1. This is a revision petition filed before the Government of India (now transferred to this Tribunal under Section 35P of the Central Excises and Salt Act, 1944) against order-in-appeal No. 113-B of 1981 dated 28-2-1981 passed by the Central Board of Excise & Customs, New Delhi.
2. M/s. Oriental Talc. Products Pvt. Ltd. (hereinafter called the appellants) have two units - one at Banswara and Anr. at Udaipur (Rajasthan). Their main business is to grind 'Soap Stone' into powder known as 'Soap stone powder' in their mills-"Three Roller Raymond Grinding Mills" and to sell the same to be used as "filler" in various industries such as Paper, Textile, Paints, Ceramics, Plastics, etc.
Power is used for the purpose of grinding.
3. For their unit at Banswara, the appellants had not obtained any excise licence, nor paid any excise duty on the goods cleared by them from that unit and as such the Central Excise (Preventive) Party, Udaipur visited the factory premises of the appellants at Banswara on 22-6-1979. Examination of the records of this unit at Banswara revealed that this unit had manufactured and cleared soap stone powder valued at Rs. 7,89,752.25 during the year 1978-79 without payment of excise duty under Item 68-CET and as such a show cause notice C. No.VI(68)15/29/79/2085-7 dated 11-2-1980 was issued by the Assistant Collector of Central Excise, Ajmer calling upon the appellants to show cause as to why Central Excise duty of Rs. 39,462.61 evaded by them should not be demanded from them under Rule 10 of the Central Excise Rules, 1944 and why penalty should not be imposed upon them for contravention of Rules 9, 173 and 226 read with Rules 7 and 173Q of the Central Excise Rules, 1944 4. In the reply dated 14-3-1980 to the show cause notice, the appellants stated that the sales of soap stone powder of the value of Rs. 7,89,252.25 at Banswara did not attract liability of duty under T.I. No. 68-CET. The 'soap stone powder' sold by them by grinding lumps obtained from their mines was of the filler variety which was purchased by the paper mills and soap manufacturers. There was no Talc, variety of powder which could be used for making the face powders liable to duty under T.I. 14F. They submitted that by grinding the lumps into powder of the required mesh, no new variety of product came into existence so as to attract liability of duty under T.I. 68-CET. They further submitted that they have not violated the provisions of any Central Excise Rules inasmuch as they were under the impression that liability of duty was not attracted due to the exemption Notification No 176/77, dated 18-6-1976 because the value of the excisable goods cleared from their Udaipur and Banswara factories taken together did not exceed the limit of Rs. 30 lakhs in the year 1976-77.
5. Collector of Central Excise, Jaipur did not accept the contentions of the appellants and by his order No. 16/80-CE issued under C. No.V(68) 15/2/79/34896 dated 28-11-1980 confirmed the demand of Rs. 39,462.61 under Rule 10 of the Central Excise Rules, 1944 and a penalty of Rs. 5,000 was also imposed upon the appellants, under Rule 173Q of the Central Excise Rules.
6. In appeal before the Central Board of Excise and Customs, New Delhi, the penalty amount was reduced" to Rs. 500 but the demand duty to the extent of Rs. 39,462.61 was confirmed.
7. Being aggrieved by order No. 113-B of 1981 of Central Board of Excise & Customs dated 28-2-1981, the appellants filed a revision petition before the Government of India, which now stands transferred to this Tribunal and is treated as an appeal.
8. We have heard Shri A. Bhattacharya, advocate, counsel for the appellants and Shri S.N. Khanna, JDR for the department and have gone through the record.
9. The main question which arises for determination is whether the grinding of soap stone obtained from the mines into powder of the required mesh in a three roller raymond grinding mill run with the aid of powder, amounts to a process of manufacture or not 10. It is now settled law that before excise duty can be levied, the goods brought into existence must be the goods which can be bought and sold in the market though they may not be actually marketed. In other words, by the process of treatment, labour and manipulation, the raw-material must be converted into a different article having a distinct name, character or use on which duty is leviable. In the case of Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. (AIR 1963 SC 791) Supreme Court held that the manufacture which is liable to excise duty must be bringing into existence of a new substance known to the market and that to become 'goods', an article must be something which can ordinarily come into the market to be bought and sold, and further that mere process is not manufacture. This was reiterated in South Bihar Sugar Mills Ltd. and Anr. v. Union of India and Ors. (AIR 1968 SC 922;. Applying these principles of law to the facts of the present case before us, grinding of 'soap stone' into 'soap stone powder' of required mesh amounts to manufacturing process as defined under Section 2(f) of the Central Excises and Salt Act, 1944. Before Special Bench 'D' of this Tribunal in the case of Pyrites and Phosphate Chemicals Ltd. v. Collector of Central Excise, Delhi (1983 E.L.T. 1192), a question cropped up whether breaking of the rocks into small pieces and then powdering them and then sieving them in specified mesh and bringing them to a given fineness amounts to manufacturing process or not Following the decision of Delhi High Court in Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. (1980 E.L.T. 735) it was held by the majority decision that breaking of the rocks into small pieces and then powdering them and then sieving them in specified mesh and bringing them to a given fineness, certainly amounts to manufacturing process. Division Bench of Delhi High Court in Hyderabad Asbestos Cement Products Ltd. and Anr. v.Union of India and Ors. (Supra) categorically held that the detailed process of converting the asbestos rocks to asbestos fibre by breaking boulders into smaller pieces and after putting them into crushers, air cleaners, separating fibres was something more than a mere process and that in such situations, the process of treatment, labour and manipulation and conversion of raw-material into a different article having a distinct name, character and use did amount to manufacture so as to make the goods liable to levy of excise duty.
