Customs, Excise and Gold Tribunal - Delhi
Bitumen Products (India) vs Collector Of C. Ex. on 23 May, 1989
Equivalent citations: 1989(24)ECR283(TRI.-DELHI), 1989(44)ELT504(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. This appeal is directed against the order issued on 3-9-1985 of the Collector of Central Excise (Appeals), Calcutta by which he had upheld the order of the Assistant Collector of Central Excise, Calcutta-I Division dated 16-4-1985 demanding a duty of Rs. 1,93,715.82 from the appellants as central excise duty on the goods cleared by them during the period April, 1983 to September, 1983. The appellants herein are engaged in the manufacture of various Bituminous products. They filed an application with the jurisdictional Assistant Collector on 1-4-1983 seeking exemption under Notification 77/83, dated 1-3-1983 for the financial year 1983-84. The department, however, found on scrutiny that the aggregate value of clearances of all excisable goods falling under Tariff Item 68 and Tariff Item 11 by the appellants had exceeded Rs. 40 lakhs during the preceding financial year 1982-83 and hence they were not eligible for the exemption. This is because para 2 of the Notification 77/83 lays down that nothing contained in the notification shall apply if the aggregate value of clearances of all excisable goods from any factory for home consumption during the preceding financial year exceeded Rs. 40 lakhs. A Show Cause Notice was issued to the appellants on 29-10-1983 demanding a duty of Rs. 1,93,715.82 on the clearances of excisable goods falling under Tariff Item 68 during the period August 1983 to September 1983, availing of the exemption. After considering their reply to the Show Cause Notice and hearing them in the matter the Assistant Collector confirmed the demand on the ground that the product 'Blown Bitumen' was also an excisable product under Item 11 of the Central Excise Tariff and the production of 'Blown Bitumen" by the appellants from 'Straight grade Bitumen' amounted to manufacture of new excisable product which was classifiable under Item 11 of the Central Excise Tariff. The order of the Assistant Collector was also upheld in appeal.
2. Shri S.K. Roychoudhary, the learned Counsel appearing for the appellants contended that the manufacture of Blown Bitumen out of duty paid Straight grade Bitumen will not attract duty and the product Blown Bitumen is not dutiable. He further submitted that in Item No. 11 of the Central Excise Tariff and sub-item (4) thereunder the expression Bitumen has been used in a generic sense without any differentiation between Straight grade and Blown variety. He also cited case law Indian Tool Manufacturers v. C.C.E. reported in 1984 (18) ELT 527 (Tribunal) wherein the Tribunal held that while ascertaining a general term used for describing a fiscal legislation, the general term so used covers that commodity or item or article in all its forms and varieties. According to the learned Counsel the term Bitumen is a general term which will include within its ambit all varieties of Bitumens including Blown Bitumen. He further pointed out that Straight grade Bitumen and Blown Bitumen are one and the same in their characteristics. The only difference is in their softening point. He further contended that earlier the Appellate Collector of Central Excise, Calcutta had held that the product is not dutiable and, therefore, the Assistant Collector cannot take a different view. The department had also informed them that the conversion of Straight grade Bitumen into Blown Bitumen is not manufacture and the product is not dutiable.
3. Shri Chakraborthy, the learned D.R. appearing for the department relied upon the Supreme Court's decision in the case of Empire Industries v. Union of India reported in 1985 (20) ELT 179 and argued that the ratio of the Supreme Court's decision as to what would constitute manufacture applies in this case and the Blown Bitumen obtained by a process of blowing Straight grade Bitumen is a new product different from Straight grade Bitumen. He also rebutted the argument put forth by the learned Counsel that there can be no duty on Blown Bitumen because it also falls under the same Tariff Item 11 of the Central Excise Tariff and as the starting material namely Straight grade Bitumen, by relying upon a judgment of the Tribunal (Larger Bench) in the case of Guardian Plasticote v. C.C.E., Calcutta reported in 1986 (24) ELT 542 where the Tribunal following the ratio of the Empire Industries judgment of the Supreme Court had held that "it is possible and permissible that process carried out on an already manufactured product could result in the manufacture of another distinct excisable commodity and that even the fact that the new excisable commodity would also fall under the same tariff item, or even under the same sub-heading of the tariff item would not make any difference as to the liability for duty with reference to the new excisable commodity".
