1997 (1) TMI 161 - AT - Central Excise

Summary

Issues:
- Whether the activity of processing synthetic coal tar dyes amounts to manufacture under Note 6 of Chapter 32 of the Central Excise Tariff.
- Whether the respondents are liable to pay excise duty under Section 11A of the CESA, 1944 for the process undertaken.

Analysis:
1. The Commissioner challenged the order of the ld. Collector (Appeals) claiming that the activity conducted by the respondents did not fall under Note 6 of Chapter 32 of the Central Excise Tariff.
2. The respondents processed market-purchased synthetic coal tar dyes, leading to a show cause notice alleging manufacturing activity. The respondents argued they only diluted or mixed the purchased dyes without creating a new commodity.
3. The ld. A.C. held that the conversion of dyes into formulated forms ready for use amounted to manufacture, thus not covered under Note 6 of Chapter 32, leading to the appeal.
4. The SDR contended that the process of dilution and mixing by the respondents resulted in a new product, formulated S.O. dyes, ready for use, thus constituting manufacture.
5. The respondents argued that they purchased formulated dyes and further processing did not amount to manufacture, emphasizing the commercial parlance test for classification.
6. The Tribunal considered whether the purchased dyes were formulated/standardised/prepared or unformulated/unstandardised/unprepared, crucial for interpreting Chapter Note 6 of Chapter 32.
7. The Tribunal analyzed the definition of formulated dyes and the process of dilution and mixing, concluding that the processes undertaken by the respondents constituted manufacture under Note 6 of Chapter 32.
8. The Tribunal noted the legal fiction created by Chapter Note 6, where even dilution for making a product ready for use amounts to manufacture, and held that the processes undertaken by the respondents were manufacturing activities.
9. Consequently, the Tribunal set aside the previous order, allowing the appeal and classifying the products under sub-heading 3204.29, determining the respondents liable to pay excise duty under Section 11A of the CESA, 1944 for the manufacturing process undertaken.