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TMI Blog2010 (6) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... - 10-6-2010 - Justice R.M.S. Khandeparkar, President and Shri Rakesh Kumar, Member (T) REPRESENTED BY : Shri B.L. Soni, SDR, for the Appellant. Shri Rajesh Kumar, Advocate, for the Respondent. [Order per : Justice R.M.S. Khandeparkar, President (Oral)]. - Heard the learned SDR and the learned Advocate for the appellant and the respondent respectively. 2. The present appeal arises from the order dated 27th December, 2004 passed by the Commissioner (Appeals), Delhi. By the impugned order, the Commissioner (Appeals) allowed the appeal filed by the respondents against the order of the adjudicating authority and quashed the proceedings which were sought to be initiated by issuance of three show cause notices dated 2-2-99, 29-6-99 as well as 23-3-99. The adjudicating authority vide its order dated 10-9-99 had denied the benefit of exemption Notification No. 167/86, dated 1-3-86 to the respondents and had confirmed the demand of 1,23,552/- and had imposed penalty of ₹ 50,000/-. 3. The respondent are engaged in the manufacture of essential oil (Tarpeness or not), classifiable under Chapter heading 330,00 of the Central Excise Tariff Act, 1985. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product in question and use of power during the process of manufacture as noted by the adjudicating authority submitted that electric power is used at three stages of the process of manufacture of the product in question and considering the same and relying upon the decision of the Supreme Court, the respondents were not entitled for the benefit of the said notification. 7. Learned Advocate on the other hand, submitted that the Commissioner (Appeals) having correctly construed the process of manufacture of the product in question and having observed that the process regarding drawing, lifting and shifting of water being prior to the commencement of such process, no fault can be found with the impugned order and therefore, the Commissioner (Appeals) has rightly granted the benefit of the said notification to the respondents. He also submitted that in the facts and circumstances of the case, there was absolutely no justification for imposition of penalty. 8. As rightly submitted on behalf of the appellant that the adjudicating authority in his order, on the basis of analysis of the materials on record has clearly observed that electric power was being used at three different s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of water in the boiler as water level being maintained with the help of pressure gauge which functions with the help of electric power. It cannot be said that the entire process of the said manufacture is without the aid of power. 10. The finding arrived at by the Commissioner (Appeals) on the process regarding lifting, shifting and drawing of water are the processes prior to starting of the manufacturing process of the essential oils is not borne out from the record. Rather, it is contrary to the materials on record. 11. The Apex Court in J.K. Cotton Spg. Wvg. Mills Co. Ltd. v. Sales Tax Officer, Kanpur reported in 1997 (91) E.L.T. 34 (S.C.) while dealing with the expression in relation to manufacture had held that In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, by commercially inexpedient goods the activity thus so conducted would be one in relation to the manufacture. Generation of steam without the presence of water in the boiler is unimaginable. In other words, in order to generate steam the presence of water in the boil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rule can be applied and each case must be decided on its own facts having regard to the context in which the term is used in the provision under consideration. 11. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end-result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. 12. Manufacture thus involves series of processes. Process in manufacture or in relation to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of cloth, there is no reason to regard the process of designing as not being a part of the process of manufacture. The process of designing may be distinct from the actual process of turning out finished goods. But there is no warrant for limiting the meaning of the expression in the manufacture of goods' to the process of production of goods only. The expression in the manufacture' takes in within its compass, all processes which are directly related to the actual production. 14. After referring to the decision of the Apex Court in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. reported in 1977 (1) E.L.T. J199 (S.C.), the Apex Court observed that the definition of the word 'manufacture' as in Section 2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market it would be the case where in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. What is necessary in order to characterize operation as processing is that commodity must result in operation and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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