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TMI Blog1995 (9) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case as far as this activity of the appellants is concerned. Apart from the above, the appellants also undertake purification of bought out chemicals by way of distillation/recrystallisation. This was declared in the classification list as `chemicals purchased from market further repacked/purified (Annexure C) . Annexure C to the classification list described the chemicals purchased from the market and further repacked/purified. The entire dispute in the present case relates to this activity of purification of chemicals undertaken by the appellants. 3. The dispute before me is confined to the purification process undertaken by the appellants through distillation/recrystallisation as this was the question posed before me as Third Member for resolving the difference of opinion in the order of the Hon ble Members of this Tribunal who heard the matter originally and which judgment is reported in [1991 (56) E.L.T. 393 (Tribunal)]. 4. The appellants were issued with a show cause notice dated 30-3-1983 alleging that the process of purification amounts to process of manufacture. The appellants filed their reply dated 2-9-1983. Relevant portion of the reply is extracted below : 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemicals containing moisture. Then same is dried. If Aluminium ammonium sulphate - ALNH4(SO4)2. 12H2O M.W. 453.32 is purified then chemical remains the same chemical i.e. Aluminium ammonium sulphate ALNH4 (SO4)2. 12H2O M.W. 453.32. That means that chemical properties remains the same. In this process no new product emerges. Distillation : (Simple distillation) In this purification process, the liquid chemicals (solvents) are poured into distillation units and then heated either electrically or by steam and the distillates are collected in the other vessel. In this process, the first distillates is taken out and thereafter whatever material comes is collected which is in pure liquid form. The remaining liquid (last residue) about 1 to 2 liters are taken out. If Acetic acid glacial- CH3.COOH - M.W.60.05 is distilled then the chemical remains the same chemical i.e. Acetic acid glacial-CH3.COOH - M.W.60.05. That means that chemical properties remains the same. In this process, no new product emerges. The process does not involve fractional distillation." 5. The appellants filed their further reply dated 25-11-1983, inter alia, contending that the process of purification of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry has a special purpose of using the above chemicals. From the purpose, you cannot distinguish whether the item is manufactured or not ? But it should be taken chemically how the item is manufactured by changing its identity and known by a new trade name. Ammonium Chloride is manufactured `by product of ammonia Soda process but this process we do not carry out, whereas we buy as Ammonium Chloride and final product remains as Ammonium Chloride only. As such the special purpose has no bearing on manufacturing. The chemicals which are purifying have 90% uses for various industrial use and 10% uses in Laboratory for testing. Same way technical material have major various industrial uses and also minor uses in School and College in laboratory for testing. As such you cannot distinguish whether the item is manufactured or not, but chemical reaction must take place and produces a new product with new name, then only you can call as manufactured item. ACETIC ACID AR EL grades are used as Laboratory Reagents for synthesis in R D in research for production of new items, rayon industry, pharmaceuticals, electronic industry and food additive. Distilled Acetic Acid of above all gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Bombay passed the order dated 31-3-1994 holding that the process of distillation and recrystallisation does not amount to manufacture. Against this order, the Department filed an appeal under Section 35E (4) of the Central Excises and Salt Act, 1944 before the Collector (Appeals), Bombay. The Collector (Appeals) after granting an opportunity of personal hearing, passed order in appeal No. M-23/B11-14/87, dated 20-1-1987. The relevant portion of the order-in-appeal is reproduced below :- I have carefully gone through the case records, various arguments contained in the application in Form EA-2, Cross objection, Memo/Written submission and those argued by the Representatives of both the parties during the course of personal hearing. In the instant case, the products in question have a distinct identity and use as compared to the raw materials used for their production and these are also known in the trade parlance as distinct from the raw materials. The Hon ble Supreme Court in the case of Union of India v. Delhi Cloth Mills [1977 (1) E.L.T. J 199)] and in the case of South Bihar Sugar Mills v. Union of India [1978 (2) E.L.T. (J 336)] has taken above view. Order-in-original pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct. Both prior to purification and after purification, the product is sold in the same name and it also has the same character. The use of the product has also not changed. Citing the example of Acetic Acid and Ammonium Nitrate as an illustration, the Counsel for the assessees contended that both prior to purification and after purification, the product is bought and sold and identified in the market only as Acetic Acid or Ammonium Nitrate as the case may be. Thus, there is no change in the name of the product. The character of the product remains the same totally. The product is also put to use as Acetic Acid or Ammonium Nitrate only. Even when it is used in the laboratory, it is used only as Acetic Acid or Ammonium Nitrate only. It was contended by the learned Advocate that based on the particular use which the commodity is put to, out of the various possible uses, the product cannot change. The learned Counsel for the assessees also contended that there is no basis or evidence in support of the learned Member (Judicial) s finding in Para 12 of the order that the name, character and use of the product has changed after purification. 