Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (10) TMI 1725 - CESTAT AHMEDABAD (LB)

2015 (10) TMI 1725 - CESTAT AHMEDABAD (LB) - 2015 (325) E.L.T. 339 (Tri. - LB) - Manufacturing activity or not - activity of blending to increase the viscosity of the product- Appellants had mixed Guar Dal Flour/Powder (75%), Guar Dal Powder/Saw Dust (5-10%) and TKP (10-15%) in a blender - Guar Dal Powder, known as Guar Gum - classification under Sub Heading No.1301.10 - Imposition of penalty - Held that:- Appellants received the Guar Dal Powder which is derived from seed of Guar plant. The seed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n a fluid and there is a change of properties as per end use of the goods. Thus, there is a change of character of the impugned product.

There is change of character of the goods of different properties as per viscosity used in various industries. - the activities undertaken by the Appellant would amount to manufacture. - Decided against the assessee.

Classification - Held that:- the Guar Dal Flour/Powder was modified by chemical reaction in order to improve their propertie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assification of the goods, imposition of penalty on the Appellants cannot be sustained.

Demand of duty confirmed for the normal period of limitation with Interest - Penalty waived - Decided partly in favor of assessee. - Appeal No.E/196,197,1305-1308/2003 - Order No.A/11271-11276/2015 - Dated:- 28-8-2015 - MR. P.K. DAS, MEMBER (JUDICIAL), MR. H.K. THAKUR, MEMBER (TECHNICAL) AND MR. P.M. SALEEM, MEMBER (TECHNICAL) For the Petitioner : Shri Gajendra Jain, Shri Jigar Shah, Shri Anand Na .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

emanded the case back to the Tribunal with the direction that the matter shall be decided by the Larger Bench. 2. The learned Authorised Representative on behalf of the Revenue raised a preliminary issue insofar as the Hon ble Supreme Court directed the Larger Bench to decide the conflict of opinion between two Division Benches of the Tribunal in the case of M/s Hindustan Gum & Chemicals Ltd Vs CCE, Ahmedabad-II [2004 (163) ELT 196 (Tri-Del)] in favour of the Assessee and M/s Dilip Gum Indus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ovo proceedings as reported in [2012 (279) ELT 535 (Tri-Del)] (M/s Hindustan Gum & Chemicals Ltd Vs CCE Ahmedabad), (hereinafter referred to as Hindustan Gums & Chemicals Ltd 2012), in favour of the Revenue. Thus, there is no difference of opinion of co-ordinate Benches of the Tribunal and therefore, the matter may be transferred to the Division Bench to pass appropriate order. 3. On the other hand, the learned Advocates on behalf of the Appellants submit that in the said decisions, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

