2022 (5) TMI 566 - HC - Central Excise

Process amounting to manufacture or not - activity of blending of various mineral oils and selling the same to various industrial consumers or persons engaged in the construction of roads - Area Based Exemption - substantial expansion of their plant and machinery to the extent of 25% or more or not - time limitation - HELD THAT - The case of the appellant is that there are two ingredients for manufacturing the thinner/industrial oil. The product of the appellant is just a blend of two oils and has nothing to do with the manufacturing of new product, as only the viscosity of the final product is reduced. This Court while taking into consideration the manufacturing process, comes to the conclusion that there are three ingredients, which are (a) two oils as raw-material are used; (b) blending is there with the electric motor and (c) process is carried out for reducing the viscosity of the final product. The final product is sold in a different name. As held by the Hon ble Supreme Court in NOVOPAN INDIA LTD., HYDERABAD VERSUS COLLECTOR OF CENTRAL EXCISE AND CUSTOMS, HYDERABAD 1994 (9) TMI 361 - SUPREME COURT to the facts of the present case, it is clear that (1) two oils are used for the manufacturing the produce (2) Oils are mixed with the electric motor (3) by mixing the oils the viscosity is reduced (4) the final product is used as industrial oil (5) the final product is sold with a different name and brand, so the goods are transformed into other goods, which are different and/or new after electric process, after reducing the viscosity, the use is also changed for the industrial process, marketed with different name(s) and in these circumstances, there is no other conclusion except that the appellant is carrying manufacturing process. The detailed discussion herein above makes it amply clear that the appellant has made substantial expansion of their plant and machinery to the extent of 25% or more which is the basic requirement of exemption under notification No. 50/2003-CE, dated 10.6.2003, the appellant has carried out the manufacturing activities in the plant. So, it is concluded that M/s SRK Petrochemicals Ltd. are engaged in the manufacture of Thinner and Industrial Fuel Oil. Time Limitation - HELD THAT - The demand is raised well in time by the respondent and the appellant cannot deny the payment of his legal dues towards the respondents - this Court finds that the judgment passed by the learned Appellate Authority below, upholding the order passed by the authorities below is just reasoned after appreciating the facts which have come on record to its true perspective and the same needs no interference as the same is as per law. The net result of the discussion is that reducing the viscosity of two oils by electric process is nothing but manufacturing and the further act of selling the same with a new name and brand is also an additional ingredient to conclude that the appellant is doing the manufacturing process - the order passed by learned CESTAT needs no interference and the same is upheld. Appeal dismissed.

Summary

Issues:
Challenge to final order of Central Excise & Service Tax Appellate Tribunal; Manufacturing process vs. blending of oils; Appeal against order-in-appeal dismissal; Appellant's argument of no manufacturing process involved; Respondent's argument of manufacturing due to blending and new brand creation; Appellant's citation of relevant judgments; Application of legal principles to the case; Conclusion on manufacturing activity; Limitation on demand notice; Upholding of CESTAT order.

Analysis:
The judgment involved a challenge to the final order of the Central Excise & Service Tax Appellate Tribunal (CESTAT) by the appellant, who was engaged in the manufacture of thinner falling under Chapter Heading 3814.00 of the Central Excise Tariff Act, 1985. The appellant was also blending various mineral oils to create industrial fuel oil, which was sold to consumers. The appeal was against the dismissal of their appeal by the learned Commissioner (Appeals).

The core issue revolved around whether the blending process undertaken by the appellant constituted a manufacturing activity. The appellant argued that no manufacturing process was involved as blending two oils did not result in a new product. They contended that the blending process did not change the nature of the product and that there was no chemical reaction during blending. On the other hand, the respondent argued that the installation of a plant, storage tanks, blending with an electric motor, and selling the product under different names indicated a manufacturing process.

The legal arguments presented by both parties included citations of relevant judgments by the Hon'ble Supreme Court to support their positions. The court analyzed the facts and legal principles in detail, considering the transformation of goods into new marketable products through blending. The court applied the legal tests laid down by the Supreme Court to determine whether the appellant's activities amounted to manufacturing.

Ultimately, the court concluded that the appellant's blending process, resulting in the creation of industrial fuel oil sold under a different brand, constituted a manufacturing activity. The court found that the appellant had expanded their plant and machinery, meeting the requirements for exemption under a specific notification. Additionally, the court held that the demand notice issued by the respondent was within the applicable limitation period.

In light of the analysis and observations, the court upheld the order of the CESTAT, dismissing the appellant's appeal. The judgment emphasized that the blending process, coupled with selling under a new brand, qualified as manufacturing, and there was no merit in the appellant's arguments against the manufacturing characterization.