1. Under letter dated 20-3-1978, the Superintendent of Central Excise, Bhilwara-1, intimated the Respondents, M/s Shree Pratap Commercial Company Private Limited, that the product manufactured by them falls under Central Excise Tariff Item No. 22F, and duty on the said basis has to be paid on the removals already made during the period 16-3-1976 to 11-5-1977 and particulars regarding clearances subsequent to 12-7-1977 to 28-2-1978 may be furnished and also from 1-3-1978 and future clearances may not be taken without obtaining an appropriate license. This was followed by a demand in form D.D. 2 dated 24-5-1978.
The respondent protested by letter dated 2-6-1978 to the Assistant Collector of Central Excise, pointing out that there had been no regular show cause notice and hearing and also been denied. The Assistant Collector thereafter adjudicated and the Chemical Examiner, on the basis of whose report the Superintendent had sent his letter, was also cross-examined during the adjudication proceedings. On adjudication, the Assistant Collector of Central Excise, Udaipur under order 2-3-1982 held that the asbestos fibre (fluff) manufactured by the respondent is dutiable under Tariff Item No. 22F and confirmed the demand for the period 24-5-1977 to 5-8-1977 and from 24-11-1977 to 24-5-1978, holding the remaining period of demand to be time-barred.
Under his order he had also held that asbestos powder manufactured by the respondent was not subject to duty. On appeal by the respondent, the Collector (Appeals), New Delhi set aside the orders of the Assistant Collector with reference to fluff also. It is against! the said order that the appeal has been preferred by the Collector of Central Excise, Jaipur. The respondent has preferred cross objection No. 224/84-D. But since no further relief has been prayed for therein except the dismissal of the appeal itself, this is really not in the nature of a cross-objection as provided under rules, being only submissions of the respondent for dismissal of the appeal.
2. Shri K.D. Tayal, Senior Departmental Representative appeared for the appellant, the respondent being represented by Shri D.N. Kohli, Consultant and S.S. Madarji, Advocate.
3. The case for; the department shortly stated is that asbestos is always in the form pf fibre, though in certain forms, such as fluff or powder, the length of [the fibre may not be sufficient to make it spinn-able and, therefore, the commodity manufactured by the respondent would fall under Tariff Item No. 22F, whether it is fluff or powder.
The respondent on the other hand contends that asbestos fluff is not in the form of a fibre and hence would not fall under Tariff Item No. 22F, the resultant product of the respondent's process being only asbestos fluff or asbestos powder and hence the order of the Collector (Appeals) is valid. It was further contended that there was no manufacturing activity carried on by the respondent and hence there was no question of the resultant product being subjected to duty.
4. At the inception Shri Kohli raised a preliminary objection that the entire adjudication proceedings were invalid since no show cause notice had been issued to the respondent before the issue of the demand and, for that reason itself, the appeal of the department has to be dismissed. But Shri Tayal pointed out that the letter of the Superintendent of Central Excise, dated 20-3-1978 gave all necessary details that have to be disclosed in the show cause notice such as the nature of the commodity, item under which the commodity fell, period for which the duty is to be demanded as well as the amount of duty that would be payable. He, therefore, contended that the adjudication proceedings cannot be found fault with on the basis of absence of: show cause notice and further pointed out that the demand under D.D. 12 form also disclosed all the above details and that, following the same the Assistant Collector had, in fact, granted the opportunity to the respondent to defend the case and, in fact, cross examine the Chemical Examiner also and in the circumstances, the interests of the respondent had been duly safe-guarded by holding an appropriate adjudication enquiry. On a perusal of records, the above contentions of Shri Tayal were seen to be well founded and accepting the said contentions we had over-ruled the preliminary objection of Shri Kohli. Thereafter both parties made submissions on the respective stands.
5. The activity carried on by the respondent is described as follows in the affidavit of the Manager of the respondent dated 5-10-1982 filed before the Appellate Collector of Central Excise during the course of hearing of the appeal : (1) I am the Manager and Attorney of the appellant and 1 am looking after the Asbestos (Mining and processing) business and its related matters of the Appellants.