decide the appeals as per direction of the Hon ble Supreme Court. 4. The relevant portion of the Order dt.01.05.2015 of the Hon ble Supreme Court is reproduced below:- It is argued by Mr. Radha Krishnan, learned Senior Counsel appearing for the Appellants that it was pointed out before the Tribunal that in the case of Dilip Gum Industries Vs CCE, Rajkot (Order No.A/772-773/WAB/2004/C-II), dt.01.09.2004, the Tribunal held that Guar Gum is classifiable under Heading 1301.10. The Tribunal further n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Instead, the Tribunal chose to follow the decision in Hindustan Gum & Chemicals Ltd, holding at the same time that the order in Dilip Gum Industries does not come as a binding precedent, which according to the learned Senior Counsel was impermissible. We are inclined to agree with the aforesaid submission of learned Senior Counsel. After finding a conflict of opinion rendered by two coordinate Benches in the aforesaid two cases, the only course of action open for the Tribunal was to refer th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Ltd 2011 (272) ELT 326 (SC). We, thus, set aside the impugned order and remit the case back to the Tribunal. We also direct that the matter shall be hard by a Larger Bench. We may record that in the impugned order, the Tribunal has held that the aforesaid process constitutes manufacture. Since in the case of Hindustan Gum & Chemicals Ltd, this issue was left open to be decided by the Tribunal, the Larger Bench of the Tribunal can take a fresh look into this issue in the instant case as wel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ld as Guar Dal Powder/Flour. M/s Kraps had been filing declarations in terms of notification issued under Rule 174 of the erstwhile Central Excise Rules, 1944 with the Department from the Financial Year 1997-98 onwards, declaring that the product sold by them as Guar Dal Powder. On 29.06.2000, a team of Central Excise Officers visited the premises of M/s Kraps. The said officers were of the opinion that M/s Kraps was engaged in the manufacture of Guar Dal Powder, known as Guar Gum, classifiable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2.2000 was issued by the Commissioner of Customs & Central Excise, Surat-II, proposing that the goods should be classified under Heading No.1301.10 of CETA, demand of duty of ₹ 92,53,196.00 alongwith interest and to impose penalty, for the period 1997-98 to June 2000. It has also proposed to confiscate the seized goods under Rule 173Q(1) of erstwhile Central Excise Rules, 1944. 5.2 By the impugned order, the Adjudicating authority confirmed the classification of Guar Dal Powder as Guar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o.A/1658-1659/WZB/AHD/2004/C-I, dt.06.10.2004, the Tribunal held that the process carried out by M/s Kraps amounts to manufacture. The impugned goods Guar Dal Powder would be classifiable under Heading No.1101 of the Tariff, attracting Nil rate of duty and therefore, the demand of duty, confiscation, penalty ordered in the impugned order was set aside. Revenue filed appeals before the Honble Supreme Court. By Order dt.01.05.2015, the Honble Supreme Court set aside the order of the Tribunal and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng the excisable goods Guar Gum without following the Central Excise Procedure. The statements of Shri Babulal Kanjibhai Sakaria, Manager, Shri Jibrajbhai Bhavanjibhai Patel, Partner, and Shri Ramnikbhai Narsinghbhai Patel, Accountant of M/s Ravi Gum were recorded. 6.1 A show cause notice dt.05.01.2002 was issued by the Deputy Commissioner of Central Excise, Division-II, Rajkot, proposing demand of duty of ₹ 4,56,208.00 alongwith interest and to impose penalties on all the Appellant Nos.3 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

osed under Rule 173Q of erstwhile Rules on M/s Ravi Gum was set aside and the penalties imposed on other Appellants were reduced. 6.4 M/s Ravi Gums and other Appellants filed appeals before the Tribunal. By Final Order No.A/2706-2709/WZB/AHD/2007, dt.12.10.2007, the Tribunal, following the Tribunal s earlier decision in the case of M/s Kraps Chem P. Ltd (supra), set aside the impugned order, and allowed the appeals with consequential relief to all the Appellants. Revenue filed the appeals agains .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. It is a mere mixing of Gaul Dal Flour/Powder and TKP (Tamarind Kernel Powder) without any chemical reaction and after processing Gaul Dal Flour would remain Guar Dal Flour/Powder. So, there is no change in character, use and identity. 7.1 Secondly, even if it would amount to manufacture, the product will be classified under Heading 1101 of the Tariff, at Nil rate of duty. It cannot be classified under Heading No.1301. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

therefore, the demand of duty for the extended period of limitation and imposition of penalty cannot be sustained. The learned Advocate submitted written submissions alongwith case laws, during the course of hearing. 8. Ms.Dimple Gohil, learned Advocate appearing on behalf of M/s Ravi Gums and its Partner and employees, adopted the arguments of the learned Advocate Shri Gajendra Jain. She submits that the entire demand of duty is beyond the normal period of limitation. It is submitted that M/s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

behalf of the Revenue submits that it is not a case of mere mixing of Gaul Dal Flour and TKP and the Appellant also added Glycol and Methonol for dispersion of powder in the blender, which is increasing the viscosity of the product for use in different industries. The process undertaken by the Appellant would amount to manufacture. The process undertaken by the Appellant, by adding various additives to change its viscosity and solubility as per the requirement of the user. Thus, there is a chan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t had not taken any registration and imposition of penalty is warranted. The learned Authorised Representative also submitted written submission with compilation of case laws during the course of hearing. 10. After hearing both the sides and on perusal of the records, we find that the first issue is that whether the process undertaken by the Appellant would amount to manufacture. The learned Advocate submits that the Appellants had mixed Guar Dal Flour/Powder (75%), Guar Dal Powder/Saw Dust (5-1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

