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TMI Blog2021 (11) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of removal of ethanol blended motor spirit on its clearance value. The appellant was issued a Show Cause Notice dated 09.06.05 wherein, it was alleged that the process of blending ethanol with motor spirit amounts to manufacture as: (a) Notification No.63/2003-CE specifically exempted EBMS from excise duty and that there was no exemption on EBMS for the period 01.07.2004 to 07.08.2004. (b) Circular F.No.366/5/2002-TRU dated 02.01.2003 uses the word manufacture for the process of blending 5% ethanol with 95% motor spirit to produce EBMS. 1.1 Further, that unblended motor spirit had been used captively by appellant to manufacture a new product namely EBMS. The benefit of captive consumption under Notification No. 67/95-CE dated 16.03.1995 was not available to motor spirit. Accordingly, it was proposed to demand excise duty on the motor spirit which was subsequently cleared as Ethanol blended motor spirit on payment of duty. The Show Cause Notice was adjudicated vide Order-In-Original dated 24.02.2006 whereby, the demand of excise duty was confirmed along with interest and penalty. The appellant being aggrieved by the said Order dated 24.02.2006 filed an appeal No. E/1758/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of EBMS. He submits that the process of blending 5% ethanol with 95% motor spirit to produce EBMS does not amount to manufacture therefore, when the appellant have paid the duty on the higher value i.e. on the value of EBMS, no duty can be demanded on the unblended motor spirit. He submits that there is no difference in the motor spirit and EBMS as both are treated as motor spirit and falling under the same CETH 27.10 and both conform to BIS Specification i.e. BIS specifications 2796 for motor spirit. He submits that this is the third round of appeal. In the same case earlier the hon'ble Tribunal remanded the matter. However, the impugned order has travelled beyond the scope of such remand by stating that CBEC Circular dated 13.12.19 refers to methanol whereas, the product in question in the present case was ethanol. He failed to appreciate that the said circular was considered by the Hon'ble Tribunal as well and found to be relevant therefore, it was beyond the scope of remand for the respondent to consider and adjudicate upon the applicability or otherwise of the said circular. He further submits that the mere fact an exemption notification existed (albeit for another period) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and ethanol. It is evident from this notification that the government has accepted that duty is not required to be paid at both the stages i.e. Prior to and after addition of ethanol but only at one stage. As the appellant had already paid higher duty amount of 3,97,68,000/- on EBMS, it could not have been called upon to pay excise duty on motor spirit prior to blending of ethanol. He referred to CBEC Circular No. 1078/02/2021-CX dated 22.06.2021 which has clarified that if duty is paid on 5% ethanol and 95% motor spirit then on clearance of EBMS no duty is to be collected and the product need not suffer duty again and is exempted from various duties of excise. Reliance was placed on the case of Commissioner of Central Excise, Rohtak vs. Indian Oil Corporation Ltd- 2015 (321) E.L.T. 571 (P & H), where Hon'ble High Court held that once duty was paid on motor spirit, assessee was entitle to exemption on EBMS. The purpose of exemption notification was to prevent payment of duty on 5% ethanol at both the stages by the assessee. He submits that the respondent has erroneously relied on the Circular F.No. 356/5/2002-TRU dated 02.01.2003 to allege that blending 5% ethanol with 95% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that EBMS was nothing but motor spirit albeit with Ethanol blended in it. The appellant has consciously chosen to pay duty at a later stage mainly after blending ethanol in the motor spirit on the higher value with a view to comply with the law as laid down by the Hon'ble Supreme Court interalia in the judgments of JG GLASS (supra) & SIDDHARTHA TUBES LTD. v CCE- 2000 (115) ELT 32 (SC) 2.7 In view of the above submission, appellant submits that the impugned order be set aside. 03. Shri S.N.Gohil, learned Superintendent (Authorized Representative) appearing on behalf of the revenue reiterates the finding of the impugned order. 