1992 (5) TMI 111 - AT - Central Excise

Issues Involved:

1. Eligibility of graphite powder/flakes for exemption under Notification 23/55-C.E.
2. Interpretation of "natural black minerals" in the exemption notification.
3. Applicability of Note (2) to Chapter 25 of the Central Excise Tariff.
4. Whether the processing of graphite constitutes "manufacture."

Issue-wise Detailed Analysis:

1. Eligibility of Graphite Powder/Flakes for Exemption under Notification 23/55-C.E.:

The Assistant Collector of Central Excise, Sambalpur denied the exemption to graphite powder/flakes produced by the respondents under Notification 23/55-C.E., dated 29-4-1955, as amended. The Assistant Collector held that the graphite powder/flakes were obtained by processes such as grinding, washing, froth flotation, and pulverization, while the notification confines the exemption only to "natural black minerals namely graphite." The respondents argued that they were covered by the Tribunal's decision in T.P. Minerals (Pvt.) Ltd. v. Collector of Central Excise [1989 (40) E.L.T. 149], which held that the exemption under Notification 23/55 for graphite was not conditional and would be available in the form in which it is produced.

2. Interpretation of "Natural Black Minerals" in the Exemption Notification:

The appellant-Collector argued that the graphite obtained from mines is not pure and has to be processed to remove impurities before it is marketable. The graphite powder/flakes used by the respondents are not "natural graphite" but manufactured/processed graphite, to which the exemption does not apply due to the specific wording "natural black minerals" in the notification. The Department emphasized that the exemption was confined to the form in which graphite is mined in the quarries and any subsequent processing would take the product out of exemption. The respondents countered that the term "natural black mineral" was significant because the exemption was not available to "artificial" or "synthetic" graphite. They argued that the exemption should apply to graphite powder/flakes processed from crude graphite after removing impurities.

3. Applicability of Note (2) to Chapter 25 of the Central Excise Tariff:

The Department argued that Note (2) to Chapter 25, which covers products that have been washed, crushed, ground, powdered, etc., lays down guidelines for classification and is not applicable to the interpretation of the exemption notification. The respondents contended that Note (2) to Chapter 25 should be considered because the question of exemption from duty arises only after it is held that the impugned goods are excisable. They argued that the government would not have thought of giving exemption from duty under Notification 23/55 unless it was first held that the goods were excisable.

4. Whether the Processing of Graphite Constitutes "Manufacture":

The Department cited Supreme Court decisions, such as Union of India v. Delhi Cloth & General Mills [1977 (1) E.L.T. (J 199)] and South Bihar Sugar Mills v. Union of India [1978 (2) E.L.T. (J 336)], to argue that if a different product comes into being and is marketed differently as a result of processing, it is said to have undergone a process of manufacture. The respondents argued that the processing of crude graphite did not result in the emergence of anything different from graphite itself. They cited the Supreme Court decision in Minerals & Metals Trading Corporation of India v. Union of India [1983 (13) E.L.T. 1542 (S.C.)], which held that concentration of wolfram ore to make it usable and merchantable did not constitute a manufacturing process. The respondents also cited Tribunal decisions, such as Steel Authority of India Ltd. v. Collector of Central Excise [1991 (54) E.L.T. 414] and Collector of Central Excise, Patna v. M/s. Pyrites, Phosphates and Chemicals Ltd., Bihar [1983 (12) E.L.T. 537], which held that crushing or sieving did not bring about any new product and therefore did not constitute manufacture.

Conclusion:

The Tribunal considered the appeal, the rival submissions, and the case records. It observed that the Tribunal had previously decided in T.P. Minerals case that the exemption under Notification 23/55 was available in respect of graphite in the form in which it is produced. The Tribunal also found support in the Supreme Court judgment in the M.M.T.C. case, which held that the process of making ore usable and merchantable did not constitute manufacturing. The Tribunal agreed with the respondents that the use of the words "natural black minerals" in the exemption notification should be read in the context of distinguishing natural graphite from synthetic graphite. The Tribunal concluded that the Department's appeal had no force and rejected it, affirming the eligibility of graphite powder/flakes for exemption under Notification 23/55-C.E.

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