(2) That crude asbestos ore in form of lumps produced at the Appellant's own mines in Rajasthan is brought to their fatory at Bhilwara. The crude lumps are first of all crushed in a jaw crushed to produce smaller size lumps which then in turn are fed to the pulverising machines for grinding to produce asbestos powder.
(3) The powder as received from the pulveriser is either sold as such or it is sieved to separate bigger particles (coarse material) from smaller particles (fine material). The bigger particles or the coarse material is sold as fluff to obtain slightly better price.
(4) That the process involved is nothing but a simple crushing and grinding of asbestos rock into powder/fluff.
The question is whether this would amount to manufacture or not. The judgment referred by both parties in this connection is Hyderabad Asbestos Cement Products Limited v. Union of India 1980 ELT 735 (Delhi). No doubt, that case dealt with a process wherein apart from crushing the rocks for separating the asbestos fibre therefrom, a further process was also carried on to separate the fibres through air suction method. The fibre so separated by that method was used for being spun into fabrics or similar materials thereafter. In the present case, the pulverised powder is sieved to separate asbestos fluff from asbestos powder, neither fluff nor powder being capable of being spun thereafter. But this distinction does not make the ratio of the Delhi High Court inapplicable to the facts of the present case. In that case the Delhi High Court had held that asbestos rock was not saleable in the market as such and that several processes were applied to the same thereafter to crush and pulverise the same and later separate the asbestos fibre from the rock particles. It was held that such a process resulting in the production of the asbestos fibre from the mined asbestos rock amounted to manufacture. In the present case also the mined asbestos rock is admittedly crushed, pulveriseq" and then sieved in order to separate asbestos fluff and asbestos powder from the rock particles. Thereafter in the present case also a definite commercial commodity emerges out of the process adopted by the respondent and is distinct from the original product mined from the quarries. Therefore, following the ratio of the Delhi High Court decision, we are satisfied that the process adopted by the respondents amounted to manufacture and the contention of the respondent to the contrary is to be rejected.
6. At this stage reference may be made to a contention of Shri Tayal, which we rejected even during the course of arguments. Shri Tayal wanted to put forward the case of the department with reference to the asbestos fluff as well as asbestos powder resulting from the manufacturing process adopted by the respondent. But it was pointed out to him that even under the orders of the Assistant Collector, the asbestos powder had been held to be non-dutiable and that there had been no appeal therefrom by the department to the Collector (Appeals) and that there had been no review show cause notice also issued against the said finding. The case before the Collector (Appeals) proceeded only with reference to asbestos fluff and the, dutiability thereof. The Collector (Appeals) held against the department on that matter also and hence the present appeal. In the circumstances, it was pointed out to Shri Tayal that the department cannot now be permitted to put forward any case regarding dutiability of asbestos powder. Shri Tayal was, therefore, not permitted to put forward any argument on that point.
7. The case of the department, as earlier noted, is short and is to the effect that asbestos is in its essential nature a fibrous substance and it does not matter whether the product resulting from the respondent's manufacturing process was fibre of spinnable lengths or fibre of non-spinn-able short lengths, as in the case of fluff, and, therefore, so long as the product was asbestos, the same would fall under Tariff Item No. 22F. In support of his contention Shri Tayal relied upon several definitions in' well-known scientific pooks. For instance he pointed out that in Van Nostrand's 'Scientific Encyclopaedia1 (6th edition) (Page 232), asbestos is mentioned to be a popular name for several fibrous minerals used as fire-proofing and heat insulating material and that the fibrous kind of ambhipole is called asbestos. The commercial variety of asbestos is mentioned therein to be a variety of serpentine called chrysotile. It is also mentioned therein that the longer asbestos fibres may be woven into various fabric materials etc., other uses of asbestos fibres being mentioned to be for manufacturing asbestos boards when mixed with portland cement etc. In the Encyclopaedia Britahnica Micropaedia Ready Reference and Index page 568, asbestos is mentioned to be a miner fibre occurring in nature in fibrous form. It is also mentioned that the fibre is freed by crushing the rock and is then separated usually by a blowing process. Still further it is mentioned that the longer fibres of at least 1 cm, length are suitable for spinning into yarn and that the shorter lengths are used in such products as paper, millboard, asbestos building materials, etc.