04. We have carefully considered the submissions made by both the sides and perused the records. The issue to be decided by us in this appeal is that when the appellant paid the duty on ethanol blended motor spirit on its value of clearance that whether the activity of blending of motor spirit with ethanol is amount to manufacture or otherwise and whether the appellant once again required to pay duty on motor sprit unblended. We find that even after blending of 5% ethanol with 95% motor spirit, the product EBMS remains motor spirit as per the chemical nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion is extracted below:- "In the instant case it is stated that methanol is blended product conforms to the BIS specifications prescribed for motor spirit. This process involves only simple blending and no new product having different properties, characteristics, or use emerges; thus mixing 3% methanol in motor spirit, which does not cease to be motor spirit after mixing 3% methanol, in my opinion, will not amount to "manufacture" as envisaged in section 2(f) of the Central Excise and Salt Act, 1944." 4.2 In view of the above opinion, it is clear that blending of ethanol with 95% motor spirit does not amount to manufacture as envisaged in section 2(f) of Central Excise Act, 1944. The contention of the adjudicating authority that the circular mention about methanol not ethanol, we find no difference whether it is methanol or ethanol since the property of both are same and the purpose of mixing is also same which is evident from the above Para 4.1 of IS 2796-2000. The only issue is that whether the blending of either ethanol or methanol with motor spirit amount to manufacture. This is abundantly made clear as per the above opinion of the chemical examiner and the same was acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urbojet' etc. they do not become products different from unblended MS/HSD, with different characteristics and usages. Their characteristics remain the same, as they both have to conform to the ISI specification for unblended MS/HSD and their usage also remain the same. Hon'ble Supreme Court in its judgment in case of CCE v. Sudarshan Chemical Industries (supra) and this Tribunal in its judgments in cases of Lakme Lever Ltd. v. CCE (supra) and CCE v. Mysore Ammonia Pvt. Ltd. (supra) has held that a process or treatment to enhance the marketability of a product or improve the value addition does not amount to manufacture. In this case, the blending only improves the quality of the MS/HSD resulting in better value addition, without charging the basic characteristics and usages of the products." In the case of BHARAT PETROLEUM CORPORATION LTD. v. CCE, PATNA; 2013 (295) ELT 106 (Tri-Kol) 5.1 Heard both sides and perused the records. The Appellant are receiving duty-paid Motor Spirit (MS) at their warehouses after 1-9-2004 and they blend/mix the same with Multi-functional Additives (MFA) and the resultant product is called as 'speed'. The said resultant product is cleared to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only improves the quality of the MS/HSD resulting in better value addition, without charging the basic characteristics and usages of the products." 5.2 Besides applying the principles laid down on the subject by the Hon'ble Supreme Court in a series of judgments in the cases of - (i) South Bihar Sugar Mill v. UOI reported in 1978 (2) E.L.T. J336 (S.C.); (ii) UOI v. Delhi Cloth Mills Ltd. reported in 1977 (1) E.L.T. J199 (S.C.); and (iii) Tega India Ltd. v. CCE reported in 2004 (164) E.L.T. 390 (S.C.), the Bench has held that the conditions to convert a process into manufacture are not satisfied in the present case, as no new and different article with distinct name, characteristics and usages emerge. It is observed as : "4.3 ..........This criteria of manufacture is not satisfied in this case as, as mentioned above, the MS and the HSD after blending with MFA remain MS and HSD only and except for a brand name being added to their names, there is no change in their basic characteristics and usages. As mentioned above, there is no separate ISI specification for branded MS or branded HSD and both branded as well as unbranded MS/HSD have to conform to the same ISI specifications. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the said judgments. Also, it has been brought to our notice that on similar facts, show cause notice issued by other Commissionerate has been dropped holding that mixing of MS with MFA does not result into a new product and accordingly no manufacture takes place within the meaning of Section 2(f) of the CEA, 1944. In view of above, we do not find force in the arguments advanced by the Revenue that the resultant product namely, 'speed' which emerges after mixing MS with MFA is liable to duty as the process of mixing amounts to manufacture within the definition of manufacture under Sec. 2(f) of CEA, 1944. Consequently, we set aside the impugned Order-in-Original passed by the Commissioner of Central Excise and allow the appeal filed by the Appellant. In the case of HINDUSTAN PETROLEUM CORPORATION LTD. v. CCE; 2015 (319) ELT 133 6. We have considered the rival contentions and perused the record. It is undisputed that the appellants bring duty paid "Petrol" and "HSD" to their depot where part of such "Petrol" and "HSD" is blended with Multifunction Additives and said products are sold at higher price under the brand names "Power / Turbo Jet" respectively. The issue is whether suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there