2016 (8) TMI 1058 - AT - Central Excise

Demand - clearance of final products i.e. base paints along with tinters and ready colour shades on stock transfer basis to the various depots on payment of duty on the MRP affixed on the packages - Whether process of mixing base paint with tinter amounts to manufacture - Held that - there is no dispute that commodity paint is specified in the 3rd Schedule and assessed to duty under Section 4A on MRP basis. It is also not in dispute that the appellant is undertaking the process of mixing of paints with tinters and re-packing the same in unit containers and are labeling the same with MRP at their depots before dispatching them for sale to the ultimate consumers. These processes are clearly covered by sub-section (iii) of Section 2(f). Consequently, the process undertaken by the appellant would amount to manufacture and excise duty will need to be paid, at the stage of the depot. Therefore, the process of mixing base paint with tinter amounts to manufacture and is liable to payment of duty at the depot. - Decided against the appellant

Summary

Issues:
- Whether the process of mixing base paint with tinters amounts to manufacture under Section 2(f) of the Central Excise Act?
- Whether the appellant is liable to pay excise duty for clearances made from depots after the process of mixing base paint with tinters?

Analysis:
1. The appeal challenges an order passed by the Commissioner (Appeals) regarding the liability of the appellant, a manufacturer of paints and thinners, for excise duty on clearances made from depots after mixing base paint with tinters.

2. The Revenue contended that the mixing process constitutes manufacture under Section 2(f) of the Central Excise Act, leading to a duty demand of ?3,87,418/-, upheld by the Commissioner (Appeals).

3. The appellant argued that tinting does not amount to manufacture as it does not create new goods, citing relevant case laws and a CBEC Circular in support.

4. The Tribunal noted that the process of mixing base paint with tinters to obtain desired colors/shades was considered manufacturing by lower authorities.

5. Referring to Section 2(f) of the Central Excise Act, the Tribunal emphasized that the appellant's processes, including mixing, repacking, and labeling, fall under the definition of manufacture, especially under sub-section (iii).

6. It was established that the appellant's activities, involving mixing paints with tinters and labeling with MRP, align with the definition of manufacture under the Act, requiring duty payment at the depot stage.

7. The Department argued that the plea challenging the duty payment cannot be raised at this stage and highlighted that the resultant mixed paint would have a higher MRP.

8. Consequently, the Tribunal upheld the impugned order, affirming that the process of mixing base paint with tinters constitutes manufacture, warranting duty payment at the depot, and dismissed the appeal.

9. The appeal was ultimately dismissed, affirming the liability of the appellant to pay excise duty for clearances made from depots after the tinting process.