Custom, Excise & Service Tax Tribunal
-Haldia Commissionerate vs Krishna Wax Private Limited on 9 May, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Excise Appeal No. 75438 of 2021
(Arising out of Order-in-Appeal No. 33/HAL/CE/2020-21 dated 01.02.2021 passed by
the Commissioner of C.G.S.T. & C.Ex. (Appeals-II), Kolkata, Bamboo Villa, 3rd Floor,
169, A.J.C. Bose Road, Kolkata - 700 014)
Chief Commissioner of C.G.S.T. and Central Excise : Appellant
Haldia C.G.S.T. and Central Excise Commissionerate,
M.S. Building, 15/1, Strand Road, Kolkata - 700 001
VERSUS
M/s. Krishna Wax Private Limited : Respondent
Unit at Jalan Complex, Right Lane-3,NH-6, Biprannapara,
P.S.: Domjur, Howrah
[Regd. Office: Classic Tower, Plot No. 10A & 11A, 56, Gariahat
Road, Kolkata - 700 019]
APPEARANCE:
Shri S.S. Chattopadhyay, Authorized Representative for the Appellant/Dept.
Shri Sudhir Mehta, Advocate for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75883 / 2024
DATE OF HEARING: 06.05.2024
DATE OF DECISION: 09.05.2024
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by the Revenue against the impugned Order-in-Appeal No. 33/HAL/CE/2020-21 dated 01.02.2021 passed by the Ld. Commissioner of C.G.S.T. &C.Ex. (Appeals-II), Kolkata wherein the Ld. Commissioner (Appeals) has set aside the demands confirmed in the Order-in- Original No. 04/JC/CGST/Haldia/Adjn/2020 dated 14.07.2020.
Page 2 of 11Appeal No.: E/75438/2021-DB
2. The facts of the case are that the respondent viz. M/s. Krishna Wax Private Limited, Gariahat Road, Kolkata - 700 019, are engaged in the import and trading of slack wax, paraffin wax, pressed paraffin and residue wax. These items are imported in drums / containers. Slack wax is a waste originating from Oil Refineries manufacturing lubricating oil. Slack wax comprises waste oil and wax. Wax comprises of about 50%-65% and balance waste oil, according to the quality of slack wax.
2.1. Oil is lighter to wax so it comes above the waste wax. Oil and wax are separated from the drums by tilting the drums. About 90% of the waste oil is separated by merely tilting as oil, being lighter than wax, comes to the surface. About 10% of the oil was separated by squeezing, for which the respondent used a hydraulic press. The respondent was of the view that separation of wax and oil by emptying the drum did not amount to manufacture. Accordingly, they did not pay any Central Excise duty on the foot oil or Pressed wax.
2.2. The Department was of the view that the respondent has undertaken processing on the imported slack wax and residue wax and manufactured foot oil, pressed wax, paraffin wax, etc. As the respondent has undertaken the processing without obtaining Central Excise Registration and without following the Central Excise law and procedures, and cleared the goods without payment of Central Excise Duty, a Show Cause Notice dated 21.03.2006 was issued to the respondent demanding Central Excise duty amounting to Rs.1,58,42,719/-.
Page 3 of 11Appeal No.: E/75438/2021-DB
3. The respondent challenged the jurisdiction of the Show Cause Notice issuing authority before the Hon'ble High Court at Calcutta and the Hon'ble High Court issued an order in favour of the respondent. After obtaining an order regarding jurisdiction of the Show Cause Notice issuing authority, the respondent filed an appeal before the Ld. Commissioner (Appeals) and got a decision in their favour holding that the process undertaken by the respondent did not amount to manufacture. This decision was challenged by the Department before the CESTAT, Kolkata, who vide its Order dated 31.05.2017, upheld the order of the Ld. Commissioner (Appeals) and dismissed the appeal filed by Revenue. The Department filed an appeal before the Hon'ble Supreme Court of India. The Hon'ble Apex Court, vide its Order dated 14.11.2019, allowed the Department's appeal and directed that the proceedings pursuant to the said Show Cause Notice be taken to its logical conclusion.
