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Collector Of Central Excise vs Mahavir Minerals Store Supply Co. … on 1 September, 1988

Customs, Excise and Gold Tribunal – Delhi
Collector Of Central Excise vs Mahavir Minerals Store Supply Co. … on 1 September, 1988
Equivalent citations: 1988 (18) ECC 35
Bench: D Mandal, G Agarwal, P Jain


ORDER

P.C. Jain, Member

1. A common issue is involved in all the aforesaid appeals filed by the Collector of Central Excise, Vadodara, therefore, a common order is being passed.

2. Question involved in this case is whether crushing of dolomite mined into lump form from dolomite mines into its powder and chips forms would amount to process of manufacture. The exact process of manufacture as given in the order-in-original passed by the Assistant Collector of Central Excise is as follows:

After the excavation of the mineral dolomite, it is either sold out as it is in the form of dolomite lumps or brought to the factories for bringing the lumps into smaller shape, that is, in the form of dolomite chips and/or dolomite powder. Dolomite is a mineral product taken out from mines in lumps. To create utility of such lumps it has to be rendered into either powder or in chips form.

3. The learned SDR, Sri. V.M. Doiphode appearing for the appellant-Collector has urged that dolomite in lump form is not useable as such for any purpose. It has to be necessarily made in the form of powder or chips by crushing such dolomite lumps and then only it is rendered into the marketable form. He further states that dolomite is a generic name of the product which is mined but to a purchaser or seller its specific form has to be asked for. If a person wants dolomite in powder form, he would have asked for that specific form of that dolomite. His mere saying that he needs dolomite would be incomprehensible. By this, the learned SDR asserts that by the process of crushing dolomite lumps into powder and chips a new product having a distinct name, character and use has come into existence and therefore, the process of crushing or grinding is a process of manufacture as has been held by the Supreme Court in a number of judgments starting from the well known case of Delhi Cloth & General Mills 1978 ELT-J 199 Obviously a reference to 1977 ELT-J 199–Ed. In the aforesaid case the Supreme Court had accepted the meaning of “manufacture” given in Permanent Edition of “Words and Phrases” Vol. 26 from an American Judgment which is as follows:–

Manufacture implies a change, but every change is not manufacture, and yet every change of an article is a result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.

The learned SDR in support of his contention also places strong reliance on Delhi High Court’s judgment in the case of Hyderabad Asbestos Cement Products Ltd. v. Union of India 1980 ELT 735. The learned SDR submits that in that case a question arose whether asbestos fibre produced from the asbestos rocks was a result of process of manufacture or not. Hon’ble Delhi High Court applying the aforesaid test laid down by the Supreme Court, came to the conclusion that

asbestos fibre is a marketable commodity and is known to the market and is saleable as such. It is also not disputed that asbestos rock which is mined by the petitioner is as such not saleable in the market. Great and intensive process is required before the asbestos rock which is mined by the petitioner can be converted, transformed and put into the market as asbestos fibre.

I find it impossible to accept that all the aforesaid processes can be equated to be anything else but manufacture because more especially when only now a marketable commodity has come into existence, which is totally and significantly different from the asbestos rock which was mined in the first instance.

In the instant case as well, emphasises the learned SDR, the marketable commodity dolomite, comes into existence only after crushing and grinding into its forms of powder and chips. He has also placed reliance on the following two judgments:–

(1) Collector of Central Excise, Jaipur v. Oriental Products Pvt. Ltd. .

(2) Brakes India Ltd. v. Superintendent of C.E. .

In the first mentioned case of Collector of Central Excise, Jaipur, the learned SDR states that grinding of soap stone lumps into soap stone powder of required fineness, has been held by the Tribunal as a process of manufacture. He cites another judgment in respect of asbestos fluff in the case of Collector of Central Excise, Jaipur v. Shree Pratap Commercial Co. Pvt. Ltd. 1984 ECR 1877. He also relies upon a decision in Regional Director, ESI v. Ram Chander and an order 149/84-C dated 13-3-1984 in the case of M/s. Dhartidhan passed by the Tribunal.

In view of the foregoing series of decisions, learned SDR submits that the instant process of crushing and grinding of dolomite into powder and chips brings into existence a new commodity having different name, character or use and as such is rightly chargeable to duty under T.I. 68 as it then stood.