9. Replying to the contentions of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials used for production and these are also known in the trade parlance as distinct from the raw materials. No basis of evidence whatsoever has been cited by the Collector (Appeals) in support of this conclusion. Even before me, the learned DR has not placed any material to substantiate this finding of the Collector (Appeals). In the reply dated 25-11-1983, appearing at pages 40 to 44 of the paperbook, the appellants have pointed out as to how the Revenue s contention that there is substantial increase in purity is not correct. The correctness of this factual position indicated in the reply before the original assessing authority at the very first stage had not been disputed by the Revenue at any stage. Even the learned DR did not dispute the correctness of the submission regarding the percentage of increase in the purity level. It is thus evident from the reply dated 25-11-1983 which has not been disputed by the Revenue that the percentage of increase in the purity on account of the process of purification viz. distillation and recrystallisation undertaken by the appellants is not significant. In the illustration pointed out in the reply the increase in the purity level is les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are respectively given as liquid and vapour phase oxidation, oxidation, reaction in the presence of a catalyst and fermentative oxidation. In the present case, however, the appellants start with Acetic Acid of purity 99.5% and end with Acetic Acid of 99.7% purity. 13. The Hon ble Gujarat High Court in the case of Vijay Textile v. Union of India [1979 (4) E.L.T. (J 181)] in Para 10 of the judgment had referred to a judgment of King s Bench in Michical v. Finch (1906) 2 KB 352. The appellants before the Court in that case subjected a certain 330 sachharine (that is sachharine 330 times as sweet as sugar) to a chemical process, the result of which was that in some cases, 550 sachharine (that is sachharine 550 times as sweet as sachharine) was produced, in others a mixture sweeter than 330, but not as sweet as 550 Sachharine. It was held by the Court that the appellants were not manufacturing sachharine within the meaning of the Finance Act, 1901, so as to be compelled to take out the excise licence required by Section 9 of that Act and Section 2 of the Revenue Act, 1903 and to obtain from an officer of Inland Revenue, a book such as prescribed by Regulation No. 633 of the Statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... require pure chemicals and others who may not require pure chemicals . Further, in the memorandum of Cross objection filed before the Collector (Appeals) at page 60, the appellants have submitted as under : Both the products received for purification and obtained after purification bear the same name (with change of grade) and both of them can be put to identical use. No ground is given in support of the contention that the end product has distinct identity and use as compared to the raw materials, which are subjected to the process of purification . Thus, even going by the criteria of use, there is no difference between the starting material and the purified chemical. 14.1 In the case of Collector of Central Excise v. Anil Chemicals Private Ltd. [1985 (21) E.L.T. 889 (Tribunal)], this Tribunal was concerned with the issue whether the production of prilled ammonium nitrate 99% from AN 75% to 82% amounts to manufacture and it was held therein that the process does not amount to manufacture and that mere concentrating a product will not by that fact produce a different product. In Paragraph 16, Tribunal observed as follows : It would be easy to say that prilling results ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 In the decision of the Tribunal in the case of ILAC Ltd. v. Collector of Central Excise, Bombay - 1985 (23) E.L.T. 532 (Tribunal), it was held that the calcium carbide in that case though sub-standard, was still calcium carbide and was used as calcium carbide. Therefore, it must be treated under the excise law as calcium carbide with all the consequences that follow. The point to be emphasised in this case is that purity and grade of the chemical is not material for determining excisability but the test is whether the goods continue to remain the same even after purification i.e. whether the chemicals like ammonium chloride continue to remain ammonium chloride, etc. even after the processes of recrystallisation and distillation. 15.2 In the case of Collector of Central Excise v. Bakul Aromatics Chemicals Ltd., [1989 (43) E.L.T. 758 (Tri.)] the Tribunal was concerned with the ques- tion whether concentration of 65% formic acid to 85% formic acid by removing excess water would amount to manufacture and it was held therein that the product subjected to the process of removal of excess water and the product obtained by removal of the excess water are one and the same viz. formic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. The test that is required to be applied is : does the processing of the original commodity being into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of one possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive, but with each process suffered the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic Acid, it would only be under sub-heading 2915.10 only. That would clearly amount to double taxation. This anomaly does not get highlighted in the present matter because the Department is levying duty under Tariff Item 68 of the Schedule to the erstwhile Central Excise Tariff. It is an accepted and agreed position in the present case that the purification of chemicals is not included as a process of manufacture under Section 2(f) of the Act as it stood prior to 28-2-1986 nor is there any chapter note in any of the chapters treating purification of chemicals as amounting to manufacture. 19. As can be gathered, the key test is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity. In my view in the instant case this test has not been satisfied as the chemicals prior to the two processes concerned herein continue to remain the same after being subjected to the processes, admittedly with only a change in increase in purity. The commodity retains its identity substantially through the processing stage. Therefore, it cannot be said to have been manufactured. 20. In the light of the above discussion, I am of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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