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TMI Blog1992 (7) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated 29-10-1987 requiring them to show cause as to why differential duty amounting to Rs. 89,26,251.44 should not be recovered in respect of "Solubilised vats" and "Pastes" cleared during the period 1-10-1982 to 31-7-1987. As far as "pastes" were concerned the show cause notice stated that exemption in terms of Board's instructions was available only in cases where 'pastes' were produced out of formulated dyes manufactured by other parties and not when they were manufactured in the same factory. The show cause notice further alleged that the duty being recoverable on the goods in question in the form in which they were cleared from the factory, the appellants had misdeclared the value of the goods. 3. The appellants denied all the charges in the show cause notice. However, in the impugned order dated 11-5-1988, the Collector held 'Solubilised vats' when manufactured by the assessee out of duty paid intermediate product viz. formulated dyes were not eligible for exemption under Notification No. 180/61. In this regard, the Collector also observed that the weight of the "Solubilised vats" being more than the weight of the formulated dyes used as input, duty was chargeable wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Collector's finding in regard to the Solubilised vat dyes manufactured by the appellants was also erroneous since as a result of the process of conversion of vat dyes into Solubilised vat dyes no new product emerges. He contended that such solubilised vat dyes manufactured by the appellants out of duty paid dyes falling under Chapter 32 were exempt from duty in terms of Notification No. 180/61. He pointed out that in appellants own case reported in 1981 (8) E.L.T. 684, the Bombay High Court had held that Solubilised vat Dyes (Indigosol) were exempted under Notification No. 180/61 (as amended). On these grounds, Shri Dalvi prayed that the impugned order may be set aside. 5. On behalf of the Revenue, the learned S.D.R. Smt. Ananya Ray stated that Note No. 6 to Chapter 32 provides that conversion of unformulated, unstandardised or unprepared forms of synthetic organic dyes of Heading No. 32.04 into formulated, standardised or prepared form ready for use in the process of dyeing shall amount to "manufacture". She contended that the case law cited by the appellants and Tariff Ruling No. 13/65, dated 30-9-1965 being of a period prior to the introduction of the new Tariff in 1985 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of excise leviable thereon, if and only if such dyes are manufactured from any other dye on which excise duty or countervailing Customs duty has already been paid. Schedule 1. Solubilised Vats 2. Rapid Fast Colours 3. Rapidogens 4. Fast Colour Salts" It is an admitted fact that the appellants were manufacturing solubilised vats out of formulated dyes. In this regard we consider it desirable to refer to the following extract from paragraph-6 of the impugned order: "The Solubilised vats are manufactured from formulated dyes. The said dyes are intermediate products of the assessee from which Solubilised vats are manufactured and cleared. Hence, the concession contemplated under Notification No. 180/61 is not available to the assessee as the vats have been manufactured from duty paid dyes." It is seen that the Department did not dispute the appellants' claim that they were manufacturing Solubilised vats out of duty paid standardised/formulated vat dyes falling under Heading 3204.29. Under these circumstances, we do not find any substance at all in the Collector's finding that the solubilised dyes even when manufactured by the appellants out of duty paid standardised/formul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a new excisable product viz. paste. It was nowhere alleged that the appellants were using unprepared/unformulated dyes for conversion into paste. Having regard to these facts and taking into account the appellants' claim that they were using only duty paid formulated/standardised dyes for conversion into paste, we hold that Note-6 to Chapter 32 which has been referred to by the Collector in support of his findings, is not relevant to the issue involved in this case. 10. It is thus seen that the only point that needs examination is whether conversion by the appellants of duty paid formulated/standardised dyes into paste through addition of dispersing agents (glycerine), water and other chemicals amounts to manufacture resulting in the production of a new excisable commodity. In this regard it is seen that in the case of Sandoz India Ltd. v. Union of India, reported in 1980 (6) E.L.T. 696, the Bombay High Court had held that conversion of a pigment from its solid state into a liquid state with the aid of solvent and dispersing agent in order to make it usable does not amount to manufacture since as a result of such processing no new article having distinctive name, character or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the nature and character of goods at intermediate stage was not relevant for determining the duty liability and goods have to be classified according to their nature and character at their final finished stage of production after completion of all integral processes of manufacture. Paragraph 4 of the said judgment being relevant is reproduced below: "Having regard to the process involved in the manufacture of "Calikut Special" by the respondent we are of the view that it is not possible to hold that the character of the goods at the intermediate stage of production could be taken into consideration for determining the liability under the Act. The processes involved in the instant case after the intermediate stage referred to above formed an integral part of the manufacture of the product in question and the classification of the manufactured product for purposes of excise duty should depend upon its nature and character at its final stage of production unless a contrary intention appears from the statute. It is seen from clause (vii) of Section 2(f) of the Act which is, no doubt, introduced subsequently that bleaching, heat setting, etc. are incidental and ancillary processes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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