must be such a transformation in the raw as a result of the processing that a new and different article with distinct name, characteristics and usages emerges. This criteria of manufacture is not satisfied in this case as, as mentioned above, the MS and the HSD after blending with MFA remain MS and HSD only and except for a brand name being added to their names, there is no change in their basic characteristics and usages. As mentioned above, there is no separate ISI specification for branded MS or branded HSD and both branded as well as unbranded MS/HSD have to conform to the same ISI specifications. Similarly, there is no change in their use. Thus applying the above-mentioned criteria laid down by the Hon'ble Supreme Court as to what constitutes manufacture, the process of blending ordinary MS or HSD with MFA to make branded MS or branded HSD, does not amount to manufacture." 6. We find no reason to disagree with the aforesaid view taken by the Coordinate Bench of the Tribunal. Therefore, going by the ratio of above judgment we are of the view that impugned order is not sustainable. 7. Accordingly, appeal is allowed and impugned order is set aside. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les does not amount to manufacture is squarely applicable to the facts of this case. 4.3 Hon'ble Supreme Court in a series of judgment - South Bihar Sugar Mills v. UOI reported in 1978 (2) E.L.T. J336 (S.C.) and Union of India v. Delhi Cloth Mills Ltd. reported in 1977 (1) E.L.T. J199 (S.C.) and Tega India Ltd. v. CCE reported in 2004 (164) E.L.T. 390 (S.C.) has held that manufacture implies a process, as a result of which a new product with distinctive name, character and usages emerges, that the word "manufacture" implies change, but every change in raw material is not manufacture and that there must be such a transformation in the raw as a result of the processing that a new and different article with distinct name, characteristics and usages emerges. This criteria of manufacture is not satisfied in this case as, as mentioned above, the MS and the HSD after blending with MFA remain MS and HSD only and except for a brand name being added to their names, there is no change in their basic characteristics and usages. As mentioned above, there is no separate ISI specification for branded MS or branded HSD and both branded as well as unbranded MS/HSD have to conform to the same ISI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the appeal. 4.3 In view of the consistent view taken by this tribunal in the aforesaid judgments, blending of additives with the motor spirit does not amount to manufacture. In the present case not only it is supported by the aforesaid judgments but there is a clear board circular according to which the blending of ethanol and motor spirit cannot be held as amount to manufacture. The adjudicating authority has also made reliance on Notification No.62/2002- CE, 63/2002-CE & 64/2002-CE all dated 31.12.02 and contended that since by these notifications EBMS is exempted that shows that the EBMS is a manufactured goods. We completely disagree with this proposition of the learned adjudicating authority that merely because a product is exempted by itself cannot be a manufacture goods. 4.4 First, it is to be tested that activity is whether amount to manufacture and if it is so, then only the application of exemption notification comes into play. Therefore, it is settled law that merely by any product is appearing either in the notification or tariff entry, for this reason it cannot be concluded that the goods are manufactured goods. The process independently to be seen that whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot including the cost of galvanisation in the assessable value of the black pipes subjected to the process of galvanisation. While that process did not amount to manufacture, it added to the intrinsic value of the product to make up the full commercial value which was realised by the appellants by charging a higher price for such pipes covering the cost of galvanisation. 3. We are in agreement with the view taken by the Tribunal. The mere fact that the process of galvanisation is carried on in another shed can make no difference. When the assessable value is to be calculated of the galvanized black pipe made by the appellants, the element of the cost of galvanization must form a part thereof. 4. Our attention was invited to the judgments of this Court which deal with cases where duty was to be levied at an intermediate stage and again at the final stage. They have no relevance to the point at issue. 5. The appeal is dismissed with costs, quantified at Rs. 25,000/-. 4.7 In the above judgment, the assessee sought to pay duty only at the stage of black pipe whereas, they have cleared the goods in the form of galvanized pipe on the ground that the conversion from black pipe to g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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