4. We have carefully considered the submissions made by the learned Counsel and the learned D.R. The issue is whether the production of Blown Bitumen from Straight grade Bitumen could amount to manufacture and whether the Blown Bitumen could be an excisable goods classifiable under the tariff. We find that in the paper book there is an extract from the publication "A Layman's Introduction To Oil Refining edited by D.G. Crook, published by Indian Oil Corporation Ltd. on Bitumen. From this extract it is seen that bitumen is a dark viscous material and in fact is usually a solid at normal ambient temperatures. It is widely used for road-making purposes, generally in the form of a binder for stone aggregates. For such purposes, resilience to resist deformation by heavy traffic is important. Because of the hundreds of compounds it contains, bitumen does not have a sharply defined melting point, but merely becomes progressively softer and more fluid as the temperature is raised. The hardness, or otherwise, of a bitumen is therefore, expressed in terms of a "softening-point" test which measures the temperature at which the bitumen reaches a standard, but quite arbitrary, degree of fluidity. The actual hardness, at a given temperature, is determined by another criterion, the penetration test, which measures the depth to which a standard needle will sink into a bitumen, when a specified load is applied to the needle for a fixed time. There will be a certain relationship between softening point and penetration test. It is possible to modify this relationship by a process known as "blowing". If air is blown through molten bitumen, chemical reactions take place, changing the nature of the molecules, and this causes the softening point to increase. The product also has a reduced ductility. Such "blown bitumen", because of its high softening point, and its more rubbery nature, is particularly suitable for impregnating roofing felts, where the prime requirement is for a product which will neither crack in cold weather, nor flow under Lot sunlight. The extract from the book given in detail as above would clearly show that the bitumen is generally used for road making purposes in the form of a binder for stone aggregates and in the 'Blowing Process' of bitumen chemical reactions take place, changing the nature of the molecules causing the softening point to increase. Such Blown Bitumen has different uses other than as a binder used in road making process. On the other hand Blown Bitumen because of the high softening point, imparted to it by the blowing process, becomes fit for use as roofing material, therefore, the starting material is called Straight grade Bitumen, and after the blowing process, the resultant material is known as Blown Bitumen, which is obtained as a result of chemical reactions which changes the nature of the molecules and the blown bitumen so obtained has different uses to which the starting material, because of its lower softening point, cannot be put to. Therefore, it will be valid to conclude that there has been a process of manufacture involved in the production of blown bitumen from straight grade bitumen. The above view is also supported by the ratio of the Supreme Court's judgment in the case of Empire Industries v. Union of India where the court had taken into consideration several High Courts decisions. In para 30 it had observed "the moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, "manufacture" takes place and liability to duty is attracted." The fact that Bitumen and Blown Bitumen are falling under the same tariff item makes no difference so long as a new product emerges as a result of the process of manufacture, as has been clearly laid down by the decision of the Larger Bench in the case of Guardian plasticote, which we respectfully follow. The department also considered that Blown Bitumen will fall under Item 11 of the Central Excise Tariff as is seen from the tariff advice dated 16-9-1982 given by the C.B.E.C. The Appellate Collector's decision relied upon by the appellant is also found to be the one issued on 18-12-1981 prior to the department's view as reflected in the Board's Tariff Advice referred to above. In this view of the matter and in terms of para 2 of the Notification 77/83 when the aggregate valuation of clearances of both the excisable items exceeded rupees 40 lakhs in the previous financial year, the appellants had rightly been held to be ineligible for the exemption under the notification. In the result we see no reason to interfere with the order passed by the Collector (Appeals) and the appeal is accordingly rejected.