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TMI Blog1993 (8) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Section 6 of Central Excises Salt Act, 1944 read with Rule 174 of Central Excise Rules, 1944, and Rules 9(1), 52A, 53, 173B, 173C, 173G, and 226 of Central Excise Rules, 1944, inasmuch as they had manufactured a total quantity of 3,14,05,555 bottles (75ml.) of liquid optical whitening agent (with brand name `UJALA classifiable under Chapter sub-heading No. 3204.30 of CET, 1985 during the period 86-87 to 17-1-1990 without taking out a Central Excise Licence and removed the same without payment of duty and without observing the relevant provisions of C.E. Rules, 1944, and also contravened the provisions of Central Excises Salt Act, 1944 and of rules made thereunder by filing false declaration with jurisdictional Central Excise Range Officer suppressing facts with intent to evade payment of duty which attracts the provisions of sub-section (1) of Section 11A of the Act. 3. The annexures to the show cause notice gives details of the changes, and gist of all the statements, recorded by the investigating team. The brief facts are that the appellant commenced production of Ujala in the year 1983 and the turnover for the year 1984-85 was declared as Rs. 62,384/- for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect classification would be only under sub-heading 3204.29 of CET, 1985, as the preparation does not result in a manufacture of a fresh product. He relied on the Chemical Examiner s report, who had opined that no new product had emerged by mere physical mixing of the inputs with hot water. He drew support form the technical opinion of Shri Arvind V. Patwardan and that of Dr. N.R. Iyengar. He referred to Chapter Note 6 of Chapter 32, which noted what amounted to manufacture and even as per this Note, the activity of preparing and making Ujala did not amount to manufacture. He contended that before classifying under sub-heading 3204.90, the Department has to over-rule other headings. The product would fall under 3204.29 as `Synthetic Organic Dyes and preparations based thereon (formulated). He relied on the following ruling to contend that there is no emergence of new product : (i) Collector of C. Excise v. Indian Dye Stuff Industries - 1986 (26) E.L.T. 936 (ii) Collector of Central Excise v. Denson Engineers - 1991 (52) E.L.T. 296 (iii) Collector of Central Excise v. Gujarat Phenolics Synthetics (P) Ltd. - 1991 (53) E.L.T. 419 (iv) Coromandel Prodorite (P) Ltd. v. Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Star Paper Mills v. Collector of Central Excise, [1986 (26) E.L.T. 81]. She contended that the Collector had correctly determined the classification as the product would fall under the residuary item. 21. Shri V. Lakshmikumaran, countering the arguments, submitted that heading 3204.29 covers also preparations thereon and as the essential characteristics remained the same, it should fall in the same heading and that the ratio of Mallaya Fine Chemicals cited would squarely apply to the facts of the case. The show cause notice proposes a new classification and hence, it has to be construed as a fresh show cause notice and in the Star Paper Mills, cited by the learned SDR, the facts are different, inasmuch as, in that case, a corrigendum had been issued, while in the present case, it is a fresh show cause notice and not a corrigendum and hence, the citation would not apply. He contended that the end-use is not the criterion for the purpose of classification and hence, Acid violet dye in solution form would not fall under sub-heading 3204.90 because of a particular use. 22. We have carefully considered the submissions made by both sides and have perused the records and the cita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Chemical Examiner quoted in the show cause notice is already extracted above. As can be seen from the extract of the report, the `Ujala Liquid is stated to be in the form of bluish violet coloured liquid. It is an aqueous solution composed mainly of colouring matter . The characteristic of white powder is stated to be composed of fluorescent brightening agent and inorganic compound ; while `Blue pow-der is stated to have characteristics of ultramarine blue; and `violet powder is a synthetic, organic colouring matter Acid dye . The Chemical Examiner by his letter, dated 17-1-1990 to the Assistant Collector has stated as follows : Sir, Sub : C. Excise - samples of Acid Violet, Ujala Super Whitener, Ultramarine blue and white stainer drawn from M/s. Jyothi Laboratories on 17-11-1989 Test Report. Please see the enclosed copy of T.R. of 4 samples drawn from M/s. Jyothi Laboratories. The samples were drawn at the time of our visit to the factory along with Superintendent (Preventive) of C. Excise Head Quarters, Cochin. The entire method of manufacturing was also verified. The factory is getting the Acid Violet and Fluorescent Whitening agent from Bombay. The fluores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the appellants and the technical opinion produced by them. The burden of classification is on the Revenue and before classification is done, the Revenue has to show that a new product has emerged after a process of manufacture which has not been proved in the present case and the evidence is also in favour of the appellant. 