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TMI Blog1997 (9) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents who are licensed for the manufacture of pan masala, with and without zarda, vide declaration under Rule 57G of the Central Excise Rules, 1944 declared the inputs for use in the manufacture of pan masala. One of the inputs is sandalwood oil which the respondents sent to the job workers for manufacture of "mixture of odoriferous substance" falling under sub-heading 3302.90 of the Schedule to the CETA and the perfumed substance was returned to the assessee who used it as an input in the manufacture of their final product, pan masala. Since it was noticed on enquiries made with the job workers about the processes carried out by them on the sandalwood oil received by them from the assessees, that the original properties of the sandalwood oil are completely lost and the same is mixed with other essential oils resulting in a new and different product with distinct name, character and use, the Department was of the view that the product manufactured by the job workers was an independent finished product classifiable under sub-heading 3302.90. Therefore, the Department was of the view that the sandalwood oil received by the assessees and on which Modvat credit had been taken, had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixture of odoriferous substances) and got the same back for the manufacture of pan masala and that the perfumed sandalwood oil, even though a finished product in itself, was an intermediate product used by the respondents in the process of manufacture of their final product, pan masala. In coming to this conclusion, the Collector relied upon several orders, of the Tribunal in which it was held that emergence of an intermediate identifiable product by itself (sic) long as the inputs, through such intermediate product, are used in or in relation to the manufacture of the final product. He held that provisions of Rule 57D, providing that credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that intermediate products had come into existence during the course of manufacture of final product and that such intermediate products are for the time being exempt from the whole of duty of excise leviable thereon or chargeable to nil rate of duty, covered the assessees. He also held that the extended period of limitation was not available to the Department since the assessees had been filing RT 12 returns all along with all the relevant documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xture in a closed vessel from bottom and simultaneous cooling from top of the vessel so as to ensure proper mixing of the mixture within the vessel. This process is followed by a second blending with additional perfumes at room temperature and during two such blending process finished product increases by about 10% in weight. In the second type of manufacturing activity, sandalwood oil is charged by vapours of keora flowers through distillation process. No increase in weight generally takes place by adoption of this method. The nature of the net product after blending with perfumes has been reported by the Chemical Examiner, CRCL, New Delhi vide communication dated 30-9-1992 to be as under : "The sample is in the form of light reddish yellow coloured free flowing liquid having pleasant mixed odour of sandalwood, keora and Gulab (Rose). It is a mixture of sandalwood oil and odoriferous substances". 5.1 The Central Institute of Medicinal and Aromatic Plants (CSIR), Lucknow, vide their letter dated 30-6-1992 have reported the following : "The sample is of keora perfumed sandalwood oil. Keora peak is very small showing that keora is in trace. The percentage of santalol is as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Ponds India (supra), the Hon'ble Madras High Court held that it was not correct in law for the Tribunal to hold that the intermediate products are necessarily those which have to undergo further processing in the factory of production for further use in the manufacture of the final product when the word intermediate only means coming between two things as regards time, place or order. In the grounds of appeal, the Revenue has cited certain decisions in support of the appeal; however, these decisions are no longer good law and have already been overruled. The decisions of the Tribunal in the cases of Ponds India reported in 1988 (38) E.L.T. 351, Kusum Products - 1990 (48) E.L.T. 50 and M/s. Rasoi Ltd. - 1990 (49) E.L.T. 522 have been considered by the Hon'ble Madras High Court in the case of Ponds India supra and have been found not to represent the correct law. The decision in the case of CCE v. Indo Swing Ltd. reported in 1992 (57) E.L.T. 606 is based upon the Ponds India decision of the Tribunal which has been set aside by the Hon'ble Madras High Court. The Tribunal's order in the case of Mysore Kirloskar reported in 1990 (50) E.L.T. 175 was rendered prior to the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of the expression "intermediate product" occurring in Rule 57F relating to Modvat. It is also pertinent to note that in the same paragraph of the Supreme Court judgment, the Court has held that addition or application of minor items by the job workers would not detract from the nature and character of his work. In the present case, the test report of the Central Institute of Medicinal Aromatic Plants (CSIR), Lucknow also clearly shows that the item in dispute is nothing but a mixture of sandalwood oil (supplied by the respondents herein to their job workers) with odoriferous substances like keora, and gulab in small quantities. Hence, even if the ratio of the Prestige Engineering case were held to be applicable, the perfumed sandalwood oil would be required to be treated as an intermediate product used in the manufacture of pan masala, the declared final product of the respondents. 9. For the reasons recorded above, we hold that the respondents herein are entitled to credit of duty paid on sandalwood oil towards payment of duty on their final product, i.e. pan masala. 10. The second aspect of the case relates to applicability of the extended period of limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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