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Gujarat Dyetex Industries Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC2117DTri(Delhi)
AppellantGujarat Dyetex Industries
RespondentCollector of Central Excise
Excerpt:
.....steam is used to drive a generator or a turbine that would be use of power and when not generating power, steam can hardly be used for any other purpose except heating. therefore, it is more reasonable to argue that the use of "steam for heating" is to be taken as one of the alternatives, excluding "power for heating". in other words, power is to be understood as standing by itself, its use for any purpose being prohibited, while in the case of steam its use is restricted to heating and so is narrower in scope. such a narrow scope appears to be unnecessary for power.8. we are unable to agree with the reading given by the appellant that if power is used at a stage prior to actual processing of the raw material, such use should not be understood as disqualifactory because the notification.....
Judgment:
1. This appeal arose from the order No. 690/80 dated 27th May, 1980 passed by the Collector of Central Excise (Appeals), Bombay. M/s Gujarat Dyetex Industries, Ahmedabad manufacture organic surface active agents (synthetic detergents) falling under item 15AA-CET and claimed exemption under notification No. 101/66-CE. Their goods fall under item 2 of this notification which reads : "Organic surface active agents (other than soap), surface active preparations and washing preparations, whether or not containing soap." "If in or in relation to the manufacture and packing of such surface active agents, surface active preparations and washing preparations, no process is ordinarily carried on with the aid of power or of steam for heating." 2. The manufacturers manufacture their detergents without power except in the pumping of raw materials in which they use power driven pumps.

The Appellate Collector held that the exemption is related to non-use of power not only in the manufacturing process but in relation to the manufacture which has a wider connotation. He further held that pumping of raw materials by means of power would constitute manufacture with the aid of power. Thus a vital condition to be eligible for the exemption is not satisfied.

3. In their appeal, Gujarat Dyetex Industries maintained that if in or in relation to the manufacture and packing of surface active agents, surface active preparations and washing preparations, any process is ordinarily carried on with the aid of power or of steam for heating, then the notification is not available. In other words it means that no power should be used in the manufacturing process and packing. They further say that the restriction of use of power only starts from the stage of processing and ends at the stage of packing. The condition does not restrict the use of power in stages prior to manufacturing or posterior to packing. They maintain that the process of manufacturing starts only in the reaction vessel and at this stage the process of reaction is done without the aid of power. Therefore, the vital condition of notification No. 101/66 is satisfied.

4. The case was fixed to be heard on 13-10-83, but the appellant wrote a letter dated 4th October, 1983 to say they were not in a position to attend the appeal on 13-10-83 for personal hearing. The appeal was, therefore, heard without representation from M/s Gujarat Dyetex Industries. For the department Shri A.K. Jain, S.D.R. appeared.

5. The learned counsel for the department argued that the condition has the words "no process is ordinarily carried on without the aid of power or of steam for heating". It is a moot point whether the heating will have to be done by either the power or the steam to disqualify the claimants. According to him the learned counsel felt that heating will relate to steam and not to power. In that case since the power has been used to pump the raw material, the condition has been violated and the appellants do not get the exemption. In his view this violation has occurred as heating does not relate to power and power has been used in the manufacture or in relation to the manufacture of the product.

6. In its appeal dated 18-11-80, the appellants contend that what is restricted is the use of power in the manufacturing process and packing only. This means that no power should be used in the manufacturing process and packing. This means that the restriction of use of power only starts from the stage of processing and ends at the stage of packing. The condition does not restrict the use of power in stages prior to manufacturing process or subsequent to packing. Therefore, the Appellate Collector was wrong when he held that the condition of the above notification is not restricted to manufacturing process.

Similarly the contention of the Appellate Collector that pumping of raw material with the aid of power constitutes manufacture within Section 2(f) of Central Excise Act is basically incorrect. They argue that the pumping of raw material does not constitute any part of the manufacturing process within the meaning of Section 2(f) of Central Excises and Salt Act. The manufacture starts only in the reaction vessel and that at this stage the process of reaction is done without the aid of power. Therefore, the condition of notification No. 101/77 is satisfied beyond doubt in their case.

7. The learned counsel for the department says that the word 'heating* relates only to steam and not to power. We are inclined to agree with this view because of the construction of the sentence which goes thus : "...no process is ordinarily carried on with the aid of power or of steam for heating." The word 'heating' should relate only to steam not merely because of the disjunctive "or" but because the genitive possessive "of" occurs before both "power" and "steam". If heating was to relate both to "power" and "steam", the construction would be "with the aid of power or steam for heating". In the construction given in the notification, the use of steam is restricted only to heating while the use of power is not restricted to any particular purpose, because if steam is used to drive a generator or a turbine that would be use of power and when not generating power, steam can hardly be used for any other purpose except heating. Therefore, it is more reasonable to argue that the use of "steam for heating" is to be taken as one of the alternatives, excluding "power for heating". In other words, power is to be understood as standing by itself, its use for any purpose being prohibited, while in the case of steam its use is restricted to heating and so is narrower in scope. Such a narrow scope appears to be unnecessary for power.

8. We are unable to agree with the reading given by the appellant that if power is used at a stage prior to actual processing of the raw material, such use should not be understood as disqualifactory because the notification speaks not of ''manufacture" alone but also of anything "in relation to the manufacture and packing...". If any activity relating to the manufacture of the surface active agent in the claimant's factory is carried on with the aid of power, such use of power disqualifies the claimant. The use of power therefore clearly is not only in the actual manufacture process but clearly relates to any act done in relation to that manufacture of the goods, even if that act is a subordinate one or an act meant only to further the process of manufacture without itself being one that is of essence an act of manufacture. There can be little doubt that the act of transfer of the slurry or raw material by power driven pumps is an activity relating to the manufacture of the surface active agents/synthetic detergents in the factory. In view of this we must hold that the use of power in the movement of the slurry before the manufacture of the synthetic detergents disqualifies Gujarat Dyetex Industries from the benefit of notification No. 101/ 66-C.E.


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