THE Supreme Court decided to examine whether the process of addition of multi-functional additives (MFAs) to petrol and diesel and retailing them as premium brands amounts to manufacturing for the purpose of imposition of excise duty. The Central Excise department has approached the apex court challenging order of the Customs, Excise &Service Tax Appellate Tribunal (CESTAT) on the issue. “CESTAT has erred in holding that blending of motor spirit (MS) with MFA does not amount to manufacture and thus failed to consider the fact that blending of MS with MFA gives rise to a product, Speed, with distinct brand name and usage,” said the department in its appeal.
Attorney General GE Vahanvati and advocate Chinmoy P Sharma on behalf of the department submitted before the apex court that the activity by which Speed comes into exitence is covered under the provisions of section 2(f) of the Central Excise Act. Speed has a distinct identity for which the customers pay a premium price, said the central government’s top law officer.
A bench comprising justices SH Kapadia and Aftab Alam acting on the department’s plea issued notice to BPCL and directed the corporation to file its reply.
The department in its appeal said Section 2 (f) of the Act stipulates that manufacture includes any process incidental or ancillary to the completion of a manufactured product. The process of addition of certain quantity of MFA into MS to bring into existence Speed is incidental and ancillary as the resultant product has different name, characteristics and usage. It thus comes within the meaning of ‘manufacture’ contemplated under section 2 (f) of the Act, said the department.
It further said: ”The blending of MFA to normal petrol is an irreversible process and the resultant product i.e. branded MS (Speed) can not be brought into existence but for blending of MFA with normal petrol in a given proportion.”
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