2018 (11) TMI 1284 - AT - Central Excise

Process amounting to manufacture or not - processes to refine and purify the various petroleum products (Petroleum Benzine and Hexane) to obtain specified grade of petroleum products - Section 2(f) of Central Excise Act, 1944 - binding precedent - applicability of decision in the case of CCE Bombay Vs E.Merk (I) Ltd Final Order No 995/98-C dated 12.10.1998 in Appeal No E/2617/94-C of 1994 - applicability of the decision in the present case. Whether the order of the tribunal in case of E Merck, would be binding on the party s and would be a binding precedent for all the times to come, even if it can be shown that by applying the principles laid down by the Apex Court in the case of S D Fine Chemicals itself, to the facts of present case the processes undertaken amounts to manufacture? Held that - From the order dated 8.8.1992 of adjudicating Assistant Commissioner, and that of Commissioner (Appeal) dated 26.09.1994, in case of E Merck, it is quite evident that both the authorities had found the facts of the case identical were identical with the case of S D Fine Chemical 1991 (6) TMI 124 - CEGAT, NEW DELHI as decided by the tribunal. The said order was appealed by the revenue before the Apex Court. Further the said order of tribunal, was not an unanimous order, and there was a difference in opinion amongst the Member s hearing the matter in first instance. While Member (T) was in favour of allowing the appeal, Member (Judicial) disagreed and was for dismissing the appeals. When the matter was referred to third Member, third member agreed with the view of Member (Technical) for dismissing the appeal. Since the issue in case of E Merck was never examined by the Tribunal, on merits and the matter was agitated only for the reason that decision in case of S D Fine Chemicals, relied upon by adjudicating authority and Commissioner (Appeal) have been appealed before the Apex Court, tribunal has dismissed the appeal filed by revenue only on that ground. Since Tribunal has not considered the issue in E Merck on merits and in light of the Apex Court decision in case of S D Fine Chemicals, the earlier decision of Tribunal referred above cannot be a binding precedent. As result of the processes undertaken the raw material is (1) refining the hydrocarbons present in commercial grade bulk hexane/ petroleum ether (benzene) into fractions of more closely related properties, (2) converting raw material into more desirable reaction products, and (3) purifying the products of unwanted elements and compounds. Such a process may have altered some or all characteristics of the product. However the test for manufacture as laid down by the series of decisions referred above is not vis a vis the alteration in some or all the characteristics of raw material, but is the emergence of a new product having distinct name, character and use As result of the processes undertaken by the party s on the raw material viz Commercial Grade Bulk Hexane/ Petroleum Ether (Benzine), a new commercially identifiable product having separate name, character and use has emerged, the processes undertaken are processes of manufacture. There is no justification for invocation of extended period. Matter remanded back to the adjudicating authority for re-computation of the duty demand within the normal period and also for allowing CENVAT credit of duty paid on raw materials, subject to submission of documentary evidences - appeal allowed by way of remand.

Issues Involved:
1. Whether the processes undertaken by the appellants to refine and purify various petroleum products (Petroleum Benzine and Hexane) amount to manufacture under Section 2(f) of the Central Excise Act, 1944.
2. Whether the extended period of limitation can be invoked.
3. Admissibility of CENVAT credit on inputs and input services used in the manufacture.

Detailed Analysis:

1. Manufacture of Petroleum Products:
The core issue in all the appeals is whether refining and purifying petroleum products (Petroleum Benzine and Hexane) to obtain specified grades amount to manufacture under Section 2(f) of the Central Excise Act, 1944, thereby attracting Central Excise Duty.

The Tribunal previously ruled in a similar case involving M/s Sunbel Alloys Company of India Ltd. that such processes do amount to manufacture. This decision was challenged, and the Bombay High Court remanded the case for fresh consideration, emphasizing the need for judicial discipline and thorough examination of previous decisions and arguments.

The appellants argued that their activities were identical to those previously ruled as not amounting to manufacture in the case of Merck Specialities Pvt. Ltd. The processes involved included washing with acid, water, and rectification, which did not result in a new product with different characteristics or marketability. They cited multiple decisions supporting that mere purification does not constitute manufacture.

The Revenue, however, contended that the processes resulted in new products with distinct names, characters, and uses, thus meeting the criteria for manufacture. They highlighted that the final products were known differently in the trade and had different uses, which was corroborated by the statements of the appellants' employees.

The Tribunal, considering the detailed submissions and technical literature, concluded that the processes undertaken resulted in new commercially identifiable products with distinct names, characters, and uses. Thus, the processes amounted to manufacture.

2. Extended Period of Limitation:
The Tribunal considered whether the extended period of limitation for confirming the duty demand was justified. It noted that the department was aware of the activities undertaken by the appellants, implying no suppression of facts. Therefore, the extended period could not be invoked, and the duty demand was sustainable only for the normal period of limitation.

3. Admissibility of CENVAT Credit:
The Tribunal acknowledged that the appellants would be eligible for CENVAT credit on the duty paid on inputs and input services used in the manufacture of the finished products. The adjudicating authority was directed to re-compute the duty demand within the normal period and allow CENVAT credit based on documentary evidence.

Conclusion:
The Tribunal held that the processes undertaken by the appellants amounted to manufacture, and the duty demand was to be re-computed within the normal period, allowing CENVAT credit. The appeals were disposed of by way of remand for re-computation and further necessary actions.

Pronouncement:
The judgment was pronounced in court on 19.11.2018.

← Previous Next →