8. In Mc Graw-Hiill Encyclopaedia of Science and Technology (Page No.744), asbestos is known as manufactured by crushing, fiberizing, screening, vaccum separation of fibre from rock, classification of the fibre being by length. So far as uses are concerned, long fibres are mentioned to be used for spinning into yarn and woven into cloth; medium and short fibres being used for making asbestos shingles, sheet siding, pipe, floor tile, etc.
9. In the Condensed Chemical Dictionary Tenth Edition revised by Gessner G. Hawley (Page No. 90), it is mentioned that asbestos is a group of impure magnesium silicate minerals occurring in fibrous form.
Specifically referring to amphibole, it is mentioned that such fibres are generally brittle and cannot be spun but are more resistant to chemicals and to heat than serpentine asbestos.
10. Based on the above citations, Shri Tayal contends that asbestos being thus essentially found in fibrous form, the length of the fibre being important only with reference to the uses to which the material is to be put, the commodity manufactured by the respondent, i.e. fluff would also fall under Item No. 22F of the Central Excise Tariff, though the length of the fibre in such fluff may not be sufficient for spinning.
11. Shri Kohli oh the other hand contended to the contrary. He pointed out that the variety of asbestos available in Rajasthan, and which alone is quarried and crushed by the respondent, belongs to the amphibole variety and the nature thereof is not fibrous. He further contended that in that nature of the items mentioned in Item No. 22F, the commodity that would fall under that item would have to be fibre that could be spun into fabric. But this coritention is not acceptable since the said Item 22F included slag wool and rock wool also, which admittedly are not spinnable. Therefore, the fact that the amphibole variety of asbestos may not yield spinnable variety of asbestos fibre, would not take the same outside Item 22F of the Central Excise Tariff.
But the question would be whether the fluff manufactured by the respondent out of the amphibole asbestos would be fibre or not.
12. The Chemical Examiner had, on analysis of the material manufactured by the respondent, stated his opinion that each of the four samples sent for analysis is asbestos in the form of short fibre. No doubt, no copy of the chemical examination report appears to. have been given to the respondent before the issue of the notice dated 20-3-1978. But during the adjudication proceedings before the Assistant Collector, the Chemical Examiner had been produced for cross examination and had been cross examined; the notes thereof being found in pages 26 to 29 of the paper book filed by the respondent. The Chemical Examiner has specifically stated in cross examination also that the material manufactured by the respondent consists of fibres though of short length. He has further stated that the microscopic structure of the fibres in spinnable lengths as well as in the fluff are similar except in length. The respondent had certain samples analysed by the Department of Geology of the University of Rajasthan, the report being found in pages 7 to 9 of the paper book of the respondent. The Chemical Examiner had been shown this report also during his cross-examination, but stated that the said report is also not against his opinion. Shri Kohli referred to the fact that photographs Nos. 1 to 3 in the said report are referred to be of substances acicular in nature and contended that this would distinguish fibre obtained from chrysotile variety of which the photographs are Nos. 4 to 6, which shows bent fibres. But the Chemical Examiner has stated that though photographs 1 to 3 are of substances of needle like structure, they are yet short fibres.
13. Shri Kohli then referred to an extract from Indian Mineral Year Book 1980 (pages 13 to 14 of the Paper Book of the respondent). But even here under the heading 'Grading and Marketing', the reference is to such grading depending upon the fibre length only. Five different grades are mentioned, the last two belonging to powder and dust. The last sentence in that paragraph reveals that other producers of amphibole asbestos sell their output as crude or fluff and powder. This does not mean that such substances are not fibrous as in the case of the longer length.
