TMI Blog1991 (6) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... they had shown that such process of purification and distilation were not process of manufacture and they claimed exemption for such goods under Notification 77/83 dated 1-3-1983 as the value of all excisable goods cleared by them during the period 1982-83 amounted to Rs. 22,24,272/- excluding value of packed and purified goods which was Rs. 2.11 crores. A show cause notice was issued on 23-7-1983 by the Assistant Collector, in which it was alleged that the products repacked and purified are of high quality chemicals subjected to process like recrystallisation grinding etc. to achieve purity and that therefore this refined chemicals are much purer as compared to those of technical or commercial grade. It was further noted in the show cause notice that these products are for selected and specialised uses such as analytical testing in laboratories etc. Therefore the processes were held to be processes for manufacture and the goods excisable goods after the value of their clearance were to be added to the value of excisable goods already declared by Applicants in their classification list the total value exceeded Rs. 40.00 lakhs during 1982-83, and because of this, in terms of the No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that merely improving the quality or purity of the goods does not amount to manufacture with reference to the production of prilled ammonium nitrate 99% from ammonium nitrate 75 to 82%. The Ld. Counsel further cited the CEGAT decision in the case of Bush Boake Alien v. CCE, Madras in its order No. 1246/90-C dated 13-11-1990 holding that mere dilution of duty paid food colours ready for direct use by individual consumers will not amount to a process of manufacture. Ld. SDR Shri Jayaraman on the other hand urged that by the processes of crystallisation and distillation the final product is a fine laboratory chemical different from the starting material and as such a process of manufacture had occurred and as has been observed by the Collector (Appeals) the resultant product has a distinct identity commercially. The facts of the case in Bush Boake Alien case and Anil Chemicals according to Ld. SDR are distinugishable. 4. On a careful consideration of the submissions made by the parties herein it is seen that the appellants undertake the process of purification of duty paid chemicals by recrystallisation and simple distillation. The question is whether such purification which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are stated herein. The appellants are manufacturers of Chemical laboratory and fine chemicals. They are also engaged in the activity of repacking and purification of laboratory and fine chemicals. The purification is carried out by them by methods like rccrystallisation, distillation etc. They had filed a classification list with effect from 1-4-1983 for their manufactured products under T.I. 68. In Part III of the said classification list, the process of dilution, repacking and purification were shown as process which does not amount to manufacture. Hence, they claimed exemption vide Notification No. 77/83 dated 1-3-1983 as value of all excisable goods cleared by them during the period 1982-83 excluding the value of repacked and purified goods which is Rs. 2,10,43,705/-. The Department issued a show cause notice dated 23-7-1983 asking them to explain as to why the claim should not be rejected. By their reply dated 12-9-1983, they contended that the process of distillation and recrystallisation does not amount to manufacture within the meaning of Section 2(f) of the Central Excises Salt Act, 1944. An opinion of Deputy Chief Chemist, Bombay was sought by the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India v. D.C.M. [1977 (1) E.L.T. J-199] and in the case of South Bihar Sugar Mills v. Union of India [1978 (2) E.L.T.J-326] has taken above view, order-in-original passed by the lower authority is not correct, so it is set aside and application under Section 35E(4) is allowed. 7. Shri Lakshmi Kumaran, learned Advocate arguing for the appellants, relied on the extract of the definition of term Distillation and crystallization appearing at pages 340 and 801 respectively of McGraw Hill Encyclopaedia of Science and Technology, 5th Edition which is reproduced below :- The process of producing a gas or vapour from liquid or solid. However, the term sublimation is used ordinarily to describe the vaporization of a solid. Heat is generally supplied to the liquid during the distillation although in special cases the latent heat required for the vaporization may be obtained from the internal energy of the liquid. The main purpose of distillation is either the separation of volatile components from non-volable materials or the separation of a mixture of volatile components. The separation of volatile components from non-volatile materials is carried out by a simple distillation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical formula except, gets purified for the laboratory needs. To a query from the Bench, he admitted that the Trade understanding of ordinary chemicals and laboratory chemicals are different and that laboratories cannot use ordinary chemicals as there will be variance in results. He has relied on the ruling of this Bench in the case of Bush Boake Alien (India) Ltd. v. Collector of Central Excise, Madras - Order No. 1246/90-C dated 13-11-1990. He has also relied on the ruling of Collector of Central Excise, Aurangabad v. Anil Chemicals [1985 (21) E.L.T. 889] and also that of Transpower Corporation v. Collector of Central Excise as reported in 1989 (43) E.L.T. 299. 