1. This appeal is directed against the order dt. 8-9-1986 passed by the Collector of Central Excise (Appeals), New Delhi. The appellants manufacture limestone chips and powder by grinding and sieving of limestone received from quarries. The Assistant Collector of Central Excise, Saharanpur, by his order dated 11-4-1986, referred to the process of manufacture of lime stone chips and powder by crushing and sieving of limestone to obtain chips of different sizes and powder of limestone; and held that this amounted to a process of manufacture for which he relied upon the amended Section 2(f) of Central Excises & Salt Act, 1944 and held the goods to be classifiable under Heading 25.05 CETA '85. This heading covers, inter alia, mineral substances not elsewhere specified, lime, etc. He also denied exemption under Notification 23/55 on the ground that the exemption is only to such goods employed as filler and that limestone chips and powder cannot be considered as fillers. The relevant extract of the Notification is as follows : In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the following items from the whole of the excise duty leviable thereon under Section 3 of the Central Excises & Salt Act, 1944 (1 of 1944), namely :- (1) Minerals, employed either as extenders, suspending agents or fillers or as diluents, namely :Barytes, Bauxite, Bentonite, China Clay, Celestite, Limestone and Chalk (including Precipitated Chalk), Fuller's earth, Gypsum, Mica, Silica, Asbestine, Talc and Slate".
2. The Collector (Appeals), by the impugned order, upheld the Assistant Collector's findings on the excisability of the goods and classification thereof. However, in respect of exemption under Notification 23/55, he agreed that limestone chips are not fillers and hence ineligible. But he directed the Assistant Collector to reconsider the claim in respect of limestone powder as a filler in the light of further evidence.
3. Addressing arguments for the appellants, the Id. Counsel, Sh. J.S.Agarwal, relied upon the case of Vidarbha Ceramics v. CCE -1988 (36) ELT 508 (T) to say that grinding of fireclay lumps into fireclay powder cannot ipso facto be considered as a process of manufacture. Also referred to case of CCE v. Mahavir Minerals Stores Supply Co. - 1988 (38) ELT 171 (T) that crushing of dolomite into powder chips does not amount to manufacture. He contended that it is also well-settled that mere change in physical form cannot amount to manufacture and in the present case there was only change in physical form from limestone to chips and powder by crushing, grinding and sieving. No chemical change is involved. As regards eligibility to exemption under Notification 23/55, the Ld. Counsel pointed out that the issue stands settled by the decisions of this Tribunal in the case of CCE v. Madhu Chemicals -1986 (23) ELT 166 (T) and also by its decision, subsequently, in the case of CCE v. Oriental Products -1987 (28) ELT 147 (T) wherein it has been held that for exemption under Notification 23/55, end use specified therein need not be proved. Sh. Jayaraman, the Ld. S.D.R. appearing for the Collector, relied upon the case of Associated Soapstone Distributing Co. v. CCE, Indore -1985 (22) ELT 109 (T) decided by the Tribunal holding that grinding/crushing of soapstone lumps into soapstone powder is manufacture. Also the case of Oriental Talc Products v. CCE - 1984 (18) ELT 657 (T) on the same lines relating to conversion of soapstone into soapstone powder. As regards exemption, the Ld. D.R. reiterated the findings of the lower authority and contended that proof that the material was put to uses specified in the notification as fillers, extenders, etc. has to be produced to earn exemption since it is well-settled law that notification has to be strictly interpreted.
4. The submissions made by both the parties, herein, have been carefully considered. The appellants' case is that the process of crushing, grinding and sieving of limestone to obtain limestone chips and powder will not amount to a process of manufacture in terms of Section 2(f) of Central Excises & Salt Act, 1944. However, in this case, the amended definition of the term 'manufacture' is applicable.
The Assistant Collector had extracted the definition in his order and has applied it. With the introduction of Central Excise Tariff Act in 1985, the definition of 'manufacture' in S. 2(f) of the CESA '44 has been substituted which reads as follows: "(i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture".
