S. Chems and Allied Producers Pvt. Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
1. arguing on the application for waiver of pre-deposit of rs. 18,56,316/0 confirmed as duty and penalty of amount equal to the duty and stay of recovery of the above amounts, shri c.s. lodha, the ld.counsel submits that the duty demand is prima facie unsustainable since the activity carried out by the applicants of crushing manganese ore into suitable smaller lumps for pulverising and then into power does not amount to manufacture. in support of this contention, he relied upon the decision of the supreme court in the case of cce madras v.coimbatore pioneer fertilizers ltd. [1997 (94) elt 6 (sc)] and divisional dy. commissioner of sales tax v. bherhaghat mineral industries [2000 (119) elt 271 s.c.] in which it has been held that crushing of dolomite lumps into chips and power is not a process of manufacture so as to attract excise duty. he further submits that even if the contention raised by him that the process does not amount to manufacture is not accepted, the classification of the product would remain under chapter heading 26 in which case exemption notification no. 5/98-ce would be available to the applicants. lastly, he submits that the bulk of the demand is barred by limitation as show cause notice issued in june, 2000 covers the period october, 1998 to march 2000 and the applicants did not suppress any material facts from the department and disclosed the description of the product as manganese ore and not as manganese dioxide. for these reasons, he urges that the requirement of pre-deposit be waived and recovered stayed.2. this prayer is opposed by the ld. departmental representative who submits that in terms of note 2 to chapter 26, the disputed product falls for classification outside under chapter 26 since it is not ore used in the metallurgical industry but used in the manufacture of dry battery cells. he submits that chapter heading 2802 would be appropriate because the goods are known commercially as manganese dioxide and he relies upon note 10 to chapter 28 to buttress his submission that the process of conversion of manganese ore into power amounts to manufacture. regarding applicability of extended period, he submits that the department was never informed that the product manufactured and cleared was manganese dioxide since in the invoice the goods have been described only at manganese ore powder. he thus justified confirmation of duty and imposition of penalty.3. we have carefully considered the rival submissions. we are, prima facie, satisfied with the contention of the applicants that the process of crushing and pulverizing of lumps of manganese ore into small sizes does not amount to manufacture in the light of the ratio of the decisions of the apex court cited above and also we find that tour views are fortified the product as manganese ore. we, therefore, waive the pre-deposit of duty and penalty and stay recovery thereof pending the appeal.

Judgment:
1. Arguing on the application for waiver of pre-deposit of Rs. 18,56,316/0 confirmed as duty and penalty of amount equal to the duty and stay of recovery of the above amounts, Shri C.S. Lodha, the ld.counsel submits that the duty demand is prima facie unsustainable since the activity carried out by the applicants of crushing Manganese Ore into suitable smaller lumps for pulverising and then into power does not amount to manufacture. In support of this contention, he relied upon the decision of the Supreme Court in the case of CCE Madras v.Coimbatore Pioneer Fertilizers Ltd. [1997 (94) ELT 6 (SC)] and Divisional Dy. Commissioner of Sales Tax v. Bherhaghat Mineral Industries [2000 (119) ELT 271 S.C.] in which it has been held that crushing of dolomite lumps into chips and power is not a process of manufacture so as to attract excise duty. He further submits that even if the contention raised by him that the process does not amount to manufacture is not accepted, the classification of the product would remain under Chapter heading 26 in which case exemption Notification No. 5/98-CE would be available to the applicants. Lastly, he submits that the bulk of the demand is barred by limitation as show cause notice issued in June, 2000 covers the period October, 1998 to March 2000 and the applicants did not suppress any material facts from the department and disclosed the description of the product as Manganese Ore and not as Manganese Dioxide. For these reasons, he urges that the requirement of pre-deposit be waived and recovered stayed.

2. This prayer is opposed by the ld. departmental representative who submits that in terms of Note 2 to Chapter 26, the disputed product falls for classification outside under Chapter 26 since it is not Ore used in the metallurgical industry but used in the manufacture of Dry Battery Cells. He submits that Chapter heading 2802 would be appropriate because the goods are known commercially as Manganese Dioxide and he relies upon Note 10 to Chapter 28 to buttress his submission that the process of conversion of Manganese Ore into power amounts to manufacture. Regarding applicability of extended period, he submits that the department was never informed that the product manufactured and cleared was Manganese dioxide since in the invoice the goods have been described only at Manganese ore powder. He thus justified confirmation of duty and imposition of penalty.

3. We have carefully considered the rival submissions. We are, prima facie, satisfied with the contention of the applicants that the process of crushing and pulverizing of lumps of Manganese Ore into small sizes does not amount to manufacture in the light of the ratio of the decisions of the Apex Court cited above and also we find that tour views are fortified the product as Manganese ore. We, therefore, waive the pre-deposit of duty and penalty and stay recovery thereof pending the appeal.