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1993 (8) TMI 196
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....ted 19-6-1990 was issued to the appellant and its proprietor for contravention of Section 6 of Central Excises & Salt Act, 1944 read with Rule 174 of Central Excise Rules, 1944, and Rules 9(1), 52A, 53, 173B, 173C, 173G, and 226 of Central Excise Rules, 1944, inasmuch as they had manufactured a total quantity of 3,14,05,555 bottles (75ml.) of liquid optical whitening agent (with brand name `UJALA' classifiable under Chapter sub-heading No. 3204.30 of CET, 1985 during the period 86-87 to 17-1-1990 without taking out a Central Excise Licence and removed the same without payment of duty and without observing the relevant provisions of C.E. Rules, 1944, and also contravened the provisions of Central Excises & Salt Act, 1944 and of rules made thereunder by filing false declaration with jurisdictional Central Excise Range Officer suppressing facts with intent to evade payment of duty which attracts the provisions of sub-section (1) of Section 11A of the Act. 3. The annexures to the show cause notice gives details of the changes, and gist of all the statements, recorded by the investigating team. The brief facts are that the appellant commenced production of Ujala in the year 1983 and ....
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....the later show cause notice proposing under sub-heading 3204.90 and confirmed thereunder is wrong and the correct classification would be only under sub-heading 3204.29 of CET, 1985, as the preparation does not result in a manufacture of a fresh product. He relied on the Chemical Examiner's report, who had opined that no new product had emerged by mere physical mixing of the inputs with hot water. He drew support form the technical opinion of Shri Arvind V. Patwardan and that of Dr. N.R. Iyengar. He referred to Chapter Note 6 of Chapter 32, which noted what amounted to manufacture and even as per this Note, the activity of preparing and making Ujala did not amount to manufacture. He contended that before classifying under sub-heading 3204.90, the Department has to over-rule other headings. The product would fall under 3204.29 as `Synthetic Organic Dyes' and preparations based thereon (formulated). He relied on the following ruling to contend that there is no emergence of new product : (i) Collector of C. Excise v. Indian Dye Stuff Industries - 1986 (26) E.L.T. 936 (ii) Collector of Central Excise v. Denson Engineers - 1991 (52) E.L.T. 296 (iii) Collector of Cen....
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....show cause notice based on the same facts and therefore, the demands were sustainable. She relied on the ruling rendered in the case of Star Paper Mills v. Collector of Central Excise, [1986 (26) E.L.T. 81]. She contended that the Collector had correctly determined the classification as the product would fall under the residuary item. 21. Shri V. Lakshmikumaran, countering the arguments, submitted that heading 3204.29 covers also preparations thereon and as the essential characteristics remained the same, it should fall in the same heading and that the ratio of Mallaya Fine Chemicals cited would squarely apply to the facts of the case. The show cause notice proposes a new classification and hence, it has to be construed as a fresh show cause notice and in the Star Paper Mills, cited by the learned SDR, the facts are different, inasmuch as, in that case, a corrigendum had been issued, while in the present case, it is a fresh show cause notice and not a corrigendum and hence, the citation would not apply. He contended that the end-use is not the criterion for the purpose of classification and hence, Acid violet dye in solution form would not fall under sub-heading 3204.90 because ....
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.... in a new product by process of manufacture and whether the product has a different name, character and use than the original product? The report of the Chemical Examiner quoted in the show cause notice is already extracted above. As can be seen from the extract of the report, the `Ujala Liquid' is stated to be "in the form of bluish violet coloured liquid. It is an aqueous solution composed mainly of colouring matter". The characteristic of white powder is stated to be composed of "fluorescent brightening agent and inorganic compound"; while `Blue pow-der' is stated to have "characteristics of ultramarine blue; and `violet powder' is a synthetic, organic colouring matter Acid dye". The Chemical Examiner by his letter, dated 17-1-1990 to the Assistant Collector has stated as follows : "Sir, Sub : C. Excise - samples of Acid Violet, Ujala Super Whitener, Ultramarine blue and white stainer drawn from M/s. Jyothi Laboratories on 17-11-1989 Test Report. Please see the enclosed copy of T.R. of 4 samples drawn from M/s. Jyothi Laboratories. The samples were drawn at the time of our visit to the factory along with Superintendent (Preventive) of C. Excise Head Quarters, Cochin. ....
