TMI Blog1979 (9) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ispersible insoluble Azo dyestuffs. According to the petitioners, the process of formulation is only to break the pigment particles for physical aid using dispersing agent and water without any chemical change taking place. The diluents used for the formulation were stated to be (1) Belloid TD, (2) Sodium Lingo Sulphonate and (3) Water. The petitioners also informed the Deputy Collector that the company was manufacturing some of the concentrated dispersible insoluble Azo Dyestuffs locally. 3. Now, according to the petitioners, excise duty which is levied on synthetic dyestuff under Item 14D of the Central Excise Tariff is being paid by them on the synthetic organic dyestuff manufactured by them and, according to the petitioners, no excise duty is payable on the formulation made from dyes, as such formulation did not constitute manufacturing. The organic dyes, according to the petitioners, were purchased as such from the market and the formulated dyes were made by the petitioners using either the dyes manufactured by them or dyes purchased by them. The petitioners had, however, paid the excise duty on the dye formulation of which the petitioners claimed refund and the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on Foron liquids. Since Foron pigments fall under the same tariff item as Foron liquids, duty cannot be recovered on Foron pigments, otherwise it would amount to double taxation under the same tariff item. Even assuming that conversion of Foron pigments into Foron liquids is not "manufacture" and that no new product having distinct characteristic is brought into existence, it is clear that duty is correctly leviable on Foron liquids which are the excisable goods cleared from the appellants factory." These observations clearly indicate that the main circumstances which weighed with the Appellate Collector was that the form in which the dye was taken out of the factory was different from the form in which the Foron pigment was manufactured and since at the time when the goods were cleared they were in different form the liquid or the formulation of the dye attracted excise duty. 6. We wish to point out at this stage that there is no finding recorded by the Appellate Collector that the process by which the Foron pigment was formulated into a Foron liquid was a manufacturing process. On the other hand, the Appellate Collector proceeded to decide the liability of the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racteristic. Mr Bhabha has relied on trade notice in support of his argument that where some dispersing agents are added to a dye, the formulation does not bring about any new product. This trade notice which is in the form of Tariff Rulings No. 18/65 deals with the question as to whether "Vats-Paste" produced by mixing duty-paid "Vat Powder" with glycerine and dispersing agents, etc. is assessable to duty under Item 14D of the Central Excise Tariff and the decision of the Board was stated to be as follows : "Vat Powders are assessable to duty as synthetic Organic Dyestuff under Tariff Item 14D of the First Schedule of Central Excise Act, 1944. The conversion of "Vats, Powder" into "Vats, Paste" does not involve any chemical change, the glyerine and dispersing agents etc. serving merely as moisture retaining and deflocculating agents. The Board have therefore decided that where "Vats, Paste" is produced by blending "Vats, Powder" on which duty has been paid, with Glycerine etc. the "Vat Paste" is not chargeable to duty." Relying on this it is contended by Mr. Bhabha that even, according to the Excise Department, addition of a dispersing agent was permissible and there is no rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of the Supreme Court will clearly indicate that the Appellate Collector was labouring under a complete misapprehension that merely because a change has been brought about in the state of the pigment and it has been converted into a liquid state by the addition of the diluent and the dispersing elements, the article in its liquid state, i.e., Foron liquid, is liable to excise duty. 11. It is settled law that in a case of taxation the burden of proving that the necessary ingredients prescribed by the taxing provision are satisfied is entirely upon the taxing authority. It was primarily, therefore, for the taxing authority to satisfy the Court that the formulation of the Foron pigment in the form of Foron liquid is an entirely distinct commodity having entirely a distinct name, character and use as compared with the pigment itself. The argument which is advanced on behalf of the Union of India that Foron dyestuff in the form of wet cake is not a fully manufactured item or a product and that it is really the Foron liquid which is a final manufactured product need not detain us for long because we seen no reason to disbelieve the petitioners' positive statement in paragraph 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of India has recognised the marketability of disperse dyes and it is not in dispute that Foron pigment is a kind of a disperse dye. It will, therefore, be no argument to say that the petitioners could not have sold the Foron dyestuff in the wet cake form at all and that the real finished product is the formulation of the said dye. There is also the statement of the petitioners in paragraph 2 of the petition where it is stated that there are diverse agencies in India which purchase dyes and formulate them. This averment has also been denied and as already pointed out, it is stated that "Foron pigment manufactured by the petitioners from which Foron liquids are manufactured by the petitioners are in the form of wet cake, are not treated within emulsifier and standard dyes, are not fully (sic) and the same are not known or sold in the market as dyes" and "in fact Foron pigments are not marketed or sold in wet cake condition unless treated with emulsifier and standardised or converted into Foron liquids by a process of manufacturing, namely by breaking up the pigment particle, adding emulsifier and water and stirring with the aid of power." This bare statement made on behalf of the U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , polyester and other synthetic fibres and for thermo-plastics." Therefore, one of the essential characteristics of a dispersible dye is that it is to be introduced as a dispersion or a colloidal suspension in water. What is meant by 'dispersion' is also explained in the same Dictionary as follows : "A two-phase system of which one phase consists of finely divided particles (often in the colloidal size range) distributed throughout a bulk substance, the particles being the disperse or internal phase and the bulk substance the continuous or external phase. Under natural conditions the distribution is seldom uniform, but under controlled conditions the uniformity can be increased by addition of wetting or dispersing agents (surfactants such as a fatty acid.... Larger particles will either gradually coalesce and rise to the top or settle out, depending upon their specific gravity." "Dispersion", therefore, is a phenomenon as a result of which a certain amount of uniformity with regard to the distribution of the particles is achieved. This is done by a dispersing agent, the meaning of which is given as follows : "A surface-active agent (q.v.) added to a suspending medium to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se either by bleaching, dyeing or printing carried out in the processing house. The two relevant entries in that case were Items 19 and 22 of the First Schedule to the Act, which are as follows : "19. Cotton Fabrics - 'Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chadders, bed-sheets, bed-spreads, ........" "22. 'Man-made fabrics' means all varieties of fabrics manufactured either wholly or partly from man-made fibres or yarn and includes embroidery in the piece, in strips or in motifs and fabrics impregnated coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials, in each of which man-made (i) cellulosic fibre or yarn, or (ii) non-cellulosic fibre or yarn, predominates in weight." The processors who were the petitioners before the Gujarat High Court carried on the business of bleaching, dyeing and printing, so as to make the fabric more attractive to the consumers after the fabric was woven on powerlooms which did not belong to the processors themselves. After referring to the meaning given to the word "manufacture" by the Supreme Court in South Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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