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TMI Blog2000 (2) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Rules were not available to them. It was further alleged that the goods were fresh goods cleared in the garb of goods alleged to have been received under D-3s under Rule 173H with intent to evade payment of duty. The appellants replied to the show cause notice submitting inter alia as follows: - (i) The show-cause notice was based on mere suspicion and misapprehension, no evidence having been cited in support of the Department's allegations. (ii) Rule 173H did not stipulate that the goods, received for being refined, reconditioned, repaired or subjected to similar process in the factory; must be cleared after such processing to the same parties from whom they were received. (iii) Pan Masala was a mixture of several ingredients, of which betel nut constituted the principal ingredient accounting for more than 80 per cent of the mixture. The other main ingredients were catechu and lime, which were mixed with betel nut and flavoured with a flavouring agent. Some of their customers complained about the quality of the product and returned the goods for reprocessing. The appellants carried out the reprocessing by rubbing the mixture manually and then passing it through a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Collector (Appeals) as per order dated 30-9-1993. The present appeal of the assessee is against this order of the Commissioner (Appeals). 3. We have carefully examined the impugned order and connected records of the case. We have also heard Shri Vivek Bhagat, Advocate for the appellants and S/Shri A.K. Prasad, SDR and R.S. Sangia, JDR for the Respondent/Revenue. 4. During the period of dispute (February, 1989 to February, 1990) the appellants had received certain quantities of pan masala returned by the buyers for the purpose of reprocessing. Soon after receipt of such goods, the appellants filed D-3 declarations under Rule 173H of the Central Excise Rules. They reprocessed the goods and cleared the same without payment of duty. The Department wanted to levy duty on such clearances of reprocessed pan masala, alleging that the reprocessing amounted to manufacture under Chapter Note 3 in Chapter 21 of the Schedule to the Central Excise Tariff Act read with Section 2(f) of the Central Excises and Salt Act. The appellants justified the clearances of the reprocessed pan masala without payment of duty, contending that the reprocessing did not amount to manufacture but was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such addition of a minor ingredient at the time of reprocessing cannot be considered to have brought into existence any new substance having different name, character or use from that of the original product. The ld. Counsel has, therefore, submitted that the above reprocessing of pan masala was only a process of reconditioning or repair or rectification of defect, which did not amount to manufacture. He has, further, submitted that no labeling or re-labeling or repacking as contemplated under Chapter Note 3 ibid was done by the appellants during the reprocessing of pan masala as above. The ld. Advocate has, therefore, contended that Chapter Note 3 ibid cannot be pressed into service to make the above reprocessing a case of manufacture for the purpose levy of Central Excise duty. In support of this submission, he has also spelt out the distinction between "repair" and "manufacture" by relying on the decision of the Tribunal in the case of Shriram Refrigeration Industries Ltd. (supra) 6. One of the allegations the Department had raised in their show cause notice was that the appellants, upon receipt of pan masala from the buyers, had cleared the same after reprocessing to othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears to be quite consistent with the method of reprocessing as explained by them and the same merits acceptance in the absence of evidence to the contrary. We are also inclined to accept the reliance placed by the appellants on the Apex Court's rulings in the cases cited supra for holding that no new substance was brought into existence by the mere addition of a fresh quantity of flavouring agents to the pan masala during its reprocessing and therefore the reprocessing did not amount to manufacture under Section 2(f) of the Act. There is no warrant for treating the process as amounting to manufacture in terms of Chapter Note 3 of Chapter 21 [CETA] either inasmuch as hardly any evidence is forthcoming from the Department's side to rebut the appellants plea that they had not carried out any labeling or re-labeling of containers and re-packing from bulk packs to retail packs or any other treatment to render the product marketable to the consumer". 10. We have already found that all the main ingredients viz., betelnut, catechu and lime of the pan masala brought into the appellants factory under Rule 173H have remained as such (both qualitatively and quantitatively) in the repr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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