TaxTMI 
TaxTMI 
2024 (5) TMI 9
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.... ground and segregated. In case of specific demand from the buyer after the said process, the product is then coated. After all these process, the final product is manufactured. After receiving said lumps, the principal manufacturer used to send the same for crushing to the appellant (job worker). After crushing of lumps, the appellant return it back the goods to the principal and at the factory of principal manufacturer, the crushed lumps are then further grinded by the principal manufacturer and sometime after doing the same coating with Stearic Acid, Titanium Dioxide, the final product is cleared under Chapter 38 of Central Excise Tariff Act. In some cases uncoated final product is cleared by the principal manufacturer under Chapter 25 of the Central Excise Tariff. The goods cleared under Chapter 38 attract duty of the Central Excise at the prescribed rates whereas the goods cleared under Chapter 25 attracts nil rate of duty. The case of the department is that the activity of crushing of lumps by the job worker is liable to service tax as in the case of clearance of goods by the Principal manufacturer under Chapter 25 at nil rate of duty, the appellant being a job worker are not....
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....ngs of the impugned order. 4. We have carefully considered the submission made by both the sides and perused the records. 5. We find that the only issue to be decided in the present case is that whether the activity of crushing of lumps is the activity which amounts to manufacture in terms of Section 2(f) of Central Excise Act, 1944. Section 2(f) is reproduced below. "Section 2(f) of the Central Excise Tariff Act, 1985 has been substituted by Section 4 of the Act, which reads as under : (f) "manufacture" includes any process : (i) incidental or ancillary to the completion of manufactured product; (ii) which is specified in relation to any goods in the section or chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; and the word "manufacture" shall be construed accordingly and shall includes not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account." As per the above Section 2(f) from the sub-clause (ii) of Section 2(f), it is clear that in relation to any goods in....
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....ds is subject to processing for production of powder. The transformed product has its own market similar to, and yet independent of, the harvested product that is subjected to processing. It is the particular use to which powdered spice is put to that prompted the establishment of an entire industry. Furthermore, without such processing there would be an unsatiated demand for powdered spice which would have to be undertaken, with additional labour, in domestic kitchens. Every aspect of 'manufacture', as settled by judicial determination, is, thus, complied with. The applicability of the decision in Jayakrishna Flour Mills (P) Ltd. to the impugned products is beyond question. 30. In view of the above, we conclude that 'manufacturing' as held by the dispute that is wanting in the decision in Sara Spices which resolved an entirely different dispute. We also conclude that the test for 'manufacture', as laid down in Delhi Cloth and General Mills Ltd and other decisions that enlarged upon it, complied with in the conversion of 'wheat' to 'wheat products', is, unqualifiedly, existent in the conversion of 'spice' to 'spice powder....
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....strian, interpretation must prevail." 9. On a plain reading of Section 2(f)(ii) with Chapter Note 2 of Chapter 25 of the Central Excise Tariff Act, 1985 it is clear that `manufacture" includes any process which is specified in relation to any goods as amounting to manufacture under any section of the Act or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985. If any process is specified in the section or Chapter Note to be a manufacture then under the definition it shall be a `manufacture", otherwise not. By artificial definition of the word `manufacture" the Legislature have retained the power to equate any process with `manufacture" by providing accordingly in the section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985. Chapter Note 2 of Chapter 25 does not equate the process of crushing as amounting to manufacture but merely enumerated the forms of products falling under the Headings Nos. 25.01, 25.03 and 25.05 in which they can be taxed. The intention of the Legislature is clearly not to equate the process of crushing as amounting to manufacture. 10. The intention of the Legislature can be further seen on a comparison o....
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....son (Minerals) Ltd., Maihar was examined and his statement was recorded under Section 14 of the Act by the Superintendent of Central Excises and Salt Act on 31-8-1989. In answer to questions he has stated that the company is manufacturing lime stone in a particular size by crushing the lime stone in lump form. According to him, the company purchases lime stone in lump form or excavates it from their mines and then crushes it by putting it in crusher machine to obtain the desired sizes of lime stone chips, as per the requirement of the buyer by screening. He has further stated that the company had purchased lime stone in lump form from M/s. R.S. Minerals, Maihar and M/s. Diwan Lime Co. Pvt. Ltd., Maihar. According to him, prior to 1-4-1989 the company had no crusher, so they used to get the lime stone crushed into particular size by supplying lime to Subash Stone Crusher, Maihar; Rakesh Stone Crusher, Katni, Vijay Stone Crusher, Maihar and MaaSharda Stone Crusher, Baraiya and thereafter by their own crusher at Reusa. Apart from their own crusher, they are getting the lime stone crushed from M/s. Subash Stone Crusher. They were selling crushed lime stone of particular size to Durgapu....
