1991 (9) TMI 73 - SC - Central Excise

Power-aided preliminary steps like pumping brine or mixing coke and limestone constitute 'process' under Section 2(f); Notification 179/77-C.E. exemption denied

SC held that preliminary operations like pumping brine into pans or lifting and mixing coke and limestone are integrally part of the continuous ... Interpretation of the Notification No. 179/77-C.E. - bye-product - transferring of the raw materials - part of the process of manufacture Or not - scope of the term 'manufacture' under Section 2(f) - Whether the operation constitutes 'processing'? - appellant contended that pumping the brine into the pan or lifting the raw materials to the kiln head is a process in relation to the manufacture of the final product and since that process with the aid of power is integrally connected with the manufacture, the exemption would not apply. Held that:- The natural meaning of the word `process' is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject-matter in order to transform or reduce it to a certain stage. The transfer of raw material to the reacting vessel is a preliminary operation but it is part of a continuous process but for which the manufacture would be impossible. The handling of the raw materials for the purpose of such transfer is then integrally connected with the process of manufacture. The handling for the purpose of transfer may be manual or mechanical but if power is used for such operation, it cannot be denied that an activity has been carried on with the aid of power in the manufacturing process. The use of diesel pump sets to fill the pans with brine is an activity with the aid of power and that activity is in relation to the manufacture. It is not correct to say that the process of manufacture starts only when evaporation starts. The preliminary steps like pumping brine and filling the salt pans form integral part of the manufacturing process even though the change in the raw material commences only when evaporation takes place. The preliminary activity cannot be disintegrated from the rest of the operations in the whole process of manufacture. Similarly, when coke and lime are taken to the platform in definite proportions for the purpose of mixing, such operation is a step in the manufacturing process. It precedes the feeding of the mixture into the kiln where the burning takes place. The whole process is an integrated one consisting of the lifting of the raw materials to the platform mixing coke and lime and then feeding into the kiln and burning. These operations are so interrelated that without anyone of these operations manufacturing process is impossible to be completed. Therefore, if power is used in anyone of these operations or anyone of the operations is carried on with the aid of power, it is a case where in or in relation to the manufacture the process is carried on with the aid of power. Thus 'processing' may be an intermediate stage in manufacture and until some change has taken place and the commodity retains a continuing substantial identity through the processing stage, we cannot say that it has been manufactured. That does not, however, mean that any operation in the course of such process is not in relation to the manufacture. If any operation in the course of manufacture is so integrally connected with the further operations which result in the emergence of manufactured goods and such operation is carried on with the aid of power, the process in or in relation to the manufacture must be deemed to be one carried on with the aid of power. In this view of the matter, we are unable to accept the contention that since the pumping of the brine into the salt pans or the lifting of coke and lime stone with the aid of power does not bring about any change in the raw material, the case is not taken out of the notification. The exemption under the Notification is not available in these cases. Accordingly, we allow these appeals Issues Involved:1. Interpretation of Notification No. 179/77-C.E., dated 18-6-1977.2. Definition and scope of the term 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944.3. Determination of whether the use of power in preliminary operations disqualifies a product from excise duty exemption.Issue-wise Detailed Analysis:1. Interpretation of Notification No. 179/77-C.E., dated 18-6-1977:The key issue is the interpretation of Notification No. 179/77-C.E., which exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, provided that no process in relation to their manufacture is ordinarily carried out with the aid of power. The Tribunal had previously ruled that the manufacturing process starts from the stage of feeding raw materials into the salt pan or kiln, and that the use of power for transferring raw materials does not disqualify the goods from the exemption.2. Definition and scope of the term 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944:Section 2(f) defines 'manufacture' to include any process incidental or ancillary to the completion of a manufactured product. The Court emphasized that 'manufacture' involves a series of processes that result in a commercially new article. It was noted that the term 'process' includes any operation or activity in relation to manufacture, and should not be limited to those that bring about a change in the raw material.3. Determination of whether the use of power in preliminary operations disqualifies a product from excise duty exemption:The Court examined whether the use of power in preliminary operations, such as pumping brine into salt pans or lifting raw materials to the kiln head, disqualifies the goods from the exemption. The Court concluded that these preliminary operations are integral parts of the manufacturing process. It was held that if power is used in any operation that is essential and integrally connected to the manufacturing process, the exemption under the notification does not apply.Conclusion:The Court ruled that the use of power in any stage of the manufacturing process, even in preliminary operations, disqualifies the goods from the excise duty exemption under Notification No. 179/77-C.E. Consequently, the appeals by the Revenue were allowed, and the orders of the Tribunal were set aside. The Court emphasized that the exemption is not available when power is used in any operation that is part of or related to the manufacturing process. No order as to costs was made.