TaxTMI 
TaxTMI 
2010 (6) TMI 360
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....tion No. 167/86, dated 1-3-86 to the respondents and had confirmed the demand of 1,23,552/- and had imposed penalty of Rs. 50,000/-. 3. The respondent are engaged in the manufacture of essential oil (Tarpeness or not), classifiable under Chapter heading 330,00 of the Central Excise Tariff Act, 1985. They had been availing the modvat credit facility under Rule 57A of the Central Excise Rules, 1944. The respondents filed declaration under Rule 173B of the Central, Excise Rules, 1944 to be effective from 3-8-98 in respect of the said goods claiming the benefit of the Notification No. 167/86 dated 1-3-86 on the ground that no processes, in relation to the manufacture of the said goods would he carried out with the aid of power. The respondents filed another declaration under Rule 173B of the said Rules to be effective from 1-9-98 declaring the goods, namely nature, essential oil concentrates and absolales resionoid, "for terpen, bi-products of determination of essential, oils" "aqueous distillation" and aquous solution of essential oils" and Claimed the slab exemption under Notification No. 9/98-C.E., dated 2-6-98. Pursuant to the second declaration, Investigation was carried out an....
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....es of the case, there was absolutely no justification for imposition of penalty. 8. As rightly submitted on behalf of the appellant that the adjudicating authority in his order, on the basis of analysis of the materials on record has clearly observed that electric power was being used at three different stages in the manufacturing process - (i) the unit use deep bore tube well water which as pulled out of the ground with the help of electric water pumps (ii) to lift the water to highrise water treatment plant with the help of set of booster pump; and (iii) the boiler is fitted with an automatic pressure gauge, which automatically starts the electric motors whenever there is a decrease in the pressure/water level in the boiler during the process of generation of steam. 9. The Commissioner (Appeals) while describing the process of manufacture of the product has observed that the electric power is used by the respondents for drawing out water from the tube well and lifting the same to a high rise water treatment plant. The treated water is thereafter filled in the boiler with the help of electric motors. Thereafter, it has been observed by the Commissioner (Appeals) that "The pr....
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....ture may, even if theoretically possible, by commercially inexpedient goods the activity thus so conducted would be one in relation to the manufacture. Generation of steam without the presence of water in the boiler is unimaginable. In other words, in order to generate steam the presence of water in the boiler is absolutely necessary and without generation of the steam, there cannot be manufacture of essential oils, the product in question. Being so, the presence of water and the activity which is necessary to heat water in the boiler was being integrally related to the process in relation to the manufacture of the said product. Being so, such process being involved in the matter, the benefit of the Notification No. 167/86-C.E., dated 1-3-86 cannot be said to be available to the respondents. The said Notification reads thus - Notification : 167/86-C.E., dated 1-3-1986 Specified goods In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (2) of the Table hereto annexed and falling under the Schedule to the Central Excise Tariff Act,....
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....e original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. 12. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to, manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. 13. 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. According to Oxford Dictionary one of the meanings of the word 'process' is "a continuous and regular act....
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....n or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. What is necessary in order to characterize operation as "processing" is that commodity must result in operation and experience some change. This act of operation on the commodity is material for the purpose of determining whether the operation constitutes "processing'. Having so observed it. was also held by the Apex Court - "16. Webster defines the word "goods" thus :- "goods noun, plural; (1) movables; household furniture; (2) Personal or movable estate? as horses, cattle, utensils, etc., (3) Wares; merchandise; commodities bought and sold by merchants and traders," 17. These definitions make it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold". Ultimately, it was ruled by the Apex Court - "21. We are therefore of opinion that the High Court was right in its conclusion that there was no legal basis for the demands of excise duty which were made on the petitioners and in directing the authorities to withdraw these demands. 22. The appeals are accordingly di....