TMI Blog1983 (10) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... e pallets of goods described as Lubricating Oil (Tephguard) valued at Rs. 1,75,632/- by the respondent and claimed clearance under Open General Licence as raw material, was not accepted as such by the Collector of Customs, Madras (vide his Order No. S8/72/81-GR.I dated 28-2-1981). He noted that the goods imported would be blended in stainless steel kettles under controlled temperature conditions. Laboratory grade bonding agents like sodium hexaphosphate will be added in p.p.m. quantities for blending the product. The blended compound will be transferred to filling machines for filling cans which will then be sealed and labeled and packed for marketing . He found that this process is one of blending and cannot be considered as a manufacturing process; it was also not possible to distinguish the product in the form in which it is marketed in India from the imported material. He also referred to the terms of agreement entered into between the importer and their suppliers in U.S.A. and held that in terms of the agreement itself, the item imported is not a raw material but only a finished product. In the preparation of the product, Sodium Hexa-metaphosphate in small quantities is bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Finance, Department of Revenue issued a Notice F. No. 374/46/81-Cus. II dated 29-1-1982 (in appeal at Sl. No. 1) under Section 131(3) of the Act, proposed to review the order of the Board contained in No. 567-A of 1981 dated 17-8-1981 on the basis that - The Central Government is however tentatively of the view that the Board was not correct in allowing clearance of the goods under O.G.L. (open general licence), after taking a view that the goods in question could not be treated to be a raw material. When the Board itself has taken the view that the goods were not a raw material merely because the importers might have obtained an import licence for this purpose does not appear to justify the view that the goods could still be allowed clearance under O.G.L. It appears to Government that the imported material for which the importers are the authorised distributors of the foreign suppliers does not come in the category of a raw material, the import of which is permitted under O.G.L. in terms of Appendix 10 of the Policy for the period AM-81. That being so, the import of this material in the absence of a valid import licence appears to be unauthorised. The Board in allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , seals, flexible hose ...... piston rings ..... . A reference to the literature put out by the American Manufacturer - The Products on the Move Inc., suppliers of the product to the appellant-importer, Air Control Systems, Madras - reads in part as follow : Simply stated, the once a year application of Tephguard with Teflon results in a Teflon on Teflon operating surface in the engine ..... By introducing Tephguard into the engine crankcase and thereby coating all the internal parts with a micro-thin layer of Taflon, that portion of energy which was used in overcoming friction is now available for powering the drive train . 12. At the outset the Senior Departmental Representative stated that a perusal of the agreement between Air Control Systems and the suppliers would show that it is one for distributorship of a finished product and not for the manufacture of a consumer product in the country. In this connection he placed reliance on the first, second, third, tenth and nineteenth clauses of the agreement. The first clause grants exclusive right of distribution by mentioning the geographical areas to the appellant; the second clause relates to acceptance of such grant, subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, it was thought of as early as on 28th June 1979 itself; and as would be evident from what happened later on, only the principal raw material was brought and processed in India. In the light of the wording of the agreement and the correspondence now produced, we agree that the importers contention that the agreement does not bar processing of the product in India from some stage anterior to the final one. 14. The next point made on behalf of revenue was that blending is not a process of manufacture, particularly when the product to be added - sodium hexa-metaphosphate - is a very small quantity. The representative of the respondent explains that the additive sodium Hexa-metaphosphate is a dispersal agent and it is used only in P.P.M. (parts per million) quantities. It is not the smallness of the quantity used that matters but the results achieved. As it will be seen from the literature, what is sought to be achieved by the product is to effect a micro-thin coating of the resin on the moving surfaces of the engine i.e. in the piston rings and the sides of the chamber, so that the slippery surfaces that PTFE provides and the antistick property that it has, is achieved. Inci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifiable under Tariff Item 68; if the value of the goods manufactured does not exceed Rs. 30 lakhs there is an exemption provided the machinery installed is below Rs. 10 lakhs; in the circumstances the importers do not come under excise purview. This would show that another branch of the Central Board of Excise and Customs considered the process of blending, explained to them by the importer, as constituting manufacture but did not bring it under Excise control. Though the decision by itself may not be binding on the action sought to be taken by the Customs Bench of the Ministry of Finance, it only goes to show that two views were possible and as we have set out in detail above the so-called operation of blending is in fact one of manufacture of a highly refined and sensitive product. 17. The only other point that has been made all along and emphasised by the Senior Departmental Representative is about the importation in 12 oz. cans which is suggestive of immediate use by a consumer. Attractive as the argument is, the representative of the respondent explains that being the first introduction of a new product in the market to a fairly discriminative user - automobile owners - th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipals, Products on the Move Inc. Gainesvilla, Texas 76240, U.S.A. We have been given exclusive rights for processing the product and marketing the same in India. The Director of Industries, Tamil Nadu, have advised us to procure the material under O.G.L. as per copy of letter enclosed and we had also approached the Joint Chief Controller of Imports for his approval to import the item viz. TEPHGUARD - Colloidal Teflon under O.G.L. While the Joint Chief Controller has clarified that we can import the material provided the item is a raw material for the end product and not a consumable for process. The enclosed process outline and manufacturer s leaflet on the end product will clearly show that the item is the basic raw material for the end product. We would therefore request your recommendation that the item to be imported is really a raw material and not a consumable. As we have to place our order on our Principals for the item before 15-2-1980, we would request your early advice in the matter. 20. Though the letter is a detailed one, setting out as it does all the information that was at the disposal of the importer at that time, the D.G.T.D. did not help out but merely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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