4. On the basis of the direction issued by the Hon'ble Apex Court, the ld. adjudicating authority adjudicated the Notice and issued the Order-in- Original dated 14.07.2020 wherein he has confirmed the demand of Rs.1,58,42,719/-, along with interest, and imposed equal amount of duty as penalty.
5. On appeal, the Ld. Commissioner (Appeals) vide impugned order dated 01.02.2021 set aside the Order-in-Original and allowed the appeal filed by the respondent. Aggrieved against the dropping of the demand in the impugned order, the Revenue has filed this appeal.
Page 4 of 11Appeal No.: E/75438/2021-DB
6. The respondent made a preliminary objection regarding raising of the entire demand for the period from April 2001 to March 2005 from them. The respondent submits that they have purchased the assets from the proprietorship firm M/s. Krishna Wax Industries. They have not taken over the assets and liabilities of the proprietorship firm. When the respondent purchased the assets, the liabilities of M/s. Krishna Wax Industries has not been transferred to the respondent. Thus, the respondent submits that the demand confirmed against them in the Order-in- Original for the period prior to April 2005 is not sustainable.
7. Regarding the merits of the issue, the respondent submits that they are a trader. They have no manufacturing activity. No plant and machinery for any manufacturing activity was installed in the factory. They have not manufactured foot oil, pressed wax or paraffin wax separately; they have imported slack wax and residue wax; foot oil, pressed wax and paraffin wax are parts of the goods imported. They have imported paraffin wax separately and traded it. Residue slack wax and residue wax both have oil content varying from 30 to 70%. The respondent only separated those by tilting the drums where 90% of the oil was emptied and separated. About 10% of the oil was separated by squeezing for which a pressing machine was used. Separation or emptying the drum did not amount to manufacture as defined in Section 2(f) of the Central Excise Act, 1944.
7.1. The ld. adjudicating authority has held that tilting, separating and pressing with hydraulic press as a process amounting to 'manufacture'. In this regard, the respondent contends that Foot oil, pressed Page 5 of 11 Appeal No.: E/75438/2021-DB paraffin wax and pressed wax are sold in the market separately, but these products are parts of the 'slack wax' and 'residue wax', which were only separated; so the process of separation cannot be considered as an activity of manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944. Accordingly, the respondent prayed for upholding the impugned order.
8. The Ld. Authorized Representative for the Revenue submitted that the respondent has manufactured foot oil, pressed wax and paraffin wax by applying hydraulic press and the products are marketable as separate commodities. New products with distinct name, character and use emerges during the process of separation. In view of the above, he submitted that the activity undertaken by the respondent amounts to manufacture as defined in Section 2(f) of the Central Excise Act, 1944. Accordingly, he prayed for setting aside the impugned order and allowing the appeal filed by Revenue.
9. Heard both sides and perused the appeal documents.
9.1. We observe that the respondent has imported slack wax and residue wax. Slack wax and residue wax both have oil content varying from 30 to 70% and the respondent only separated those by tilting the drums, where 90% of the oil was emptied and separated. About 10% of the oil was separated by squeezing for which a pressing machine was used by the respondent. We observe that the separation or emptying the drum and separating the oil from the slack wax and residue wax does not involve any process amounting to manufacture. No machinery or equipment was utilized for the purpose of such Page 6 of 11 Appeal No.: E/75438/2021-DB separation. The hydraulic press used to squeeze 10% of the oil cannot be considered as a process of separation of oil by means of an equipment. In this case, the separation is not a process where any new product is coming into existence. Foot oil, pressed wax and paraffin wax are all parts of slack wax and residue wax, which were only separated. Thus, we observe that the process undertaken by the respondent cannot be considered as a process amounting to manufacture as defined in Section 2(f) of the Central Excise Act, 1944.
9.2. In this regard, we observe that the Ld. Commissioner (Appeals) has given a categorical finding in the impugned order, which reads as under:-
"I have carefully gone through the impugned Order, grounds of appeal, submission made by the appellant, evidences on record and all other legal provisions as in exist. I find that the short question arising for consideration in this case is whether the process of generation of Foot Oil, Pressed Wax, Paraffin Wax etc. from Slack Wax and Residue Wax, as imported by the appellant, amounts to manufacture or not as defined under Section 2(f) of Central Excise Act, 1944. For the sake of convenience, I prefer to reproduce below the relevant provisions of Section:
Section 2. Definitions..
