1985 (9) TMI 196 - AT - Central Excise

Tribunal overturns Collector's decision on bone processing as manufacturing under Central Excise Tariff

COLLECTOR OF CENTRAL EXCISE, MADURAI Versus SUBBARAJ AND COMPANY, SHENCOTTAI

COLLECTOR OF CENTRAL EXCISE, MADURAI Versus SUBBARAJ AND COMPANY, SHENCOTTAI - 1986 (23) E.L.T. 200 (Tribunal) Issues: Classification under Central Excise Tariff - Manufacture or not; Eligibility for exemption under Notification No. 176/77-Central Excises, dated 18-6-1977Classification under Central Excise Tariff - Manufacture or not:The appeals involved a common dispute regarding the classification of products under Item 68 of the Central Excise Tariff. The respondents purchased raw bones, processed them into various products, and exported some while selling the rest in India. The Assistant Collector initially held the goods dutiable under Item 68, but the Appellate Collector ruled in favor of the respondents, stating that the processing did not amount to manufacture. The Central Government challenged this decision, leading to the matter being brought before the Tribunal. The respondents argued that their process did not constitute manufacture, citing examples from sales tax cases. However, the department contended that the processes transformed raw bones into distinct commercial products, relying on judgments emphasizing the end result's distinct name, character, and use. The Tribunal, following the Supreme Court's test, held that the processes amounted to manufacture, as the products had distinct commercial value and usage, different from raw bones.Eligibility for exemption under Notification No. 176/77-Central Excises, dated 18-6-1977:The respondents also claimed exemption under Notification No. 176/77-Central Excises, dated 18-6-1977. They argued that their total clearances and machinery values fell within the exemption limits. The department, however, contended that the notification did not differentiate between export and local clearances, making the respondents ineligible due to including export values. The Tribunal noted that the lower authorities had not fully examined the exemption conditions, as the Appellate Collector had ruled in favor of the respondents on the substantive issue. Therefore, the Tribunal directed the Assistant Collector to reassess the respondents' eligibility for exemption under the notification.In conclusion, the Tribunal set aside the Appellate Collector's orders, restoring the Assistant Collector's decision on the classification issue. The Tribunal allowed the appeals, emphasizing that the respondents' processes constituted manufacture under the Central Excise Tariff. The matter of exemption under Notification No. 176/77-Central Excises, dated 18-6-1977 was remanded back to the lower authorities for a comprehensive evaluation.