2019 (12) TMI 1373 - AT - Central Excise

Appellant's Printing Paste Not Manufacture under Central Excise Act

M/s Marathon Nextgen Realty & Textiles Ltd. Versus Commissioner of Central Excise, Thane-I

The Tribunal held that the process of preparing 'printing paste' by the appellant did not amount to 'manufacture' under Section 2(f) of the Central Excise ... Levy of Duty - Process amounting to manufacture - preparation of ‘printing paste’ - HELD THAT:- In the present case, the show-cause notice was issued to the appellant way back in 1990 alleging that the appellant had manufactured and captively consumed printing paste in their factory premises falling under Chapter sub-heading 3204.29 but failed to discharge duty on the same - the appellant had produced purchase invoice of dyes issued by M/s Jaysynth Dyes Stuff (I) Ltd., BPCL, India Chemicals indicating that the dyes purchased by them were standardized one. Also, SASMIRA’s certificate produced by the appellants reveals that printing paste prepared by the appellant are of short shelf life and cannot be marketable. Thus, in view of the overwhelming evidence and in absence of any contrary evidence produced by the Revenue to show that the printing paste manufactured by the appellant in their factory premises was from non-standardized, non-formulated or non-prepared dyes, the order confirming the duty holding that the printing paste prepared by the appellant resulted into ‘manufacture’ within definition of Section 2(f) of Central Excise Act, 1944 and accordingly dutiable under Chapter sub-heading 3204.29 of Central Excise Tariff Act, 1985, cannot be sustained. Appeal allowed - decided in favor of appellant. Issues Involved:1. Whether the process of preparing 'printing paste' by the appellant constitutes 'manufacture' under Section 2(f) of the Central Excise Act, 1944.2. Whether the printing paste prepared by the appellant is classifiable under sub-heading 3204.29 of the Central Excise Tariff Act, 1985.3. The burden of proof regarding whether the printing paste was prepared from standardized, formulated, or prepared dyes.4. Marketability and shelf life of the printing paste.5. Legality of the enhanced duty demand and reclassification of the product.Detailed Analysis:1. Manufacture Definition and Classification:The primary issue is whether the process undertaken by the appellant to prepare 'printing paste' constitutes 'manufacture' under Section 2(f) of the Central Excise Act, 1944. The appellant used duty-paid standardized, formulated, and prepared dyes and chemicals to create the printing paste, which was then used within the factory premises. The Revenue alleged that this process resulted in 'manufacture' as defined under Note 6 to Chapter 32 of the Central Excise Tariff Act, 1985, thereby classifying the product under sub-heading 3204.29. However, the appellant argued that the Revenue failed to provide evidence that the printing paste was made from non-prepared, non-standardized, and non-formulated dyes.2. Burden of Proof:The appellant contended that the burden of proof lies with the Revenue to establish that the printing paste was prepared from unstandardized, unformulated, and unprepared dyes. This principle was supported by the Hon'ble Bombay High Court in Phoenix Mills Ltd. Vs. Union of India, which held that the burden to prove whether the process resulted in 'manufacture' rests with the Revenue. The Revenue did not follow the directive to consult the Dy. Chief Chemist to verify the nature of the dyes used.3. Marketability and Shelf Life:The appellant provided evidence, including invoices and certificates from suppliers, to substantiate that the dyes used were standardized and formulated. Additionally, certificates from SASMIRA and BRTA indicated that the printing paste had a short shelf life and was not marketable. The Board's Circular No. 2/93 dated 21.04.1993 clarified that printing paste prepared from formulated, standardized, or prepared dyes by simple mixing with other materials does not amount to manufacture.4. Enhanced Duty Demand and Reclassification:The appellant argued that the enhanced duty demand from Rs. 49,47,687.62 to Rs. 63,42,042.36 and the reclassification of the product through a corrigendum were unlawful. The Tribunal supported this view, referencing judgments in Mahindra & Mahindra Ltd. Vs. Commissioner of Central Excise and Century Laminating Co. Ltd. Vs. Commissioner of Central Excise, which held that such actions are not sustainable.Conclusion:The Tribunal concluded that the Revenue failed to provide evidence that the printing paste was prepared from non-standardized, non-formulated, and non-prepared dyes. The appellant's evidence, including purchase invoices and certificates, demonstrated that the dyes were standardized and formulated. Consequently, the process did not amount to 'manufacture' under Section 2(f) of the Central Excise Act, 1944, and the product was not classifiable under sub-heading 3204.29. The enhanced duty demand and reclassification were also deemed unsustainable. The appeal was allowed, and the impugned order was set aside with consequential relief as per law.