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....ot be applied to the facts of the present case as, no new product has emerged and it is not also known differently in the market. The Revenue has also not produced any evidence contradicting the claim of the appellants and the technical opinion produced by them. The burden of classification is on the Revenue and before classification is done, the Revenue has to show that a new product has emerged after a process of manufacture which has not been proved in the present case and the evidence is also in favour of the appellant. 38. Therefore, on the basis of the technical opinion and the case law cited above, we have to uphold the contention of the assessee that there is no manufacture on the addition, and mixing of Ranipal, Ultramarine blue in the liquid Acid violet dye and there is no new product emerging from such a process. 39. As regards the classification of the product, it would not be necessary for me to deal with it, as the first question has been answered in favour of the appellant. However, as my learned brother Shri Lajja Ram is taking a different view of the matter, it becomes necessary for me to answer the other two questions also. 40. In the event of the product....
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....da ash and other chemicals or uniting of two or more formulated/standardised/prepared dyes undertaken in the preparation of dye both for dyeing or printing purposes would not amount to manufacture. Therefore Note 2 of Chapter 32 is not attracted in the present case. The product cannot be classified under Heading 3204.90 as a preparation based on synthetic organic colouring matter. The contention of the appellant that acid violet dye falls under sub-heading 3204.29 as "other"; under the Heading "synthetic organic dyes and preparations thereon" requires to be accepted. The product `Ujala' is more appropriately classifiable under sub-heading 3204.29 of Central Excise Tariff, 1985. 41. The appellants have contended that the show cause notice, dated 31-5-1991 is a fresh show cause notice and hence, the demands being time-barred, it cannot be confirmed. They have relied on the ruling of Anna Saheb Bapu Bhagate v. Collector of Central Excise, Bombay [1986 (24) E.L.T. 567]. In Paragraph 10 of this judgment, it has been held as under : "10. In this case the show cause notice had been initially issued in 1979 demanding duty for the period of six months preceding thereto. But subsequent....
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....scribed the characteristics of the product as under : (i) `Ujala' is an instant action liquid optical whitener, imparts ultra violet effect and fluorescent effect to the clothes, thereby giving optical brilliance of white colour. (ii) The special formula avoids corrosion of clothes, whether cotton, synthetic or silk, and ensures long life of clothes. 46. In a letter to Canteen Stores Department, it was stated that the special ingredients of `Ujala' prevent fungus formation, clotting, sedimentation and disintegration. Long shelf life was said to be another peculiarity of `Ujala'. 47. In statement, dated 17-1-1990, the proprietor of the firm has stated that by dipping of clothes in the solution of their product `Ujala', an attractive whiteness is obtained in the clothes. 48. On page 158 of the paper book it is stated that `Ujala'is used as an auxiliary preparation so as to give brightness to the clothes washed. The purpose for which it is used is washing. It is said to be imparting brightness to the existing colours. 49. The process of preparing the product has been given by the appellants as under : (i) Water is boiled in ovens. (ii) Acid dye violet, also cal....
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..... 57. Ultramarine blue is an inorganic pigment; blue powder. It is used in very low percentages to intensify whiteness of laundered clothing etc., by off-setting yellowish undertones; gives a `blue' rather than a `yellow' white. (Source : Condensed Chemical Dictionary). 58. According to the party, ultramarine blue was classifiable under heading No. 3206, which covers `other colouring matter'. 59. It is thus seen that each of the raw materials had a distinctive name, character and use, and the final product, produced out of the processing of these raw materials, has a different name, character and use, different from the raw materials from which it is produced. 60. The use to which the product `Ujala' is put is different. Its characteristics are different. Its name is different, different from the raw materials. It has got a violet tinge and is used for washing of the clothes after use of soap/detergents, to give them an optical whiteness, to give a fluorescent effect. 61. In the light of the above discussions, with regard to the final products and the raw materials etc., let us now analyse whether the process involved in the processing of acid dye violet, Ranipal and....
