Polymer granules to powder can amount to manufacture, but excise duty still depends on proof of marketability.

Conversion of LLDPE/LDPE/HDPE granules into powder was treated as manufacture under Note 6(b) to Chapter 39 because one primary form of polymer was changed into another primary form. Excise liability, however, depended on proof of marketability, and the record was found insufficient because the alleged hygroscopic nature of the powder was unsupported by particulars and reliable evidence of actual marketability was lacking. The matter was therefore remanded for fresh adjudication on evidence, with consideration of the claimed small-scale exemption and, if duty was payable, Modvat credit.

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Issues: (i) Whether conversion of LLDPE/LDPE/HDPE granules into powder amounts to manufacture under the tariff chapter note. (ii) Whether the powder is excisable without adequate evidence of marketability, and whether the matter should be remanded for fresh adjudication.

Issue (i): Whether conversion of LLDPE/LDPE/HDPE granules into powder amounts to manufacture under the tariff chapter note.

Analysis: The conversion of one primary form of the polymer into another primary form falls within Note 6(b) to Chapter 39. On the admitted facts, the respondents changed granules into powder, and such conversion is treated as manufacture under the tariff scheme.

Conclusion: Yes. The process amounts to manufacture, and this issue is against the assessee.

Issue (ii): Whether the powder is excisable without adequate evidence of marketability, and whether the matter should be remanded for fresh adjudication.

Analysis: Excise duty can attach only if marketability is established. The finding that the powder was not marketable rested mainly on its hygroscopic nature, without particulars such as moisture absorption rate or shelf life. The Revenue also did not place reliable evidence on record to show actual marketability of the disputed powder. In these circumstances, the record was held insufficient for a final determination, and fresh adjudication with evidence from both sides was required. The authority was also directed to consider the claimed small-scale exemption and, if duty were held payable, the availability of Modvat credit.

Conclusion: The question of excisability was not finally determined and the matter was remanded for fresh adjudication.

Final Conclusion: The appeals were disposed of by remanding the matters to the adjudicating authority for reconsideration on evidence, with the issue of duty liability left open.

Ratio Decidendi: Conversion of one primary form of a polymer into another primary form amounts to manufacture, but excise liability still requires proof of marketability on the evidence on record.

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