1983 (11) TMI 292 - AT - Central Excise

Issues Involved:
1. Whether the conversion of PVC resin into PVC compound amounts to "manufacture" within the meaning of Section 2(f) of the Central Excises & Salt Act.
2. Whether PVC compound falls under Item 15A(1)(ii) of the Central Excise Tariff Schedule.
3. Whether PVC compound made out of duty-paid PVC resin attracts duty again under Item 15A(1)(ii).
4. Applicability of Notification No. 206/77 exempting PVC compound from excise duty.
5. Relevance of past judgments and case laws cited by both parties.

Detailed Analysis:

1. Whether the conversion of PVC resin into PVC compound amounts to "manufacture" within the meaning of Section 2(f) of the Central Excises & Salt Act:

The Tribunal examined the process of converting PVC resin into PVC compound. The appellants argued that the process did not involve polymerisation or co-polymerisation and thus did not amount to "manufacture" under Section 2(f). However, the Tribunal noted that the process resulted in a homogenously mixed material with modified physical and mechanical properties, indicating a definite process of manufacture. The Tribunal referenced the Bombay High Court's judgment in Writ Petition No. 623/79, which held that the transformation of grey cloth into dyed and printed fabric constituted "manufacture" as it resulted in a new product with a distinct name, character, and use. Similarly, the Tribunal concluded that the conversion of PVC resin into PVC compound amounted to "manufacture" within the meaning of Section 2(f) of the Act.

2. Whether PVC compound falls under Item 15A(1)(ii) of the Central Excise Tariff Schedule:

The appellants contended that PVC compound, being a modified form of PVC resin, did not fall under Item 15A(1)(ii) due to the absence of the words "whether or not modified." The Tribunal referred to the general description of Item 15A(1), which covers artificial or synthetic resins and plastic materials in any form, including moulding powders. The Tribunal emphasized that PVC compound, being distinct and different from PVC resin, fell within the ambit of Item 15A(1)(ii). The Tribunal also noted that the absence of the words "modified" did not detract from this position, as PVC compound was not chemically modified PVC resin.

3. Whether PVC compound made out of duty-paid PVC resin attracts duty again under Item 15A(1)(ii):

The Tribunal addressed the issue of double taxation, noting that this was not a case of taxing the same product twice under the same tariff entry. The Tribunal referenced the Bombay High Court's judgment in 1983 ECR 1183-D, which held that processed cotton fabrics made out of grey cotton fabrics were excisable under the same tariff item as the latter. Similarly, the Tribunal concluded that PVC compound made out of duty-paid PVC resin could be subjected to excise duty under the same tariff sub-item. The Tribunal also mentioned Rule 56A, which mitigates the rigours of multiple-stage taxation.

4. Applicability of Notification No. 206/77 exempting PVC compound from excise duty:

The appellants argued that Notification No. 206/77, dated 29-6-1977, exempting PVC compound from excise duty, was unnecessary since PVC compound did not fall under Item 15A(1)(ii). The Tribunal rejected this argument, reiterating that PVC compound did fall under Item 15A(1)(ii).

5. Relevance of past judgments and case laws cited by both parties:

The Tribunal considered various past judgments and case laws cited by both parties. The appellants referred to the Bombay High Court's decision in India Plastic Corporation (P) Ltd. and the Government of India's decision in the Gramophone Company of India Ltd. case. The Tribunal found these cases not directly applicable to the present matter. The Tribunal also considered the Supreme Court's judgment in State of Tamil Nadu v. P.L. Malhotra but found it irrelevant to the present case. The Tribunal upheld the orders appealed against and rejected the appeal.

Separate Judgment by Member (T):

Member (T) dissented, arguing that there was no "manufacture" and that the legislative intent to levy duty again on the same item was not manifest in the First Schedule. He emphasized that mere inclusion in a general description or particularisation from it did not amount to a charge and levy of duty. He concluded that the conversion of PVC resin into PVC compound did not amount to "manufacture" and that the legislative intent to bring the product to duty was not clear. Therefore, he would have allowed the appeal.

Conclusion:

The majority decision held that the conversion of PVC resin into PVC compound amounted to "manufacture" within the meaning of Section 2(f) of the Act, and that PVC compound fell under Item 15A(1)(ii) of the Central Excise Tariff Schedule. The orders appealed against were upheld, and the appeal was rejected. The dissenting opinion argued against the majority's interpretation and would have allowed the appeal.

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