2022 (8) TMI 163 - Central Excise

Process amounting to manufacture or not - conversion of waste oil/used oil/sludge obtained from various sources into reclaimed fuel oil / re-refining used oil amounts - classifiable under Central Excise Tariff Sub-heading No. 27101990 or classifiable under Chapter heading 27109900 as claimed by the Appellant? - Time Limitation - suppression of facts or not - HELD THAT:- The basic fact that is not disputed is that the Appellant purchasing waste/ sludge oil from vessels and other sources. This is sold as waste oil/sludge oil and is purchased by the appellant also as waste oil /sludge oil. For removing impurities from said waste oil Appellant undertake various processes. The processing undertaken by the appellant is inform of filtering distillation, dehydration, centrifuging etc. The entire tenor of the Adjudicating Authority while confirming the demands is only on the ground that the used oil which was unfit for use as fuel Oil were made fit for use by the appellant by refining or reprocessing the same and hence, characteristic and the use has changed. Due to which Chapter Note No. 4 of Chapter 27 gets attracted and the said activity becomes manufacture. It is observed that the purifying of the sludge/used oil would not amount to manufacture. Manufacture implies a change, but every change is not manufacture.

The Apex Court in the landmark decision in the case of UNION OF INDIA VERSUS DELHI CLOTH AND GENERAL MILLS CO. LTD. [1962 (10) TMI 1 - SUPREME COURT], held that “The word ‘manufacture’ used as a verb is generally understood to mean as ‘bringing into existence a new substance,’ however, minor in consequence the change may be.” The true test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognized in trade as a new and distinct commodity. In the present case, the appellant bring used waste oil /sludge oil and by removing impurities, it is made again useable as oil. Both before and after the processing, the product remains as only oil. That being so, it cannot be said that a new and distinct commodity has come into existence consequent to the process undertaken by the appellant.

From Circular dated 11-4-2016, it can be held that the process of cleaning of waste oil to yield reclaimed fuel oil does not amount to manufacture as defined under Section 2(f) of the Central Excise Act, 1944. Once it is held that the activity is not manufacture all he demands including duty, interest, penalties and personal penalty in the impugned shall not sustain on merit.

Extended period of Limitation - suppression of facts or not - HELD THAT:- The department was aware of the Appellant’s activity in respect of Waste Oil/ Sludge/Used Oil. The Appellant have not suppressed anything from the department. It is also noticed that CBEC vide circular No. 1024/12/2006-CX dated 11.04.2006 also instructed that “ the issue is interpretational in nature and therefore where a demand is raised pursuant to this circular, it should be raised for normal period of limitation only. SSI benefit, where admissible, should be extended”. Therefore, in this fact the demand confirmed by the Ld. Commissioner invoking the extended period legally not sustainable and the same is set aside on limitation too.

Appeal allowed - decided in favor of appellant.