1986 (9) TMI 197 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of Central Excise duty on formulated dyes.
2. Determination of assessable value for the purpose of excise duty.
3. Interpretation of "manufacture" under Section 2(f) of the Central Excises and Salt Act.
4. Relevance of the Bombay High Court's judgment in the Sandoz case.
5. Validity of refund claims by the respondents.

Detailed Analysis:

1. Applicability of Central Excise duty on formulated dyes:
The Assistant Collector held that Central Excise duty was payable on formulated dyes, not at the wet cake stage. The respondents contended that the manufacturing process was complete at the wet cake stage, and further formulation did not constitute manufacture. The Collector (Appeals) sided with the respondents, referencing the Bombay High Court's judgment in the Sandoz case, which stated that the formulation of wet cake into diluted disperse dyes did not amount to manufacturing. The Tribunal, however, concluded that the formulation process did indeed amount to manufacture under Section 2(f) of the Act.

2. Determination of assessable value for the purpose of excise duty:
The Assistant Collector's orders were based on the value of formulated dyes, rejecting the prices declared for wet cake form. The Collector (Appeals) set aside these orders, but the Tribunal upheld the Assistant Collector's view that the assessable value should be that of the formulated dyes, as these were the forms in which the dyes were sold in the wholesale trade. The Tribunal emphasized that the value for assessment should include all processes that contribute to the marketability of the product, referencing the Supreme Court's judgment in the Bombay Tyre International case.

3. Interpretation of "manufacture" under Section 2(f) of the Central Excises and Salt Act:
The Tribunal considered whether the formulation of concentrated dyes into diluted forms constituted manufacture. It noted that the Supreme Court's decision in Empire Industries Ltd. supported the view that any process resulting in a commercially distinct product amounts to manufacture. The Tribunal found that the process of formulating dyes with dispersing agents and diluents created a new product with a distinct character and use, thus falling under the definition of manufacture.

4. Relevance of the Bombay High Court's judgment in the Sandoz case:
The respondents relied heavily on the Sandoz case, where the Bombay High Court held that the formulation of dyes did not constitute manufacture. The Tribunal, however, found that the Supreme Court's subsequent judgment in Empire Industries Ltd. had effectively overruled the principles laid out in the Sandoz case. The Tribunal concluded that the formulation process did amount to manufacture, making the Sandoz case inapplicable to the present facts.

5. Validity of refund claims by the respondents:
The Assistant Collector had rejected the respondents' refund claims, which were later set aside by the Collector (Appeals). The Tribunal upheld the Assistant Collector's decision, stating that the refund claims were not sustainable as the assessments were made based on approved price lists, which had become final and were not appealed against. The Tribunal emphasized that allowing the refund claims would be inconsistent with the final assessments.

Conclusion:
The Tribunal allowed the appeals, setting aside the orders of the Collector (Appeals). It held that the formulation of dyes constituted manufacture and that the assessable value should be based on the formulated dyes. Consequently, the respondents' refund claims were also rejected. The Tribunal's decision was in line with the Supreme Court's interpretation of "manufacture" and the principles of determining assessable value for excise duty purposes.