Imported insecticide dilution not "manufacture" under Central Excise; Circular invalidated.

The High Court held that the process of diluting imported insecticides by adding substances does not amount to "manufacture" under the Central Excise Tariff Act, 1985. The Court found the circular issued by the respondents, which contradicted a Tribunal decision, to be invalid and contrary to judicial principles. Emphasizing the need to challenge Tribunal decisions through proper legal channels, the Court quashed the circular and show cause notice, allowing the writ petition in favor of the petitioner. The respondents were advised to pursue legal action within the framework of the law if they had other grievances.

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Issues:
1. Whether the process of diluting imported insecticides amounts to "manufacture" under the Central Excise Tariff Act, 1985.
2. Validity of the circular issued by the respondents declaring the process as "manufacture" and overriding a previous Tribunal decision.
3. Legality of the circular in light of conflicting decisions and its impact on uniformity in classification and assessment of goods.
4. Adherence to judicial decisions and the authority of the Board to issue directions contrary to Tribunal decisions.
5. Compliance with Supreme Court judgments on tariff amendments and classification of pesticides and insecticides.

Issue 1:
The petitioner, a manufacturer of electro thermo appliances, diluted imported insecticides for marketability by adding various substances. The respondents contended that this process constitutes "manufacture" under the Act, leading to a dispute over duty liability. The petitioner challenged a show cause notice and a circular issued by the respondents directing the treatment of the process as "manufacture."

Issue 2:
The circular referred to a Tribunal decision which held that dilution does not amount to "manufacture." However, the Board, under Section 37B of the Act, deemed the addition of chemicals to pesticidal chemicals as "manufacture." The High Court analyzed the legality of the circular, which sought to dispute the Tribunal decision, and found it contrary to judicial principles.

Issue 3:
The High Court referenced a previous judgment where a Single Judge held that the circular was invalid as it contradicted the Tribunal decision. It emphasized that the appropriate remedy for the revenue was to challenge the Tribunal's decision in court rather than issue a circular overriding it. The High Court noted that similar decisions were made by other High Courts, reinforcing the position on challenging Tribunal decisions.

Issue 4:
The High Court highlighted that the Board had no right to render a Tribunal decision irrelevant through a circular. It emphasized the need for challenging Tribunal decisions through proper legal channels rather than issuing circulars that contradict judicial decisions. The Court referred to the acceptance of the Single Judge's decision by the respondents and its subsequent adoption by other High Courts.

Issue 5:
In light of Supreme Court judgments on tariff amendments and classification of pesticides, the High Court allowed the writ petition, quashing the circular and the show cause notice. The Court clarified that if the respondents had other grievances against the petitioner's activities, they could pursue legal action in accordance with the law. The petition was disposed of with no order as to costs.

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