2004 (4) TMI 74 - SC - Central Excise

Supreme Court Upholds Duty Levy on Aluminium Paint Manufacturing Process

The Supreme Court upheld the levy of duty on the manufacturing of Aluminium Paint by the Appellants, determining that the mixing process constituted ... Manufacture - Mixing - Marketability - Held that:- After the aluminium paste, metal lacquer and thinner are mixed in exact proportions, a separate and distinct product with a distinct identity comes into existence. It is a Paint which is known in the market as 'Aluminium Paint'. We see no substance in the submission that it is not marketable because it has a very short shelf life. As per the statement given by the Manager and the Managing Director of the Appellants' Company the product has a shelf life of 8 to 10 hours. This is enough to market it. Even otherwise, the Department has produced from the market stickers pasted on Aluminium Paint tins sold in the market. Further, at the time of hearing before the Additional Collector the counsel for the Appellants produced a box of Aluminium Paint manufactured by ICI Limited. This showed that the Appellants had got the product from the market. That the product could be purchased in the market is also clear from the statement of the Managing Director of the Appellants, dated 1st June, 1989, wherein he has inter alia stated that the Appellants have since stopped making the product and started purchasing Aluminum Paint from the market. When asked whether there was any difference between the product which they purchased from the market and the mixtures which they used to manufacture, the answer was that he could not say - both the authorities below were right in holding that a distinct product had come into existence and that it was a marketable - Decided against assessee. Issues: Levy of duty on manufacturing Aluminium Paint without declaration or payment, whether the process amounts to 'manufacture,' marketability of the product, invocation of extended period of limitation.Levy of Duty on Manufacturing Aluminium Paint: The case involved Appellants who were manufacturers of bus bodies but were also found manufacturing Aluminium Paint without making any declarations or paying duty. The Additional Collector passed an order levying duty on them, which was upheld by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The Appellants argued that mixing Aluminium paste, metal lacquer, and thinner did not amount to 'manufacture.' However, the Supreme Court held that the mixing process resulted in a distinct product known as 'Aluminium Paint,' which was marketable. The Court noted that the product had a shelf life of 8 to 10 hours, making it suitable for the market. Evidence from the market and the Appellants' own statements confirmed the marketability of the product.Marketability of the Product: The Appellants contended that the Aluminium Paint was not marketable due to its short shelf life. However, the Court found this argument unsubstantiated, relying on evidence such as stickers on Aluminium Paint tins in the market and the Appellants' purchase of the product from the market. The Court emphasized that a distinct product had indeed come into existence through the mixing process, which was recognized and purchased in the market. The Appellants' failure to disclose the manufacturing process to the Department further supported the conclusion of marketability.Invocation of Extended Period of Limitation: The Appellants challenged the invocation of the extended period of limitation, arguing that it was not warranted. The Court disagreed, stating that since the Appellants had not disclosed the manufacturing process, maintained no accounts, and paid no duty, the extended period of limitation was correctly invoked. The Court upheld the decision of the authorities in invoking the extended period of limitation due to the non-disclosure by the Appellants. Consequently, the Supreme Court found no infirmity in the impugned judgment and dismissed the appeal without any order as to costs.