Manufacture and classification of dye preparations turned on physical mixing, with the demand also held time-barred.

Mixing acid violet dye with Ranipal and ultramarine blue, followed by heating, filtering and bottling, was held not to amount to manufacture because the process produced only a physical mixture and no new commercially distinct excisable product. On classification, the preparation was treated as an acid violet dye preparation under sub-heading 3204.29, not the residuary sub-heading 3204.90. The revised show cause notice dated 31-5-1991 was treated as a fresh notice because it changed the proposed classification, and the resulting demand was held time-barred beyond the statutory limitation period. The assessee succeeded on manufacture, classification and limitation.

---

---

Issues: (i) Whether the preparation of Ujala by mixing acid violet dye, Ranipal and ultramarine blue amounted to manufacture of a new excisable product; (ii) If manufacture had taken place, whether the product was classifiable under sub-heading 3204.29 or 3204.90 of the Central Excise Tariff, 1985; (iii) Whether the show cause notice dated 31-5-1991 was a fresh notice and, if so, whether the demand was time-barred.

Issue (i): Whether the preparation of Ujala by mixing acid violet dye, Ranipal and ultramarine blue amounted to manufacture of a new excisable product.

Analysis: The record showed that the product was made by heating water and mixing the ingredients in fixed proportions, followed by filtering and bottling. The majority view held that Chapter Note 6 to Chapter 32 applied only to conversion of unformulated, unstandardised or unprepared dyes into formulated, standardised or prepared forms ready for dyeing. Since the input acid violet dye was already standardised, and the evidence including the Chemical Examiner's report and supporting technical opinions indicated only a physical mixture without emergence of a new commercially distinct product, the process did not satisfy the test of manufacture. The contrary view treated the resultant product as commercially different, but that view did not prevail.

Conclusion: No manufacture of a new excisable product was established; this issue was decided in favour of the assessee.

Issue (ii): If manufacture had taken place, whether the product was classifiable under sub-heading 3204.29 or 3204.90 of the Central Excise Tariff, 1985.

Analysis: On the majority reasoning, the product remained a preparation based on synthetic organic dye and did not fall under the residuary heading for fluorescent brightening agents or luminophores. The chapter note was held not to permit classification under sub-heading 3204.90 on the facts found. The product was treated as continuing to answer the character of acid violet dye preparation, and the Board's tariff clarification supported the view that simple mixing of formulated or standardised dyes with other materials does not alter the classification into a manufactured new product.

Conclusion: The product was classifiable under sub-heading 3204.29 and not under sub-heading 3204.90; this issue was decided in favour of the assessee.

Issue (iii): Whether the show cause notice dated 31-5-1991 was a fresh notice and, if so, whether the demand was time-barred.

Analysis: The revised notice was held to introduce a new basis by changing the proposed classification from one heading to another after the assessee's reply. It was treated as a fresh show cause notice and not a mere corrigendum. As the effective demand could only be sustained within the statutory limitation period, the demand beyond six months from the relevant notice was held unsustainable. The competing view treated the later notice as a continuation of the earlier proceedings, but that view did not carry the majority.

Conclusion: The notice dated 31-5-1991 was a fresh notice and the demand was barred by limitation; this issue was decided in favour of the assessee.

Final Conclusion: The majority held that the impugned product did not attract duty on the basis sustained by the adjudicating authority, and the assessee succeeded on manufacture, classification and limitation.

---