1996 (7) TMI 556 - AT - Central Excise

Tribunal rules heat treatment of green slats for pencil manufacturing amounts to manufacturing

The Tribunal determined that the process of heat treatment with steam on green slats to create pencil slats and seasoned timber amounted to manufacturing. ... Process amounting to manufacture - transformation into a new product - distinct name, character and use - physical treatment v. chemical change - distinguishability of precedentProcess amounting to manufacture - transformation into a new product - distinct name, character and use - Whether heat treatment of green timber slats (steam at 80 C and 150-175 PSI) producing seasoned slats for pencil manufacture amounts to a process of manufacture. - HELD THAT: - The Tribunal found that the steam heat treatment effected changes in the timber slats - enabling penetration of colouring material, softening, removal of natural resins and loss of density - which imparted different qualities and a definite character and use to the goods. Timber slats could not, in their original state, withstand the temperatures and pressures applied or permit the penetration of colouring matter; after treatment a definite product with properties different from the original emerged. The Tribunal expressly distinguished the Apex Court decision relied upon by the appellant on the ground that in that case the goods retained no definite and distinct property after processing. Applying the principle that only processes which bring into existence a commercially new product with distinct name, character and use amount to manufacture, the Tribunal concluded that the processes here produced such a new product and therefore amounted to manufacture. [Paras 6]The processes converting green slats into seasoned timber suitable for pencil manufacture amounted to manufacture; the Collector (Appeals) order was upheld and the appeal rejected.Final Conclusion: The Tribunal upheld the Collector (Appeals) finding that the heat/steam treatment of green timber slats produced a product with distinct properties and therefore constituted a process of manufacture; the appeal was dismissed. Issues:Determining whether the process of heat treatment with steam for pencil slats and seasoned timber amounts to manufacture.Analysis:The case involved a dispute over whether the process of heat treatment with steam on green slats to create pencil slats and seasoned timber constitutes manufacturing. The appellants argued that the processes did not result in a new product with distinct properties, citing a Supreme Court judgment on similar matters. The Department, however, contended that the processes led to the creation of a new product fit for pencil manufacturing. The Collector (Appeals) had ruled in favor of the Department, prompting the appellants to appeal to the Tribunal.The Tribunal analyzed the processes undertaken, which included heat treatment with steam to facilitate color penetration and removal of water content and natural resins, resulting in a loss of density. The key question was whether these processes transformed the green slats into a new product. The Tribunal noted that the treated timber slats exhibited different properties, such as the ability to withstand high temperature and pressure for color penetration, softening, and resin removal. The Tribunal emphasized that the resulting product had distinct qualities from the original green slats, making it suitable for pencil manufacturing.The Tribunal differentiated this case from the Supreme Court precedent cited by the appellants, highlighting the creation of a new product with unique characteristics in the current scenario. It concluded that the processes indeed amounted to manufacturing as they brought about a definitive change in the properties of the timber slats, making them suitable for pencil production. Therefore, the Tribunal upheld the Collector (Appeals) decision, ruling against the appellants and rejecting their appeal.