2017 (7) TMI 715 - AT - Central Excise

Manufacture - dilution and addition of preservatives, with branding of the product - Held that - there must be a transformation, a new and different article must emerge having a distinctive name, character or use - Applying the principle to the facts of the present case, we note that different tests conducted by the Revenue clearly indicated that the raw material as well as the impugned goods are having same chemical characters. This is not disputed - we are not able to discern any substantial point or evidence so as to interfere with the said finding of the original authority - appeal dismissed - decided against Revenue.

Summary

Issues:
Central Excise duty liability on products called Sika Latex and Sika Latex Power.

Analysis:
The dispute in this case revolves around the Central Excise duty liability of the respondent on the products named Sika Latex and Sika Latex Power. The Revenue contended that the processes undertaken by the respondent amount to manufacture, thus necessitating the imposition of Central Excise duty on the cleared products. Samples were tested, and proceedings were initiated against the respondent under tariff heading 28344010 for damp proof or water-proof compounds. The Commissioner held that the respondent's activities did not amount to manufacture as per Section 2(f) of the Central Excise Act, 1944, as they involved dilution, addition of preservatives, and branding without transforming the products into new entities.

The main point of contention was whether the respondent's activities constituted manufacture under the Central Excise Act, 1944. The Revenue argued that the products had different identities and uses, falling under chapter 38, thus warranting Central Excise duty. However, the respondent maintained that their processes did not create new products but involved dilution, addition of preservatives, and branding for marketing purposes. The Tribunal referred to the Supreme Court's principle in Union of India v. Delhi Cloth and General Mills Co.Ltd., emphasizing the emergence of a new article with distinctive characteristics for an activity to qualify as manufacture. The tests conducted by the Revenue indicated that the raw materials and final products had identical chemical properties, leading to the conclusion that no new product emerged from the respondent's processes.

The Tribunal analyzed the Commissioner's findings, which highlighted the similarity between the raw materials and the final products based on test reports. The Commissioner's decision was supported by the National Test House report, which confirmed the lack of emergence of a new product. The Tribunal found no substantial evidence in the Revenue's appeal to overturn the Commissioner's ruling. Consequently, the Tribunal dismissed the Revenue's appeal, affirming that the respondent's activities did not amount to manufacture, and upheld the original authority's decision to drop the Central Excise duty demand.