14. Shri Kohli then referred to another report on a sample sent by the respondent to the Indian Bureau of Mines (pages 15 to 17 of the paper book of the respondent). In this report also anthophyllite is mentioned to occur as prismatic as well as in fibrous form, it being further stated that the sample sent when subjected to crushing and fine grinding results into powder. Evidently no sample had been sent which would result in fluff, as admittedly manufactured by the respondent.
15. Shri Kohli then made reference to a book "Asbestos from Rock to Fabric" by Charles Z. Carroll-Porozynski, published by the Textile Institute, Manchester (1956) and another book "Asbestos Fundamentals origin-properties-mining-processing : utilization" by Hans Berger, translated from German by Ralph. E. Oesper of the University of California and published by Chemical Publishing Company, INC, New York (1963). These two books refer to the manufacturing process by which the fibre is finally separated from the crushed rock and then woven into fabrics, the process of separation consisting of several stages. But the extracts from these books do not make out that asbestos may be of non-fibrous character also.
16. It had oeen earlier seen that the Delhi High court, in considering the case of another manufacturer of asbestos had held, on a consideration of various relevant materjial, that the asbestos obtained by crushing rock and separating the minerals would fall under Central Excise Tariff Item 22F, the process being one of manufacture. The various technical books cited by Shri Tayal conclusively establish that asbestos is always fibrous in character, the classification being with reference to length of the firbre. While the amphibole variety available in the mines used by the respondent would appear to produce asbestos fibre of short length and, therefore, not spinnable, that would not for that reason fall outside Central Excise Tariff Item 22F.Consideration of the materials relied on by Shri Kohli also does not, as earlier j seen, lead us to any contrary conclusion. In the circumstances, on a careful consideration of the submissions of both sides, we are satisfied that the material manufactured by the respondent would also be asbestos fibre as falling within Central Excise Tariff Item 22F. But in so far as no appeal had been preferred by the department against order of the Assistant Collector, in relation to asbestos powder manufactured by the respondent, the department was not permitted to raise any argument with reference to such powder in this appeal, arguments being confined with reference to fluff only. For the reasons stated earlier, we argee with Shri Tayali in his contention that such fluff would fall under Item 22F of the Central Excise Tariff.
17. No doubt, Shrii Kohli raised a further contention that the order of the lower authority refers to a trade enquiry, the particulars of which had not been disclosed !to the respondent, and for that reason also the enquiry had not been conducted properly. But as Shri Tayal pointed out, the trade enquiry appears to have been with reference to asbestos in the form of powder (as; is seen from the order dated 2-3-1982 at pages 52-53, of the respondent's paper book). Therefore, so far as the matter now under appeal relating to fluff, the trade enquiry does not appear to be of any relevance.
18. But Shri Kohili pointed out that so far as the demand for the period 24-5-1977 to 5-841977, the same was barred by time on the date of the issue of the demand in form D.D. 2, i.e. 24-5-1978. There is no doubt that as on 24-5-1978, the demand for period beyond six months would be barred by time. This would be so even with reference to the date of issue of the letter by the Superintendent of Central Excise (20-3-1978). This Tribunal has held in the Five Member Bench decision in the Atma Steel Case 1984 (17) ELT 331 (Tribunal) that it is the period of j limitation as on the date of issue of show cause notice that would be relevant on the question of limitation and not the period as was in force during the period covered by the short levy. Therefore, in the present instance Shri Kohli is correct in his contention that so far as the demand for the period 24-5-1977 to 5-8-1977, the demand was barred by time.
19. In view of the above discussion, we hold that the order of the Collector (Appeals) |is liable to be set aside. But so far as the order of the Assistant Collector dated 2-3-1982, the same, while being restored, will have to be set aside so far as the demand for the period 24-5-1977 to 5-8-1977. The appeal is accordingly allowed on the above terms. The cross-objection is dismissed.