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TMI Blog2024 (3) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ushed in job crusher and pulverized in pulveriser. Thereafter, the powder generated is heated between 200 C to 300 C in a furnace and thereafter it is packed in bags for commercial use. Whether this process and the resultant product can be classified as activated bleaching earth. 5. Respondent No. 2 took into consideration the evidence led by the Director of appellant company and also the report that was obtained from IICT, Hyderabad along with the opinion of one Sri V. Ramachandra Rao, Head of Department of the Metallurgy Department in J.N. Government Polytechnic College, Ramanthapur, Hyderabad and also taking note of the evidence which was collected from the premises of the appellant company, particularly, the invoices where the product has been sold by the appellant themselves by the name of activated bleaching earth. Respondent No. 2 confirmed the demand of Rs. 5,04,330/- being the duty payable and also an equivalent amount towards penalty under Section 11AC of the Act along with interest at the rate of 20% per annum. In addition, also ordered for confiscation of plant and machinery and also penalty of Rs. 10,000/- upon one of the directors of the appellant company under Rule 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g upon the type of oil being extracted and the requirement is fulfilled by the appellants by their different grades of Activated Bleaching Earth. In fact, the invoices describe the final product as Activated Bleaching Earth. The Activated Bleaching Earth, is processed and manufactured out of the fullers earth. Its characteristics can be manipulated so as to suit the different requirements of customers i.e. for bleaching of cotton seed oil, bleaching of soya bean oil etc., By undertaking the process of manufacture, different products having different usages come into existence. 7. It was this order passed by respondent No. 1 which was subjected to challenge before the Tribunal vide Appeal No. E/274 275/2002. The Tribunal also after hearing the appellant, finally vide the impugned order dated 12.10.2004 affirmed the order passed by respondent Nos. 2 and 3 and dismissed the appeal filed by the appellant holding as under and which is under challenge in the present appeal: 6. The first issue pertains to whether or not the process carried out by the appellants amounts to manufacture. We have already described the process to which Fullers Earth is subjected. In the case of Ajanta Marble C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in so far as penalty and interest is concerned under Section 11AC and 11AB. Penalty and interest under these Sections can be imposed and demanded only for the clearances effective after 28/09/1996. We observe that confiscation of plant and machinery is not called for in a case of this type. We therefore, set aside the confiscation. Penalty imposed on the Director of the company under Rule 209A 209A is set aside. 8. The following substantial questions of law were formulated while preferring the present appeal: 1. Whether the process undertaken by the appellant amounts to manufacture or not when read with note 2 of the Chapter 25 of the Section V of the Central Excise Tariff Act, 1985? 2. Whether the products dealt by the appellants classified under hearing 25.05 or 38.02 of Central Excise Tariff Act in view of the explanatory notes of HSN? 3. Whether the Raw Material in question (fuller s earth a natural mineral clay) is also known as bentonite or motmorillanite or not in the view of respondents own experts opinion differs with? 4. Whether it is justified to invoke the proviso to section 11A of the act to bring in the extended period of limitation to five years instead of six mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with intent to evade payment of duty, ⎯ (a) the Central Excise Officer shall, within [two years] from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; 11. Learned counsel for the appellant raised the following contentions challenging the orders passed by respondent Nos. 1 and 2 which were affirmed by the Tribunal: 11.2 According to the learned counsel for the appellant, fuller s earth is exempted and classified as item No. 2505 and the relevant Chapter 25 of Section V (Mineral Products) of the Central Excise Tariff Act, 1985, speaks about the process of certain things in this regard, when such particular items are subjected to chemical treatment and heating shall still qualify for exemption as explained in the explanatory notes forming part of the Excise Tariff Act. 11.3 It was contended by the learned counsel for the appellant that the records which the appellant had produced before the respondents clearly show that the fuller s earth is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evidenced from the report of the Council of Scientific and Industrial Research Unit (IICT). 11.10 It was also the contention of the learned counsel for the appellant that the products in question before this Court emerged as no different products, neither the original product (fuller s earth/chair fines) ceased to exist now but for the said process, the original products have no use. It was strongly contended that it is universally known that the fuller s earth is a natural absorbent and can be used as it is without any treatment. 11.11 According to the learned counsel for the appellant, the respondents failed to appreciate that the appellant had not suppressed any information or evidence as alleged. Instead the appellant had produced all the invoices, registers and books before the assessing authority which were not disputed and this can be evidenced from the respondents own notice and impugned orders passed and the explanation of the appellant by word of mouth and letter about the process involved in the goods dealt by them to the authorities concerned and be evidenced from respondents own orders and records. 11.12 Lastly, it was contended that there was no sufficient material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earth, however, the said fuller s earth lumps is put under certain chemical process like jaw crushing of the lumps and making powder of it. Secondly, heating the said product at the range of 200 C to 300 C and the product being washed/mixed with chemicals and acids so as to manufacture different grades of activated bleaching earth. The entire process undertaken would bring the final product as a manufactured product in terms of the definition of manufacture under Section 2(f) of the Act. 16. Learned Senior Counsel in support his contentions had relied upon the following decisions: 1) M/s. Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, Bombay (1989) 2 Supreme Court Cases 439. 2) Sarabhai M. Chemicals v. Commissioner of Central Excise, Vadodara (2005) 2 Supreme Court Cases 168. 3) Servo-Med Industries Private Limited v. Commissioner of Central Excise, Mumbai (2015) 14 Supreme Court Cases 47. 4) Union of India and Others v. J.G. Glass Industries Ltd. and Others (1998) 2 Supreme Court Cases 32. 17. The Hon ble Supreme Court in the case of Union of India Ors. Etc (supra) dealing with the definition of manufacture and deciding an issue whether a process is that of manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e product Activated Bleaching Earth and Activated Carbon in their invoices. 20. 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. 21. 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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