38. Therefore, on the basis of the technical opinion and the case law cited above, we have to uphold the contention of the assessee that there is no manufacture on the addition, and mixing of Ranipal, Ultramarine blue in the liquid Acid violet dye and there is no new product emerging from such a process. 39. As regards the classification of the product, it would not be necessary for me to deal with it, as the first question has been answered in favour of the appellant. However, as my learned brother Shri Lajja Ram is taking a different view of the matter, it becomes necessary for me to answer the other two questions also. 40. In the event of the product being considered as a new product having emerged out of a process of manufacture, then its classification is required to be answered. As per the show cause notice, dated 19-6-1990, the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. Therefore Note 2 of Chapter 32 is not attracted in the present case. The product cannot be classified under Heading 3204.90 as a preparation based on synthetic organic colouring matter. The contention of the appellant that acid violet dye falls under sub-heading 3204.29 as other"; under the Heading synthetic organic dyes and preparations thereon requires to be accepted. The product `Ujala is more appropriately classifiable under sub-heading 3204.29 of Central Excise Tariff, 1985. 41. The appellants have contended that the show cause notice, dated 31-5-1991 is a fresh show cause notice and hence, the demands being time-barred, it cannot be confirmed. They have relied on the ruling of Anna Saheb Bapu Bhagate v. Collector of Central Excise, Bombay [1986 (24) E.L.T. 567]. In Paragraph 10 of this judgment, it has been held as under : 10. In this case the show cause notice had been initially issued in 1979 demanding duty for the period of six months preceding thereto. But subsequently the said show cause notice had been replaced by a fresh show cause notice, dated 9-5-1980 demanding duty for the entire period 4-11-1975 to 30-7-1979. To use the words of the Appellate Collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal brilliance of white colour. (ii) The special formula avoids corrosion of clothes, whether cotton, synthetic or silk, and ensures long life of clothes. 46. In a letter to Canteen Stores Department, it was stated that the special ingredients of `Ujala prevent fungus formation, clotting, sedimentation and disintegration. Long shelf life was said to be another peculiarity of `Ujala . 47. In statement, dated 17-1-1990, the proprietor of the firm has stated that by dipping of clothes in the solution of their product `Ujala , an attractive whiteness is obtained in the clothes. 48. On page 158 of the paper book it is stated that `Ujala is used as an auxiliary preparation so as to give brightness to the clothes washed. The purpose for which it is used is washing. It is said to be imparting brightness to the existing colours. 49. The process of preparing the product has been given by the appellants as under : (i) Water is boiled in ovens. (ii) Acid dye violet, also called acid violet, `Ranipal , a fluorescent brightener, and ultramarine blue, an inorganic pigment, are dissolved in the boiled water, in the proportion of 98.5%, 1.16% and 0.34%, respectively. (iii) The mixu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low white. (Source : Condensed Chemical Dictionary). 58. According to the party, ultramarine blue was classifiable under heading No. 3206, which covers `other colouring matter . 59. It is thus seen that each of the raw materials had a distinctive name, character and use, and the final product, produced out of the processing of these raw materials, has a different name, character and use, different from the raw materials from which it is produced. 60. The use to which the product `Ujala is put is different. Its characteristics are different. Its name is different, different from the raw materials. It has got a violet tinge and is used for washing of the clothes after use of soap/detergents, to give them an optical whiteness, to give a fluorescent effect. 61. In the light of the above discussions, with regard to the final products and the raw materials etc., let us now analyse whether the process involved in the processing of acid dye violet, Ranipal and ultramarine blue, is a process of manufacture, that is the manufacture of the washing preparation, `Ujala . 62. to 84. * * * * * * 85. In the case of Chowgule and Co. Private Limited and Another v. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a case of making any or all of the products usable for the same purpose for which they were usable before, but using the resultant product for an entirely different purpose, that is for washing of the clothes. 93. to 108. * * * * * * 109. As will be seen above, in the case before us, there are three raw materials classifiable under different heads and the same were used for different purposes. 110. Thus, the rationale of the case - Bush Boake Allen India Ltd. v. Collector of Central Excise, Madras, referred to above, is not applicable to the facts in the case before us. 111. Let us now deal with the classification of the product `Ujala . 112. Under show cause notice, dated 19-6-1990, the product was sought to be classified under sub-heading No. 3204.30 of the Central Excise Tariff. 113 to 115. * * * * * * 116. The proposal for classifying the product `Ujala under Heading No. 3204.90 was based on the reasons that it was a fresh preparation based on products falling under sub-heading No. 3204.19 (blue), 3204.21 (Acid Violet Crude), 3204.29 (Acid violet standardised and 3204.30 (Ranipal), the combination of all of which improves the colour of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture or not, has to be answered in the light of the well laid down tests by the Hon ble Supreme Court in a series of decisions. The facts and circumstances of each case have to be analysed [Refer Bombay High Court s decision in the case of Shakti Dye Works (supra)]. This is the job of those who are called upon to adjudge the matters before them, who have to come to and report their decision in a logical, judicial and judicious manner. This work cannot be delegated to any other authority, howsoever high or learned that may be, and no authority could dispose of contentious matters unilaterally in violation of the principles of natural justice. Views have to be based on reasons and the findings have to be transparent. 127. Very often in defence, statements from the experts are filed in support of the points made by the noticees. It needs to be remembered that the evidence of experts can never be conclusive as it is merely opinion evidence (Ishwari Prasad v. Mohammad Isha, 1963 (3) SCR 722). 128. It has been held in a number of cases by the Hon ble Supreme Court that expert opinion is by its very nature, weak and infirm [Refer Magan Beharilal v. The State of Punjab, AIR 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No new rules were quoted therein. Thus, the observations of the Tribunal in the case of Radhika Vitamalt v. Collector of Central Excise [1985 (21) E.L.T. 920 (Tribunal)], are not applicable to the realities in this case. 137. The Tribunal in the case of Collector of Central Excise v. Star Paper Mills [1986 (26) E.L.T. 81 (Tri.)] has held that when subsequent or second show cause notice refers to the earlier show cause notice the subsequent show cause notice is to be treated to have been issued in continuation of the earlier one and therefore, the time limit is to be computed with reference to the first show cause notice, and the second notice cannot be said to have been hit by limitation. 138. In the case before us the notice after the submissions made by the appellants, in the light of their submissions, referred to the proceedings already in progress under the original notice. In fact it referred to the submissions made by the appellants. It did not create any new demand. It did not invoke any new penal provisions. As the original notice was issued within the time of limitation, and in fact, the adjudicating authority only resurrected the demand under the normal period of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the product `Ujala is classifiable under sub-heading No. 3204.29 of Central Excise Tariff, 1985 as held by Member (J) or under sub-heading No. 3204.90 of Central Excise Tariff, 1985 as held by Member (T); (iii) Whether the show cause notice, dated 31-5-1991 is a fresh show cause notice and if so the demands are barred by time as held by Member (J) or the show cause notice, dated 31-5-1991 is a corrigendum show cause notice and the demands are not barred by time as held by Member (T), and (iv) Whether the appeal is to be allowed as held by Member (J) or to be dismissed as held by Member (T). [Order per : K.S. Venkataramani, Member (T), Third Member on reference, agreeing with S.L. Peeran, Member (J)]. - The ld. Counsel, Shri Lakshmikumaran appearing for the appellants, adressed arguments on the points of difference spelt out above. In regard to the question of classification of the product `Ujala under Central Excise Tariff Act, 1985, the ld. Counsel contended that the classification of the product under sub-heading 3202.29 is the correct one. The ld. Counsel submitted that `Ujala is based only on acid violet dye and the addition of Ranipal and ultramarine blue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon Note 6 to Chapter 32 CET in support of his arguments