2009 (2) TMI 170 - AT - Central Excise

Manufacture Blending Change of identity and characteristics - Held that - The MS and HSD after being blended with small quantity of MFAs remain MS and HSD only, conforming to ISI specifications IS 2796 - 2000 and IS 1460 - 2000 respectively just because blending improves their quality and after blending they are sold under different brandnames like Speed , Power , Turbojet etc. they do not become products different from unblended MS/HSD, with different characteristics and usages - Their characteristics remain the same, as they both have to conform to the ISI specification for unblended MS/HSD and their usage also remain the same - a process or treatment to enhance the marketability of a product or improve the value addition does not amount to manufacture - In this case, the blending only improves the quality of the MS/HSD resulting in better value addition, without charging the basic characteristics and us ages of the products Demand can not be sustained.

Summary

Issues involved: Whether blending of duty paid branded motor spirit and duty paid branded HSD with multifunctional additives amounts to manufacture under the Central Excise Act, 1944.

Analysis:
1. Issue of Manufacture: The central issue in this case pertains to whether the blending of duty paid branded motor spirit and duty paid branded HSD with multifunctional additives constitutes "manufacture" under the Central Excise Act, 1944. The Tribunal referred to a previous decision where it was held that blending ordinary motor spirit and high-speed diesel with a small quantity of multifunctional additives to create branded products like "Speed," "Power," and "Turbojet" does not amount to manufacture. The Tribunal emphasized that the blended products still conform to the ISI specifications for unblended motor spirit and high-speed diesel, maintaining the same characteristics and usage. The process of blending was considered as enhancing the quality and value addition without changing the fundamental nature of the products.

2. Legal Precedents: The Tribunal relied on various legal precedents, including judgments by the Hon'ble Supreme Court and previous decisions of the Tribunal, to support its conclusion that a process or treatment aimed at enhancing marketability or improving value addition does not constitute manufacture. The Tribunal highlighted that previous rulings had established that activities leading to better quality and increased value of a product, without altering its basic characteristics or usage, do not fall under the definition of manufacture. The blending process in this case was deemed to fall within the scope of activities that enhance product quality and value without fundamentally changing the nature of the products.

3. Decision and Relief: Based on the precedent set by the earlier decision in the case of Hindustan Petroleum Corporation Ltd. and others, the Tribunal set aside the impugned order and allowed the appeal with consequential relief. The Tribunal's decision was grounded in the interpretation that the blending of duty paid branded motor spirit and high-speed diesel with multifunctional additives did not amount to manufacture under the Central Excise Act, 1944. The ruling emphasized that the process of blending, which resulted in branded products, did not alter the fundamental characteristics or usage of the motor spirit and high-speed diesel, thereby exempting it from central excise duty.

In conclusion, the judgment by the Appellate Tribunal CESTAT, New Delhi, delved into the intricacies of the blending process involving duty paid branded motor spirit and high-speed diesel with multifunctional additives to determine whether it constitutes manufacture under the Central Excise Act, 1944. The decision was anchored in legal precedents and a nuanced analysis of how the blending process impacted the quality and value of the products without changing their essential nature.