Physical separation of foot oil and paraffin wax from imported slack wax not manufacture under Section 2(f) Central Excise Act

CESTAT Kolkata dismissed Revenue's appeal challenging whether separation of foot oil, pressed wax and paraffin wax from imported slack wax and residue wax constituted manufacture under Section 2(f) of Central Excise Act, 1944. The respondent separated oil content through tilting drums (90% separation) and hydraulic pressing (10% separation). The tribunal held that mere physical separation without utilizing machinery or equipment does not amount to manufacture as defined under the Act. The process was purely mechanical separation, not manufacturing, relying on precedents involving mineral sand separation. Commissioner (Appeals) order upholding respondent's position was affirmed.

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Issues Involved:

1. Jurisdiction of the Show Cause Notice issuing authority.
2. Whether the process undertaken by the respondent amounts to "manufacture" u/s 2(f) of the Central Excise Act, 1944.
3. Liability of the respondent for the period prior to April 2005.

Summary:

Jurisdiction of the Show Cause Notice issuing authority:

The respondent challenged the jurisdiction of the Show Cause Notice issuing authority before the Hon'ble High Court at Calcutta, which ruled in favor of the respondent. The Department's appeal to the Hon'ble Supreme Court was allowed, directing that the proceedings be taken to their logical conclusion.

Whether the process undertaken by the respondent amounts to "manufacture" u/s 2(f) of the Central Excise Act, 1944:

The respondent argued that they are a trader and not engaged in manufacturing. They imported slack wax and residue wax, separating oil by tilting and pressing, which does not constitute manufacturing as defined in Section 2(f) of the Central Excise Act, 1944. The Ld. Commissioner (Appeals) and the Tribunal observed that the separation process did not involve any machinery or equipment that would qualify it as manufacturing. The hydraulic press used for squeezing oil was not considered a manufacturing process. The Tribunal upheld the Ld. Commissioner (Appeals)'s finding that no new product emerged from the separation process, and thus, it did not amount to manufacture.

Liability of the respondent for the period prior to April 2005:

The respondent contended that they did not assume the liabilities of the proprietorship firm M/s. Krishna Wax Industries when they purchased its assets. Therefore, the demand for the period prior to April 2005 was not sustainable against them.

Conclusion:

The Tribunal, relying on various judicial precedents, including the Hon'ble Supreme Court's decision in Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur, held that no process amounting to "manufacture" u/s 2(f) of the Central Excise Act, 1944 was undertaken by the respondent. Consequently, the impugned order was upheld, and the appeal filed by the Revenue was rejected.

(Order pronounced in the open court on 09.05.2024)

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