- (1.) The short question which arises for determination in these civil appeals filed under section 35l (b) of the Central excise Act, 1944 is - whether powdering of Low density Polyethylene (LDPE) and High density Polyethylene (HDPE) granules into moulding powder amounts to "manufacture".
(2.) Assessee manufactures plastic water storage tanks and toys. On 24.4.1997, the factory of the assessee was visited by Officers of anti Evasion Branch of Central Excise commissionerate, Delhi. During this visit, it was noticed that the assessee had installed the injection, moulding, extruding and pulverizing machines, operated with electric power, to handle plastic inputs and produce moulded shapes for manufacturing toys, water storage tanks, desks, tables etc. On enquiry, the process revealed that the moulding machine accepted the plastic input only and since the inputs, consisting of LDPE and plastic colouring material, were procured in the granular form, the same was first required to be intermixed in specified proportion and then pulverized to produce the moulding powder. This was done with extruders and pulverizers. After receiving the two inputs, the extruder through hoopers melted and mixed them in the melting and mixing chambers to produce filaments which after being cooled were chipped into small pieces. These small pieces produced with the extruder were later placed in the pulverizers which grinded them into powder.
(3.) Accordingly, two show-cause notices dated 1.5.1997 demanding duty for the period October, 1996 to March, 1997 and dated 4.11.1997 for the period May, 1993 to september, 1996 were issued to the assessee calling upon them to show-cause as to why the above process was not "manufacture" in view of note 6 (b) to Chapter 39 of the Central Excise tariff Act, 1985 (hereinafter referred to for the sake of brevity as "the 1985 Act"). According to the show-cause notices, the aforestated process constituted "manufacture" and the moulding powder constituted "excisable goods" as defined under section 2 (d) of the Central Excise Act, 1944 (hereinafter referred to for the sake of brevity as "the 1944 act"). According to the said show-cause notices, assessee had clandestinely removed the said powder without filing the classification list and in breach of Central Excise Rules, 1944 (hereinafter referred to for the sake of brevity as "the 1944 Rules") resulting in escapement of duty from assessment Consequently, the department issued the above two show-cause notices under rule 9 read with section 11a of the 1944 Act.;