4. Controverting the aforesaid contentions, learned consultant for the respondents states that the process of crushing and grinding in the instant case is not a process of manufacture. Before crushing and grinding it was dolomite and it remained so after application of the aforesaid process. No new product has come into existence. He relies on Supreme Court’s judgment in the case of MMTC v. Union of India and Ors. 1983 ELT 1542. It has been held in the said judgment that Wolfram ore concentrate having 65% concentration of WO3 still remains an ore and ore concentrates are marketable as ores in the international market and trade. In the instant case the learned consultant states that dolomite is marketable for use only as dolomite chips and powder, Rendering a mined product into its marketable form does not amount to a process of manufacture as has been held in the aforesaid judgment of the Supreme Court.

The learned consultant further points out that based on the aforesaid judgment of the Supreme Court the Tribunal has held in the case of Collector of Central Excise, Patna v. Pyrites & Phosphates & Chemicals Ltd. 1983 ELT 537-CEGAT that crushing/sieving of pyrites is not manufacture in terms of Secion 2(f) of the Central Excises and Salt Act, 1944. The learned consultant also relies, inter alia, on the judgment of the Tribunal in the case of Collector of Central Excise, Jaipur v. Fine Marbles and Minerals Pvt. Ltd., Makrana -Tribunal wherein it has been held that cutting of marble blocks to obtain marble slabs is not a process of manufacture.

A very strong reliance has been placed by the learned consultant for the respondents on a decision of the Madhya Pradesh High Court which is directly on the issue involved in this case. This is the case of Bheraghat Mineral Industries v. Div. Dy. C.S.T. and Anr. 1987 (20) VKN 290 a copy of which has been produced by the respondents during the course of hearing. The learned consultant points that the definition of the term ‘manufacture’ in Section 2(j) of the State Act is a very wide and comprehensive definition. The said judgment of Madhya Pradesh High Court relying on a number of decisions of the Supreme Court including that in the case of Delhi Cloth and General Mills referred to above holds that the instant process is not a process of manufacture. Extracts from Para. 10 of the said Report in case of Behraghat Mineral Industries is reproduced below:–

Here the petitioner, after purchasing lumps of dolomite from registered dealers crushed them and sold chips and powder to glass manufacturers–What was purchased was dolomite and sale was also of dolomite. Chips and powder of dolomite are not different commercial commodity than dolomite lumps. It is not the respondents’ case in their return that anything more is required to be done except crushing the lumps to get chips and powder from the lumps and that composition of the end product is different from lump. The lumps are broken into chips and powder for convenience and use but they retain the same characteristics and qualities of dolomite lumps. Except for change in shape, there is absolutely no transformation of composition to bring about a new commercial commodity.

The learned consultant, therefore, urges in the end that all the appeals deserve to be dismissed.

5. We have carefully considered the pleas advanced on both sides. We observe that it cannot be laid down as a general principle either way whether crushing and grinding of a product is a process of manufacture or not. It will vary from product to product and is dependent upon the fact, on the basis of the test laid down by the Hon’ble Supreme Court in the case of Delhi Cloth & General Mills mentioned supra, that if a new commodity having a different name, character or use comes into existence through a process or series of processes then such a process or series of processes can be termed as a “process or processes of manufacture”. Various judgments have been quoted by both the sides having a relation to different commodities. The only judgment which is directly applicable to the instant case is that of Madhya Pradesh High Court in the case of Behraghat Mineral Industries mentioned supra. The relevant extracts therefrom have already been reproduced which lay down the ratio that by the instant process of crushing and grinding of dolomite lumps, no transformation into a new commercial commodity takes place. The learned SDK’s attempt to disregard this judgment of Madhya Pradesh High Court that it is a judgment pertaining to a Sales Tax Act and not to the Central Excises Act is, to our mind, not an acceptable plea. The definition of ‘manufacture’ in the Central Excises & Salt Act is only an inclusive definition to include some peripheral processes. On the other hand, the definition of ‘manufacture’ in the State Act as pointed out by the learned consultant for the respondents is very wide. Nevertheless, it is to be observed that the aforesaid judgments of Madhya Pradesh High Court takes into account almost the entire case law on the question of “manufacture” applicable both to the excisable commodities and the sales tax commodities. The test laid down by the Supreme Court in a number of its pronouncements referred to in the aforesaid judgment of Madhya Pradesh High Court have been noticed and duly applied. Accordingly, following the direct judgment of Madhya Pradesh High Court we are of the view that the process of grinding and crushing of dolomite lumps into dolomite powder and chips is not a process of manufacture. Hence all the appeals are rejected while upholding the impugned order.

Sole cross-objection herein is also disposed of in the above terms.

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