Levy of Duty when process adopted is not manufacturing process

PJ/Case Laws/2011-12/1553

Case: COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III V/s M/S TIKITAR INDUSTRIES

Citation: 2012-TIOL-20-SC-CX

Issue:- Whether product will attract nil rate of duty when there is no production involved in the process of obtaining it?

Brief Facts:- Respondent-assessee is a manufacturer of the ’Bitulux Insulation Board' known as 'Tikki Exjo Filler', which fails under the Chapter Sub-heading 4407.10 of the Central Excise Tariff Act, 1985. The 'Tikki Exjo Filler' is obtained by the process of bituminization of the Insulation board which also falls under the same Chapter Sub-heading 4407.10 of the Act. Assessee had filed the declaration under Rule 173G of the Central Excise Rules, 1944 inter alia requesting the Adjudicating Authority to classify the product in issue as an item falling under Chapter Sub-heading 4407.10 of the Act at nil rate of duty on the ground that there is no manufacture involved in the process of obtaining 'Tikki Exjo Filler' from bituminizing the Insulation board.

The Adjudicating Authority vide its Order dated 19.3.1996 held that the product in question requires to be classified under Chapter Sub-heading 4407.10 of the Act and rate of duty would be levied at 10 per cent as the activity carried out by the assessee amounts to manufacture.
In appeal, the First Appellate Authority accepted the assessee's stand that the rate of duty leviable on the product in issue is nil rate of duty. For the reasons best known, that order of the appellate authority has attained the finality.

In the meantime, Revenue issued several show cause notices demanding differential duty at 10% by classifying the said product under heading 4407.10.

Thereafter, the assessee carried the matter in appeal before the first appellate authority, who vide its order no. GS/133-134/B.III/97 dated 16.5.1997 had allowed the appeal and had set aside the show cause notices issued, inter alia, demanding the differential rate of duty from the assessee in view of its earlier Order No. GS/132/B--III/97 dated 16.5.1997.

Revenue filed appeal before the Tribunal. The Tribunal by its impugned judgment and order dated 2.1.2003 has rejected the revenue's appeal and, thereby, has confirmed the orders passed by the first appellate authority.

Hence, Revenue is in appeal before the Supreme Court.

Appellant’s Contention:- Revenue contended that they has not questioned the correctness or otherwise of the order passed by the first appellate authority in GS/132/B.III/97 dated 16.5.1997. In the said order, the first appellate authority has given a finding that the product Bitulux Insulation Board is identical to the Insulation Board which finds a place under Chapter Heading 4407.10. The appellate authority has also observed in its order that the Assistant Commissioner (Adjudicating Authority) was not justified in treating the process of conversion of Insulation Board into Bitulux Insulation Board as a manufacturing activity.

Reasoning of Judgment:- The Supreme Court noted that since the revenue has not questioned the correctness or otherwise of the findings on the conclusion reached by the first appellate authority vide its order dated 16.5.1997 in GS/132/B.III/97, it may not be open for the revenue to contend that the adjudicating authority was justified in issuing the impugned show cause notices and also the further confirmation of said notices vide orders passed by the adjudicating authority, the appellate authority and the Tribunal. Further without questioning the orders passed by the appellate authority in GS the orders passed by the appellate authority in GS/132/B.III/97 dated 16.5.1997, the revenue would not be entitled for any relief, whatsoever. No merit in appeal as order holding the process as amounting to manufacture had been set aside by order dated 16.05.1997.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1553

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