ORDER
Moheb Ali M., Member (T)
1. This appeal arose out of the order of the Commissioner (Appeals) who in the impugned order upheld the classification of rosin and turpentine oil ordered by the Deputy Commissioner. The lower authority held that power is used in the manufacture of the above products and therefore the products do not qualify for nil rate of duty.
2. The facts are that the appellants are manufacturers of rosin and turpentine oil. They filed a classification declaration effective from 1.4.2001 classifying the goods under chapter sub-heading 3806.19 and 3805.19 respectively and claimed nil rate of duty as the goods are manufactured without the aid of power. The Deputy Commissioner however decided that the products are not entitled to ‘nil’ rate as power is used in their manufacture. This he seemed to have done without giving any opportunity to the appellants to put forth their case.
3. The Commissioner (Appeals), before whom the dispute came up, upheld the decision of the Deputy Commissioner after going into the process of manufacture of the said products. The process of manufacture of the products as discussed by him is as follows:-
“It is stated by the appellants that the main raw material for manufacture of Rosin and Turpentine Oil is Oleo-pine Rosin. The raw material is lifted to a manufacturing platform by manually operated chain pulley block. The raw material is melted in a melting tank by a “Bhatti” fired with coal. This melted raw material is transferred to settling tanks. In these settling tanks, the raw material is kept in liquid form by heating it with ‘Bhatti’ and stirred by manually operated agitator so that the impurities settle down. Then these impurities are separated and purified material is transferred to main tank (Distillery). In this tank the material is further heated on fire upto 180°C. At this temperature, the vapours of turpentine oil along with the water are formed. The turpentine oil is collected through a condenser by sprinkling water. When Rosin is settled down in the Distillery the same is collected separately. The water which is sprinkled in the condenser is stored in an overhead water storage tank at the height of about 30 ft. The water is lifted from ground water tank through a 2HP electric motor. The water is pumped to the ground water tank from a well using 3HP electric motor. This water which is lifted to overhead water tank by using electric motor falls over the condenser for cooling Turpentine oil vapours.”
The water itself falls on the condenser by force of gravity and no power is used while sprinkling the water. This is an accepted position.
4. The Commissioner (Appeals) holds that the above process clearly shows that power is used in the manufacture of the goods in question. His reasoning is as follows:-
“….. it is clear that segregation of Turpentine oil from Rosin and the cleaning of tanks by using water are processes which are integrally connected to manufacture of Turpentine oil and Rosin. The water constitutes an important ingredient in the process adopted by the appellants for manufacturing of Rosin and Turpentine oil and since the appellants are using power operated pumps to lift water first from the well to the overhead tank it cannot be said that in the manufacturing process no activity is carried on with the aid of power.”
He rejected the appellants’ plea that after all the water is falling due to gravity on the condenser on the ground that water is first pumped with the aid of power. He therefore rejected the appeal before him.
5. During the course of hearing, the learned advocate before us relied on the decision of the Tribunal in the case of Eastern Metal & Ferro Alloys Ltd. v. CCE, Bhubaneshwar 1996 (86) ELT 104 where the Tribunal held that use of power in the raw materials or in the articles which do not directly participate in process of manufacture of final products does not amount to use of power in the manufacture of final product.
6. The learned advocate argued that in any case the department (M.F.(D.R.) letter No. B. 36/11/77-TRU dated 10/16.1.1978 clarified in respect of the same product with reference to the predecessor notification 179/77-CE dated 18.6.1977 as follows:-
“Rosin and Turpentine oil – Use of power – A question has been raised regarding the applicability of Notification No. 179/77-CE, dated 18.6.1977 to units manufacturing Rosin and Turpentine oil where no power is used in the manufacture of Rosin but power is used for drawing water into the tank through which the coils containing oil vapours pass. The point at issue is whether a factory in which power is used to the extent and for the purpose mentioned above can be considered as a factory in which manufacture is being carried on with the aid of power or not for the purpose of the above mentioned notification.
It is clarified that so long as the use of power is limited to drawing water into a cooling tank through condensation coils pass, manufacture of rosin cannot be said to be with the aid of power for the purpose of Notification No. 179/77-CE, dated 18th June, 1977 (M.F.(D.R.) Letter No. B. 36/11/77-TRU, dated 10/16.1.1978.”
7. The learned advocate argued that this clarification is binding on the department irrespective of what is ruled by various courts on the subject. The departmental representative relied on the decision of the Supreme Court in the case of CCE v. Rajasthan State Chemical Works 1991 (55) ELT 444 (SC) wherein the Apex Court while interpreting the same notification rejected the contention that power is used only in handling operations and not in bringing about any change in the raw material and therefore no power is used in or in relation to manufacture. The DR argued that the Apex Court’s decision is binding as it sets out the law. The learned advocate pointed out that the departmental circular is still binding on the department. He relied on the decision of the Supreme Court in Dhiren Chemicals’s case (2002 (143) ELT 19 SC) wherein the Apex Court held mat CBEC circulars are binding on Revenue even if placing different interpretation given by the Supreme Court.
8. Heard both sides.
9. The clarification of TRU on the same issue now being agitated is binding on the department and even on the Commissioner (Appeals) if such a circular is beneficial to the assessee. We accept the appellants’ contention and set aside the order of the Commissioner (Appeals). It is clearly brought out that in the process of manufacture as described supra, no power is used in the manufacture of rosin and turpentine oil. The fact that water is pumped up to the overhead tank does not amount to manufacture with the aid of power. The appellants are entitled to the benefit of exemption.
10. The appeal is allowed. The order of the Commissioner (Appeals) is set aside.