. Verification of Modvat Credit and Duty Calculation:
- The Tribunal directed the Commissioner to verify whether the appellant had availed Modvat credit and to re-examine the duty calculation related to finished goods shortage.
- Additionally, the Tribunal addressed the disallowed amount for shortage of raw materials, emphasizing the need for proper correlation between physical stock verification and statutory records.

4. Remand and Penalty Imposition:
- The Tribunal set aside the impugned order and remanded the matter to the Commissioner for fresh adjudication, considering the findings on the non-leviability of duty on blended oil.
- Regarding the penalty imposition, the Tribunal left the decision to the Commissioner based on the outcomes of the reassessment on shortages of finished goods and raw materials.

In conclusion, the Tribunal held that blending lubricating oil with colouring material does not amount to manufacture under the Central Excise Act, based on the lack of substantial transformation in the product. The case was remanded for further examination of duty demands, Modvat credit verification, and penalty imposition considerations.