Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Oriental Products (P) Ltd. on 26 December, 1986
Equivalent citations: 1988(18)ECC30, 1987(12)ECR495(TRI.-DELHI), 1987(28)ELT147(TRI-DEL)
ORDER V.T. Raghavachari, Member (J)
1. Show cause notice dated 30-8-1979 had been issued to the respondents M/s. Oriental Talc Products (P) Ltd. directing them to show cause why an amount of Rs. 43,770.26 should not be recovered from them as the difference between the duty payable by them during the period 1-4-1978 to 31-3-1979 and the duty actually paid by them on the basis of job charges. The respondents were holders of a Central Excise licence for manufacture of Soap stone powder falling under T.I. 68 C.E.T. and it was in connection with such manufacture that the above notice had been issued. The respondents resisted the claim contending that the conversion of soap stone lumps into powder did not constitute manufacture requiring payment of Central Excise duty and that in any event the demand was not sustainable as duty payable had been properly paid and that the demand was further time barred. On adjudication the Assistant Collector under his order dated 13-2-1980 rejected the defences abovesaid and confirmed the demand. On appeal to the Appellate Collector he held that the grinding of soap stone lumps into powder did not amount to manufacture to attract central excise levy and on that basis quashed the demand. This appeal is by the Collector of Central Excise, Jaipur. against the said order. The contention in the appeal is that grinding of soap stone into varying degrees of fineness and grading the powder so obtained into different varieties for specific industrial applications would constitute manufacture under section 2(f) of the Central Excises & Salt' Act and the order of the Appellate Collector was therefore wrong.
2. We have heard Shri Vineet Kumar for the Department and Shri Apurva Bhattacharya, Advocate for the respondents.
3. Shri Vineet Kumar contends that this question, whether the grinding of soap stone lumps into powder would constitute manufacture under section 2(f) of the Central Excises and Salt Act, is concluded by the decision of this Tribunal in the case of Associated Soap Stone Distributing Company (P) Ltd. v. Collector of Central Excise, Indore (1985 Vol.22 E.L.T. 109) and, therefore, following the said decision the order of the Appellate Collector has to be set aside and that of the Assistant Collector restored. Shri Bhattacharya contests this claim. He pleads that the activity of the respondent is merely to grind the lumps into powder and that the reference in ground No. l of the grounds of appeal to grinding into varying degree of fineness and grading the powder into different varieties is not done by the respondents. He pleads that the respondents merely grind the lumps into powder and deliver the resultant powder to the customer. But it may be seen in this connection that the finding of the Assistant Collector is as follows:
"As per the facts brought on record it was evident that the party ground the soap stone lump into powder of specified fineness and qualities with the aid of power and soap stone powder was being manufactured as per specified requirements of different industries at varied prices by the supplier M/s K.C. Ghutani. It would therefore be apparent that soap stone lumps were being powdered with conscious attempt to produce grades and qualities of powder to meet requirements of specified type of users."
In the circumstances it is difficult to accept the contention of Shri Bhattacharya as earlier mentioned.
4. Shri Bhattacharya further refers to two other decisions which possibly may be held against the respondents but which, according to him, would not apply to the facts of the instant case. He refers to the decisions in Hyderabad Asbestos Cement Products Ltd. v. Union of India (1980 E.L.T. 733 Delhi) and Pyrites Phosphate and Chemicals Ltd. v. Collector of Central Excise, Delhi (1983 E.L.T. 1192). In the first of the above said cases the Delhi High Court held that conversion of Asbestos rock into Asbestos fibre would amount to manufacture. Shri Bhattacharya claims that since fibre was being separated from the parent rock unlike in the present case where rock is merely reduced to powder the ratio of the said decision would not apply. In respect of the second decision he claims that the rock phosphate was being ground to powder since it is only as powder that it could be used as fertilizer and hence that decision would not apply. He further points out that there is another decision in the case of Collector of Central Excise v. Pyrites Phosphate and Chemicals Ltd. (1983 E.L.T 53) where it has been held that crushing and sieving would not amount to manufacture under section 2(f) of the Central Excises and Salt Act. He therefore claims that it is this decision which would be applicable to the facts of the present case.
5. While the decision in the case of Hyderabad Asbestos Cement Company Ltd. may not be strictly applicable to the facts of the instant case for the reason mentioned by Shri Bhattacharya his contention in respect of the case reported in 1983 L.L.T. 1192 does not appear to be proper. 3ust as in that case it was only the powdered form that was useable as fertilizer it is only powdered form in the present case that could be put to various industrial uses such as fillers, extenders etc.
