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TMI Blog1993 (2) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... /71 dated 29-9-1971 and done so correctly. The problem now boils down to the fact whether the polyethylene granules after they are added with an anti-oxidant are again liable to duty. The goods after the addition of anti-oxidant, are called vulcanisable polyethylene and are used for high tension cable manufacture. Does this process tantamount to. manufacture is the question. As has been explained polyethylene granules are manufactured. They are normally cleared as such. A portion of it is used to vulcanisable polyethylene. This is made by addition of anti-oxidant. No change takes place chemically. The goods even after this addition remain polyethylene granules. The Supreme Court in the case of Delhi Cloth and General Mills had held that the word manufacture used as a verb is generally understood to mean as bringing into existence a new sub-standard (substance) and does not mean merely" to produce some change in a substance", however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases Vol. 26 from an American judgment. The passage runs thus Manufacture implies a change, but every change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re adding anti-oxident to polyethylene granules. This is contrary to the report of the Chemical Examiner that an organic chemical has been used - viz. dicumyl peroxide. 3. It will be seen from the above that while the Assistant Collector held that no duty need be paid at the stage of production of polyethylene granules and the liability should be discharged on the final product viz. vulcanisable product, Collector (Appeals) has decided that if duty has been paid on polyethylene granules, no further liability arises after mixing of anti-oxident. 4. A brief narration of facts is necessary to explain the background of the dispute. Major portion of the polyethylene granules which the appellants manufacture is sold and a small portion is converted to make vulcanizable polyethylene. The Test Memo, dated 17-9-1984 for test of a sample of XLPE (HPDEI 4201) (vulcanizable polyethylene) with the report of the Chemical Examiner, dated 4-12-1984 on a test of the sample which was produced by the learned Departmental Representative is as under : Description of sample - XLPE (HPDEI 4201) (Vulcanizable Polyethylene) Process of manufacture in brief Low Density Polyethylene Granules (falli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cable diameter compared to thicknesses necessary with paper cable and butyl rubber. (3) The excellent moisture resistance of vulcanizable polyethylene makes it suitable for duct and direct burial cable and permits more economical design criteria and installation facilities in high voltage service." 7. It is upon receipt of the Classification List and the note setting out the manufacturing process and end-use that the Assistant Collector passed the order which was set aside by Collector (Appeals). 8. Shri L. Narasimha Murthy, the learned Departmental Representative submits that the mixing of dicumyl peroxide to polyethylene should be regarded as a process incidental or ancillary to the completion of the manufactured product and to that extent, it cannot be denied that a commercially new product with a distinctive name, character and end-use emerges after the mixing. He referred to the Condensed Chemical Dictionary by Gessner Hawley (X edition) in which one of the uses of dicumyl peroxide is shown as a vulcanizing agent and submitted that the quality of vulcanisation is imparted by treating polyethylene with dicumyl peroxide. It also appeared from The Encyclopedia of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additive sodium hexametaphosphate is a dispersal agent and it is used only in P.P.M. (Parts per million) quantities. It is not the smallness of the quantity used that matters but the results achieved. As it will be seen from the literature, what is sought to be achieved by the product is to effect a micro-thin coating of the resin on the moving surfaces of the engine i.e. in the piston rings and the sides of the chamber, so that the slippery surfaces that PTFE provides and the antistic property that it has, is achieved. Incidentally, there is also cleaning of the surfaces of contact and the coating is not corrosive. For this purpose, homogeneous bonding of a very high order is needed; hence what is described as blending is a controlled and delicate operation of manufacture to achieve the above desired objectives. 15........The dispersing agent, sodium hexametaphosphate does the trick of dispersion of PTFE in such a fine form and efficient way that what finally emerges is a micro-thin coating on the moving surfaces which are in contact." (Emphasis added) 11. Shri Murthy s contention was that just as Sodium hexa-metaphosphate changed the properties of PTFE by blending in very sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fillers to phenol formaldehyde resin does not result in emergence of a new product) (e) Collector of Central Excise, Bangalore v. Mallaya Fine Chair (Pvt.) Ltd. -Tribunal s Order No. 1245/90-C, dated 13-11-1990 (unreported) (Food colours - adding of common salt or Glauber s salt or potable water and repacking into convenient retail packets did not amount to manufacture) 13. Shri Lakshmi Kumaran also placed a copy of the clarification issued by the Central Board of Excise Customs in their Letter F. No. 93/2/82-Cx. 3, dated 5-5-1982 that conversion of duty-paid Phenol Formaldehyde resins into Phenol Formaldehyde moulding powder falling under Item 15A(1)(i) did not involve any chemical reaction and therefore the moulding powder was again not liable to duty. 14. On the question of later the better principle of collecting excise duty Shri Lakshmi Kumaran referred to the unreported decision of the Tribunal in the case of Modern Steels v. Collector of Central Excise, Chandigarh, [Order No. E/2/92-B1, dated 7-1-1992 - Since reported vide 1992 (57) E.L.T. 220 (Mad.)] and submitted that it was held by the Tribunal in this case that where duty was chargeable on steel ingots its le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter or use. In the present case, the name of the product does not change in the sense that it continues to be called polyethylene, though, of course, vulcanizable polyethylene. But its properties (character) as well as its uses undergo material change. This fact is fully explained in the note on the manufacturing process submitted by the respondents (reproduced in para-6) and, as highlighted by the learned DR and indicated in para-10. It is also clear from the Encyclopaedia of Chemistry by Hampel Hawley cited by the learned DR referred to in para 9. In view of these factors, we are of the considered view that vulcanizable polyethylene is a distinctly different product from polyethylene in terms of the tests prescribed by the Supreme Court. 18. We have also to consider the points made by Shri Lakshmi Kumaran and the case law cited by him. The decision in the Asian Cables Corporation case relies heavily on the Encyclopaedia of Chemistry and refers to chemically cross-linking of polyethylene with dicumyl peroxide; and commercially cross-linked polyethylene having found widest application in power cable insulation. The essential test of excisability is marketability of a produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the erstwhile Chief Chemist vide this office U/o C. No. 22-Ex. 0/75, dated 9-4-1975 (page 3/n.s. of linked file No. 93/20/74-CX. 3) that both phenolic resin and phenolic moulding powder are covered as Phenoplast" under Item 15A(l)(i) of C.E.T. The generic name Phenoplast comprises a wide range of resinous material derived from the condensation reaction of Phenol or its homologues (cresols, xylenol, etc.) or substituted phenol with aldehydes such as formaldehyde, etc. The abbreviation P-F stands for Phenol formaldehyde. The process of mixing fillers, dyes, catalyst like Hexa Methylene Tetramine , lubricant, etc., with the Novolac or two stage P-F resin does not involve chemical reaction. This compounding process can be regarded as a physical blending. The change in physical properties does not result from condensation, polycondensation, etc. These fundamental reactions actually take place during the process of manufacture of the P-F resin itself from the raw materials. A similar change in form, i.e. powder to liquid/paste takes place in case of PVA (Polyvinyl alcohol) resin where no chemical reaction occurs. Attention is invited to M.F. (DR) F. No. 93/1/72-CX, dated 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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