1985 (2) TMI 272 - AT - Central Excise

Summary

Issues Involved:
1. Marketability of Sandogen NH Conc.
2. Classification and excisability of Sandogen NH Conc.
3. Eligibility of Sandogen NH Liquid for duty exemption under Notification No. 101/66.
4. Whether dilution of Sandogen NH Conc. amounts to "manufacture."

Issue-wise Detailed Analysis:

1. Marketability of Sandogen NH Conc.:
The Department argued that Sandogen NH Conc. was not "goods" in the commercial sense as it was not marketed or marketable. The onus was on Sandoz to show marketability. Sandoz countered by producing a classification list from May 1973, indicating that Sandogen NH Conc. was marketed and cleared on payment of duty. The Tribunal concluded that the Department's assertion lacked evidence, and the classification list provided by Sandoz was sufficient to establish that Sandogen NH Conc. was marketable.

2. Classification and excisability of Sandogen NH Conc.:
The Department initially classified Sandogen NH Conc. under Item No. 15AA C.E.T., which Sandoz accepted and paid duty on. The Appellate Collector later ruled that dilution did not amount to "manufacture," thus the diluted product was not excisable. The Tribunal found that Sandogen NH Conc. was indeed excisable and dutiable under Item No. 15AA C.E.T., as evidenced by the approved classification list and the Department's earlier acceptance of duty payments.

3. Eligibility of Sandogen NH Liquid for duty exemption under Notification No. 101/66:
Sandoz claimed that Sandogen NH Liquid, being a diluted form of Sandogen NH Conc., was eligible for duty exemption under Notification No. 101/66. The Department argued that Sandoz had not provided sufficient details in the classification list to justify this exemption. However, the Tribunal noted that a sample of Sandogen NH Liquid had been tested in 1973 and found to be covered by Serial No. 4 of Notification No. 101/66. The Tribunal concluded that Sandogen NH Liquid was eligible for duty exemption as it was made from duty-paid Sandogen NH Conc.

4. Whether dilution of Sandogen NH Conc. amounts to "manufacture":
The Department contended that the dilution of Sandogen NH Conc. to produce Sandogen NH Liquid did amount to "manufacture" and thus the diluted product should bear the duty. Sandoz argued that dilution did not create a new product and hence did not constitute "manufacture." The Tribunal found that dilution did not result in a new excisable commodity, aligning with the Bombay High Court decision in 1980 E.L.T. 696. Therefore, Sandogen NH Liquid, being a preparation made from an excisable product, was not subject to further excise duty.

Conclusion:
The Tribunal set aside the show cause notice and rejected the appeal, affirming that Sandogen NH Conc. was excisable and dutiable under Item No. 15AA C.E.T., and Sandogen NH Liquid was eligible for duty exemption under Notification No. 101/66. The dilution process did not amount to "manufacture" from the excise point of view.