6. This aspect has been considered in 1985 Vol.22 E.L.T. 109 at paragraph 7 where it is observed as follows:
"Applying the well-known test laid down by the Supreme Court as reiterated above, we observe that soap stone powder was different in appearance as compared to soap stone lumps. The Collector, who examined the samples of both, has observed that while the lumps were having a yellowish colour, the powder was white. However, we do not place much importance on this colour factor alone; the more important thing is the use of the material. None of the industries for which soap stone powder is intended can use the soap stone lumps'; The lumps are totally useless for them. They become useable as raw material by the user industry. There was a direct authority in the form of an order of this Tribunal on soap stone powder itself [1984(18) E.L.T. 657 (Tribunal) - Oriental Talc Products Pvt. Ltd., Udaipur v. Collector of Central Excise, Jaipur]. It has been held in this order that grinding of soap stone into soap stone powder of required mesh amounted to manufacturing process. We put this authority to the appellants. They sought to distinguish it saying that the material under consideration before the Bench in that case was intended for talcum powder industry and was ground to a fine mesh size. However, we observe that this is not so. The soap stone powder covered by the earlier Bench order was used as a filler in various Industries, such as paper, textiles, paints, ceramics, plastics etc. Whatever may be nature of the user industry, the point made by us still remains valid that the material becomes usable only after powdering. It is evident, therefore, that the name, character and use of soapstone lumps and soap stone powder are not the same; they are two distinct products by that test. It may be that no extraneous matter is added to the powder. But nothing turns on that factor."
7. The decision of the Supreme Court referred to in the said paragraph in in the case of Empire Industries Ltd. (1985 Vol. 20 E.L.T. 179). The above said observations equally apply to the facts of the present case and we accordingly hold that the conclusion of the Appellate Collector that the activity of the respondents in grinding soapstone lumps into soapstone powder of required fineness would not amount to manufacture is not correct.
8. As earlier mentioned two other defences had been raised before the Assistant Collector, one on the basis that liability for payment of duty was on job charges only and the other regarding time bar. Shri Bhatta-charya did not advert to either of these defences during the course of his submissions before us and it is therefore not necessary to consider the said defences.
9. Then Shri Bhattacharya referred us to the notification No. 23/55-CE. dated 29-4-1955 as amended from time to time and claimed that the product manufactured by the respondents would in any event be exempt from payment of duty as falling under item 1 of the said notification. The notification exempted from payment of whole of the excise duty leviable on the items enumerated in that notification, item No. 1 reading as follows:
"1. Minerals, employed either as extenders, suspending agents or fillers or as diluents, namely:-
Barytes, Bauxite, Bentonite, China Clay, Celestile, Limestone and Chalk (including precipitated chalk), Fuller's earth, Gypsum, Mica, Silica, Asbestine, Talc and Slate."
10. In opposing this contention Shri Vineet Kumar stated that in order to obtain benefit under this notification there must be proof of use of the product (Talc) as extender or suspending agent or filler or diluent. It was also pointed out that this notification would be with reference to products classifiable under T.I. 14,C.E.T and not products classifiable under other items. On the question whether soapstone or powdered soap-stone would be talc or not, we may refer to the following entry against "Talc" in the Condensed Chemical Dictionary (10th Edition), revised by G.G. Hawley, at page 991:
"talc (talcum; soapstone; steatite) Mg3Si4O10(OH)2 or 3MGO2 :H2O.
A natural by drous magnesium silicate. Compact massive varieties may be called steatite in distinction from the foliated varieties, which are called talc. Soapstone is an impure variety of steatitle."
It is therefore clear that soapstone and talc are the same.
11. On the other question whether in order to qualify for exemption under notification No. 23/55 the product must fall under T.I. 14 and whether in addition the use thereof in one of the manners mentioned in the notification should also be proved before exemption is granted, we may refer to the decision of this Tribunal in Collector of Central Excise v. Madhu Chemicals (1986 Vol. 23 E.L.T. 166). The above contentions had been raised in that case also and had been dealt with in paragraph 25 which we reproduce below:
"25. As to the departmental representative's contention that precipitated silica would not fall under item 14, CET, it may be mentioned that for the purpose of notification 23/55, it is not necessary that the substance should be classified under item 14. CET. This is because the notification item under which the substance should fall, in order to become eligible for the exemption. What is necessary is that the substance should be known to be employed either as extender, suspending agent, filler or diluent. Temple C. Patton's "Pigment Handbook" in the chapter on Synthetic Silica (precipitated) describes the multifarious uses of the substance. Among the uses are filler and extender. "The Handbook of Fillers" Reinforcements for Plastics" by Henry S. Katz & John V. Milewski, also describes precipitated silica as a filler and extender. The departmental representative contended that the respondent should be put to strict proof of the use of the substance for the purpose of exemption under the notification. Looking at the notification, it does not appear to us that such use should be proved. What appears to be relevant is that the substance should be known to be used or employed as extender, suspending agent etc. There are several exemption notifications under Central Excise Rule 8(1) which set out specific procedures to be complied with in order that exemption may be earned. In the present notification there is no such stipulation."
12. We are in respectful agreement with the above observation. Accordingly we hold that so far as the present respondents are concerned they are entitled to the benefit of exemption from duty in terms of notification No. 23/55-CE, dated 29-4-1955 in respect of their product for the period for which demand had been raised. The appeal is accordingly dismissed.