1987 (2) TMI 249 - AT - Central Excise

Transferring the water and raw material to storage tank would not amount to process of manufacture

Summary

Issues:
1. Entitlement to exemption benefits under Notification No. 179/77-CE.
2. Interpretation of the use of power in relation to the manufacture of goods.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Madras involved a dispute regarding the entitlement of the appellant, a manufacturer of Ethyl Acetate, to the benefits of exemption under Notification No. 179/77-CE. The Collector of Central Excise, Bangalore, challenged the order of the Collector of Central Excise (Appeals), Madras, dated 2-7-1986, which denied the exemption claimed by the appellant. The issue revolved around whether the appellant's use of power in pumping water and raw materials to the storage tank disqualified them from the exemption. The Assistant Collector of Central Excise, Lalbagh Division, Bangalore, initially found that the use of power for pumping water and raw materials, although not directly related to the manufacturing process, was linked to it, thereby disqualifying the appellant from the exemption.

The appellant argued that the use of power in pumping water and raw materials should be considered as part of the manufacturing process or something in relation to it. The appellant relied on a ruling by the Special Bench in the case of Gujarat Dyetex Industries, Ahmedabad, which held that any use of power related to the manufacturing process, even if before the actual manufacturing stage, would disqualify the entity from the exemption. On the other hand, the respondent contended, citing the Division Bench ruling of the Gujarat High Court in the case of Nirma Chemical Works, that the mere use of power in transferring raw materials to the storage tank did not constitute a part of the manufacturing process of the final product.

The Appellate Tribunal, after considering the arguments presented, found that the issue at hand was akin to the one addressed in the Division Bench ruling of the Gujarat High Court in the case of Nirma Chemical Works. The Tribunal noted that the use of power in transferring raw materials to the storage tank did not constitute a part of the manufacturing process of the final product as per the Division Bench ruling. The Tribunal highlighted that the Special Bench ruling, although not considering the Gujarat High Court's decision, was an ex-parte ruling. Consequently, the Tribunal upheld the decision of the Collector of Central Excise (Appeals), Madras, and dismissed the appeal, affirming that the use of power for transferring water and raw materials to the storage tank did not disqualify the appellant from the exemption benefits under the notification.