11. In the case before us, as per own admissions of the appellants, they take out the soap stone from their mines and then grind them in their grinding mills converting into a fine powder of a specific mesh known in the market as soap stone powder to be used as filler in various industries such as, Paper, Textile, Paints, Ceramics, Plastics, etc. This is a product known in the market and is bought and sold in the market as such and, therefore, by this process of converting the soap stone into soap stone powder of specified mesh amounts to process of manufacture and the authority below has correctly held it to be so.
The authority below has held this product to be liable to excise duty under Tariff Item 68 and not under Tariff Item 14F as Talc. Powder. To make it such a Talc. Powder, some more process has to be employed. We do not find any irregularity in the findings of the authority below on this point.
12. The submission of the learned counsel of the appellants as alleged in the grounds of appeal that this commodity mined, powdered and sold as soap stone of the filler variety is exempt under Notification Nos.
23/55-CE dated 29-4-1955, 114/73-CE dated 30-4-1973 and 195/75-CE, dated 13-9-1975 cannot be accepted as correct. As per own case of the appellants as set out in the reply to the show cause notice, the soap stone powder sold by them by grinding lumps obtained from their mines is of the filler variety which is normally purchased by the paper mills and soap manufacturers. There is no Talc, variety which constitutes special quality soap stone used for making face powder liable to duty under Tariff Item 14F. When this soap stone does not fall under Item 14F as per the own case of the appellants, it does not seem to reason as to how they are entitled to the benefit of these exemption notifications. The authority below has correctly held that the soap stone involved in the case in so far as the Central Excise purpose is concerned, is neither classifiable under Item 14 of the Central Excise Tariff nor does it attract the provisions of the aforementioned notifications.
13. The last submission made by the counsel of the appellants that they did not exceed the limit of Rs. 30 lakhs as laid down in Notification No. 176/77-CE, dated 18-6-1977 and, therefore, they are exempt under this notification is also not tenable. There is no dispute about the fact that the total clearances from the two units of the appellants was more than Rs. 30 lakhs during the relevant period. The only point which the appellants have contested is that only the job value should be taken into account to determine their eligibility of exemption granted under Notification No. 176/77-CE dated 18-6-1977. This contention of the appellants is not sustainable. There is no provision in Notification No. 176/77-CE, dated 18-6-1977 to take into account only the job charges to determine the total turnover. It is the total turnover which is to be taken into account for the purpose of taking the benefit of Notification No. 176/77-CE, dated 18-6-1977.
Notification No. 119/75, dated 30-4-1975 is only in respect of exemption of duty and it cannot be made available for the purpose of determining the total turnover in terms of Notification No. 176/77-CE, dated 18-6-1977. Admittedly, the total turnover was more than 30 lakhs from both the units of the appellants during the relevant period and as such the appellants are not entitled to the exemption Notification No.176/77-CE, dated 18-6-1977.
14. Regarding penalty, admittedly the appellants did not obtain the excise licence for their unit at Banswara whereas for their unit at Udaipur they were having the excise licence for the same product.
Clearing the goods without obtaining excise licence and without payment of duty amounts to violation of the rules and the authority below has correctly imposed a penalty of Rs. 500 only under Rule 173Q of the Central Excise Rules. We find no ground to interfere in the findings of the authority below and we, therefore, reject the appeal.
15. My own views are that grinding a rock to a powder will not produce a new excisable product, as long as the powder is of the same nature and composition as the rock from which it is ground, and has not acquired any character by reason of the grinding to set it apart from the rock.
16. The significant thing is that the powder here is sought to be assessed under item 68, not that it has fallen into an item for "soap stone powder". The doctrine about a new product seems to me to hold true only when, by reason of the change (grinding), the new product attracts a definition in one of the tariff headings. The rule, laid down by the Supreme Court, dealt with a problem of whether a refined oil has been produced. Such an oil has a tariff heading that it fits into.
17. Item 68 is not a description. It defines nothing. We cannot say that the soap stone has become goods "not elsewhere specified", by reason of the grinding. It is not a product that has qualified for Item