9. Shri Jayaraman, learned DR contended that the purification of chemicals to make it fit for laboratory chemicals, will change its name, character and use and it is also traded in a different name. The laboratory chemicals are commercially different and the test laid down by Supreme Court in the case of Union of India v. Delhi Cloth General Mills Co. Ltd. Others as reported in 1977 (1) E.L.T. J-199 is fully applicable to this case. He submitted that the ratio of Bush Boake Alien s case and that of Anil Chemicals case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbon Paper Co. We are therefore, of the opinion that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper. Counsel for the appellant sought to contend that the kraft paper was duty paid goods and there was no change in the essential characteristic or the user of the paper always lamination. The fact that the duty has been paid on the kraft paper is irrelevant for consideration of the issue before us. If duty has been paid, then benefit or credit for the duty paid would be available to the appellants under Rule 56A of the Central Excise Rules, 1944; It is no doubt correct that in the above case it was also observed that manufacture is bringing into being goods as known in the excise law i.e. to say known in the market having distinct separate and identifiable function. On this score in our opinion, there is sufficient evidence. On the basis of the above observations, it was strenuously contended by Mr. Lalit that in the above case there was sufficient evidence on record to hold that after manufacture the goods were known in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia of Science and Technology and in the Condensed Chemical Dictionary by Hawley have been reproduced already by the learned Member (J). Simple distillation has been defined in Hawleys Condensed Chemical Dictionary, 10th Edition at Page 926 as follows: Distillation in which no appreciable rectification of the vapour occurs i.e. the vapour formed from the liquid in the still is completely condensed in the distillate receiver and does not undergo change in composition due to partial condensation or contact with previously condensed vapour. 18. My attention has been drawn to the reply to the show cause notice dated 25-11-1983 in which the appellants have submitted that the chemicals purchased by them and distilled and recrystallised are already of high purity and there is only a very fractional or marginal increase in purity after the processes of recrystallisation and distillation are carried out by them. The relevant extract from the reply is reproduced below: We do not agree to the contention that the purpose of these two process is to obtain chemicals of high purity confirming to particular specification so as to meet the needs of chemical industry. On the basis of abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of no interest to Central Excise. 20. The argument of the learned DR that the decision supra does not discuss test of commercial understanding which is extremely relevant to determine whether the recrystallisation and distillation of chemicals are understood differently in the market from the less pure chemicals cannot be accepted. The trade understanding of the chemicals in this case is with reference to the different end-use - the chemicals prior to recrystallisation and distillation remain chemicals after the above-mentioned processes are carried out although their purity increases. Much has been made of the admission made by the learned Counsel for the appellants and recorded in paragraph 4 of the order of the learned Member (Judicial). The admission is to the effect that the trade understanding of the ordinary chemicals and laboratory chemicals are different and that the laboratory chemicals cannot be used as ordinary chemicals as there will be variance in result. This admission has to be read in its entirety as meaning that the trade understanding is with regard to end-use and not as amounting to admission that both ordinary chemicals and laboratory chemicals are different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be said to have taken place. 23. The learned DR cited the decision of the A.P. High Court in Brocke Bond India Ltd. v. Union of India and Others reported in 1984 (15) E.L.T. 32 (AP) to drive home his point that duty on raw material and subsequently on the resultant article is taxable if manufacture is involved - The High Court has held that duty on mixture of coffee and chikory resulting in a distinct commercial commodity did not amount to double taxation on the same commodity. In paragraph 50 of the judgment, the High Court held that the principle which emerges is that a process is adopted for convenience of sale or making the article of more use to the customers, if the article in question retains its essential character, it has to be taxed as such article only and the processing would make no difference. The physical stage or even composition may change, but so long as the essential character of the article continues to remain the same, it has to be taxed as that commodity alone. The test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify substantially through the processing stage. Therefore, it cannot be said to have been manufactured. 25. The citations relied upon by the learned DR do not advance the case of the Department. I have already discussed how the Andhra Pradesh High Court decision in Brooke Bond (supra) will not be of assistance to the Department. DR s reliance on the decision of the Tribunal in 1988 (37) E.L.T. 369 (T) Unique Beauitycare Products Pvt. Ltd. v. Collector of Central Excise also is misplaced. In that case raw materials were butter, vegetable black, camphor and preservatives and the resultant product is kajal which is a new product in name, use and character. This case is not applicable to the facts of the present appeal where there is no transformation of the product after the process of recrystallisation and distillation. The decision of the Tribunal in the case of Singareni Collieries Co. Ltd. v. Collector of Central Excise - 1988 (37) E.L.T. 361 (T) is also distinguishable as in that case the Tribunal was concerned with the processes of mixing ammonium nitrate and fuel oil resulting in emergence of ANFO a high explosive having its distinct name, character and use. The Tribunal held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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