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....re dispersed uniformly in liquid media. 92. In the case before us there were three items, a dye, a brightener and a pigment. They were mixed in an aqueous solution, and used as a product to which properties of all the three items have been imparted. Here was not a case of making any or all of the products usable for the same purpose for which they were usable before, but using the resultant product for an entirely different purpose, that is for washing of the clothes. 93. to 108. * * * * * * 109. As will be seen above, in the case before us, there are three raw materials classifiable under different heads and the same were used for different purposes. 110. Thus, the rationale of the case - Bush Boake Allen India Ltd. v. Collector of Central Excise, Madras, referred to above, is not applicable to the facts in the case before us. 111. Let us now deal with the classification of the product `Ujala'. 112. Under show cause notice, dated 19-6-1990, the product was sought to be classified under sub-heading No. 3204.30 of the Central Excise Tariff. 113 to 115. * * * * * * 116. The proposal for cl....
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.... cloth. 125. Thus, I agree with the findings of the adjudicating authority that the product `Ujala' was correctly classifiable under Heading No. 3204.90 of the Schedule to the Central Excise Tariff Act, 1985. 126. The question as to whether a particular process to which the raw materials have been subjected to is a process of `manufacture' or not, has to be answered in the light of the well laid down tests by the Hon'ble Supreme Court in a series of decisions. The facts and circumstances of each case have to be analysed [Refer Bombay High Court's decision in the case of Shakti Dye Works (supra)]. This is the job of those who are called upon to adjudge the matters before them, who have to come to and report their decision in a logical, judicial and judicious manner. This work cannot be delegated to any other authority, howsoever high or learned that may be, and no authority could dispose of contentious matters unilaterally in violation of the principles of natural justice. Views have to be based on reasons and the findings have to be transparent. 127. Very often in defence, statements from the experts are filed in support of the points made by the noticees. It needs to be r....
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....ause notice which had already been issued within the period of limitation. 136. It was not in the nature of an independent show cause notice. It was not styled as a corrigendum. It did not seek to expand the basis of the charges as contained in the original show cause notice. It did not put the duty amount higher than in the original notice. No new rules were quoted therein. Thus, the observations of the Tribunal in the case of Radhika Vitamalt v. Collector of Central Excise [1985 (21) E.L.T. 920 (Tribunal)], are not applicable to the realities in this case. 137. The Tribunal in the case of Collector of Central Excise v. Star Paper Mills [1986 (26) E.L.T. 81 (Tri.)] has held that when subsequent or second show cause notice refers to the earlier show cause notice the subsequent show cause notice is to be treated to have been issued in continuation of the earlier one and therefore, the time limit is to be computed with reference to the first show cause notice, and the second notice cannot be said to have been hit by limitation. 138. In the case before us the notice after the submissions made by the appellants, in the light of their submissions, referred to the proceedings al....
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.... for reference to the third Member and the Hon'ble President may be pleased to refer the same for opinion : (i) Whether the impugned product `Ujala' arises out of a process of manufacture and an excisable product as held by Hon'ble Member (T) or it does not arise out of a process of manufacture and not excisable product as held by Member (J); (ii) Whether the product `Ujala' is classifiable under sub-heading No. 3204.29 of Central Excise Tariff, 1985 as held by Member (J) or under sub-heading No. 3204.90 of Central Excise Tariff, 1985 as held by Member (T); (iii) Whether the show cause notice, dated 31-5-1991 is a fresh show cause notice and if so the demands are barred by time as held by Member (J) or the show cause notice, dated 31-5-1991 is a corrigendum show cause notice and the demands are not barred by time as held by Member (T), and (iv) Whether the appeal is to be allowed as held by Member (J) or to be dismissed as held by Member (T). [Order per : K.S. Venkataramani, Member (T), Third Member on reference, agreeing with S.L. Peeran, Member (J)]. - The ld. Counsel, Shri Lakshmikumaran appearing for the appellants, adressed arguments on the points of difference ....