different dates, deposed that they were procuring Guar Dal Powder of different particle sizes and blend into blender and packing 50 kgs pack. They are also using Glycol and Methonol for dispersion of powder from the sides of blender/mixture. The other additives like Guar Dal Dust/Saw Dust and TKP were added in required quantity. The blender was operated with the aid of power. It is stated that they had laboratory equipments such as Viscometer, Micro Balance, Stirrer, which were used for testing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hich may be acidity, basic and neutral. The viscosity of the product subject to explosive industries ranges from 1500 to 2000 CPH, and of product supplied to Mosquito Coil Industries ranges from 1200 to 1400 CPH. It is stated that the difference in the viscosity of their product supplied to different industries and the viscosity depends upon the percentage of inputs used in the process of the product. It is further stated that when TKP used more, the viscosity of the product was less and when th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such different grades of their products, Shri R.P. Gupta deposed that ratio of ingredients used in different grades of their finished products are as follows:- (1) For Paper Industries:- They supplied Guar Dal Powder known as paper aid which contains Guar Dal flour of 100 Hp or 150 Mesh + TKP (Tamarind Seed Powder) 30% to 50% and Glyxol and Methanol about 1% and no other inputs were used for making of this grade of finished goods supplied to Paper Industries. They used to blend the whole inputs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

item, the grade of their finished goods remains same. The ingredients used for making these products were Guar Dal Flour of 200 Meshm+ TKP about 5 to10% or Guar dust of 5 to 10% and when used both percentage remains same. On being asked, he deposed that except above inputs, no other raw material or chemicals were used for manufacture of finished product supplied to Mosquito coils and explosive industries. Further, he deposed that products supplied to explosive industries contains less TKP in com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and Glycol in a minimum quantity. There is a chemical reaction during mixing of these items and the viscosity of the final product ranges from 0 to 5000 CPH as per requirement of end use of the product. The chemical reaction in the Blender is expressing the magnitude of internal friction in a fluid and there is a change of properties as per end use of the goods. Thus, there is a change of character of the impugned product. The Appellants received Guar Dal Powder and after due process, it was sol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

there must be transformation; a new and different article must emerge having a distinctive name, character or use. The Hon ble Supreme Court, while dealing with the identical issue in the case of Hindustan Gums & Chemicals Ltd 2011 (272) ELT 336 (SC), directed the Tribunal to consider the process of manufacture and also sold as a marketable commodity. In the present case, we have already observed that the process undertaken by the Appellant, emerged having a distinct name Guar Gum. There is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ibunal in the case of M/s Hindustan Gums & Chemicals Ltd 2012 (supra) is reproduced below:- 13. We have considered arguments on both sides. We find that the chemical process carried out gives the product a different molecular structure and makes it suitable for a different use. Any person wanting to use Tamarind Powder as thickener in textile industry will not buy and use such powder unless it is subjected to the processes that the appellants are carrying out. So prima facie the processes co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tax from hydrogenated groundnut oil made from duty paid oil. The case of Tikatar Industries also was a case of conversion of duty paid bitumen to another grade of bitumen and the question being decide was levy of excise duty for a second time and the decision itself was based on a circular from the Board which sought to avoid levy of duty on activities involving small value additions. In the case of Shyam Oil Cakes the nature of commodity had not changed substantially. Thus we find that the dec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

verseas Ltd Vs CCE 2015 (318) ELT 538 (SC) The issue involved in this case is whether addition of dehydrated vegetables and spices to raw rice in the name of Rice & Spice would amount to manufacture. The product i.e. Rice & Spice is combination of raw rice, dehydrated vegetables and certain spices and condiments mixed in pre-determined proportion and that blended together in a mixer for uniformity and the blended mixer is heated, if required, to sterilize the product. The mixed product .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n-sterilized syringes / needles were of no commercial use, without sterilization, it cannot be said sterilization made it commercially usable. It has been observed that to amount to manufacture, there must be a transformation by which new and different article emerges which has distinct name, character or use. (c) CCE Vs Osnar Chemicals Pvt.Ltd. 2012 (276) ELT 162 (SC) It has been held that mixing polymer and additives to heated Bitumen resulting in emergence of Polymer Modified Bitumen (PMB) an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ater mixed asafetida resulting in lump or powder and no chemical change brought about in asafetida. There is no change in essential character of product and process does not amount to manufacture. In the above cases, there was no change of character, use of identity of the goods. In the present case, it is already observed that the process undertaken by the Appellant, would change the character, identity and end use of the product. Thus, none of the case laws would be applicable in the present c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and other vegetable saps and extracts Nil (3) 1301.10 In or in relation to the manufacture of which any process is ordinarily carried on with the aid of power 8% (4) 1301.90 Other Nil 16. The learned Advocate submits that the term gum as mentioned in the Heading No.13.01 would cover plant exudates/extracts. It is submitted that botanical gums are divided into two parts, seed gum and plant exudates/extracts. The seed gums are divided into Guar Gum and locust bean gum. The plant exudates/extracts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

