2013 (9) TMI 936 - HC - Central Excise

Validity of Circular dated 27th July, 1995 - process amount of manufacture or not - manufacturer of electro thermo appliances used for domestic purposes, had diluted imported insecticides under sub-heading 3808.10 of the Central Excise Tariff Act, 1985, to make them marketable. In this process, solvent, perfume and stabilising agents etc. were added. - revenue contended that the process is amounting to manufacture - Whether the circular was legal and valid as it specifically seeks to override and disputes ratio and declares decision of the Tribunal in the case of Markfed Agro Chemicals v. Collector of Central Excise. Chandigarh, 1993 (9) TMI 192 - CEGAT, NEW DELHI as an incorrect and a wrong decision Held that - We need not examine this issue in great depth and deal as similar contention was raised and answered by a Single Judge of this Court in Kissan Chemicals v. Union of India 1996 (5) TMI 91 - HIGH COURT OF DELHI AT DELHI - The Board could not have issued the circular for rendering a decision of the Tribunal as irrelevant and nugatory - It was observed that issuance of the circular by the Board in the present facts was not an appropriate remedy - The remedy actually was to challenge and question the ratio in appropriate proceedings. The petitioner had drawn attention to the judgment of the Supreme Court in Union of India v. Pesticides Manufacturing & Formulators Association of India 2002 (10) TMI 95 - SUPREME COURT OF INDIA - wherein post-amendment of the tariff, the same issue was examined and it was held that amendments to Chapter 38 in 1996 and 1997 had not resulted in any difference in classification of bulk pesticides and insecticides etc. - The writ petition was allowed and the circular was quashed as well as the show cause notice issued to the petitioner - Decided inf favour of Assessee.

Summary

Issues:
1. Whether the process of diluting imported insecticides amounts to "manufacture" under the Central Excise Tariff Act, 1985.
2. Validity of the circular issued by the respondents declaring the process as "manufacture" and overriding a previous Tribunal decision.
3. Legality of the circular in light of conflicting decisions and its impact on uniformity in classification and assessment of goods.
4. Adherence to judicial decisions and the authority of the Board to issue directions contrary to Tribunal decisions.
5. Compliance with Supreme Court judgments on tariff amendments and classification of pesticides and insecticides.

Issue 1:
The petitioner, a manufacturer of electro thermo appliances, diluted imported insecticides for marketability by adding various substances. The respondents contended that this process constitutes "manufacture" under the Act, leading to a dispute over duty liability. The petitioner challenged a show cause notice and a circular issued by the respondents directing the treatment of the process as "manufacture."

Issue 2:
The circular referred to a Tribunal decision which held that dilution does not amount to "manufacture." However, the Board, under Section 37B of the Act, deemed the addition of chemicals to pesticidal chemicals as "manufacture." The High Court analyzed the legality of the circular, which sought to dispute the Tribunal decision, and found it contrary to judicial principles.

Issue 3:
The High Court referenced a previous judgment where a Single Judge held that the circular was invalid as it contradicted the Tribunal decision. It emphasized that the appropriate remedy for the revenue was to challenge the Tribunal's decision in court rather than issue a circular overriding it. The High Court noted that similar decisions were made by other High Courts, reinforcing the position on challenging Tribunal decisions.

Issue 4:
The High Court highlighted that the Board had no right to render a Tribunal decision irrelevant through a circular. It emphasized the need for challenging Tribunal decisions through proper legal channels rather than issuing circulars that contradict judicial decisions. The Court referred to the acceptance of the Single Judge's decision by the respondents and its subsequent adoption by other High Courts.

Issue 5:
In light of Supreme Court judgments on tariff amendments and classification of pesticides, the High Court allowed the writ petition, quashing the circular and the show cause notice. The Court clarified that if the respondents had other grievances against the petitioner's activities, they could pursue legal action in accordance with the law. The petition was disposed of with no order as to costs.