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....le to confiscation and shall be liable to penalty not exceeding threr times the value of the excisable goods in respect of which any contravention of the nature referred to above has been committed or five thousand rupees, whichever is greater. 16. The principal object of the Act is not to levy penalty, its object is calculation and enforcement of payment of Central Excise duty. The manufacturer is liable to pay penalty on account of certain acts or omissions committed by them. Under Rule 173Q of the Central Excise Rules, 1944, a maximum limit of penalty which could be levied is provided and, therefore, the penalty could not be wholly disproportionate to the incidence of infringement. In Hindustan Steel Ltd. v. State of Orissa [1978 (2) E.L.T. (J 159) (SC) = AIR 1970 SC 253) it has been held that : "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed me....
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....ct? The statement recorded of the Law Officer of the petitioner company also indicates that as on 31-8-1989 there was a bonda fide belief in the mind of the petitioner that the process of crushing does not amount to manufacture. The aforesaid state of affair clearly indicate that the breach in payment of excise duty flows from a bonda fide belief of the company that they are not liable to pay excise duty, as they were not engaged in the `manufacture" of lime stone chips. Conversion of lime stone lumps into lime stone chips was never taken to be a `manufacturing" process by the petitioners. 18. The proceeding for imposition of penalty being quasi-criminal in nature, the burden to prove the alleged offence is on the excise department. No facts or circumstances are brought about by the department nor are considered by the 2nd respondent to show deliberate avoidance of payment of duty. There is nothing in the Excise Act or the Rules framed thereunder that the authority is bound to impose penalty, the moment there is default in payment of duty. The petitioners were under a bonda fide belief that they are not liable to pay excise duty on the lime stone chips. The Collector Centr....
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....als Diaspore and Prophylite in the form of lumps are products which are different in name, character and use from Diaspore and Prophylite in the form of powder or smaller sized lumps obtained by grinding or crushing of mined lumps of these materials. 7. It is seen that in the case of Associated Soap Stone Distributing Co. (P) Ltd. v. Collector of Central Excise, Indore relying upon the judgment of the Supreme Court in the case of Empire Industries Ltd. reported in 1985 (20) E.L.T. 179, the Tribunal has held that the name, character and use of soap stone lumps and soap stone powder are not the same, they are two distinct products and therefore their conversion into powder amounts to manufacture as envisaged in Section 2(f) of the Central Excises and Salt Act, Paras 6 and 7 of the said decision being relevant are reproduced below : * * * * * We have held that the Diaspore and Prophylite in the form of lumps as obtained from mines are materials which are different in character and use from the powder or smaller sized lumps which are produced by crushing or grinding of the mined lumps of Diaspore and Prophylite. For these reasons, on the ratio of the Tribunal....
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.... 11. In the result the cross objection is allowed, and the appeal is dismissed." * Associated Soapstone Distributing Com. Pvt. Ltd. 1985 (22) ELT 109 (Tri.) "6. We have carefully considered the matter. Taking the first argument of the appellants, though both sides cited authorities relating to cases where the process of crushing or grinding did not amount to manufacture (those relating to re-claimed rubber and barytes) and where it did (those relating to pyrites and asbestos fibre) and though the appellants also mentioned the cases of retreating of worn out tyres and processing of pineapples into canned slices which processes were held to be not amounting to manufacture, we observe that nothing really turns on these rival authorities. The same process may result in a new and different product in the case of one commodity but not so in the case of another commodity. The case of each commodity, therefore, stands on its own individual circumstances. "Whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of "manufacture". An....
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....ocess of crushing, grinding and sieving will amount to process of manufacture. The concept of manufacture has to be viewed keeping in view the emergence of a new product which should be known in the market as "goods". Admittedly, in this case the limestone chips and limestone powder which has emerged after crushing, grinding and sieving of limestone brings into existence a new product which has a different name, character and use. The same is also traded by the appellants and is put to different uses as has been recorded by the Assistant Collector in the order-in-original on the basis of submissions made by the appellants. So long as the new product which has emerged after several processes which finds a market and is marketable and is also traded having a different name, character and use from the original product, the manufacturing activities are complete and the product has to be considered as "goods". This is a well laid down principle and settled law from the rulings given by the Hon"ble Supreme Court. Therefore, the contention of the appellants that there is no process of manufacture in this case is not tenable. As observed earlier in the ruling cited by the advocate, the con....
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....ts Ltd. v. Collector of Central Excise & Customs, Bombay reported in 1983 (14) E.L.T. 2401 the Tribunal had held that crushing of old Rubber into powder is manufacture. This of course was under the Tariff. In addition to these decisions cited before the authorities below, we find that there is a full Bench judgment of the Madhya Pradesh High Court at Jabalpur holding that the process of conversion of stones into gittis ballast and metal in crushers having given rise to a new commercial commodity amounts to manufacture. We would hold, on merits that the crushing of stones into small stones of size would constitute manufacture. Even while holding so we are of the view that the longer period of limitation would not be applicable as the issue cannot be said to have been free from doubt. The appellants would be entitled to the benefit of doubt. The above judgment was upheld by the Hon'ble Supreme Court reported at 1999 (106) ELT A67 (SC). 5. In view of above judgments, it is settled that crushing of lumps/stones into powder amounts to manufacturing activity in terms of Section 2(f) of Central Excise Act, 1944. In the present case, the Revenue has demanded Service Tax under busines....