heating and milling. The endosperm, comprising approximately 40% of the seed, is then separated from the germ by various milling processes. The final milled endosperm, which is commercial guar gum, has a typical analysis of crude fiber, 2.5%, moisture, 10-15%; protein, 5-6%; an ash 0.5-0.8%. 17. It is submitted that on reading the tariff description of heading 1301 of the CETA covers Lac, gum, resin and other vegetable saps and extracts. The meaning of the term resin, saps, and extracts would co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

apply where a word or phrase can not be construed as it stood, and it is to be judged in the light of its surrounding words. In the present case, we are unable to accept the submissions of the learned Advocate for the reason that Heading No.1101 covers the products of Milling Industries, including flour, groats, meal, grains of cereals and flour, meal or flakes of vegetables. On the other hand, Heading No.1301 categorically covers gum . In our considered view, the description of Heading No.1301 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hether or not modified, derived from vegetable products. The most important are: (1) Agar-agar (agar) obtained by extraction from certain marine algae found mainly in the Indian and Pacific Oceans, and usually presented in the form of dried fibres, flakes, powder or in a gelatinous form obtained by treatment with acids. It is commercially known as gelose and also as Japanese vegetable gelatin (or moss) or Alga Spinosa. (2) Endosperm flour or locust beans (Ceratonia siliqua) or guar seeds (Cyam .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uld cover under Chapter 13 of HSN. It is already stated above that in present case, the Guar Dal Flour/Powder was modified by chemical reaction in order to improve their properties as per end use of the product in various industries. So, it is rightly covered under Chapter 13 of the CETA. The Learned Advocate strongly relied upon CBEC Circular F. No. 10/18/86-CX, -I dated 14.08.1986, where it has been clarified that Tamarind Seed Powder or TKP would be correctly classifiable under Sub Heading No .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nufacturing process is involved. On the other Heading 13.01 mentions gums which is a description which will cover the product better. The Appellants are relying on the entries in Heading 13.01 of the HSN which mentions natural gums to argue that the impugned product will fall outside the scope of Heading 13.01 of Central Excise Tariff. The word Natural occurring in 13.01 of HSN is conspicuous by its absence in Heading 13.01 of the Central Excise Tariff. 20. Let us now examine the matter with r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ind powder in packings for retail sale for prophylactic or therapeutic purposes (Heading 30.04) Note C (5) under Heading 13.02 Cotyledon flour of tamarind seeds (Tamarindus indica). These flours are included in this heading even if modified by heat or chemical treatment. 21. It is clear that the note under Heading 13.02 covers the impugned goods more appropriately than that under Heading 11.06. Further the Rules of Interpretation of the Tariff mandates that if a product appears to be classifiabl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iff there were some deviation from entries in HSN for the reason like that live animals of Chapter 1 of HSN could not attract excise duty. Further the early chapters of the Tariff covers animal products and vegetable products most of which cannot be considered to be manufactured items and the government did not want to levy excise duty on most such items. So the elaborate entries in HSN were compressed into fewer entries in Central Excise Tariff. In this scheme there is no evidence demonstrating .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

3.01 of the Central Excise Tariff compressed both Headings 13.01 and 13.02 of HSN. Going by this approach the Revenue s argument that the product was covered under Heading 13.01 of the Excise Tariff has more merit. 20. We find force in the submissions of the learned Advocate that the extended period of limitation cannot be invoked. It is seen from the records that the Appellant filed declaration under Rule 174 of erstwhile Rules from the year 1997-98. The Appellant had specifically mentioned the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version