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TMI Blog1998 (3) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... e other dyes and also mix the duty paid bought out dyes with diluents such as Glauber s salt, soda ash, dextrine etc., and then sell such dyes under their brand name. The Assistant Collector of Central Excise classified such dyes under sub-heading 3204.29 and ordered that they are chargeable to duty at appropriate rate on the ground that the process of conversion of concentrated dyes into standardised/prepared form ready for use is a process of manufacture. The lower appellate authority accepted the contention of the respondents (based upon the documentary evidence in the form of gate passes for the relevant period) that the dyes purchased by the respondents were standardised/formulated/prepared dyes which had been converted to reformulated dyes by addition of diluents and, therefore, conversion of such dyes would not amount to manufacture. Hence this appeal by the Revenue. 3. We have heard Shri A.K. Agarwal, learned SDR and Shri S.N. Sejpal, learned Advocate. 4. From the records, it is seen that the following operations are performed by the respondents in their factory : (a) Repacking duty paid dyes and sale to customers after affixing their own labels. (b) Mixing/grinding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket for conversion into standardised or prepared forms ready for use and this process amounts to manufacture as laid down in the Note 6 of Chapter No. 32. Diluents etc., are used to decrease or standardise their colouring power. As regards applicability of the Bombay-I Collectorate s Trade Notice No. 48 (MP)/Synthetic Organic Dyes (1)/86, dated 14-7-1986, it is stated that such process are undertaken by the Textile Mills etc. in the preparation of Dye Batch which are basically in relation to the use of such dyes by the actual user. They do not merely add the diluents but after completion of manufacturing process with the aid of power assign batch no./new shade no. and also their own brand name and market the dyes as their distinct product. Therefore, the clarification in the Trade Notice is not applicable to them." 7. It was the Department s contention that mixing the concentrated S.O. Dyes brought from the market with chemicals, Glauber s Salt or dextrine for the purpose of dilution and changing the original formulation/size by mixing, grinding and pulverising certainly amounts to manufacture since a different product comes out than the one brought from the market. The poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing and blending can be taken into account or otherwise as the notification has a provision that the aggregate value of clearances from any factory by or on behalf of one or more manufacturers at the reduced rate of duty under this notification shall not exceed Rs. 15 lakhs in any financial year. Now the point to be examined whether the goods cleared from the duty paid premises after mixing with other S.O. Dyes and further blending can be termed as excisable goods for purpose of computing the value of the clearances in terms of aforesaid notification. The activities of the assessee of mixing/diluting dyes from duty paid dyes has been within the knowledge of the department which cannot be denied inasmuch as it is on record that specific permission was granted to them for segregation the said premises from their original licenced premises. Apart from this the said activity including diluting dyes from duty paid dyes has not yet attracted levy of excise duty within the ambit of Central Excise Law. As such the diluted dyes manufactured by the assessee from the duty paid dyes in their duty paid premises cannot be termed as excisable goods. Moreover, diluted S.O. Dyes ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the aid of power assign batch number/new shade number and also their own brand name and market the dyes as their distinct product. This is not the issue before the Asstt. Collector. What is to be decided is whether the appellants are using as raw material formulated/standardised or prepared forms of synthetic organic dyes and whether the conversion of such dyes either by repacking or addition of mere diluents would amount to manufacture. The Asstt. Collector has failed to make his case on this vital issue. The appellants have approved that they have been bringing in formulated dyes which are ready for use and therefore in terms of Note 6 to Chapter 32, the conversion of such dyes would not amount to manufacture. The repacking of dyes, affixing their own brand name, assigning of batch number/new shade number, etc. would not constitute in itself a process of manufacture in view of the Note 6 to Chapter 32 of the schedule to the Central Excise Tariff Act, 1985. 12. I have considered the above submissions. I observe that it was incorrect on the part of the department to go on issuing show cause notices even after their own A.C. in the first instance had set aside the demand in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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