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TMI Blog2011 (7) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall advert to the facts emerging from C.A. No. 7627 of 2005 arising out of Tribunal's order in appeal No. E/1050/03-Mum and E/Rom-691/04-Mum. 3. The assessee, a body Corporate, is engaged in the manufacture and clearance of "Rosin" and "Turpentine Oil". As per some literature placed on record, "Rosin" is the resinous constituent of the Oleo-resin exuded by various species of pine, known in commerce as crude turpentine. The separation of the Oleo-resin into the essential oil-spirit of turpentine and common Rosin is effected by distillation in large copper stills. "Rosin" and "Turpentine Oil" are classifiable under Chapter Heading Nos. 38.06 and 38.05 respectively of the First Schedule to the Central Excise Tariff Act, 1985 (for short "the Tariff Act"). The assessee filed the requisite classification declarations with the Deputy Commissioner, Central Excise, classifying their finished goods i.e. "Rosin" under the Sub-heading 3806.19 and "Turpentine Oil" under Sub-heading 3805.19, both bearing `nil' rate of duty, on the ground that the said goods were being manufactured by them without the aid of power. The Deputy Commissioner accepted the classifications under the said Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal, placing reliance on the clarification issued by the Ministry of Finance vide letter No. B-36/11/77-TRU dated 10th/16th January, 1978, wherein it was clarified that so long as the use of power is limited to drawing water into a cooling tank through which condensation coils pass, manufacture of Rosin cannot be said to be with the aid of power, for the purpose of Notification No. 179/77-CE dated 18th June, 1977, came to the conclusion that the said clarification was binding on the revenue, including the Commissioner (Appeals), the same being a Circular beneficial to the assessee. Drawing support from the decision of this Court in Collector of Central Excise, Vadodara Vs. Dhiren Chemical Industries(2002) 10 SCC 64, the Tribunal came to the conclusion that in light of the said clarification the decision of this Court in Collector of Central Excise, Jaipur Vs. Rajasthan State Chemical Works, Deedwana, Rajasthan (1991) 4 SCC 473 cannot be relied upon by the revenue. Accordingly, the appeal preferred by the assessee was allowed by the Tribunal. 6. Thereafter, the revenue filed an application before the Tribunal for rectification of the said order. In the said applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot necessary that power should be used in all the processes involved in the manufacture of finished goods, learned counsel placed reliance on the decision rendered by the Constitution Bench of this Court in Union of India & Anr. Vs. Delhi Cloth & General Mills Co. Ltd.1963 Supp (1) S.C.R. 586 : AIR 1963 SC 791. It was thus, stressed that in light of the settled legal position on the issue by this Court, the impugned decisions deserve to be set aside. 9. Per contra, Mr. Ajay Majithia, learned counsel appearing for the assessee, supporting the decisions of the Tribunal, argued that the water lifted with the aid of power and used for cooling the coils containing Turpentine vapours cannot be said to be an integral part of the manufacture of the final product because it does not bring about any change in the raw material i.e. Olio-pine-Rosin. According to the learned counsel what is relevant for deciding the issue is the stage at which the aid of power is required and therefore, in the present case once the water is lifted and stored in the storage tanks, no further use of power is required as the water falls on the coils by the force of gravity. 10. The short question i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se whether the assessee was liable to pay Excise duty on the manufacture of refined oil which fell within item 23 of the First Schedule to the Central Excises and Salt Act, 1944, bearing the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power"? Negativing the contention that the definition of the term "manufacture" in Section 2(f) of the Act included mere processing, a Constitution Bench of this Court held that processing was distinct from manufacture and that for a commodity to be excisable it must be new product known to the market as such. It was held that the definition of "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 in a finished article known to the market, the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. 14. In M/s J.K. Cotton Spinning & Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur & Anr.(1965) 1 S.C.R. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXXX XXXX XXXX XXXX 26. We are, therefore, of the view that if any operation in the course of manufacture is so integrally connected with the further operations which result in the emergence of manufactured goods and such operation is carried on with the aid of power, the process in or in relation to the manufacture must be deemed to be one carried on with the aid of power. In this view of the matter, we are unable to accept the contention that since the pumping of the brine into the salt pans or the lifting of coke and limestone with the aid of power does not bring about any change in the raw material, the case is not taken out of the notification. The exemption under the notification is not available in these cases. Accordingly, we allow these appeals." 16. A similar question came up for consideration of this Court in Impression Prints (supra), again strongly relied upon by learned counsel for the revenue. In that case the assessee was manufacturing printed bed sheets, bed covers and pillow covers, and for that purpose the colour was mixed with the help of colour mixing machine, which was operated with the aid of power. The question arose whether the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation - a crucial component of distillation which brings about the change of the physical state of matter from gaseous phase into liquid phase, is not possible. In other words without the process of condensation, Turpentine Oil, the final product, cannot be obtained. Similarly, without lifting water from the storage tanks at the ground level with the aid of electric motor to a higher level, the water cannot fall on the cooling coils with its gravitational force. In this fact situation, we hold that the operation of lifting of the water from the well to the higher levels, is so integrally connected with the manufacture of "Turpentine Oil" and "Rosin", that without this activity it is impossible to manufacture the said goods and therefore, the processing of the said raw material in or in relation to manufacture of the said final goods is carried on with the aid of power. 18. We may now examine the ancillary question as to whether the Tribunal was correct in law in accepting the plea of the assessee that they could not be denied the benefit of the clarification issued by the Board vide their letter dated 10th/16th January, 1978, despite the decision of this Court in Rajasth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not only misplaced, in our opinion, these are irrelevant for deciding the issue at hand. 19. In that view of the matter, when the law on the question at issue before the Tribunal had already been declared by this Court, the Tribunal should not have based its decisions on the clarification issued by the Board, which otherwise stood rescinded, on the specious ground that the said clarification issued by the Board was binding on the Deputy Commissioner as also on the Commissioner (Appeals). It is well settled proposition of law that Circulars and instructions issued by the Central Board of Excise and Customs are no doubt binding in law on the authorities under the respective Statutes but when this Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Courts or the Tribunal, as the case may be, to direct that the Board's Circular should be given effect to and not the view expressed in a decision of this Court or a High Court. [(See: Ratan Melting & Wire Industries (supra)]. 20.In the final analysis, in light of the foregoing discussion, the decisions of the Tribunal, impugned in these appeals, cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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