9911796707
TMI Blog1986 (9) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... aside by the Collector (Appeals) by his order, dated 7-2-85. Appeal No. 96 5/85-C is against this order. 3. By order No. V-140(18)81/84, dated 5-2-85, the Asstt. Collector held that the action of the excise officers of levying, assessing and collecting excise duty at the formulation stage was in order, as per the definition of "manufacture" in Section 2(f) of the Central Excises and Salt Act (hereafter, the Act). Accordingly, he rejected the refund claim for Rs. 1,28,40,383.03 for the period from 1-4-83 to 31-3-84. In appeal, the Collector (Appeals) set aside the order by his order, dated 16-5-85 with consequential relief to the respondent. Appeal No. 2038/85-C is against this Order. 4. By Order No. V(14D)RC-64/82/1304, dated 1-3-84, the Assistant Collector rejected four claims, dated 12-10-81, 30-6-80, 2-12-82 and 16-9-82 for refund of Rs. 58,26,470.21, Rs. 23,90,624.37, Rs. 33,41,009.54, and Rs. 69,19,511.76 respectively for reasons similar to those noted in para 3 above. This order was set aside with consequential relief to the respondent by the Collector (Appeals). Appeal No. 2298/85-C is against this Order. 5. The facts of the case, briefly stated, are that the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wet cake stage and that no further duty was leviable on the formulated dyes since, in their production, no manufacturing process was involved. Consequently, he set aside the Assistant Collector's order and allowed the appeal before him. As already noted, the Assistant Collector also rejected two refund claims which orders were also set aside by the Collector (Appeals). 7. We have heard Shri V. Laxmikumaran, Advocate and Shri A.S. Sundar Rajan, Departmental Representative for the Revenue and Shri K.S. Cooper, Advocate, assisted by Shri A.N. Haksar and Ms. Pallavi Shroff, Advocates for the respondents. 8. The chief contention for the Revenue is that the Bombay High Court judgment in the Sandoz case (supra) is not applicable to the facts of the present case. The facts in that case were that Sandoz were manufacturers of synthetic organic dyes. They also used to purchase S.O. dyes from the market. Sandoz used to formulate the dyes from either the S.O. dyes manufactured by them or those purchased by them. The process of formulation involved the addition of dispersing agents or diluents. This process was with a view to break the pigment particles using dispersing agents an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case are similar. Concentrated dyestuffs are converted or formulated into diluted disperse dyestuff by the addition of dispersing agent and diluents. Prime Facie, therefore, the ratio of the judgment in the Sandoz case would seem to apply to the facts of the present case. 10. Shri Laxmikumaran contends that if the concentrated dyes are cleared as such, duty would be attracted under item 14D CET on the assessable value of such concentrated dyes. On the other hand, if concentrated dyes are formulated and the formulated dyes are cleared, then, duty would be attracted on such formulated dyes on their assessable value. 11. Shri Laxmikumaran's contention is that the Gujarat High Court decision in the Vijaya Textiles case (supra) on which, among others, reliance was placed by the Bombay High Court in the Sandoz case (supra) has been overruled by the Supreme Court. In the Vijaya Textiles case, the question was whether processing of cotton or man-made fabrics by independent processors (who had not manufactured the fabrics themselves) would constitute manufacture within the meaning of Section 2(f) of the Act and whether the processed fabrics would be liable to duty as cott ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (and excisable) only after the process of grinding or hole making. It did not matter whether a particular manufacturing process had been applied in the same transaction in which glass was manufactured or it was applied afterwards. The Court further held that merely because a glass sheet to which no grinding or hole-making process was applied was otherwise marketable, it did not mean that the application of grinding and hole-making processes did not form part of the manufacturing process of those glass sheets to which they had been applied. Shri Laxmikumaran draws analogy to the case before us where, though the wet cake is itself marketable, it is. also marketable after formulation and in respect of the formulation, the process of formulating is a manufacturing activity. The reply of the Counsel for the respondent is that this decision is based on a test which is opposed to the test laid down by the Supreme Court and that, in any event, it cannot have the effect of making the process of conversion of dye concentrates into liquid form a manufacturing process. It is not in dispute that both the wet cake form and the formulations are marketable. If so, in respect of the latter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced any affidavit of any dealers or consumers to show that the dyes in lump or crystal form were not capable of being used in any dyeing process before the same were blended and/or pulverised and standardized. The process, we are concerned with is not one of blending and/or pulverization but one of formulating with dispersing agents and diluents. As such, the Amar Dye Chem case may not be of direct relevance here. 17. Of all the decisions cited, the most relevant is that of the Bombay High Court in the Sandoz case (supra), since the goods involved therein were also dyes and the tariff item interpreted was item 14D, CET. It needs, therefore, to be studied closely. The Sandoz case involved formulation of concentrated dispersible insoluble azo-dyestuffs (brand name: Foron) with the aid of dispersing agents and water, with the object of breaking the pigment particles. The petitioner's contention was that the result of the process was only to disperse the dye which