TMI Blog2002 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... has dropped the proceedings initiated against the assessee in terms of Show Cause Notice No. 12/96, dated 4-3-93 raising demands on the allegation that assessee had manufactured 'Chelate compound' and marketed the same without paying the duty thereon . The finding recorded by the Commissioner is extracted herein below :- "I have gone through the records of the case including various written submissions as well as submissions made during P.H. The facts of the case in brief are as follows : M/s. Titanium Equipment and Anode Manufacturing Co. Ltd. (TEAM) were alleged to have manufactured a product called chelate solution which was used captively by them for coating anodes. However no duty was paid on this solution and the earlier adjudicating authority had confirmed the demand to the extent of Rs. 83 lakhs. Against the above order M/s. TEAM went on appeal before the Tribunal who set aside the earlier adjudicating authority's Order-in-Original and remanded the matter for de novo adjudication with the following observations : "that an opportunity of cross-examination of the Professor concerned who gave the opinion that chelate solution has a shelf life of one month should be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, before transferring the technology to TEAM, the chelate preparation consists of dissolving of proprietary metal chlorides like Ruthenium/Iridium in Iso Propyl alcohol/Butanol. The chloride in powder form when dissolved into Iso Propyl alcohol/Butanol is called chelate. Such dissolving is being done for applying this chemical on to the electrodes surface and alcohol is being used only as a carrier between the precious metal chemical powder and the surface. It is only a process of mixing and dilution and this does not change the character of the precious metal chloride at all. All the characteristics of the Ruthenium tri-chloride and Iridium tri-chloride crystals remain absolutely intact without undergoing any change. No new commercial product emerges. In the background of the above opinion and applying the ratio of the judgments cited by TEAM and also in view of the recent Tribunal's judgment in the case of Punjab Power Packs Ltd. v. CCE, Chandigarh, reported in 1998 (104) E.L.T. 50 (Tribunal), I hold that the process of diluting the metal chlorides with alcohol does not result in any new product involving manufacture. Further market study was also conducted by the Divisional Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Punjab Power Packs Ltd., v. CCE, Chandigarh, reported in 1998 (104) E.L.T. 50 (Tribunal), I hold that the process of diluting the metal chlorides with alcohol does not result in any new product involving manufacture. Since it was considered that shelf life of the impugned solution should be ascertained by a test, samples were drawn and sent to the IIT for test. The IIT Professor vide his letter dated 14-10-97 has reported that the shelf life of the compound in question is 30 hours only and that upon storage, the solution is bound to change its integrity. Further, market study was also conducted by the Divisional Assistant Commissioner, who vide his letter dated 30-11-98 has reported "that the coating solution could not be marketed as such as the shelf life of the same is very much restricted. The solution has to be used within 24 hours as it starts deteriorating by way of coagulation, precipitation, etc. after this period of time. In view of this, it appears that the above coating solution cannot be marketed". In view of the above discussions, I pass the following order. ORDER Since no manufacture is involved and further the goods themselves are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l oxide coating is not possible. The chelate thus formed and which is in the coating solution ultimately get deposited as metal oxide coating over the Titanium Anode substrate. This metal oxide coating enhances the electrical conductivity of the Titanium Anode when the Anode is used for the electrolytic cell in the manufacture of caustic soda. 4.2 The Adjudicating authority in this order dated 18-12-98 drawn prima facie wrong inference from the opinion of CECRI. Commissioner has observed in his findings that according to the CECRI opinion who were patent holders for the product, before transferring the technology to TEAM, the chelate preparation consists of dissolving proprietary metal chlorides like Ruthenium/Iridium in Isopropyl Alcohol/Butanol. The chloride in powdered form when dissolved into iso propyl alcohol (Butanol) is called Chelate. Such dissolving is being done for applying this chemical as to the electrodes surface and alcohol is being used only as a carrier between metal chemical powder and the surface. He has also observed that it is only a process of mixing and dilution and this does not change the character of the precious metal chloride at all; that all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter it coagulates and precipitates. Precipitation and coagulation will not go on without a reaction. Thus, there is a contradiction in the order particularly about the question of manufacture. The coating solution can be kept safely for over 1 month at 25ºC which was also admitted by Shri Siva Subramanian, DGM of TEAM. 4.4 Admittedly, market/marketability for each commodity is to be studied applied individually and for product by product. This commodity being a proprietary product is unique one and the existence of market is to be viewed in this context. In this case, the coating solution is transferred to the Titanium Anode substrate of the customer who has given the anode for recoating purposes for giving a metal oxide coating over the anode substrate. Clearance of coating solution (which is admittedly a proprietary product, the formulation being secret) is effected by way of coating and the value for coating solution is recovered from the customer by way of recoating charges by TEAM. It is pertinent to note here that when TEAM removes new Titanium anodes, the value of the coating is also included in the total assessable value of the anode. The adjudicating authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard even in their Order No. 4-R/2000, dated 10-1-2000 in respect of Appeal No. E/761/2000. 