1987 (2) TMI 269 - AT - Central Excise

Manufacture - Chilling of water is not a process incidental or ancillary to the manufacture of aerated waters

Summary

Issues:
1. Alleged clearance of aerated waters without payment of duty.
2. Disqualification from availing concession under Notification 293/77.
3. Use of power in the manufacture of aerated waters.
4. Entitlement to the benefit of the notification.
5. Justification of the demand for payment of duty.

Analysis:
The appellants were issued a show cause notice for allegedly clearing aerated waters without paying Central Excise Duty. The dispute revolved around the use of power exceeding the limits specified in Notification 293/77, which exempted aerated waters from duty if power usage was restricted to one horsepower for carbonation and half horsepower for bottle washing. The Asstt. Collector confirmed the duty demand, stating that power was also used for lifting water and chilling water, disqualifying the appellants from the notification's benefit.

The consultant for the appellants argued that power usage for lifting water should not be considered in manufacturing and cited a court decision to support the claim. Conversely, the respondent contended that chilling water was essential for aerated water production, making it a process incidental to manufacturing. The key issues for determination were the appellants' entitlement to the notification's benefit and the justification of the duty demand.

The Tribunal analyzed the notification's language and the power usage by the appellants. It was observed that chilling water did not alter its fundamental nature and was not a mandatory step in aerated water production. The Tribunal emphasized that chilling water was not a transformative process and did not constitute manufacturing. The Appellate Collector's assertion that chilling water was crucial lacked technical or evidential support. Consequently, the benefit of the exemption could not be denied to the appellants.

Regarding the revision of classification and duty demand, the Tribunal noted that the demand fell within the six-month period, rejecting the appellants' argument against revising the classification. Ultimately, the Tribunal allowed the appeal, setting aside the impugned order, as power usage for chilling water did not disqualify the appellants from the notification's benefit. Judge G. Sankaran concurred with the decision, emphasizing that chilling water was preparatory and not incidental to aerated water manufacturing, leading to the appeal's allowance.