was in the concentrated (or wet cake) form by addition of dispersing agents and solvent to emulsify the dye. Even after the process, the dye continued to remain the same without any change in its composition or chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of excise levy in the context of the Gujarat High Court decision in the Vijaya Textiles case (supra) and the Bombay High Court decision (in a similar matter but holding that the process of bleaching, dyeing or printing undertaken by an independent processor on grey cotton fabrics which had discharged duty liability under item, 19 CET result in manufacture of bleached dyed or printed fabrics falling under sub-item 19 CET attracting duty liability again contrary to the Gujarat High Court view) in New Shakti Dye Works Pvt. Ltd. & Ors. v. U.O.I. 1983 E.L.T. 1736. Even at the outset in its judgment, their Lordships of the Supreme Court stated that they were in agreement with the conclusions as well as the reasoning of the decision of the Bombay High Court. It should be noted here that the latter had come to its conclusions (as briefly set out earlier) on the basis of first principles as well as in the light of the retrospective legislation [The Central Excises & Salt and Additional Duties of Excise (Amendment) Act, 1980] undertaken by Parliament to overcome the effects of the Gujarat High Court decision. The Court took into account many of its previous decisions including U.O.I v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character and use. The Court also found, as a matter of fact, that wet cake was a marketable commodity. 21. As stated earlier, it is not in dispute that the dyestuff in both wet cake form and the formulated form is marketable. There is no doubt that, following the ratio of the judgment in the Sandoz case (Supra), the wet cake are concentrated form is excisable. But that is not the key to the problem here. The Respondents before us are marketing not the wet cake (there is no claim that they are) but formulated dyes. The dispute before us, it needs to be recollected, arose out of the Asstt-Collector's order of 28-2-84 holding that the value for the purpose of assessment in the Respondents case would be the value of the formulated dyes i.e., the form in which the dyes were sold in the course of wholesale trade and not the value at the wet cake. stage. It was on this basis that he rejected the prices declared in the two price lists effective from 1-4-81 and 1-4-83. It was this order which was set aside by the Collector (Appeals). In the matter of assessable values, we have the authoritative interpretation of the Supreme Court in Union of India and Others v. Bombay Tyre Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the course of wholesale trade of an article for delivery at the time and place of removal, namely, the factory gate. Where the price contemplated under the old S.4(a) or under the new S.4(l)(a) is not ascertainable, the price is determined under the old S.4(b) or the new S. 4(l)(b). Now, the price of an article is related to its value (using the term in a general sense) and into that value have poured several components, including those which have enriched its value and given to the article its marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacture after clearance), charges for other services after delivery to the buyer, namely after sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted." (Para 50, page 1654 of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been removal of the goods and the goods become liable to excise duty at that point of time or stage. He refutes Revenue's contention that it could not be said that wet cakes are removed for manufacture of another commodity when alone there could be deemed removal in terms of Rule 9. 24. In the view we have taken that the formulated dyes are liable to be charged to duty on their value ascertained under Section 4, it is not necessary to go into the merits of the above debate. 25. In the result, we hold that the Collector (Appeals) was in error in setting aside the Asstt. Collector's orders (rejecting the Respondents' price lists and holding that duty was payable on the value of the formulated dyes and, consequently, rejecting their refund claims). We set aside the impugned orders and allow the appeals. 26. [Order per : M. Gouri Shankar Murthy]. - I agree that the appeals should be allowed. I would like to set out my own reasons, even if they may appear, in some respects, merely a re-statement of the reasons advanced by our learned Brother Sankaran. 27. It would appear on the submissions made and the papers on record that - (a) the issue that arises for conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or manufacture of goods ....... from where such goods are removed [S.4(4)(b) of the Act], although "removal" itself had not been defined in the Act or in the Rules. However, in terms of Rule 9, a removal can be for consumption, export or manufacture of any other commodity. Such removal is from any place where they are produced, cured or manufactured, or any premises appurtenant thereto. Accordingly, the assessable value has to be determined when the goods are removed for consumption, export or manufacture from any place where they had been produced, cured or manufactured; (e) when according to the Respondents, the manufacture of the dye was complete with the production of wet cakes, their assessable value is, obviously, the valuation applicable on the date of the actual removal of the manufactured dye. Can the movement of the wet cake for formulation amounts to removal for consumption, export or manufacture? They were not utilised for manufacture. It is not the case of the Respondent that formalisation was "manufacture". Nor does formalisation, which is merely a dilution of the manufactured dye amount, in law, to manufacture. The use to which the original wet cake could be put was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
