By TIOL News Service

NEW DELHI, Feb 28, 2006 : GURU Ki Kripa ho to sab theek hoga!

One of the earliest notifications granting exemption to goods manufactured without the aid of power was Notification 179/77 CE, dated 18.06.1977. This notification applied to goods falling under the erstwhile T.I 68 and was involved in all kinds of controversies basically revolving around interpretation of the terms “in or in relation to the manufacture of such goods no process is ordinarily carried on with the aid of power.”

Fortunately, this notification left the scene after its rescission by notification 180/86 CE, dated 01.03.1986. However, the issues remained, for a new avatar of this notification was issued viz. 167/86 CE, dated 01.03.1986.

We take a look at some interesting judgments on this issue :-

• Shree Shankar Industries, Bombay, vs. CCE, Bombay 1984(17)ELT 402(T) - Notification 179/77-C.E., dated 18-6-1977 exempts goods falling under tariff item 68, if manufactured without the aid of power. The onus lay on the appellants to prove that they are qualified for it. Mere alleging a thing without any attempt to substantiate the same cannot take the place of proof. The appellants not only failed to prove it but, on the other hand, there is overwhelming evidence that they manufactured G.I. buckets with the aid of power. Consequently the appellants are not entitled to take the benefit of the said notification. [para 17]

• M/s Fargo Mantle Products (P) LTd., Bombay vs. CCE, Bombay, 1986(26)ELT 561(T): Power - Use of in ironing - Exemption to goods manufactured without the aid of power - Exemption admissible when ironing with the use of power done for convenient packing and ironing not a process in or in relation to manufacture - Notification No. 179/77-CE, dated 18-6-1977 - Item 68 of the Central Excise Tariff. Exemption to goods manufactured without the aid of power - Benefit inadmissible when drying done with the aid of power - Notification No. 179/77-CE - Item 68 of the Central Excise Tariff.

• CCE vs. Rajasthan Chemical Works, 1991(55)ELT 444(SC) when the Gujarat High Court decision in Nirma Chemical Works vs. UOI, 1981(8)ELT 617(Guj) holding ground for ten years was overruled. : “We are, therefore, of the view that if any operation in the course of manufacture is so integrally connected with the further operations which result in the emergence of manufactured goods and such operation is carried on with the aid of power, the process in or in relation to the manufacture must be deemed to be one carried on with the aid of power. In this view of the matter, we are unable to accept the contention that since the pumping of the brine into the salt pans or the lifting of coke and lime stone with the aid of power does not bring about any change in the raw material, the case is not taken out of the notification. The exemption under the Notification is not available in these cases.”

• Impression Prints vs. CCE, Delhi, 2005(187)ELT 170(SC) : What one has to see is whether the activity is so integrally connected to the production of ultimate goods that but for that process the manufacture of the ultimate goods is impossible or commercially inexpedient. If it is so integrally connected then that process would be covered by the expression “made with the aid of power”. It is not necessary that the words “made with the aid of power” only refer to ingredients or commodities used in the final manufacture.

Incidentally, the ratio of these decisions were diluted to a certain extent to grant exemption to cotton fabrics falling under chapter 52.07, 52.08 & 52.09 (notification 6/2002 CE) by insertion of an Explanation to clarify that lifting to overhead tanks or emptying in underground tanks or handling of chemicals such as acids, chlorine, caustic soda, mixing and stirring of dyes, kerosene, caustic soda, gum paste and emulsion etc., by stirrer, or colour fixation by passing steam or applying sodium silicate.

A recent decision of Tribunal in the case of Gurukripa Resins Pvt. Ltd. vs. CCE, Nagpur [2004(168)ELT 277(Tri-Mum) & 2005(180)ELT 468(Tri-Mum)] once again highlighted the complexities involved in interpreting the said notification and the decades old clarification issued in the year 1978. The Revenue lost the case on account of the said Circular as the Tribunal held: “Power – Use of power – Rosin and turpentine oil – Use of power for drawing water into overhead tank not amounts to use of power in or in relation to manufacture – Benefit of exemption under notification 179/77 CE., dated 18.6.1977 available – M.F. (D.R) Letter no. B-36/11/77-TRU, dated 10/16.01.1978.”

Incidentally, against the Tribunal order in the case of Gurukripa Resins Pvt. Ltd., cited as 2004(168)ELT 277(Tri-Mum), the Civil Appeal no. D 20321 of 2005 filed by Commissioner of Central Excise, Nagpur has been admitted by the Hon’ble Supreme Court on 25.11.2005 [2006 (193)ELT A195 (SC)].

The best way to avoid such disputes was to do away with exemptions of this nature and it was only in this Budget that the government had the courage to do it.

Notification 21/2006 CE., dated 01.03.2006 rescinds notification 167/86 CE and so also such “powerless exemption entries” envisaged in other notifications like 3/2005 CE, etc. have been omitted by notification 7/2006 CE.

A Powerless feeling now – Yes, being in power for twenty years makes one feel on top of the world.