that there is no manufacture involved. It was submitted that so far as dyes are concerned according to Chapter Note 6, conversion of unformulated, unstandardised or unprepared forms of dye to formulated, standardised, prepared dyes alone would constitute manufacture. It was submitted that unformulated and un-standardised dyes would be classifiable under sub-heading 3204.21 and on conversion into standardised dye, they would fall under sub-heading 3204.29 and in that event, the process of conversion would amount to manufacture in terms of Chapter Note. In all other cases, it was contended that as far as the dye industry is concerned, there is no manufacture. This view had been endorsed by the Tribunal in its decisions in the case of M/s. Bush Boake Allen (India) Ltd., Madras and in the case of Collector of Central Excise v. Mallaye Fine Chem. (P) Ltd. (supra). It is the appellants case that since the inputs are already formulated dye falling under sub-heading 3204.29 changing the form mixing with other additives would not amount to manufacture. The ld. Counsel also drew support from a tariff ruling under Section 37B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltimate product `Ujala which emerges with much higher potency, than the original materials. It was, further, argued by the ld. D.R. that the chemical examiner of the department is not an authority to decide what would amount to manufacture for the purpose of the Central Excises and Salt Act, 1944. This is a question to be adjudicated by the competent authority having regard to the material evidence on record and the process in question. Admittedly, the product is known differently in the market from its ingredients. As regards the question of classification of the goods, the ld. D.R. relied upon the Calcutta High Court judgment in the case of Nilsin Company v. Collector of Central Excise, Calcutta and Orissa Others - 1985 (22) E.L.T. 739 (Cal.) and in the case of Seth Chemical Works (P) Ltd. v. Union of India - 1989 (43) E.L.T. 6 (Cal.) wherein it is held that ultramarine blue is a colorant and also emphasised that the court held that ultramarine blue is a pigment having various uses one of which is whitening or brightening textiles or clothes. The court held that not only from the standpoint of its physical constituent but also from the stand point of various uses and of popula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms ready for use in the process of dyeing. When this is so, it cannot be held that there is a process of manufacture in the production of `Ujala . The chemical examiner s report is to the effect that it is a physical mixture of the ingredients in boiling water which report has been given after study of the manufacturing process. His opinion has thus been given on the basis of material which is relevant for determining whether the process undertaken is one of manufacture of excisable goods. His opinion though not compelling acceptance by adjudicating authority, yet it also finds support from the other experts in the field, who have given the same opinion as brought out by the Hon ble Member (Judicial) in his order. It is also significant that only during the material period, along with acid dye violet, Ranipal and ultramarine blue were used by the appellants and that during the period earlier to it and subsequently, the product `Ujala was marketed without its ingredients for the same purpose. It has been established by sufficient evidence on record that the `Ujala is blueing agent which cannot be regarded as dye for which it is relevant to refer to Encyclopaedia of Chemical Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h `Ujala is manufactured, it cannot be said that a process of manufacture as envisaged in the Chapter Note, has taken place, and hence, it is to be concluded that no process of manufacture has taken place at the hands of the appellant. It is also, in this case, borne in mind that the Larger Bench in the case of Saurashtra Chemicals v. Collector of Customs -1986 (23) E.L.T. 283 has held that in classification matters, the Chapter Notes and Section Notes govern the coverage of tariff headings. The relevant headings in the tariff, observed the Tribunal, have to be interpreted and applied in the light of the Section Notes and Chapter Notes which are statutory and binding like the headings themselves. These Section Notes and Chapter Notes, sometimes, expand and sometimes restrict the scope of certain headings. In other words, the scheme of the Customs Tariff Act is to determine the coverage of the respective headings in the light of the Section Notes and Chapter Notes. In this sense, the Section Notes and Chapter Notes have an over-riding force on the respective headings. 150. Once it has been found that no process of manufacture is involved in the preparation of the product `Uja ..... X X X X Extracts X X X X X X X X Extracts X X X X
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