1990 (9) TMI 157 - AT - Central Excise

Summary

Issues Involved:
1. Whether the process of sintering manganese ore fines amounts to manufacture.
2. Liability for duty payment: Paramount Sinters Private Limited or Maharashtra Electro Smelt Ltd.
3. Applicability of Notification No. 118/75 and Notification No. 201/79.
4. Justification of invoking Section 11A.

Detailed Analysis:

Issue 1: Whether the process of sintering manganese ore fines amounts to manufacture.

The main question arising for decision in all these appeals is whether the process undertaken by the appellants by which particles of manganese ore fines get stuck to each other physically so as to form lumps (or larger particles of manganese ore) can amount to manufacture so as to attract levy of excise duty. The appellants contend that no chemical change takes place and only the physical form is changed, converting fines into larger particles or lumps. The lumps are used similarly to the raw materials for manufacturing Ferro Manganese Alloy. They argue that the process is akin to sticking together of candles and cannot be considered as manufacture. They also claim exemption under Notification No. 118/75 for goods under Tariff Item 68 when captively consumed.

The appellants supported their contentions with technical opinions from various experts, stating that the properties of sintered ore fines and parent ore fines are the same and no new product is created by sintering the ore fines. The Departmental Representative argued that the process of sintering increases the grain size, resulting in a change in the final product with specific name, character, and use, thus classifying it under Tariff Item 68.

Upon examining the technical literature and evidence, it is clear that manganese ore fines are converted into a granular, relatively coarse form through a physical change involving agglomeration processes like sintering. The experts uniformly opined that no chemical change occurs during this process. It is well settled that every process is not a process of manufacture unless it results in a product substantially different in name, character, and use. In this case, the manganese ore fines and sintered ones serve the same purpose, and the process does not result in a new product. Therefore, the process of agglomeration does not amount to manufacture.

Issue 2: Liability for duty payment: Paramount Sinters Private Limited or Maharashtra Electro Smelt Ltd.

The appellants argued that they are not the manufacturers but only Maharashtra Electro Smelt Ltd. They claimed that they merely undertake the process of sintering under an agreement with Maharashtra Electro Smelt Ltd., who supply the materials and own the shed and building. The appellants receive only commission charges and have no ownership rights over the ores and materials sintered by them.

Given the finding that the process of sintering does not result in a new product, the question of liability for duty payment becomes moot. The appellants are not liable to pay duty as the process does not constitute manufacture.

Issue 3: Applicability of Notification No. 118/75 and Notification No. 201/79.

The appellants claimed that manganese ore sinters are entitled to total exemption under Notification No. 118/75 since the entire quantity of sinters is used within the factory of production. They also argued that any duty paid or payable on manganese ore sinters under Tariff Item 68 is available as set-off/proforma credit in terms of Notification No. 201/79 to Maharashtra Electro Smelt Ltd., who clear the Ferro Manganese on payment of duty under Tariff Item 68.

As the process of sintering does not result in a new excisable product, the applicability of these notifications does not need further consideration.

Issue 4: Justification of invoking Section 11A.

The Departmental Representative argued that the appellants failed to file a classification list and follow various provisions of the Excise Act, thereby suppressing the fact of production of sinters in the factory. Hence, invoking Section 11A was justified.

Given the finding that the process of sintering does not result in a new product, invoking Section 11A is not justified. The appellants did not suppress any facts warranting the invocation of this section.

Conclusion:

The process of sintering manganese ore fines does not amount to manufacture as it does not result in a new product with a distinct name, character, or use. Consequently, the appellants are not liable for duty payment, and the applicability of Notifications No. 118/75 and 201/79 does not need further consideration. Invoking Section 11A is also not justified in this case. The cross-appeal by the Revenue is rejected.