TaxTMI 
TaxTMI 
2022 (2) TMI 615
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.... [the Tariff Act] and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate from the whole of the duty of excise or additional duty of excise leviable thereon subject to certain specified conditions, has been denied to the appellant. The said exemption notification was to apply to new industrial units which had commenced commercial production on or after the 7th day of January, 2003 but not later than the 31st day of March, 2010 and was to apply for a period not exceeding ten years from the date of publication of the notification in the Official Gezette or from the date of commencement of commercial production, whichever was later. The condition stipulated in paragraph 4 of the notification, which is the relevant clause, is reproduced below: "4. The exemption contained in this notification shall not apply to such goods which have been subjected to only one or more of the following processes, namely, preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labeling or re-labe....
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....ufactured by the appellant was M/s Modi Revlon Pvt. It has also been stated that prior to 30.03.2010, M/s Modi Revlon was getting nail enamel manufactured by M/s Fiabila India Ltd. [Fiabila] located at Raigad. 6. For the purpose of manufacturing nail enamel, the appellant claims that it purchased two raw materials, namely, colour solution and thixo lacquer from Fiabila. The colour solution raw material is paint & varnish which is available in 20/50Kg. packages but since it is of high viscosity, it cannot be filled in small bottles in which nail enamel has to be mandatorily sold in the market under the provisions of the Drugs and Cosmetics Act, 1940 [the Cosmetics Act] read with the Bureau of Indian Standards Act, 2016 [the BIS Act]. The appellant claims that the colour solution is neither known commercially or to the consumers as nail enamel and they are not marketable as nail enamel. It is only because of the processes that are undertaken by the appellant that the manufacture of nail enamel takes place and the goods are rendered marketable to the consumer. 7. According to the appellant the following processes are undertaken on the raw material procured from Fiabila: ....
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....rs intended for consumers or repacking from bulk to retail pack amounts to manufacture. The party is doing storage, packing or repacking of goods in unit container, labeling or relabeling of containers declaration of MRP on the bottles. The party is packing, re-packing, labeling /relabeling and the said activity is covered under the definition of "manufacture" as per section 2(f) of the Central Excise Act, 1944 thus, Central Excise duty is chargeable on the said activities. Further, as the party is undertaking process of storage, repacking from bulk to retail and labeling & re-labelling of retail containers and do not undertake any other process which amounts to manufacture, the benefit of central excise duty exemption under notification no. 50/2003-CE dated 10.06.2003 seems not admissible to them. Thus, from the above it appears that Central Excise duty is leviable on the manufacture and clearances of Nail Enamel by the party. (emphasis supplied) 10. The show cause notice also invoked the extended period of limitation since the period of dispute is from 2013-14 up to June 2017 under section 11A (4) of the Excise Act. The appellant filed an interim reply as also a final reply....
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....he raw material and the final product is the change in viscosity. In Contention C.2 the Notices have themselves declared that Viscosity is the only parameter to decide the marketability of the final product i.e. Nail Polish and they had brought about changes in the physical properties of inputs received from M/s Faibila by reducing the viscosity of the colour solution. Thus the contention C.2 shows that the department's allegation that the only change is viscosity and colour is correct. Therefore Contention C.1 falls flat. 38.2 in their Contention C.2 above the Noticcee has admitted that viscosity of the products is the most important and the only parameter to decide the marketability of the product. In this regard, I find that in the case of Commissioner of C. Excise, Bangalore-II vs. M/s Osnar Chemical Pvt. Ltd. reported in 2012 (276 ELT 0162 (S.C.), the Hon'ble Supreme Court has held as follows:- xxxxxxxxxxx 38.2.1. On a careful reading of the relevant portion of the judgment reproduced hereinabove it becomes clear that even if the resultant product achieves superior quality after the activities and even if the resultant product has different visco....
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....marketable to the consumers as nail enamel; (iv) Nail enamel manufactured by the appellant is packed in less than 10 ml bottles and, therefore, is not subject to MRP based assessment under section 4A of the Excise Act; and (v) The extended period of limitation, in the facts and circumstances of the case, could not have been invoked nor could penalty or interest could have been imposed on the appellant. 14. Shri Sanjay Kumar Singh learned authorised representative appearing for the Department however, supported the impugned order and submitted that: (i) The only change brought about by the appellant is mixing the colouring matter (liquid) to a solvent of similar nature so as to reduce the viscosity; (ii) The appellant is not justified in asserting that by mixing the colouring matter to a solvent of similar nature so as to reduce the viscosity would amount to adoption of any other treatment on the goods to render the product marketable to the consumer and, therefore, the appellant would not be entitled to the benefit of exemption notification; (iii) Even if the resultant product achieves superior quality after the activities and e....
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....Act and the 2016 Act but also homogenization of the colour solution by stirring it with the help of pneumatic stirrer and mixing of thixo lacquer in predetermined quantity with the colour solution in the kettle so as the adjust the viscosity of the resultant product so that it can be filed in small bottles as mandatorily prescribed for packing nail polish, with brush attached to the cap of the bottle for application on the nails. Thereafter, the nail enamel is filed in small bottles and labelled with the declaration of the retail sale price. This treatment adopted on the goods, according to the appellant renders the product marketable to the consumers. 19. At this stage it would be useful to refer to Chapters 32 and 33 contained in the Schedule to the Tariff Act. Chapter 32 deals with tanning or dyeing extracts, tannins and their derivatives, dyes, pigments and other colouring matter, paints and varishes, putty and other mastics, inks, whereas Chapter 33 deals with essential oils and resinoids, perfumery, cosmetic or toilet preparations. 20. The appellant had purchased thixo lacquer solution from Fiabila and the invoices mention the Harmonized System of Nomenclature [HSN] cla....
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....se Tariff Act. 23. It clearly transpire from the aforesaid General Explanatory Notes that the preparations (e.g. varnish), which are suitable for other uses in addition to use as varnish (that is applied on wood) are classified as cosmetics under Chapter 33 only when they are - (a) in packings of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as cosmetics; or put up in a form clearly specialized to such use (e.g. nail varnish put up in small bottles furnished with the brush required for applying the varnish). Thus, it is more than apparent that the colour solution supplied in 20/50 Kg drums from Fiabila cannot be regarded as nail enamel. The packing of nail enamel as contemplated in HSN General Explanatory Notes and the Cosmetics Act has special significance, as without the goods being packed in the specified packing they will not be classifiable or commercially known as nail enamel. The nail enamel takes its name, character and use as such only after being packed in the manner provided. 24. A conjoint reading of the definition of manufacture in section 2(f) (iii) of the Excise Act and Chapter Note 5 of Chapter 33 of ....
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....eatment to fall within the scope of the note to the chapter it must be one that confers upon a product a quality as a result of which the product, which was otherwise not marketable is now rendered marketable. If the product were already marketable any amount of treatment to enhance its marketability would not amount to manufacture within the meaning of this note. That treatment does not render it marketable when it earlier was not. That is the object of the note is also clear from the fact that the processes which is specified in it as manufacture conversion of powder into tablets, labelling or re-labelling of containers intended for consumers, re-packing bulk drugs to retail packs are all activities which result in the products being made marketable to the individual consumers." 26. It is, therefore, not possible to accept the contention advanced by learned authorised representative appearing for the Department that the only change brought about by the appellant when the colouring matter is mixed to a solvent is to reduce the viscosity and this would not amount to manufacture. It cannot also be accepted that when the resultant product achieves superior quality, a new product m....