In this Act, unless there is anything repugnant in the subject or context, *** *** ***
(f) "manufacture includes any process, -
i) incidental or ancillary to the completion of a manufactured product;
ii) which is specified in relation to any goods in the Section or Chapter notes of the Fourth Schedule as amounting to manufacture, or Page 7 of 11 Appeal No.: E/75438/2021-DB which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer,
iii) and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;
8. Now I look into the process of generation of Foot Oil, Pressed Wax, Paraffin Wax, etc. from Slack Wax and Residue Wax, as undertaken by the appellant. The process has been explained by the appellant before me with a pictorial diagram which has also been certified by a Chartered Engineer. Slack / residue wax drums are manually turned and the contents are taken in mugs and poured on gunny cloth for wrapping Folded gunny clothes are stacked one upon another for natural pressure. Gunny cloth acts as strainer and foot oil / residue oil comes out and is thus separated from thick wax or pressed wax. Hydraulic pressure is also used for expediting the straining process.
9. From the technical literature on semi-refined paraffin wax it is seen that foot oil residue wax is described as 'residue wax formally known as foot oils' and is "commodity derived from production of semi-refined paraffin having almost 60% of residue of slacks In Ullman's Encyclopedia of Industrial Chemistry, crude wax and slack wax are synonymously. Crude soft wax is described as "Sometimes known as Foot Oil", formed the de- oiling of slack wax. The oil content of slack wax is usually between 5-12% but can be as high as 25%. In the impugned order, Foot Oil is treated as a product manufact from slack wax and residue wax. But actually, in the technical literature these are treat as synonymous, Pressed wax and paraffin wax have been classified under 271220. To quantify under this heading, oil content in wax is to be less than 0.75%. In the present case it is much higher.
Page 8 of 11Appeal No.: E/75438/2021-DB I, therefore, find that no new product has emerged after straining procedure. The names are used interchangeably in literature, but the character of the emerged product has not changed; only by a mechanical process oil has been separated, but still a high oil content has remained in the wax. Both the raw materials and end products are sold to grease manufacturers and lubricant manufacturers. From tariff also no new entry can be cited for the product.The process involved as such cannot be called incidental to manufacture."
9.3. From the above, we observe that no process amounting to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944 has been undertaken by the respondent in the process of separation of foot oil, pressed wax and paraffin wax from the slack wax and residue wax imported by them. Thus, we agree with the above findings of the Ld. Commissioner (Appeals) in the impugned order and hold that no process amounting to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944 has been undertaken by the respondent
10.In support of their submission that no manufacturing activity has been undertaken in this case, the respondent has relied upon the decision of the Hon'ble Supreme Court in the case of Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur reported in 2004 (174) E.L.T. 145 (S.C.), wherein it has been held as under:-
"17. The question whether any manufacture takes place when edible vegetable oil is processed and refined was considered by a Constitution Bench of this Court in M/s. Tungabhadra Industries Ltd. v. The Commercial Tax Officer, Kurnool, reported in [1961 (2) SCR 14]. This Court inter alia considered whether the refined oil could be said to be in the same form in which it was when extracted and held as follows:
"When raw groundnut oil is converted into refined oil, there is no doubt processing, but this consists merely in Page 9 of 11 Appeal No.: E/75438/2021-DB removing from raw groundnut oil that constituent part of the raw oil which is not really oil. The elements removed in the refining process consist of free fatty acids, phosphotides and unsaponifiable matter. After the removal of this non-oleic matter therefore, the oil continues to be groundnut oil and nothing more. The matter removed from the raw groundnut oil not being oil cannot be used, after separation, as oil or for any purpose for which oil could be used. In other words, the processing consists in the non-oily content of the raw oil being separate and removed, rendering the oily content of the oil 100 per cent. For this reason refined oil continues to be groundnut oil within the meaning of Rules 5(1)(k) and 18(2) notwithstanding that such oil does not possess the characteristic colour, or taste, odour, etc. of the raw groundnut oil."
18. Thus, this Court has held that prior to refining, it was raw groundnut oil and after refining even though the characteristic colour, taste and odour may have changed it remained ground oil. In other words, this Court held that there was no manufacture of a new and distinct commodity.
