1. The appellant M/s. Amrit Banaspati Co. Ltd. (Paper Division) Saila Khurd, District (Hoshiarpur) has filed this appeal under Section 35-B of the Central Excises & Salt Act, 1944 against the impugned order in Annexure A-l passed by the Collector of Customs & Central Excise (Appeals), New Delhi rejecting their appeal against the order passed by the Assistant Collector of Central Excise Division, Jullundur in Annexure A-2 holding them liable for Rs. 8,46732 P. on the Fibre Recovery plant under Rule 173Q of Central Excise Rules, 1944 and not granting them the benefit of Notification No. 118/75-C.E.2. The brief facts of the case are that the appellant are engaged in manufacture of paper falling under Tariff Item 17 of the Central Excise Tariff. The raw materials have to pass to the stage of pulp before the finished stage of paper is attained. The process of preparation of pulp involves grinding the raw materials and making a paste after mixing in water. The water keeps on draining out leaving a thin paste sheet which subsequently requires the shape of a paper after passing through number of rolls arranged in series. The drained water is an effluent water which has mixture of particle of raw material in fibrous form. Due to advancement of technology a new machine known as "Krofta" has been erected by foreign company. The function of the Krofta machine is to retrieve the fibre particles of waste in the effluent water and re-use the same. The appellant had manufactured one Krofta Fibre Recovering Plant for captive use within the factory. They had obtained an L-4 licence prior to the commencement of manufacture and had maintained RG-1 register. The fibre recovering plant were put on trial basis is the factory itself. The Central Excise Officers on visit to the factory on 14-12-1987 had put this plant under seizure on the reasoning that it had been removed from the place of manufacture without payment of excise duty. A Show Cause Notice was issued for confiscation, duty recovery and for imposition of penalty. The appellant has putforth his plea that the Fibre Recovery Plant had not been removed without payment of duty. It had merely been put on trial and hence there was no justification for imposition of duty or order for confiscation of plant. They further contended that they were eligible for exemption under the Notification No. 118/75 which exempted complete machinery which is meant for producing or processing any goods. It is further contended by the appellant that the learned Assistant Collector did not accept their plea for exemption under Notification No. 118/75 and instead imposed duty of Rs. 8,467.32 P. and personal penalty of Rs. 1,000/-. He also ordered for confiscation of the seized Fibre Recovery Plant and ordered the same to be redeemed on payment of a fine of Rs. 5,000/-.
3. The appellant aggrieved by the said order preferred an appeal before the Collector (Appeals), New Delhi. The learned Collector set aside the Assistant Collector's order only to the extent of imposition of penalty and confiscation of the plant but however, rejected the plea of the appellant for Exemption Notification No. 118/75 on the ground that the plant was capable of processing the waste material and recovering retrieving usable fibres from waste material going into the effluent water. The appellant in this appeal is seeking the benefit of the Notification No. 118/75-C.E. which has not been considered by both authorities below.
"In supersession of the Notification No. 58/75-C.E., dated 1-3-1975, goods falling under Item No. 68 manufactured in a factory and intended for use in the factory in which they are manufactured, or hi any other factory of the same manufacturer, are exempt from the whole of the duty of excise leviable thereon: Provided that where such use is in a factory of a manufacturer, different from his factory where the goods have been manufactured, the exemption contained in this notification shall be allowable subject to the proper officer being satisfied that the goods are intended for such use : Provided further that nothing contained in this notification shall apply to complete machinery manufactured in a factory and meant for producing or processing any goods, even if they are intended for use in the same factory in which they are manufactured or in any other factory of the same manufacturer." 5. As per the notification, any complete machinery manufactured in the factory and meant for producing or processing any goods are not entitled to claim exemption. Both the authorities below have rejected the contention of the appellant that the machinery is not meant for producing or processing any goods. The Counsel for the appellant argued that the plant merely helps in segregating or retrieving the fibres particles which were going waste in the effluent water and the function of the plant is not producing or processing of goods but merely to retrieve or segregate the water fibre particles from effluent water.
6. The Departmental Representative for the respondent contended that the plant is a complete machinery and the function of the plant is to produce or processing of goods. To emphasise his point, he pressed into argument the definition of Factory in Section 2(c) and that of manufacture in Section 2K of the Indian Factories Act, 1948.
7. For the purpose of analysing the definition of manufacture and of processing of goods, we have to confine ourselves to the definition and interpretation of definition as found in the Excise Acts and to look into the meaning in other legislations is out of our scope. It is well settled that the term manufacture has been defined to include any process involved in ancillary to the completion of a manufactured product. To manufacture is to produce something new and out of the existing materials. It further implies change in the sense of transformation into new and different article having a distinct name, character or use. The processing of goods should result in transformation of a new and distinct article known in the market which comes into being. With each process, the original commodity experiences a change or series of changes resulting in a new and distinct article that a manufacture can be said to take place.
8. Now it is to be seen as to whether the plant is processing any goods. The retrieving of lost fibre articles from effluent waste cannot be considered as processing as no new distinct article has been produced. Further neither the lost fibre nor the waste water can be considered as goods. For considering anything as goods it should satisfy the test of the meaning of goods, as has neither been defined and interpreted by the legislature and courts. Goods must be something which can ordinarily come to the market to be bought and sold or capable of being sold. Even if, waste fibre is considered as goods than the machinery manufactured by the appellant is not meant for producing or processing any goods but only lost fibre is retrieved and recovered.
The waste water nor the lost fibre comes within the ambit of goods nor the process of retrieving and or segregating the fibre from waste water can be considered as processing or manufacture. The waste fibre retrieved from effluent water do not ordinarily come to market for being bought or sold. Hence, the appellants are entitled for the exemption as claimed by them under Notification No. 118/75, dated 30-4-1975 and they succeed in this appeal. The appeal is allowed and the impugned orders of the lower authorities are set aside.