Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Raigad vs M/S. Silvo Liacal Chemicals Ltd on 1 February, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. 2950/03 Mum
(Arising out of Order-in-Appeal No. RJB/M-III/308/2003 dated 23.7.03 passed by the Commissioner of Central Excise (Appeals), Mumbai)
For approval and signature:
Shri. Ashok Jindal, Member (Judicial)
Shri. P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
Commissioner of Central Excise, Raigad
:
Appellant
Versus
M/s. Silvo Liacal Chemicals Ltd.
Respondent
Appearance Shri N.A. Sayyad, JDR for appellant Shri V.S. Sejpal, Advocate with Shri S. Agnihotri, Consultant For Respondent CORAM:
Shri. Ashok Jindal, Member (Judicial) Shri. P.R. Chandrasekharan, Member (Technical) Date of Hearing : 01.02.2011 Date of Decision : 01.02.2011 ORDER NO.
Per : P.R. Chandrasekharan This is a Departments appeal filed against the Order-in-Appeal No. RJB/M-III/308/2003 dated 23.7.2003 passed by the Commissioner of Central Excise (Appeals), Mumbai III.
2. Brief facts of the case are as follows.
3. The assessee M/s. Silvo Liacal Chem Ltd. are procuring Hydrogenated Caster Oil in flake form and the same is melted and then spray dried by them to convert into powder form. The said product is packed and sold under the name of Lubriplast and used in the manufacture of PVC pipes and is also used as lubricant in the plastic industry. The Department issued a show-cause notice dated 2.8.2002 seeking classification of the product under Heading 3812.00 of CETA 1985 and demanding duty thereon amounting to Rs.14,75,761/- for the clearances made by the party of the said product during the period from July 1997 to March 02. The case was adjudicated by the Addl. Commissioner of Central Excise, Raigad vide Order-in-Original dated 09.04.2003. In the said order the adjudicating authority held that the product Lubriplast manufactured by them from hydrogenated castor oil by changing its form from flakes to powder amounts to manufacture as a new product having a distinct name, character and use emerge. Accordingly, the adjudicating authority confirmed the duty demand amounting to Rs.14,75,761/- invoking the extended period of time and he also imposed penalty of equal amount under Section 11AC of the Central Excise Act, 1944 and also demanded interest on the duty demanded. Aggrieved by the said order, the assessee filed an appeal before the Commissioner (Appeals) who in his order dated 23.7.2003 set aside the order-in-original and allowed the appeal. The lower appellate authority observed that in the process undertaken by the party only the physical form changes and the flake is converted into powder but the product continues to remain as Hydrogenated Castor Oil. The chemical characteristics remain the same as no additives or chemicals are added to obtain the said powder. The lower appellate authority has also noted that the Chemical Examiner to whom a sample was sent for testing had also stated that the powder has the characteristics of the Hydrogenated Castor Oil. Merely because the product is used in the plastic industry, it cannot be held that a new product has emerged. The lower appellate authority also referred to Merks Index wherein it has been stated that Castor Oil Hydrogenated Opalwax is used as a pressure mold release agent in the manufacture of formed plastics and rubber goods. In the light of these observations the lower appellate authority set aside the order-in-original and allowed the appeal.
4. The Department is in appeal against the said order of the lower appellate authority. The argument adduced by the department is that by converting the hydrogenated castor oil from flakes into powder form, a new product Lubriplast arises which has a specific use in the plastic industry. Therefore, the process is deemed to be a manufacturing process and, accordingly, the product has to be classified under Heading 3812.00 of CETA 1985 as a stabilizer. Accordingly, they argued that the product is leviable to duty and the order passed by the adjudicating authority should be restored.
5. On the other hand, the assessee contends that for an activity or process to constitute manufacture, a new article should emerge having a distinct name, character and use. In their case, they have converted hydrogenated castor oil flakes into powder form by first melting it and subsequently spray drying into powder. Since no additive is added, the chemical composition of the product remains the same. As per Chemical Examiners Report vide Test Memo dated 31.03.2000 under which the sample has been tested, it is stated that the sample is in the form of creamish white coloured soft powder. It has got the characteristics of hydrogenated castor oil. They further submit that the product and the manufacturing process undertaken by them were in the knowledge of the department right from 1997 onwards when they had filed the classification declaration under Rule 173B and also from the correspondences dated 5.9.2000, 25.11.2000, 9.9.2001 wherein they had given the details of the manufacturing process and all other relevant particulars in respect of their product. Therefore, it cannot be held that they have suppressed any fact from the department. They also contest that the demand is time barred and the adjudicating authority was not right in invoking extended period of time.
6. We have carefully considered the rival submissions. In the instant case, the raw material hydrogenated castor oil is in flake form. The said raw material has been converted into powder form by melting and spraying. No chemical or any other material has been added in the process. The raw material which has been purchased from the market is classified under Heading 15.04. Since there is only change in the form and there is no change in the chemical composition, nothing new has emerged so as to constitute a new product with a distinct name, character and use. In a number of judicial pronouncements namely Union of India vs. Delhi Cloth and General Mills Co. Ltd. 1977 (I) E.L.T. (J 199) (S.C.) and Union of India vs. M/s. Parle Products Ltd., - 1994 (74) ELT 492 (SC) it has been held that activity or process in order to amount to manufacture must lead to emergence of a new commercial product different from the one with which the process was started and the new product should have a different name, character and use. In the instant case, what they started of was hydrogenated castor oil in flake form and the end product was also the same hydrogenated castor oil in powder form. Therefore, it can be seen that no new product has emerged by melting and spraying the raw material undertaken in this case. The Chemical Examiners Test Report also supports this position that the end product has the same characteristic as the hydrogenated castor oil.
7. In this view of the matter, we do not find any infirmity in the order of the lower appellate authority and, accordingly, we reject the appeal filed by the department.
(Pronounced in open Court) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) nsk 6