19. This Court has held in a number of decisions that merely because some process has been carried on it is not necessary that a new commodity has come into existence. In the case of Commissioner of C. Ex., Chandigarh-I v. Markfed Vanaspati & Allied Indus. reported in [2003 (153) E.L.T. 491 (S.C.)], the question was whether there was any manufacture when earth was processed and spent earth derived therefrom. This Court held that the burden to prove of manufacture is always on Revenue. It was held that merely because an Item falls in a Tariff Entry, it could not be presumed or deemed that there was manufacture. It was held that to begin with the product was earth and that even after processing it remained earth. It was held that the duty having been paid on earth, no duty was leviable on spent earth.
20. In the case of Collector of Central Excise v. Technoweld Industries, reported in [2003 (155) E.L.T. 209 (S.C.)], the question was whether the drawing of wires from wire rods amounted to manufacture. It was held that both the products were wires and merely because they were covered by two separate Entries did not mean that the product was excisable. It was held that in the absence of any manufacture the product did not become excisable merely because there were two separate Entries.
21. In the case of Metlex (I) Pvt. Ltd. v. Commissioner of C. Ex., New Delhi, reported in [2004 (165) E.L.T. 129 (S.C.)], it was again held that the burden of proving of manufacture laid on the Revenue. It was held that Page 10 of 11 Appeal No.: E/75438/2021-DB laminated/metalised film remained a film and no new or distinct product has come into existence.
22. In the case of Aman Marble Industries Pvt. Ltd. v. Collector of C. Ex., Jaipur reported in [2003 (157) E.L.T. 393 (S.C.)], the question was whether cutting of marble blocks into marble slabs amounted to manufacture. It was submitted that such an activity had been specifically brought into the Tariff Item by indicating the process. It was submitted that once the process had been indicated in the Tariff Item, it would amount to manufacture. These arguments were negatived. It was held that to start with the commodity was a marble and even after cutting it remained marble. It was held that there was no manufacture.
23. It was submitted that the decision in Aman Marble Industries case is not laying down the correct law inasmuch as it has not taken note of the amended definition of the term "manufacture" in Section 2(f). It was submitted that for a process to amount to manufacture it need not be so mentioned only in the Section or Chapter Note and that it could also be so mentioned in the Tariff Item. It is true that the amended definition has not been taken note of. We are in agreement with the submission that under the amended definition, which is an inclusive definition, it is not necessary that only in the Section or Chapter Note it must be specified that a particular process amounts to manufacture. It may be open to so specify even in the Tariff Item. However, either in the Section or Chapter Note or in the Tariff Entry it must be specified that the process amounts to manufacture. Merely setting out a process in the Tariff Entry would not be sufficient. If the process is indicated in the Tariff Entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purposes of identifying the product and the rate which is applicable to that product. In other words, for a deeming provision to come into play it must be specifically stated that a particular process amounts to manufacture. In the absence of it being so specified the commodity would not become excisable merely because a separate Tariff Item exists in respect of that commodity.
24. In this case, neither in the Section Note nor in the Chapter Note nor in the Tariff Item do we find any indication that the process indicated is to amount to manufacture. To start with the product was edible vegetable oil. Even after the refining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision cannot, be brought into play in the absence of it being specifically stated that the process amounts to manufacture."
Page 11 of 11Appeal No.: E/75438/2021-DB 10.1. The respondent also relied upon the decision of the Tribunal in the case of Kerala Minerals & Metals Ltd. versus Commissioner of Central Excise (Kochi) reported in 2007 (214) E.L.T. 556 (Tribunal - Bangalore) and the decision of the Tribunal Kolkata in the case of Indian Rare Earths Ltd. Versus Commissioner of Central Excise, Bhubaneswar-I reported in 2002 (139) E.L.T. 352 (Tribunal - Kolkata), wherein it has been held that separation of mineral sand by physical and mechanical process does not amount to manufacture.
11. In view of the above discussions and by relying on the decisions cited supra, we hold that no process amounting to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944 has been undertaken by the respondent. Accordingly, we do not find any infirmity in the impugned order and hence, the same is upheld.
12. In the result, we uphold the impugned order and reject the appeal filed by the Revenue.
(Order pronounced in the open court on 09.05.2024) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd