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TMI Blog2018 (6) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that:- The manner of application of the product in respect of the concentration strength is either to spray or to dip the component required to be treated for anti-rusting, after which, the mineral spirit and ethanol evaporate leaving behind the concentrate in the strength that has been made into to protect the component. The functionality of the Axxanol product remains the same irrespective of dilution that it has undergone namely to protect the components or items treated from rust prevention - Chapter Note 9 is being needlessly stretched in this case by the department and in the impugned order in an attempt to bring the diluted Axxanol within the scope of product “manufactured” by the appellant. It is also to be noted that the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While the assessee imported the Axxanol 33C in 208 litres drums, the product Axxanol 33CD made out of Axxanol 33C was marketed in 35 litres/208 litres drums, and sold under a separate set of trading invoices indicating that the products are non-excisable . 2. According to the department, the process carried out by the appellant for making Axxanol 33CD from Axxanol 33C amounts to manufacture in terms of Note No.9 to (Chapter 38 of CETA, 1985. The appellants did not disclose their nature of manufacturing activity of making Axxanol 33 to the department. The Axxanol 33 so prepared was packed in containers of 35 litres and affixed with a label containing the name of the manufacturer, product and date of manufacture. The set of procedures fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product remain the same hence the appellants were under bonafide belief and understanding that they were merely trading goods and not connected in any activity of manufacture. The trading invoices clearly indicated the goods as non-excisable. The procedure adopted by the appellant were well within the knowledge of the executing authorities; that an audit was conducted in 2007 for the period April 2004 to March 2009; that the appellant had furnished all necessary documents; that the audit did not raise any objection; that there was a further audit in 2009 and the appellant had produced the very same documents before the audit party; that the entire facts were disclosed by the appellants in the audits conducted; that no new material was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C in 208 litres drums, diluting the same in concentrations of 1:9, 1:24, 1:49 would fall within the ambit of Chapter Note 9 to Chapter 38 of the First Schedule of the CETA, 1985 and hence liable to payment of Central Excise duty. We find that the adjudicating authority has confirmed leviability of duty, inter alia on the following grounds : (i) The treatment made at the factory is only for the purpose of rendering the product marketable to the consumer since no consumer has ordered for AXXNOL 33C as it cannot be used directly. (ii) The relabeling done at factory giving details of manufacture, part number, composition of the product, lot number, quantity and date of manufacturing is not merely an incidental activity for dilution. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture . Thus dilution of the impugned product in a solvent, in this case by addition of mineral spirit/ethanol, by itself will not render the process thereof as amounting to manufacture for the purposes of Chapter Note 9. 8. At the same time, Chapter Note 9 brings within the scope of manufacture, any other treatment to render the product marketable to the consumer. In this regard, we note the assertion of the Ld. Advocate that the imported product had also been sold in a number of cases to certain customers who required that particular concentration. Hence, it cannot be alleged that the product in the concentration and form that was imported cannot be marketed as such without any treatment necessitated on it. We find merit in the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al packing / bulk pack and not as a retail pack. In the circumstances, we are not able to agree with the findings and conclusions of the adjudicating authority that if a product kept in bulk pack, which is not meant for sale at commercial level, is repacked into packages meant for sale at a commercial level beyond which no market exists for that product , it should be covered under the scope of Chapter Note 9. 9. Ld. Advocate has also referred to the conjunction or employed between the various processes indicated in Chapter Note 9. We find that the period of dispute in this case was May 2004 to March 2009. Upto 1.3.2008, Chapter Note 9 had featured conjunction and to indicate that processes of manufacture would include the process ..... X X X X Extracts X X X X X X X X Extracts X X X X
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