1995 (9) TMI 197 - AT - Central Excise

Summary

Issues Involved:
1. Whether the process of purification of chemicals by distillation and recrystallisation amounts to "manufacture" u/s 2(f) of the Central Excises and Salt Act, 1944.
2. Whether the purified chemicals are distinct commercial commodities from the raw materials.

Summary:

1. Process of Purification as Manufacture:
The appellants, a Central Excise licensee, filed a classification list effective from 1-4-1983, declaring laboratory and fine chemicals under Tariff Item 68. The dispute arose regarding the purification of bought-out chemicals by distillation/recrystallisation. The appellants argued that this process does not amount to "manufacture" u/s 2(f) of the Central Excises and Salt Act, 1944, as no new product with a distinct name, character, and use emerged. The Assistant Collector initially agreed, but the Collector (Appeals) reversed this decision, stating that the purified products have distinct identities and uses compared to the raw materials.

2. Distinct Commercial Commodities:
The appellants contended that the purified chemicals retained the same name, character, and use as before purification. They argued that the increase in purity levels was marginal and did not result in a new product. The Tribunal, in its earlier decision, agreed with the appellants, but the Revenue appealed to the Supreme Court, which remitted the matter for fresh consideration. The Tribunal, upon rehearing, reaffirmed that the purification process did not result in a new commercial commodity, emphasizing that the chemicals' names, compositions, and uses remained unchanged.

Legal Precedents and Reasoning:
The Tribunal referenced several legal precedents, including Union of India v. Delhi Cloth Mills, South Bihar Sugar Mills v. Union of India, and Empire Industries Ltd. v. Union of India, which established that "manufacture" implies the creation of a new and distinct article. The Tribunal concluded that the purification process did not meet this criterion, as the chemicals remained essentially the same before and after purification. The Tribunal also noted that imposing excise duty on the purified chemicals would amount to double taxation, as they would still be classified under the same tariff heading.

Conclusion:
The Tribunal held that the process of distillation and recrystallisation undertaken by the appellants does not amount to "manufacture" u/s 2(f) of the Central Excises and Salt Act, 1944, as no new commercial commodity with a distinct name, character, or use emerged from the process. The appeal was allowed, and the impugned order was set aside.