Process of Re-Crystallisation and Distillation not Manufacture under Central Excise Act: CESTAT quashes Excise Duty Demand [Read Order]

Quashing the excise duty demand the Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), held that the process of re-crystallisation and distillation does not manufacture under the Central Excise Act, 1944.

The appellant, M/s.Ganga Rasayanie, primarily undertook the process of Coal Tar distillation, refining, blending and repacking of various petroleum products and the said process does not change the original character and properties of the material. The Coal Tar Distillates are exempted from the whole of the duty of excise in terms of Notification No.298/86-CE dated 13.05.1986. The processed materials and bought-out materials are sold to different customers under different codes according to grade and quality.

The Show Cause Notice was issued by the Department for the period from 01.04.1991 to 22.02.1992 alleging that the processes undertaken by the Appellant amounted to ‘manufacture’.

The issue involved in the case is whether the process undertaken by the appellant amounts to manufacture and whether the appellant is eligible for the Supplemental Security Income (SSI) benefit. The amount involved is Rs.89,06,036/- with interest and an equivalent amount of penalty and fine of Rs.1,40,000/-The Period involved in the dispute is November 1987 to February 1994.

The appellant stated that they undertook the process of re-crystallisation and distillation and the resultant goods were given different numbers like GR-101, GR-4546 etc. But these processes did not bring in any new product and the processes did not amount to ‘manufacture as per section 2(f) of the Central Excise Act, 1944.

A Two-Member Bench of the Tribunal comprising PK Choudhary, Judicial Member and K Anpazhakan, Technical Member observed that “we hold that the processes undertaken by the appellant would not amount to manufacture within the meaning of Section 2(f) of Central Excise Act, 1944 and hence the finished goods are not leviable to Central Excise duty. Accordingly, the demand made in the impugned order is liable to be set aside.”

To Read the full text of the Order CLICK HERE

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