2016 (9) TMI 425 - AT - Central Excise

Duty liability - Isolated soya protein - process undertaken by appellant amounts to manufacture or not - Held that - the objective of the process of manufacture of protein isolate appears to be to increase the concentration of the protein while at the same time eliminating the content of carbohydrate. As per the flow chart, the starting point of the making process is de-oiled cake, i.e. de-fatted. The net result is that the final product - isolate soya protein is nutritionally very different from the starting raw material - soya flour. In the landmark judgment on the subject of manufacture in the case of DCM Cloth Mills 1962 (10) TMI 1 - SUPREME COURT OF INDIA the Apex Court has laid-down the yardstick to determine if an activity or process amounts to manufacture. When we apply such yardstick to the facts of the present case, there is very little doubt that, a new product, viz isolated soya protein which is perceived differently and which has a name, character and use which is totally different from the raw material namely soya flour, has come into existence. Therefore, we have no hesitation in concluding that the process of manufacture has been undertaken by the appellant and that the final products, soya protein isolate would be chargeable to duty. Period of limitation - proviso to Section 11A - activity was within the knowledge of the department inasmuch as the appellant were regularly filing declarations as required under the SSI provisions declaring the product as well as the value of clearances made in the financial year - no declaration made of the fact that appellant have other units situated elsewhere in Dholi, Haldia as well as Gadarwara - Held that - it is found that that the appellant has suppressed the material fact about details of other units. Only during investigation the department could unearth that the appellant s company is also having other units and when total clearances of all these units are considered together, the appellant were not eligible for the exemption under the SSI notification. Therefore, the extended time limit under provision to Section 11A has been rightly invoked by Revenue. - Decided against the assessee

Summary

Issues:
- Whether the process undertaken by the appellant for manufacturing isolated soya protein amounts to excise duty liability.
- Whether a new product emerges as a result of the manufacturing process, justifying the imposition of excise duty.
- Whether the appellant's challenge to the time bar under Section 11A is valid.

Analysis:

Issue 1: Process of Manufacturing Isolated Soya Protein
The appellant argued that their process does not amount to manufacture as it does not transform the soya flour into a new product. They claimed the product remains the same in substance and content, emphasizing that no new product emerges. Citing various case laws, they contended that since no new product is created, excise duty should not be charged on isolated soya protein. However, Revenue asserted that the process does amount to manufacture as the chemical composition changes through the use of chemicals, resulting in a new product. The Tribunal analyzed the process, noting the removal of impurities and the change in chemical composition, concluding that the process undertaken by the appellant for isolated soya protein amounts to manufacture.

Issue 2: Emergence of a New Product
The Tribunal considered the technical literature detailing the process of making protein isolates, highlighting the objective to increase protein concentration while eliminating carbohydrates. The final product, isolated soya protein, was found to be nutritionally different from the starting raw material, soya flour, with distinct marketing and usage. Referring to the DCM case, the Tribunal emphasized that for an activity to amount to manufacture, a new product with a distinctive name, character, and use must emerge. Applying this yardstick, the Tribunal concluded that isolated soya protein, being perceived differently with a distinct name, character, and use, qualifies as a new product, justifying the imposition of excise duty.

Issue 3: Challenge to Time Bar under Section 11A
The appellant raised a time bar argument under Section 11A, claiming the department had knowledge of their activities as they regularly filed declarations. However, the Tribunal found that the appellant had suppressed material facts about other units, rendering them ineligible for the exemption under the SSI notification due to aggregate clearances exceeding the limit. As a result, the Tribunal upheld the invocation of the extended time limit under Section 11A by Revenue, dismissing the appellant's appeal.

In conclusion, the Tribunal upheld the order confirming excise duty liability on the appellant for manufacturing isolated soya protein, considering it as a new product emerging from the process. Additionally, the time bar challenge was dismissed due to the appellant's suppression of material facts about other units.