1989 (12) TMI 175 - AT - Central Excise

Summary

Issues Involved:
1. Whether silicone emulsion obtained by the appellants is chargeable to Central Excise duty under Tariff Item 15A(1).
2. Whether the demand for duty is time-barred.
3. Whether the process of making silicone emulsion constitutes 'manufacture' under Section 2(f) of the Central Excises & Salt Act, 1944.
4. Appropriate classification of the silicone emulsion under the Central Excise Tariff.
5. Applicability of Notification No. 101/66-CE for exemption.

Issue-wise Detailed Analysis:

1. Chargeability to Central Excise Duty under Tariff Item 15A(1):
The appellants contended that no chemical synthesis took place in the preparation of silicone emulsion and that the silicone oil used had already borne countervailing duty under Tariff Item 15A(1). The lower authorities rejected this contention, holding that the emulsion was chargeable to duty under Tariff Item 15A(1) of the Central Excise Tariff, citing Explanations II & III below Tariff Item 15A. However, the Tribunal referred to a similar case, Collector of Central Excise, Bombay III v. M/s. Auxichem, where it was held that silicone preparations were not chargeable under Item 15A(1) but under Item 15AA. The Tribunal concluded that the appellants' silicone emulsion was not in primary form but preparations containing silicones and hence not classifiable under Item 15A.

2. Time-barred Demand for Duty:
The appellants argued that the demand for duty was partly time-barred as the show cause notice was issued on 26-10-1982 for goods cleared from 1-3-1982 to 30-9-1982. The Tribunal allowed this point to be raised, noting that the Department had not made a case of suppression of facts or willful misstatement by the appellants. Thus, the demand for duty should be limited to a period of six months under Section 11A of the Central Excises & Salt Act, 1944.

3. Process Constituting 'Manufacture':
The appellants claimed that no manufacture was involved in making the silicone emulsion. The Tribunal accepted that the emulsions were not the result of chemical synthesis but disagreed with the claim that no manufacture was involved. The process of mixing imported silicone oil with other ingredients resulted in a distinct product, namely, silicone emulsion, having a distinct name, character, and use. This process of mixing was deemed manufacture within the meaning of Section 2(f) of the Central Excises & Salt Act, 1944. The Tribunal cited the case of Brooke Bond India Ltd. v. Union of India, where a similar process was held to constitute manufacture.

4. Appropriate Classification under Central Excise Tariff:
The Tribunal held that the appellants' silicone emulsion was not in primary form but preparations containing silicones, following the decision in the case of M/s. Auxichem. Thus, the appropriate classification should be under Item 15AA of the Central Excise Tariff. The Tribunal noted that the products were used in textile processing and had surface-active properties, similar to the products in the Auxichem case.

5. Applicability of Notification No. 101/66-CE:
The Tribunal noted that under Notification No. 101/66-CE, emulsifiers, wetting out agents, softeners, and other like preparations intended for use in any industrial process were exempted from the whole of Central Excise duty, subject to certain conditions. If the appellants' products met the terms of this notification and the conditions laid down therein were fulfilled, the benefit of the exemption should be extended to the appellants' products.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, holding that the appellants' silicone emulsion was not classifiable under Item 15A of the Central Excise Tariff but under Item 15AA. The demand for duty, if leviable, should be limited to a period of six months. The process of making the silicone emulsion was deemed to constitute manufacture, and the benefit of Notification No. 101/66-CE should be extended if applicable.