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TMI Blog1983 (11) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... nded from them in terms of Rule 10 of the Central Excise Rules (hereinafter referred to as the Rules). In reply, the appellants submitted that they were manufacturing granule (PVC Compound) from duty-paid PVC resin, that these granules were a modified form of PVC resin, that they were not polymerisation or co-polymerisation products, that the process of conversion of duty-paid PVC resin into granules did not amount to manufacture within the meaning of Section 2(f) of the Central Excises Salt Act (hereinafter referred to as the Act), and so, they did not attract excise duty. After hearing the party, the Assistant Collector of Central Excise, Jamshedpur passed an order on 28-7-1978 demanding duty under Rule 10 on the said quantity of PVC compound at the appropriate rate. However, he allowed the appellants to avail set-off of the duty paid on the duty-paid PVC resin used in the manufacture of the said PVC compound. The appeal against this order was rejected by the Appellate Collector of Central Excise, Calcutta. Against this order, the appellants filed a revision application before the Central Government which, in terms of Section 35P of the Act, has come to this Tribunal as tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural identity of the polymer (PVC) molecules. To a query from Bench whether the resultant product was moulding granules, the Counsel replied in the affirmative but submitted that moulding granules of polymerisation or co-polymerisation products were covered by the Tariff Item 15A(1)(ii) and PVC compound was not a polymerisation or co-polymerisation product. 6. The Counsel for the appellants also referred to the decision of the Bombay High Court in the case of India Plastic Corporation (P) Ltd. reported in 1983 E.L.T. 425 wherein the Court had held that Phenolic resin and Phenolic moulding powder were not two different products. Similarly, he argued that PVC resin and PVC moulding powder were not two different products. Reliance was also placed on a decision in revision of the Government of India reported in 1981 E.L.T. 82 in the case of Gramophone Company of India Ltd. wherein it was held that modification refers to chemical modification and that addition of any lubricant, stabilisers etc. to a co-polymer of PVC and PVA did not result in modified PVC or modified co-polymer of PVC and PVA. 7. Another submission was that the product manufactured by the appellants was a physi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the rival contentions, it is well to have a proper picture of the process of conversion of PVC resin to PVC compound as employed in the appellants factory. For this, we have the benefit of the Tour Note of the Chemical Examiner to which reference has been made and on which a good deal of reliance is placed by the appellants. The relevant portions of the Tour Note are extracted hereunder :- 5. Manufacturing process :- The following raw materials are used : (i) PVC synthetic resin powder KOREA PVC grade P-1000 a purely homo-polymer resin suspension polymerisation product (co-polymerisation products like polyvinyl choloracetate type are not suitable for the purpose being more susceptible to lump formation during processing). (ii) Plasticizer primarily used are D.O.P. (Dioctyl phthalate and DIDP (De-iso-butyil phthalate). Sometimes chlorinated paraffin and secondary paraffin works are also used as and when required. The function of the plasticizer is primarily to improve the flexibility of the plastic material to be produced. (iii) Stabilizer All PVC compound need stabilizer because both heat and light depending on intensity cause deterioration. Its primary func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved and what emerges is a homogenously mixed material which is first formed into a sheet and then broken into granules ??. Evidently, it is not a case of a simple loose mixture such as said and pebble capable of being separate by simple physical means. It is also clear that the processing results in some of the physical and mechanical properties of the original PVC polymer or resin being modified though the structural identity of the polymer molecule does not undergo change. We are of the opinion that there is a definite process of manufacture involved in the subject process. 13. Now, the question that arises is whether the aforesaid process of manufacture would amount to manufacture for the purpose of Section 2(f) of the Act read with Item No. 15A CET. It is a well-settled proposition, reiterated time and again by various High Courts and the Supreme Court [South Bihar Sugar Mills v. Union of India, AIR 1968 S.C. 922 = 1978 E.L.T. (J 336)], that for a process of manufacture to be considered as manufacture within the meaning of Section 2(f) of the Act for the levy of excise duty, a (new and different) substance or goods having a distinct name, character of use different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey cloth could generally be described as cotton fabric but surely, the unbleached grey cloth is not the same cotton fabric as printed cotton fabric. It is difficult to accept the argument that a dyed and printed cotton fabric must be treated on the same footing or indeed as the same article as commonly known as grey cloth. The use to which the bleached, dyed and printed and finished product could be put to is entirely different or in any case, in addition to the use to which grey cloth could be put. The printed material in its finished form is wholly different from the grey cloth and, in fact, the grey cloth could be treated as the basic material which is subjected to different processes. Admittedly, the printed material is known in the market not by the same name, i.e. grey cloth . Cotton fabric is merely a general description but, there may be various types of cotton fabrics and yet it can never be said that all cotton fabrics are identical or are the same as the base material which was originally given to the processors. On first principles, therefore, we are not inclined to accept the contention of the learned Counsel for the Petitioners that bleaching, dyeing, printing and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hylene Polyisobutylene, Polystyrene Polyvinyl Chloride, Polyvinyl acetate, Polyvinyl Chloroacetate and other Polyvinyl derivatives, Polyacrylic and Polymethacrylic derivatives and coumarone-Indene resins; and ....... . On and from 18-6-1977 : 15A. Artificial or Synthetic Resins and Plastic Materials and Cellulose Esters and Ethers, and Articles thereof - (1) The following artificial or synthetic resins and plastic materials, and cellulose esters and ethers, in any form, whether solid, liquid or pasty, or as powder, granules or flakes, or in the form of moulding powders, namely :- (i) Condensation, Poly-condensation and polyaddition products, whether or not modified or polymerised, and whether or not linear such as Phenoplasts, Aminoplasts Alkyds, Polyamides, Super polyamides, Polyesters, Polyallyl esters, Polycarbonates Polyethers, Polyethyleneimines, Polyurethanes, Epoxide resins and Silicones; (ii) Polymerisation and co-polymerisation products such as Polyethylene, Polytetrahaloethylenes, Polyisobutylene Polystyrene, Polyvinyl Chloride, Polyvinyl acetate, Polyvinyl Chloroacetate and other Polyvinyl derivatives, Polyacrylic and Polymethacrylic derivatives and Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a question of form (solid, liquid, powder, etc.), it cannot be said that the products are different. They are different forms of the same product. However, when we come to moulding powder or moulding granules, the situation is different. They are different forms of the same product. However, when we come to moulding powder or moulding granules, the situation is different. As we have seen earlier, PVC compound or PVC moulding granules are not the same thing as PVC resin. The former product is distinct and different from the latter product. Therefore, we have to conclude that the goods manufactured by the appellants did fall for classification under Item No. 15A(1)(ii). The absence of the words modified in 15A(1)(ii) would not, in our opinion, detract from this position since it is nobody s case that PVC compound is chemically modified PVC resin. 17. The next question that would arise is whether PVC compound made out of duty-paid resin would attract duty again under Item No. 15A(1)(ii). We must straightaway observe that this is not a case of double taxation in the ordinary understood sense of the term, i.e. taking the same product twice over under the same tariff entry. The qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically modified resin. The said judgment does not seem to have application to the facts and circumstances of the present matter. Nor in our opinion, has the Government of India s decision in revision in the Gramophone Company case, referred to by Shri Mukherjee, apart from the fact that this decision is of no binding effect. 21. Shri Mukherjee s submission that the appellants were not using duty-paid PVc resin for the manufacture of any other commodity within the meaning of Rule 9 also lacks substance. As we have seen PVC compound is an excisable commodity distinct and different from PVC resin. The fact that the appellants had been captively consuming the PVC compound manufacture by them for production of cables would not detract from the appellants liability to pay duty on the PVC compound so captively consumed. Any doubts in this regard have been set at rest by the amendments to Rules 9 and 49, to which retrospective effect has been given by Section 51 of the Finance Act, 1982. The validity of this provision has been upheld in the J.K. Cotton Spinning Weaving Mills case by the judgment of the Delhi High Court reported in 1983 E.L.T. 239. Though Shri Mukherjee referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the legislature in regard to its levy is manifest, regardless of whether there has been, indeed, a manufacture as understood in law, and the product is known in the market. (ECR C 354C = AIR 1973 S.C. 2333 = 1978 E.L.T. (J 389) - Union of India v. H.U.F. business known as Ramlal Mansukh Raj). The question as to whether there has been a manufacture in the sense that a new product comes into existence having a distinct name, character and use in the market becomes germane in a case where there is a doubt or dispute regarding the identity of the product with the description in the 1st Schedule like in the DCM case (Union of India v. Delhi Cloth Mills - 1978 E.L.T. 121). Even when such an issue becomes relevant, one should remember that it is not every change that can be manufacture regardless of the actual process-sophisticated or otherwise so that either a single or multiple levy, as the case may be, is attracted. It should be a change that amounts to a transformation, bringing into existence a new and a different article, having a distinct name, character and use and, necessarily, assessable to duty in terms of one or the other of the entries in the 1st Schedule. Obviou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on clause declares that they shall include [per Lord Watson in Dilworth v. Commissioner of Stamps - (1899) A.C. 99 at pp. 105, 106 and cited in p. 270 of Mexwell on Interpretation of Statutes 12th Edition]; (c) on the contrary, the use of the expression, the following, namely is restrictive of a general category or description, otherwise wide in its scope and amplitude, to one or more specific object, or objects, class or classes, falling within the general category or description. We are not merely to pay lip service to these principles of interpretation of fiscal statutes, but apply them to a construction of the definitions of the objects of levy as well as the rates of levy specified, all in the 1st Schedule to the Act. 27. Once an inclusive definition is made use of to enlarge the meaning of a word or words generally descriptive of an item in the First Schedule, or, when the amplitude of a word or words of general description restricted to those specified, does it follow that each of those sought to be included, or, as the case may be, specified or singled out of a word or words of general description becomes, straightway and without more, subject to levy in a taxin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was held that painting and lacquering did not involve further extrusion of completely extruded aluminium tubes within Item 27 of the 1st Schedule. Nor did such process of painting or lacquering amount to manufacture of aluminium tubes extruded or otherwise; (ii) (1906) 2 K.B. 352 (Monical v. Pinch) wherein it was laid down that a process enhancing the sweetness of sachharin did not amount to manufacture thereof since it was Sachharin before it was treated and Sachharin after it was treated ; and (iii) interestingly enough, a ruling of a Division Bench of the Bombay High Court in 1977 E.L.T. 34 (Empire Dyeing and Manufacturing Co. v. V.P. Bhide) holding, inter alia, that - Admittedly in this case, duty of excise is claimed against the petitioner Company on the basis that the goods processed by the petitioner Company were cotton fabrics not otherwise specified thus falling in sub-item (5) of Item 19. The goods are the same as have been subjected to payment of excise duty when they were released from the factories of the manufacturers. In respect of the goods which have already borne excise duty and do not fall into a different item of excisable goods in the First Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic materials) the generic description was particularised and classified separately into unprocessed cotton fabrics and processed cotton fabrics and they were brought separately to levy of duty. thus the legislative intent to - (a) declare each of the various processes specified as a separate manufacture in itself; and (b) levy duty upon the unprocessed cotton fabrics as well as each of the processed cotton fabrics separately, became categorically manifest, even though the inclusive definition of cotton fabrics in Item 19 was retained. In effect, therefore, after the amending Act, while cotton fabrics had been inclusively defined (by the retention of Item 19) and levied to duty as unprocessed cotton fabrics, - (c) certain specified processes carried out on the basis cotton fabrics had been each declared to be a separate manufacturer in itself; and (d) all such processed cotton fabrics again subjected to duty. It is a clear manifestation of the legislative intent to levy duty twice over once on unprocessed cotton fabrics and again as processed cotton fabrics, if any of the processes specified is carried out. 31. Once the aforesaid legislative changes had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, one would be reluctant, again with respect, to follow the ratio of the Bombay High Court in New Shakti Dye Works v. Union of India in preference to the decision of the Gujarat High Court in the case of Vijay Textiles. In my opinion, (a) whenever - (i) an inclusive definition is used, or, for that matter, certain specific goods are singled or carved out of a generic description in a manner restrictive of its scope and amplitude; (ii) the goods so included in a definition or singled out of a generic description are, accordingly, in so far as the first Schedule is concerned, identified with the definition or generic description, each of the processes employed to convert goods from one form into another within the inclusive definition or generic description is not manufacture , since the goods originally conformed to the definition or description and still do notwithstanding the change in form after the process. The change effected by the process in such a case does not take them out of the inclusive definition or generic description, in so far as the first Schedule is concerned; (b) when duty had, previously, been paid in respect of such goods qua goods conforming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the form and the chemical Examiner s report. the length or the complication or the sophistication involved in the process cannot render the conversion a manufacture ; not the difference in names, regardless of the legislative declaration equating one with the other. The difference in name, character and use is irrelevant, moulding powder and granules specifically having been mentioned in the 1st Schedule as a form of polymerisation product P.V.C. resin. (d) In 1983 E.L.T. 425 [Industrial Plastic Corporation (Pvt.) Ltd. v. Union of India], it was held that the addition of fillers does not render the resulting powder to be anything other than phenolic Resin. The decision does not seem to be inapplicable merely because it was a case of an interpretation of a notification, containing an explanation of the expression phenolic resins . What we are concerned with is the finding of the Bombay High Court to the effect that the addition of fillers to a phenolic resins to make moulding powder does not render the product any different from Phenolic resin. (e) We have ourselves held, following the aforesaid decision, that moulding powder was none other than a phenolic resin in Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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