The new definition differs from the old in that instead of setting out the activities which will amount to manufacture in respect of different tariff items as was done earlier, the new definition in caluse (ii) lays down that any process which is specified in Section/Chapter Notes of the Schedule to the Tariff Act will constitute 'manufacture'. In the present case Note 2 under Chapter 25 reads as follows : "Heading Nos. 25.01,25.03 and 25.05 cover only products which, have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products that have been roasted, calcined or obtained by mixing." It is clear therefrom that crushing, grinding and sieving will amount to manufacturing process. Therefore, such processes to convert limestone into limestone chips and powder will be processes of manufacture as per the substituted definition of the term in Section 2(f) of CESA, 1944. Apart from this, even under the old definition of the term the Tribunal had found in the cases of Associated Soapstone Distributing Co. -1985 (22) ELT 109 and in Oriental Talc Products -1984 (18) ELT 657 and also in the Case Law reported in 1987 (28) ELT 147, the Tribunal had applied the criteria laid down by the Supreme Court in the Empire Industries case 1985 (20) ELT 179 as to what would constitute manufacture and had concluded that grinding of soapstone lumps into soapstone powder will amount to manufacture. Therefore, the findings of the lower authorities in this regard is correct in law and is upheld. However, the denial of exemption to the goods under Notification 23/55 saying that they have not been shown to be used as fillers is not maintainable in view of the Tribunal's decisions in the case of Madhu Chemical and that of Oriental Products cited (supra) wherein the Tribunal has observed, "The departmental representative contended that the respondent should be put to strict proof of the use of the substance for the purpose of exemption under the notification.
Looking at the notification, it does not appear to us that such use should be proved. What appears to be relevant is that the substance should be known to be used or employed as extender, suspending agent, etc. There are several exemption notifications under Central Excise Rule 8(1) which set out specific procedures to be complied with in order that exemption may be earned. In the present notification, there is no such stipulation". The ratios of these are applicable to the facts of the present case and it also appears that the appellants had led evidence regarding such use before lower authorities. In the result, the goods are eligible for exemption under Notification 23/55.
The appeal is disposed of in the above terms.
5. While agreeing with the order prepared by my learned brother Shri K.S. Venkataramani, Member (Technical), I am to add a few words to the same.
6. The issue that arises for consideration in this appeal is as to whether the product in question is classifiable under Chapter Heading 23.02 or 25.04 or 25.05 of CET and whether the appellants are entitled for the benefit of exemption of payment of duty under Notification No.23/55.
7. Shri J.S. Agarwal, learned Advocate for the appellants, did not press for classification of the product under Heading 25.04 in view of the Hon'ble Supreme Court's decision in the case of Akbar Badniddin Jiwani v. Collector of Customs [1990 (47) ELT 161 (SC)]. The learned advocate also did not argue on classification of the product under Heading 23.02. The advocate had submitted that the process of obtaining chips from limestone of different sizes and powder of limestone by process of crushing, grinding and sieving does not amount to manufacture and the product continues to remain as limestone, which the appellants have procured from quarry. In this connection, he has relied upon the following rulings - 5. CCE Patna v. Pyrites, Phosphates & Chemicals Ltd., Bihar -1983 (12) ELT 537 6. Y. Moideen Kunhi and Ors. v. CCE, Bangalore and Ors. -1986 (23) ELT 293 In all these cases, the view that has been taken was that the processes which were undertaken in respect of the products did not amount to manufacture as no new product emerged and the original product continued to remain the same despite the products undergoing several processes. It has been held in these rulings that the processes that the products undergo, will not amount to manufacture as no new commodity emerges.
8. Shri Jayaraman, learned Departmental Representative, has on the other hand, relied upon the ruling of the Supreme Court in the case of Empire Industries reported in 1985 (20) ELT 179 and also that of Associated Soapstone Distributing Co. v. CCE Indore -1985 (22) ELT 109 and Oriental Talc Products -1984 (18) ELT 657.
9. Learned Member (Technical) has examined the definition of manufacture appearing in Section 2(0 of the Act alongwith Note 2 under Chapter 25 of CET and has held that the process of crushing, grinding and sieving will amount to process of manufacture. The concept of manufacture has to be viewed keeping in view the emergence of a new product which should be known in the market as "goods". Admittedly, in this case the limestone chips and limestone powder which has emerged after crushing, grinding and sieving of limestone brings into existence a new product which has a different name, character and use. The same is also traded by the appellants and is put to different uses as has been recorded by the Assistant Collector in the order-in-original on the basis of submissions made by the appellants. So long as the new product which has emerged after several processes which finds a market and is marketable and is also traded having a different name, character and use from the original product, the manufacturing activities are complete and the product has to be considered as 'goods'. This is a well laid down principle and settled law from the rulings given by the Hon'ble Supreme Court. Therefore, the contention of the appellants that there is no process of manufacture in this case is not tenable. As observed earlier in the ruling cited by the advocate, the concept of manufacture was considered keeping with the new goods that emerged after several processes the product had undergone.
10. The Assistant Collector has rejected the appellants' claim for classification under Chapter Heading 23.02 which deals with preparations of a kind used in the animal feed including dog and cat feed. The reasoning given by the Assistant Collector for rejecting this heading is not seriously challenged and I find that there is no ground to interfere with the said findings. However, the lower authorities were not justified in rejecting the claim of the appellants for grant of exemption of duty under Notification No. 23/55. For the reasons stated by my learned brother in the impugned order, the appellants are entitled for grant of exemption and the appeal is allowed.