SO Dye Mixing Not Manufacturing: Tribunal Rules in Favor

The Tribunal upheld the Adjudicating Authority's decision, ruling that the process of mixing/diluting SO dyes did not amount to manufacture under the Central Excise Act. The respondent's activity of converting dyes from unformulated to formulated form was deemed not subject to excise duty. The Tribunal relied on precedents and concluded that the dyes were already in a prepared state, and no manufacturing process occurred. The Revenue's appeal was dismissed, and the respondent's cross-objection was allowed. The judgment was delivered on 20.04.2023.

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Issues Involved:
1. Whether the process of mixing/diluting SO dyes with dry salt, globular salt, dextrose, etc., amounts to manufacture under Section 2(f) of the Central Excise Act, 1944, read with Note-8 to Chapter 32 of the Central Excise Tariff Act, 1985.

Summary:

1. Background:
The respondent is engaged in the process of SO dyes classified under Chapter 32 of the Central Excise Tariff Act, 1985. The Central Excise (Preventive) department, Ahmedabad, investigated and issued a show cause notice alleging that the respondent's activity of converting SO dyes from unformulated/unstandardized to formulated/standardized/prepared dyes amounts to manufacture, thus liable for excise duty. The Adjudicating Authority dropped the proceedings, leading to the present appeal by the Revenue.

2. Revenue's Argument:
The Revenue argued that the respondent's activity of converting unformulated/unstandardized dyes into formulated/standardized/prepared dyes by diluting their strength amounts to manufacture as per Note-8 to Chapter 32. They relied on the judgment in Collector of Central Excise, Bombay vs. French Dyes & Chemical (P) Limited - 1997 (90) ELT 411.

3. Respondent's Argument:
The respondent contended that their activity only involves diluting already formulated/standardized/prepared SO dyes by mixing water, starch, salt, etc., without altering the chemical properties. They argued that the product remains the same, and no manufacturing process is involved. They supported their argument with multiple judgments, including CCE vs. Osnar Chemical Pvt. Ltd. (2012), Flex Engineering Ltd vs. CCE, U.P. (2012), and others.

4. Tribunal's Analysis:
The Tribunal considered whether the process of mixing/diluting SO dyes amounts to manufacture under Section 2(f) of the Central Excise Act, 1944, read with Note-8 to Chapter 32. The Adjudicating Authority had already considered the investigation, statements, and chemical examiner's test report, concluding that the respondent's activity did not amount to manufacture as the dyes were already in formulated/standardized/prepared form. The Tribunal agreed, noting that the purchased dyes were indeed in the formulated/standardized/prepared form, and any activity on such dyes does not amount to manufacture under Note-8 of Chapter 32.

5. Reliance on Precedents:
The Tribunal cited several judgments supporting the respondent's position, including Commissioner of Central Excise vs. Fresh Laboratories (2008), Nirvip Dyes & Chemicals Pvt. Limited vs. CCE, Mumbai (2007), and Phoenix Mills Limited vs. UOI (2004). These cases established that mere dilution or mixing of already formulated/standardized/prepared dyes does not constitute manufacture.

6. Conclusion:
The Tribunal upheld the Adjudicating Authority's order, dismissing the Revenue's appeal and allowing the respondent's cross-objection. The Tribunal also allowed the assessee's appeal for a different period, as the issues and facts were identical.

Pronouncement:
The judgment was pronounced in the open court on 20.04.2023.

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