1990 (12) TMI 205 - AT - Central Excise

Classification of limestone chips & powder as manufacturing process upheld under Central Excise Tariff Act

The Tribunal upheld the classification of limestone chips and powder as a manufacturing process under the Central Excise Tariff Act. The goods were deemed ... Manufacture ISSUES PRESENTED AND CONSIDERED 1. Whether the processes of crushing, grinding and sieving of limestone into chips and powder constitute 'manufacture' within the meaning of Section 2(f) as amended (i.e., including processes specified in Section/Chapter Notes to the Tariff Act). 2. Whether limestone chips and powder are classifiable under the relevant CET headings (Chapter 23 v. Chapter 25 headings), having regard to the nature of the product after processing. 3. Whether the products (limestone chips and/or powder) are exempt from excise duty under the exemption Notification (items 'minerals ... employed ... as extenders, suspending agents or fillers or as diluents'), and if proof of actual end-use is required to claim exemption. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether crushing, grinding and sieving of limestone constitutes 'manufacture' under Section 2(f) (amended) Legal framework: The amended Section 2(f) defines 'manufacture' to include (i) processes incidental or ancillary to completion of a manufactured product and (ii) processes specified in Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985, as amounting to manufacture. Note 2 to Chapter 25 specifically lists processes including crushed, ground, powdered, sifted, screened, etc., as covered for certain headings. Precedent treatment: Earlier tribunal and Supreme Court authorities have addressed when physical processing amounts to manufacture; some decisions held mere change of physical form may not constitute manufacture where no new marketable product emerges, while other authorities treated grinding/crushing into powder as manufacture depending on factual matrix and application of the established tests. Interpretation and reasoning: The Court applied the amended statutory definition and Chapter 25 Note 2, which expressly treats crushing, grinding and sieving as processes that amount to manufacture for the relevant headings. The Court also applied the established principle that emergence of a new product - having a different name, character, marketability and use - supports conclusion that manufacturing activities are complete. Here, limestone chips and powder (post-processing) have distinct names, characters, uses and marketability as traded goods, satisfying the test. Ratio vs. Obiter: Ratio - Under the amended statutory definition, crushing, grinding and sieving of limestone (where Note 2 applies) amount to 'manufacture'; additionally, the marketability/new-product test confirms manufacture where a distinct product emerges. Obiter - References to older line of authorities finding no manufacture in other contexts are discussed by way of distinction rather than overruling. Conclusion: The processes of crushing, grinding and sieving of limestone into chips and powder constitute 'manufacture' within the meaning of the amended Section 2(f) read with Note 2 of Chapter 25; the lower authorities' finding of excisability on that basis is upheld. Issue 2 - Classification under CET headings (Chapter 23.02 v. Chapter 25 headings) Legal framework: Classification must reflect the nature and use of the goods after processing; Chapter/heading Notes and the product's character are determinative. Precedent treatment: Authorities apply tests of the product's identity post-processing and its predominant character/use for classification; where product is used/traded as a mineral, Chapter 25 headings are engaged. Interpretation and reasoning: The Tribunal noted that the appellants did not press for alternate heading arguments and that the processed limestone products (chips and powder) are distinct marketable goods. The Assistant Collector's rejection of classification under the animal-feed preparations heading was not contested on substantial grounds and was left undisturbed. Ratio vs. Obiter: Ratio - Where processed mineral yields a distinct traded mineral product with differing character/use, classification under the mineral headings (Chapter 25) is appropriate rather than under unrelated chapters. Obiter - The Tribunal did not undertake an exhaustive reclassification exercise because the appellants did not press alternative headings. Conclusion: The classification of the processed limestone as falling within the mineral headings (Chapter 25) was sustained; the Assistant Collector's rejection of classification under Chapter 23.02 was not interfered with. Issue 3 - Entitlement to exemption under Notification for minerals employed as extenders/fillers/etc., and whether proof of actual end-use is required Legal framework: The exemption notification lists specified minerals as exempt when 'employed either as extenders, suspending agents or fillers or as diluents.' Interpretation principles for exemption notifications require strict construction, but the terms of the particular notification and any procedural stipulations control whether proof of actual end-use is mandated. Precedent treatment: Tribunal decisions have diverged on whether strict proof of specified end-use is necessary; specific prior tribunal rulings held that where the notification contains no procedural condition, actual proof of end-use need not be strict and it suffices that the substance is known to be used as an extender/filler/etc. Interpretation and reasoning: The Court observed binding (tribunal) precedents holding that the notification at hand contains no stipulation requiring documentary proof of end-use, and what is relevant is that the mineral is known to be employed for the purposes specified. The appellants had adduced evidence before the lower authorities regarding such uses. Given this, the denial of exemption solely on the ground that use as filler was not shown was not maintainable. Ratio vs. Obiter: Ratio - Where an exemption notification enumerates uses but contains no explicit procedural requirement for proof of end-use, claimants need not produce strict proof of actual employment in a particular consignment; it is sufficient that the substance is known to be used as one of the enumerated types (extender, filler, etc.) and supporting evidence is before the authority. Obiter - General observations on strict construction do not displace the specific textual reading of this notification. Conclusion: Limestone chips are not fillers in many contexts, but limestone powder (and the mineral goods here) are eligible for exemption under the notification where it is established that the mineral is known to be employed as an extender/filler/etc.; the lower authority's denial of exemption for lack of proof was set aside and exemption allowed insofar as evidence of use existed. Cross-reference See Issue 1 for statutory construction driving excisability/classification; see Issue 3 for statutory/textual construction of exemption notification and interaction with evidentiary burden - amended definition of 'manufacture' (Issue 1) establishes liability, while the notification's terms (Issue 3) determine entitlement to exemption notwithstanding excisability.