TMI Blog2014 (12) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out leads to transformation of inputs into a final product having distinctive name, character or use. Inputs are not being sold by their manufacturer as water resistant bonding agent at all but as a product which manufacture after experiment can be used for diverse applications. In our view, Revenue has discharged the burden that final products are new products with distinctive name, character or use. - maintenance of elaborate records and conduct of quality test ipso facto dos not mean that the process amounts to manufacture, however, it is to be noted that if the process is very simple of dilution, then there is no need to keep elaborate records and there will be no need to conduct quality test for each batch (it can be concentration test only). - in the facts and circumstances of the case, the product having distinct name, character and use comes into existence from the inputs. The final product is a water resistant bonding agent while the inputs are understood as aqueous polymer dispersion used in the modification of hydraulic setting system. Name of inputs or process of transformation is a trade secret and is not known to trade or users. - Decided against the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng system. The products being sold by them have distinctive name, character and use and hence the process undertaken by them amounts to manufacture. These products are therefore excisable. Revenue's further claim is that the final product of the appellant is appropriately classifiable under Chapter 38 under Heading 3824, while the products Styrofan D 623 AP and Apcotex TSN 100 are being classified by their manufacturers under Chapter Heading 40.02. 2. The learned Advocate for the appellants' main submissions are that there is no change in name, character and use. The learned Advocate for the appellants' main submissions are that there is no change in name, character and use. The learned Advocate further submitted that the first appellate authority has dismissed the appeal on extraneous and irrelevant material. Further, there is no deemed manufacture' provision involved/invoked in the present case. It was argued that the term manufacture' means bringing into existence a new product having a distinct name, character and use and burden to prove manufacture' is on Revenue and such a burden has not been discharged in support of his contentions, he quote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Pvt. Ltd. Vs. CCE - 2003 (151) ELT 624 (T) (h) N.S. Corporation Vs. CCE - 1998 (103) ELT 409 (T) (i) King Win Universal (India) Vs. CCE - 2000 (117) ELT 305 (T) (j) Sandoz India Ltd. Vs. UOI - 1980 (6) ELT 696 (Bom.) (k) Coromandal Prodorite Pvt. Ltd. Vs. GOI - 1985 (20) ELT 257 (Med). (l) Tata Export Ltd. Vs. UOI - 1985 (22) ELT 732 (MP) (m) CCE Vs. Berger Paints India Ltd. - 1998 (104) ELT 642 (T) 2.3 Another contention of the learned Advocate was that the fact that there is change in the tariff heading is of no relevance to decide whether activity amounts to manufacture or not. In support of the said contention, learned Advocate quoted the following judgments:- (a) CCE vs. Markfed Vanaspati Allied Inds. - 2003 (153) ELT 491 (SC) (b) CCE Vs. Technoweld Industries - 2003 (155) ELT 209 (SC) 2.4 It was also argued that the maintenance of elaborate records and conduct of quality tests ipso facto does not mean that the process amounts to manufacture. Activity per se has to be seen in order to determine whether the process amounts to manufacture or not. The learned Advocate further argued that the reliance on the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draulic setting system. Learned A.R. further argued that the fact that appellant is just diluting the input is of no consequence as the commercial user does not know the details of inputs or the dilution process and extent of dilution, as it is secret. So called dilution is not simply addition of water and mixing. It is highly technical job and it is for this reason that every batch after dilution is tested and thereafter certified whether it is suitable for cement mortar/concrete or not. If process was simple, then one would have added fixed percentage of water and there was no need to test each batch. The learned AR further contended that from the above it is clear the products Styrofan D 623 AP and Apcotex TSN 100 and the products Sika Latex and Sika Latex Power are different and having distinctive name, character and use and therefore, the process undertaken by the appellant amounts to manufacture. Further, since the final product is used as water resistant bonding agent or additives, these are correctly classifiable under Chapter 38 and would be chargeable to duty. Another contention of learned AR was that that various case laws quoted by the appellants have to be seen in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mechanical properties of these products (e.g. touching up mortar and floor screed). As the efficiency of Styrofoam D 623 AP can be influenced by different types of hydraulic setting agents, preliminary tests must always be carried out for the intended application. It would thus be seen from the product literature that Styrofan D 623 AP is not a product which is used straight away by the consumer or the end user but it is generally used by various manufacturers, who process the same for specified application. In the present case the appellants have processed the same but claimed that the process being done by them is only of diluting. It also appears that the process of dilution is trade secret of the appellant and is not known to the end user or to the trade and commerce in general. It also appears that so called dilution process is not a simple process of addition of water as is done in the case of large number of chemicals, pesticides and insecticides etc. In fact, Sika Latex Power is being sold as multi-functional rubber emulsion and appears to be suitable for repairing. The Hon'ble Supreme Court has explained the term manufacture in the famous case of Union of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e desired effect. As Styrofan D 623 AP has a high film forming temperature, it should only be applied in combination with cement as a bridge for the adhesion. Depending on the intended application, it may be advisable to add film forming auxiliary in amounts of 2-5% by weight to the wet component. Styrofan D 623 AP like most dispersions, has tendency to foam and hence anti-foam agents in amount of 1% by weight to the dispersion should be added. Preliminary trials should be carted out to test the suitability of the additives used along with it. Manufacturers should carry out their own trials in developing products based on Styrofan D 623AP, because experiments on our part cannot embrace the great variety of factors that may exert an influence during production, processing. E.g. the mutual compatibility of the components of the formulation, the curing characteristics of the hydraulic binders, the wetting and adhesion on various substrates etc., these tests should include storage trials at 50 O c to determine whether viscosity remains stable. From the above, it is very clear that the inputs are meant to be used by the manufacturers, who in turn are expected to carry out thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products are new products with distinctive name, character or use. 4.3 Learned Advocate also has quoted a number of judgments relating to the test reports. In our view, there is no dispute relating to chemical composition/test report of the products. Chemical testing of the goods would be of help where the goods are sold with reference to their chemical name or strength etc. In the present case, the final products are not sold by chemical name at all and in our view the testing of the final product is therefore of no consequence. We, therefore, do not consider it necessary to discuss those judgments. 4.4 Learned Advocate has also argued that the process of dilution does not bring into existence a new product having different name, character and use, we are not in agreement with the said argument. As held earlier, dilution in the present case brings into existence a new product having different name, character or use. The dilution with water and the name of inputs are something which is known only to the appellant. In fact, even the process of diluting or extent of dilution is trade-secret and not known in the commercial world. Even to the Revenue they have not given very prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny reference to Tariff. Existence of different Tariff entry only supports the contention already arrived at. 4.8 While we agree with the learned Advocate contention that maintenance of elaborate records and conduct of quality test ipso facto dos not mean that the process amounts to manufacture, however, it is to be noted that if the process is very simple of dilution, then there is no need to keep elaborate records and there will be no need to conduct quality test for each batch (it can be concentration test only). Learned Counsel also contended that reliance on product Styrofan D 623 AP as aforementioned and its scrutiny is necessary to understand whether the inputs and the final products have the distinct name, character and use. The case laws quoted are in totally different facts and circumstance. We therefore do not consider it necessary to discuss each and every case law. Learned Counsel has also argued that details of other customers of the supplies are not at all relevant, we have come to independent conclusion and our conclusion is not based upon such criterion. 5. In our view of the above discussion, we are of the considered view that in the facts and circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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