1983 (12) TMI 289 - AT - Central Excise

Issues Involved:
1. Whether the process of converting silicone oil into silicone emulsion amounts to "manufacture".
2. Classification of the resultant silicone emulsion under the Central Excise Tariff Schedule (CET).
3. Applicability of Item 15A(1) CET or Item 68 CET for duty purposes.
4. Whether silicone emulsion can be charged to duty again under Item 15A(1) CET if silicone oil has already paid additional duty of customs.

Issue-wise Detailed Analysis:

1. Whether the process of converting silicone oil into silicone emulsion amounts to "manufacture":

The Tribunal examined whether the process of mixing silicone oil, emulsifier, and water to produce silicone emulsion constitutes "manufacture" under Section 2(f) and Section 3 of the Central Excises & Salt Act. The Tribunal referred to the Encyclopaedia of Polymer Science and Technology, which describes the production of silicone emulsions as involving high-shear blending devices, indicating a complex process beyond simple mixing. The Tribunal concluded that the conversion process does amount to "manufacture" as it results in a product with a new name, character, and use.

2. Classification of the resultant silicone emulsion under the Central Excise Tariff Schedule (CET):

The Tribunal analyzed whether silicone emulsion falls under Item 15A(1) CET or Item 68 CET. Item 15A(1) CET covers condensation, polycondensation, polyaddition products, and silicones. Explanation II to Item 15A(1) CET specifies that silicones produced by chemical synthesis are included, while Explanation III includes emulsions. The Tribunal held that silicone emulsion, being a form of silicone, falls under Item 15A(1) CET due to the combined operation of Explanations II and III.

3. Applicability of Item 15A(1) CET or Item 68 CET for duty purposes:

The Tribunal rejected the contention that silicone emulsion should be classified under Item 68 CET. The Tribunal noted that Item 15A(1) CET specifically includes silicones, and the process of converting silicone oil into silicone emulsion falls within the ambit of this item. Therefore, the resultant silicone emulsion is dutiable under Item 15A(1) CET.

4. Whether silicone emulsion can be charged to duty again under Item 15A(1) CET if silicone oil has already paid additional duty of customs:

The Tribunal addressed the argument that charging duty on silicone emulsion would amount to double taxation since silicone oil had already paid additional duty of customs. The Tribunal clarified that additional duty of customs is not the same as excise duty. Excise duty is levied on goods manufactured or produced in the country, while additional duty of customs is levied on imported goods. Therefore, charging excise duty on silicone emulsion does not constitute double taxation. The Tribunal also noted that multi-stage taxation is a regular feature of the Central Excise taxation system.

Separate Judgment by H.R. Syiem:

H.R. Syiem, in a separate judgment, disagreed with the majority view. He argued that once a product has paid duty under a specific item, it should not be taxed again under the same item after undergoing changes. He emphasized that emulsification does not create a new product but changes its form. Therefore, silicone emulsion, which has already paid countervailing duty as silicone oil, should not be charged excise duty again under Item 15A CET.

Conclusion:

The majority judgment concluded that the process of converting silicone oil into silicone emulsion amounts to "manufacture," and the resultant product falls under Item 15A(1) CET for duty purposes. The appeal was rejected, and the stay order vacated. However, H.R. Syiem's dissenting opinion argued against double taxation for the same product under the same tariff item.

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