The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that mixing fine crumb rubber with sulphur does not amount to manufacture.
The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) as per the process of mixing of brought out “Fine Crumb Rubber” with 3% to 5% of sulphur/yellow powder and 2 % Finawax C and the judgments cited by the learned counsel it prima-facie appears that the activity does not amount to manufacture of distinct product in terms of Section 2 (f) of the Central Excise Act, 1944.
Section 2(f) of the Central Excise Act,1944 (CEA) defines “manufacture” as: “manufacture” includes any process incidental or ancillary to the completion of a manufactured product; which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985, as amounting to manufacture, or which in relation to goods specified in Third Schedule, (MRP Goods) involves packing or repacking of such goods in a Unit container or labelling or rebelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.
Background
The appellant/assessee have carried out the trading activity of ‘Fine Crumb Rubber’ during the period 13.05.2010 to 28.07.2012. “Fine Crumb Rubber purchased from outside was only re-packed without adding anything to it and sold by appellants as trading activity, during the period 13.05.2010 to 23.09.2011. “Fine Crumb Rubber” purchased from outside was added with 3% to 5% Sulphur /Yellow Powder and 2 % Finawax C and sold as a Trading Activity from 29.09.2011 to 28.07.2012.
The Commissioner while adjudicating the show cause notice has passed the impugned order holding that “Fine Crumb Rubber” is significantly different and result of process of mixing/blending of Crumb Rubber with sulphur/yellow powder and wax and the same is distinctly different from the Crumb Rubber that was procured from the market. She has, therefore, confirmed the duty demand for the period from May, 2010 to July, 2012 under Central Excise Tariff Heading 40040000 which is for “Waste, parings and scrap of rubber (other than hard rubber) and powders and granules obtained therefrom”.The commissioner has also applied longer limitation period and imposed equal amount of penalty under Rule 25 of Central Excise Rules, 2002 read with Section 11 AC of Central Excise Act, 1944.
Arguments
The assessee contended that ‘Fine Crumb Rubber’ is the mixture of bought out item i.e. ‘Fine Crumb Rubber’ and Yellow powder. Around 95% of ‘Fine Crumb Rubber’ and 5% Sulphur (yellow powder) are mixed by physical/ mechanical /process as per buyer’s requirement , around 2 % Finawax C is mixed in the “Fine Crumb Rubber”. There is no involvement of any chemical process or any chemical reaction.
The assessee contended that as per purchase invoice the description of brought out item is Rubber Fine Crumb Powder and also in the sales invoice the description of sold product is mentioned as “Fine Crumb Rubber”. So, there is no change in the name, characteristics and end-use of the original bought out items.
The assessee argued that the demand is also wholly time barred. The show cause notice was issued on 25.05.2015 covering the period from May, 2010 to July, 2012. The appellants have not suppressed the facts or resorted to any wilful misstatement etc. with intent to evade payment of duty. On the contrary, they have been holding a bonafide belief that the simple process of mixing does not amount to manufacture. In support he relied upon various correspondences dated 09.02.2010, 14.10.2011 and 28.06.2012 whereby the appellant have disclosed /declared the entire activity including the process of mixing of sulphur was with the 95% of Crumb Rubber . Therefore, there is no suppression of fact, the entire demand is liable to be set aside on the ground of time bar also.
Conclusion
The Tribunal noted that the appellant have informed the department from time to time about their activity of sale of “Fine Crumb Rubber” out of bought out Crumb Rubber and mixing of 5% of Sulphur/yellow powder and Wax with 95% of Crumb Rubber. Therefore, the department was very much aware about the activity of the appellant. Hence, there is no suppression of fact on the part of the appellant with intent to evade payment of duty.
The showcase notice was issued covering the period from May, 2010 to July, 2012 which is much after the normal period of one year. Therefore, the entire demand is not sustainable on the ground of the time bar. Accordingly, the demand on the time bar alone is set aside. Since, the entire demand is beyond the normal period and is set aside on time bar.
Case Title: Tinna Overseas Limited Versus Commissioner of C.E & S.T.-Silvasa
Case No.: Final Order No. 12010/2024
Date: 12.09.2024
Counsel For Petitioner: H D Dave
Counsel For Respondent: Rajesh K Agarwal