1986 (10) TMI 205 - AT - Central Excise

Summary

Issues Involved:
1. Whether the conversion of Transformer Oil Base Stock (TOBS) to Transformer Oil (TO) amounts to 'manufacture' under the Central Excises and Salt Act, 1944.
2. Whether the classification of TOBS and TO under different tariff items post-1978 budgetary changes impacts the duty liability.
3. Whether the Assistant Collector had the authority to review the earlier decision of the Central Excise authority from 1971.
4. Whether the process of purification of TOBS to TO constitutes a manufacturing activity.
5. Whether the legislative intent and tariff changes from 1st March 1978 justify the imposition of excise duty on TO.

Detailed Analysis:

1. Whether the conversion of Transformer Oil Base Stock (TOBS) to Transformer Oil (TO) amounts to 'manufacture' under the Central Excises and Salt Act, 1944:
The appellant argued that the conversion of TOBS to TO does not amount to 'manufacture' as defined by Section 2(f) of the Central Excises and Salt Act, 1944, since no new product comes into existence. They relied on the Supreme Court's judgment in Union of India v. Delhi Cloth and General Mills Co. Ltd., which states that 'manufacture' implies a change where a new and different article emerges having a distinctive name, character, or use. The Assistant Collector and the Tribunal, however, held that the conversion results in a commercially distinct product known to the market as Transformer Oil, thus constituting 'manufacture.'

2. Whether the classification of TOBS and TO under different tariff items post-1978 budgetary changes impacts the duty liability:
The Assistant Collector observed that prior to 1st March 1978, both TOBS and TO were classified under Tariff Item 8, but post-1978, TOBS was classified under Tariff Item 11A4(a). The Tribunal agreed with this classification change, indicating that the legislative intent was to treat TOBS and TO as separate commodities for excise duty purposes. The Tribunal noted that the intention of the legislature was clear in excluding TOBS from Tariff Item 8 and including it under Tariff Item 11A4(a).

3. Whether the Assistant Collector had the authority to review the earlier decision of the Central Excise authority from 1971:
The appellant argued that the Assistant Collector had no powers of review under the Central Excise and Salt Act, 1944, and that the earlier decision from 1971, which stated that the conversion of TOBS to TO does not attract excise duty, should stand. The Tribunal, however, held that the earlier decision had no relevance in the changed context post-1978 budgetary changes, and the Assistant Collector was correct in reclassifying the products based on the new legislative framework.

4. Whether the process of purification of TOBS to TO constitutes a manufacturing activity:
The Tribunal referred to the Indian Standard Glossary of Petroleum Terms and the Indian Standard Specification for Insulating Oil for Transformers and Switchgear, which indicated that TOBS without purification cannot be used as TO. The Tribunal concluded that the process of purification, involving filtration or other suitable treatment, amounts to manufacturing activity as defined under Section 2(f) of the Central Excises and Salt Act, 1944. The Tribunal dismissed the appellant's argument that mere purification does not constitute manufacture.

5. Whether the legislative intent and tariff changes from 1st March 1978 justify the imposition of excise duty on TO:
The Tribunal observed that the legislative changes from 1st March 1978 clearly indicated the intent to classify TOBS and TO under different tariff items, thereby justifying the imposition of excise duty on TO. The Tribunal noted that the legislative intent was to charge TO separately under Tariff Item 8, distinct from TOBS classified under Tariff Item 11A4(a). The Tribunal upheld the classification and duty liability as per the changed legislative framework.

Conclusion:
The Tribunal dismissed the appeal, holding that the conversion of TOBS to TO amounts to manufacture, the classification changes post-1978 were valid, and the legislative intent justified the imposition of excise duty on TO. The Tribunal found no merit in the appellant's arguments and upheld the findings of the Assistant Collector and the Collector of Central Excise (Appeals), Bombay.