2024 (3) TMI 980 - HC - Central Excise

Process amounting to manufacture or not - raw material fuller s earth lumps were being subjected to undergo a process of getting crushed in job crusher and pulverized in pulveriser - manufacturing and selling of Activated Bleaching Earth and Activated Carbon - excisable goods or not - Whether this process and the resultant product can be classified as activated bleaching earth? - suppression of material facts or not - HELD THAT - From the finding of fact given by the authority passing the Order-in-Original, what is established is that though fuller s earth is the raw material which is subsequently converted into an Activated Bleaching Earth or an Activated Carbon through a mechanical process which includes a chemical treatment after crushing the fuller s earth lumps altering the clay into powder and by increasing its bleaching potential. The very purpose of subjecting the fuller s earth clay to chemical treatment in a mechanical manner is to alter the nature of the product. Further, the bleaching ability is enhanced by way of mechanical and chemical process and the filtration rate of the product also gets enhanced and becomes faster. Another fact which stands established is that the raw material fuller s earth in itself cannot be used for those purposes which it is subsequently used after the mechanical chemical process is undertaken. Yet another fact which is established from the pleadings is that the use of the Activated Bleaching Earth cannot be achieved if fuller s earth is used as it is without the chemical treatment and the mechanical process which includes the heating process etc. The mechanical process which fuller s earth is subjected to is to increase its bleaching performance and filtration properties and the product is also tailor made as per the specifications required by the client as per use at their plants. The bleaching earth has a set of advanced formula of different combinations and it is applied by the manufacturer by using the production technology to manufacture different grades of Activated Bleaching Earth. All these process put together alters the fuller s earth clay into an Activated Bleaching Earth giving it the properties that increases its bleaching potential. The finding so arrived at by respondent No. 2 which stands affirmed by yet another detailed reasoned order passed by respondent No. 1, both of which again subjected to test before the Tribunal and the Tribunal also giving specific reasons in the course of affirming the orders passed by respondent Nos. 1 and 2 - there are no substantial merit in the arguments advanced by the learned counsel for the appellant calling for an interference to the findings given by the Tribunal. Appeal dismissed.

Summary

Issues Involved:
1. Whether the process undertaken by the appellant amounts to manufacture.
2. Classification of the products under the Central Excise Tariff Act.
3. Identification of the raw material in question.
4. Justification for invoking the extended period of limitation under Section 11A.
5. Justification for clubbing all years together for duty calculation.

Summary:

Issue 1: Whether the process undertaken by the appellant amounts to manufacture.
The court examined the definition of "manufacture" under Section 2(f) of the Central Excise Act, 1944. The process involved crushing fuller's earth lumps, heating the powder, and treating it with chemicals to produce activated bleaching earth. The court referred to the Supreme Court's tests to determine manufacture: whether a different product comes into existence and whether the original product ceases to exist. It was concluded that the process altered the characteristics of fuller's earth, creating a new product with different uses, thus amounting to manufacture.

Issue 2: Classification of the products under the Central Excise Tariff Act.
The court affirmed that the resultant product, activated bleaching earth, should be classified under Chapter Heading 3802 of the Central Excise Tariff Act. The process undertaken by the appellant, including chemical treatment and heating, transformed fuller's earth into a product with enhanced bleaching and filtration properties, fitting the classification criteria.

Issue 3: Identification of the raw material in question.
The appellant contended that fuller's earth is different from bentonite or motmorillanite, as supported by expert opinions. However, the court found that the process undertaken by the appellant, including chemical and thermal treatment, transformed fuller's earth into activated bleaching earth, aligning with the findings of the authorities.

Issue 4: Justification for invoking the extended period of limitation under Section 11A.
The court upheld the invocation of the extended period of limitation, noting that the appellant had contravened Central Excise Rules with the intent to evade duty. The appellant's records and invoices described the product as activated bleaching earth, supporting the authorities' findings of suppression of facts.

Issue 5: Justification for clubbing all years together for duty calculation.
The court did not find merit in the appellant's argument against clubbing all years together for duty calculation. The authorities' approach was justified given the continuous nature of the appellant's manufacturing process and the consistent classification of the product.

Conclusion:
The court rejected the appeal, affirming the orders of the lower authorities and the Tribunal. The process undertaken by the appellant was deemed to amount to manufacture, the product was correctly classified, and the extended period of limitation was justifiably invoked. The appeal was devoid of merit and dismissed without costs.