6. Appeal No. E/631/2001 is filed by the assessee against Order-in-Appeal No. 5/2001(M)(III)(D), dated 16-1-2001 passed by Commissioner (Appeals), Chennai allowing the departmental appeal against Order-in-Original No. 31/99, dated 14-1-99 by which the Asstt. Commissioner, Chinglepet Division had dropped the proceedings initiated by five show cause notices dated 4-9-96, 4-4-97, 3-10-97, 30-4-98 and 5-11-98 for various periods commencing from November 1995 to September 1998 on the same grounds that the process carried out by the assessee brings into existence new goods and they are required to be cleared on payment of duty. The AC followed is OIO of the Commissioner of Central Excise dropping proceedings which are the subject matter of Revenue Appeal in E/305/2000 in which the order of the Commissioner is already extracted (supra). 7. Heard Ms. L. Mythili and Shri Anand, Learned Advocates appearing for assessees in E/631/2001 and E/305/2000 and Shri M.S. Krishnan, ld. Counsel appearing for assessee in E/761/2000, while Revenue's appeals were argued by Shri G. Sreekumar Menon, ld. SDR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence having been produced by the Revenue. In this regard he relied on the judgment of Life Line Systems P. Ltd v. CC, New Delhi reported in 1988 (33) E.L.T. 699 (T) which, according to him, has been followed by this Bench in the case of ANZ Grindlays Bank vide Final Order Nos. 1465 to 1466/2001, dated 31-8-2001. It was further contended that Apex Court in the case of Union Carbide India Ltd v. UOI Others - 1986 (24) E.L.T. 169 have laid down the law on marketability excisability of sine qua non. He submits that same opinion with regard to expert opinion has been expressed in the case reported in 1984 (17) E.L.T. 55 wherein it has been held that expert evidence deserves to be accepted. He also pointed out to the judgment relied on by the Commissioner rendered in Punjab Power Packs Ltd. v. CCE - 1998 (104) E.L.T. 50. He further contended that there was no charge of suppression in the matter and even otherwise demands cannot be confirmed as same are time barred. He submits that matter was adjudicated in the year 1988 in Order No. V/68/15-11-86-19-9-88 in OIO No. 29/88 which has not been appealed by department and therefore it cannot be said that larger period was invokable in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied the judgment of Punjab Power Packs Ltd. v. CCE (supra). In order to counter this finding, Revenue ought to have got the item tested through their own chemical labs and obtained the rebuttal evidence which is not forthcoming. Further the Divl. Asstt. Commissioner himself has carried out the market survey and found the item to be not marketable. The Board in their grounds have contended that the solution has shelf life for 24 hours and it starts deteriorating by way of coagulation, precipitation etc. after this period of time. The finding as reported by the Divl. Asstt. Commissioner and the conclusion drawn therefrom is not correct. It is contended that even if it has got less shelf life, even then it can be considered as a product having satisfied the test of marketability. We have carefully applied our mind and considered this argument and grounds. We are not satisfied with the same. The test of marketability has to be proved with evidence and that the product is being sold in the market in the condition in which it is kept. The fact that Divisional Asstt. Commissioner has noted that as such the product is not being sold and it has a very short shelf life and it starts dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessable value as per Section 4 of the Central Excise Act, 1944. He has also denied the Modvat credit on the input chemicals used for the re-coating jobs undertaken by the assessee. The Commissioner (Appeals) in the order impugned has agreed with the lower authority that in terms of Board's Circular No. 3/92, dated 14-5-92, re-coating of anodes done in a factory would not amount to manufacture under Section 2(f) of CEA, 1944. Despite holding the same, he has yet held that appellants incurred some expenditure and the same is collected from the customers when it is supplied back. This expenditure towards these chemicals has to be includible in the assessable value and differential duty to be paid, while conforming to 173H of C.E. Rules. The findings recorded by the Commissioner (Appeals) in Paras 3 to 6 are reproduced herein below :- 3. In the grounds of appeal the appellants inter alia contended that the process of recoating of anodes is not a process of manufacture since no product having a distinct name, character or use emerges after recoating of the anodes. After this process anode remains anode only. They have further stated that ACCE, VII Division had specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73H. In these circumstances, I see no infirmity in the impugned order. Accordingly, the appeal is rejected. 14. We have heard Ms. L. Mythili, Advocate along with Shri Anand ld. Advocate for appellants and Shri G.S. Menon, ld. SDR for Revenue. 15. Ld. Counsel submitted that once it is accepted by Revenue that re-coating does not amount to a process of manufacture and there is no dispute about that aspect of the matter, then question of adding such charges to assessable value does not arise. In this regard, she relied on the judgment of Modi Xerox Ltd. v. CCE, Meerut - 1997 (91) E.L.T. 116 wherein it was held that stripping of original damaged coating of photoreceptor drum which is used in the manufacture of photocopiers and application of new coating does not amount to manufacture. Likewise, the same ratio was laid down in the case of Industrial Linings v. UOI Ors. - 1988 (36) E.L.T. 28 (Bom.), wherein the rubber lining of naked tanks and vessels or of old tanks and vessels received from user consumers or customers was held to be not a process of manufacture. In the case of Ugar Sugar Works Ltd. v. CCE - 1990 (47) E.L.T. 561, the Tribunal held that re-grooving of sugar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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