1994 (7) TMI 138 - AT - Central Excise

Summary

Issues Involved:
1. Whether coffee tablets are exempted under Notification No. 127/89 dated 27-4-1989.
2. Whether the process of converting coffee powder into tablets constitutes "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Exemption under Notification No. 127/89:
The appellants, manufacturers of coffee mixed with chicory, argued that their product, Dilkush tablets, should be exempted under Notification No. 127/89, which exempts "coffee powder containing chicory in any proportion" classified under Tariff Heading 0901.20. The appellants contended that there is no difference between coffee powder and tablets since the tablets are merely compacted powder. They argued that the exemption should apply as the tablets, if powdered, revert to coffee powder. The Department, however, denied the exemption, asserting that the notification exempts only coffee powder, not tablets. The Tribunal found that the notification exempts coffee powder containing chicory and since tablets are also classifiable under the same heading, the benefit of exemption should not be denied merely because the coffee powder is in tablet form.

2. Process Constituting "Manufacture":
The appellants argued that the process of converting coffee powder into tablets does not constitute "manufacture" as defined under Section 2(f) of the Central Excises and Salt Act, 1944. They cited several judicial precedents, including the Supreme Court's decision in Delhi Cloth and General Mills, which held that "manufacture" implies a change that brings a new substance into existence, not merely a change in form. The Department countered that the process of compression is incidental or ancillary to the completion of the manufactured product, thus satisfying the definition of "manufacture." They cited various decisions supporting their contention that intermediate processes leading to the final product are part of the manufacturing process. However, the Tribunal concluded that the process undertaken by the appellants did not amount to "manufacture" as there was no addition of any binding material, and the essential character and use of the product remained unchanged. The Tribunal emphasized that the burden of proof lies on the Department to establish that the process constitutes "manufacture."

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, concluding that the coffee tablets are not different from coffee powder for the purpose of classification and exemption. The process of converting coffee powder into tablets does not constitute "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944. The exemption under Notification No. 127/89 applies to coffee powder in any form, including tablets.