2008 (9) TMI 154 - AT - Central Excise

Manufacture - Appellant prepare branded Motor spirit and branded HSD in their depots by blending duty paid Motor spirit and duty paid HSD with Multifunctional additives (MFAs) held that blending of MS/HSD with MFA to make branded MS/HSD which sell at a premium only improves the quality of the product, and this process, would not amount to manufacture

Summary

Issues:
1. Whether blending ordinary MS and HSD with Multifunctional additives (MFA) to prepare branded MS and HSD amounts to manufacture.
2. Whether branded MS and HSD would be liable to duty under specific sub-headings.
3. Whether the process of blending ordinary MS and HSD with very small quantities of MFAs to make branded MS and HSD attracts central excise duty.

Analysis:
1. The appeals involved a common issue of whether blending ordinary MS and HSD with MFAs to prepare branded products amounts to manufacture. The Appellants argued that the addition of MFAs did not create a new product with distinct characteristics, as the branded products still remained MS and HSD. They contended that the blending process did not change the basic character of the products and cited relevant case laws and circulars to support their position. On the other hand, the Respondent argued that the additives improved the efficiency of the engine, giving the branded products different characteristics and uses compared to unbranded MS and HSD. They referred to a Tribunal judgment to support their stance.

2. The Tribunal carefully considered the submissions from both sides and analyzed the nature of the blending process. It was noted that the branded MS and HSD, after blending with MFAs, still conformed to ISI specifications and retained their basic characteristics as MS and HSD. The Tribunal emphasized that just because the blending process improved the quality of the products and they were sold under different brand names, it did not transform them into different products with distinct characteristics and usages. The Tribunal referred to previous judgments to support its conclusion that a process enhancing marketability or value addition does not necessarily constitute manufacture.

3. The Tribunal further discussed the criteria for determining manufacture as laid down by the Hon'ble Supreme Court in various judgments. It was highlighted that for a process to amount to manufacture, there must be a transformation resulting in a new product with distinctive characteristics. In this case, the blending of ordinary MS and HSD with MFAs did not lead to the emergence of a new product with different characteristics or usages. The Tribunal distinguished a previous judgment regarding blending in a different context and concluded that the blending process in the present case did not amount to manufacture. Consequently, the impugned orders were set aside, and the appeals were allowed.

This detailed analysis showcases the Tribunal's thorough examination of the legal and factual aspects surrounding the issue of whether blending ordinary MS and HSD with MFAs to prepare branded products constitutes manufacture and attracts central excise duty.