1985 (1) TMI 55 - HC - Central Excise

Synthetic resin dilution not considered manufacturing under Central Excises and Salt Act

The court held that the process of diluting synthetic resin with alcohol to form a resin solution does not amount to a manufacturing process under Section ... Short levy - Manufacture - Change in form Issues Involved:1. Whether the process of diluting synthetic resin with alcohol amounts to a manufacturing process under Section 3 of the Central Excises and Salt Act, 1944.2. Whether the resin solution produced by the appellants is a manufactured product different from the synthetic resin.3. Applicability of the amended provision of Item 15-A and whether the process adopted falls under the processes mentioned in Explanation 2.4. Validity of the differential duty demand under rule 10 of the Central Excise Rules.Summary:Issue 1: Manufacturing Process under Section 3The appellants contended that the process of diluting synthetic resin with alcohol to form a resin solution does not amount to a manufacturing process u/s 3 of the Central Excises and Salt Act, 1944. The court examined whether this process results in a new and different article with a distinctive name, character, or use. The court referenced the Supreme Court's definition of 'manufacture' which implies a transformation resulting in a new product. The court concluded that the end product, being a mere dilution of synthetic resin, does not constitute a new product and thus does not amount to manufacture.Issue 2: Manufactured ProductThe appellants argued that the resin solution is not a different product from the synthetic resin. The court noted that the end product retains the same properties as the synthetic resin and is used for bonding purposes. The court relied on the Chemical Examiner's report which indicated that the end product is still a synthetic resin. Therefore, the court held that the process does not result in a new and commercially different product.Issue 3: Applicability of Item 15-AThe court found it unnecessary to delve into the amended provision of Item 15-A since the process employed by the appellants did not result in a new product. The court noted that even if the end product were considered a new product, it could not be brought under Item 15-A, which deals only with resin.Issue 4: Validity of Differential Duty Demand under Rule 10The court upheld the applicability of rule 10, stating that the short levy was due to a mistake by the excise authorities in levying duty based on the resin content rather than the total weight of the solution. Rule 10 provides for the recovery of duties short levied due to inadvertence or error. The court concluded that the requirements of rule 10 were satisfied, and the demand for the differential duty was valid.Conclusion:The court allowed the appeal, quashing the impugned demand for differential duty. The court held that the process of diluting synthetic resin with alcohol does not amount to manufacture, and the end product is not a new and commercially different product. Therefore, the end product is not excisable under the Central Excises and Salt Act, 1944.