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.... that if it is to be used as dye in the case of textiles it is to be mixed with organic or acids known as mordents only then the colour fixation will take place in the fibre. The acid violet dye preparation as a mixture of acid violet dye Ranipal and ultramarine blue would continue to be such a preparation and there is no manufacture. The ld. Counsel also relied upon Note 6 to Chapter 32 CET in support of his arguments that there is no manufacture involved. It was submitted that so far as dyes are concerned according to Chapter Note 6, conversion of unformulated, unstandardised or unprepared forms of dye to formulated, standardised, prepared dyes alone would constitute manufacture. It was submitted that unformulated and un-standardised dyes would be classifiable under sub-heading 3204.21 and on conversion into standardised dye, they would fall under sub-heading 3204.29 and in that event, the process of conversion would amount to manufacture in terms of Chapter Note. In all other cases, it was contended that as far as the dye industry is concerned, there is no manufacture. This view had been endorsed by the Tribunal in its decisions in the case of M/s. Bush Boake Allen (India) Ltd.,....
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....payable to the appellants. This decision has been reportedly upheld by the Supreme Court, as indicated in 1990 (45) E.L.T. A95. 147. The ld. D.R. Sh. Somesh Arora, pointed out that the process undertaken by the appellants by adding Ranipal and ultramarine blue to acid dye, results in a new product which will amount to a process of manufacture because the ultimate product `Ujala' which emerges with much higher potency, than the original materials. It was, further, argued by the ld. D.R. that the chemical examiner of the department is not an authority to decide what would amount to manufacture for the purpose of the Central Excises and Salt Act, 1944. This is a question to be adjudicated by the competent authority having regard to the material evidence on record and the process in question. Admittedly, the product is known differently in the market from its ingredients. As regards the question of classification of the goods, the ld. D.R. relied upon the Calcutta High Court judgment in the case of Nilsin Company v. Collector of Central Excise, Calcutta and Orissa & Others - 1985 (22) E.L.T. 739 (Cal.) and in the case of Seth Chemical Works (P) Ltd. v. Union of India - 1989 (43) E.L....
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.... even according to the subsequent memorandum for changing the classification issued by the Collector on 31-5-1991, the admitted position is acid violet received by the appellants is standardised. Therefore, it is very clear that there is no conversion in this case of unformulated, unstandardised or unprepared form into their formulated, standardised or prepared forms ready for use in the process of dyeing. When this is so, it cannot be held that there is a process of manufacture in the production of `Ujala'. The chemical examiner's report is to the effect that it is a physical mixture of the ingredients in boiling water which report has been given after study of the manufacturing process. His opinion has thus been given on the basis of material which is relevant for determining whether the process undertaken is one of manufacture of excisable goods. His opinion though not compelling acceptance by adjudicating authority, yet it also finds support from the other experts in the field, who have given the same opinion as brought out by the Hon'ble Member (Judicial) in his order. It is also significant that only during the material period, along with acid dye violet, Ranipal and ultra....
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.... dyes by simple mixing with other materials shall not amount to manufacture and as such, not be classifiable under sub-heading 3204.29 of the Tariff." The Chemical Examiner's opinion in this case is also in accordance with this Tariff Ruling of the Board. 149. Therefore, it is found that in terms of Chapter Note 6 to Chapter 32 when applied to the process by which `Ujala' is manufactured, it cannot be said that a process of manufacture as envisaged in the Chapter Note, has taken place, and hence, it is to be concluded that no process of manufacture has taken place at the hands of the appellant. It is also, in this case, borne in mind that the Larger Bench in the case of Saurashtra Chemicals v. Collector of Customs -1986 (23) E.L.T. 283 has held that in classification matters, the Chapter Notes and Section Notes govern the coverage of tariff headings. "The relevant headings in the tariff," observed the Tribunal, "have to be interpreted and applied in the light of the Section Notes and Chapter Notes which are statutory and binding like the headings themselves. These Section Notes and Chapter Notes, sometimes, expand and sometimes restrict the scope of certain headings. In other....