TaxTMI 
TaxTMI 
2022 (9) TMI 560
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....ied in the First and the Second Schedule to the Central Excise Tariff Act 1985 [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 Gazette 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,....
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....by it from the factory. The appellant, by a letter dated April 19, 2007, filed an application in Form A-1 for registration of the proposed new Unit No.5 for manufacture of Nail Polish. The appellant also expressed its intention for availing exemption under the notification for the stipulated period of ten years. It also provided the list of goods proposed to be manufactured in the said new Unit No.5. Accordingly, Central Excise Registration Certificate dated April 27, 2007 was issued to the appellant. By a letter dated May 28, 2008, the appellant informed the Assistant Commissioner that the commercial production would commence from April 05, 2008. 7. 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 5kgs/10kgs/25kgs. 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].....
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....out on the raw material amounted to 'manufacture' under section 2(f) of the Excise Act. 10. However a demand cum show cause notice dated October 30, 2017 was issued to the appellant, mentioning therein: 21. Whereas the crux of the para 4 of above-said notification is that the assessee is not entitled for benefit of exemption if they merely engage themselves in one or more of the following processes viz. preservation during storage, cleaning operations, packing or repacking of such goods in a unit Container or labeling or re-labeling of containers, sorting, declaration or alteration of retail sale price. As per chapter note 5 of chapter 33 of Central Excise Tariff, labeling or relabeling of containers 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. Fu....
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....the market. They are and have always been known as ingredients for manufacture of nail polish, classified under Chapter 32 and not nail polish themselves. It is also not in dispute that these ingredients have never been used or commercially regarded as nail polish. 3.9 We bought these raw materials after appropriate duty on them was paid by its manufacturers. The manufacturers classified these ingredients under 32089019 and this classification being correct, has been accepted by the jurisdictional excise authorities. We blend these raw materials in desired proportion as per technical requirements and ensure that a coloured nail polish, conforming to technical specifications and parameters of colour, coverage, glass, viscosity and drying time is obtained. The resultant product so obtained is sold by us as nail polish in the market and is classified under 33049920. 3.10 It is not disputed that as a result of such blending and mixing in appropriate proportion a new and commercially identifiable product known as 'nail polish' emerges and that prior to such deft and skilled mixing and colour and viscosity monitoring, the ingredients were not regarded and sold as nail p....
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....ses carried out by the appellant on the raw material (i.e. paint and varnish) resulted into emergence of a new product known commercially and to the consumers as nail enamel, which product was marketable and had a name, character and use distinct from the raw material used, which had lost its identity. The processes carried out by the appellant on the raw material, therefore, amounted to manufacture under section 2(f) of the Excise Act; (ii) The processes undertaken by the appellant on their raw materials being incidental and ancillary to the completion of the manufactured product, namely, nail enamel, amounted to manufacture in terms of s. 2(f)(i) of the Excise Act; (iii) The processes undertaken by the appellant would also result in the goods being "subjected to any other process or processes amounting to manufacture in the State of Uttarakhand or Himachal Pradesh" and, therefore, the appellant would be entitled to the benefit of the area based exemption notification. In this connection the learned counsel submitted that the treatment adopted on the goods (colour solution) by the appellant rendered the product marketable to the consumers as nail enamel; ....
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....ispute that the appellant had undertaken the peripheral processes mentioned in paragraph 4 of the notification. Whether any other process or processes, apart from peripheral processes, had been undertaken by the appellant so as to amount to 'manufacture' contemplated in section 2(f) of the Excise Act would have to be examined. The adoption of any other treatment on the goods to render the product marketable to the consumer is one of the requirement set out under section 2(f) of the Excise Act for the process to result in 'manufacture'. Thus, what has to be seen is whether in the present case, adoption of any other treatment on the goods had rendered the product marketable to the consumers. 19. The appellant has stated that it had purchased two raw materials namely, colour solution and thixo lacquer from Fiabila for the manufacture of nail enamel. The colour solution, being paint and varnish was obtained by the appellant in packages of 5kgs/10kgs/25Kgs. The several processes undertaken by the appellant after receipt of the raw material have been enumerated above. They include not only testing as per the requirement of the Cosmetics Act and the 2016 Act but also homogenization of ....
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....products of headings 33.03 to 33.07 remain in these headings whether or not they contain subsidiary pharmaceutical or disinfectant constituents, or are held out as having subsidiary therapeutic or prophylactic value (see Note 1 (d) to Chapter 30). However, prepared room deodorizers remain classified in heading 33.07 even if they have disinfectant properties of more than a subsidiary nature. Preparations (e.g. varnish) and unmixed products (e.g., unperfumed powdered talc, fuller's earth, acetone, alum) which are suitable for other uses in addition to those described above are classified in these heading 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 perfumery, cosmetic or toilet preparations, or as room deodorizers; or (b) Put up in a form clearly specialised to such use (e.g., nail varnish put up in small bottles furnished with the brush required for applying the varnish)." 23. It needs to be noted that Chapter Note 2 of HSN is the same as Chapter Note 3 of Chapter 33 to the Excise Tariff Act. 24. It clearly transpire from the aforesaid General Expla....
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.... the depot of the appellant falls within the scope of "adoption of any other treatment to render the product marketable to the consumers". Therefore the goods have been manufactured. 4. One of the meaning of the word 'rendering' the one that would obviously apply, to the phrase of the note under consideration is "cause to be or become; make of a certain nature, quality, condition etc." (New Shorter Oxford English Dictionary). From this meaning and indeed by common usage of this word, it is only the treatment which makes a product marketable to the consumer which was so rendered. That is to say, the process to fall within the scope of the "any other treatment" it must be one which confers upon a product the attributes of marketability which it did not possess earlier. We must note here the significance of the word 'consumer' in the note. Thus the product must be referred to must be rendered marketable to the consumer. Although this word is not defined it evidently refers to one who purchase the product for consumption by him, as distinct from a purchaser who trades in it. Therefore for any treatment to fall within the scope of the note to the chapter it must be one ....