Custom, Excise & Service Tax Tribunal
No.10/Ce/Chd-Ii/2002 Dated 7.6.200 vs Commissioner Of Central Excise, ... on 1 September, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing: 01.09.2010 Date of pronouncement: 8.4.2011 S.No. Central Excise Appeal No. Appellant Respondent
Arising out of the Order in Original/ Order in Appeal No. and date Passed by
1. 2214 of 2002 M/s Nestle India Limited Commissioner of Central Excise, Chandigarh II No.10/CE/CHD-ii/2002 dated 7.6.2002 Commissioner of Central Excise, Chandigarh II
2. 181 of 2004
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Commissioner of Central Excise Ludhiana No.220-222/Ldh/03 dated 29.9.2003 Commissioner of Central Excise, Ludhiana
3. 2820 of 2005
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255/CE/Appeal/Ldh/05 dated 16.5.05 Commissioner (Appeals), Central Excise, Ludhiana
4. 550 of 2005
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614/CE/Appeal/Ldh/04 dated 26.10.04 Commissioner (Appeals), Central Excise, Ludhiana
6. 4370 of 2004
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340/CE/Appl/Ldh/04 dated 29.4.04 Commissioner (Appeals), Central Excise, Ludhiana
7. 3522 of 2005
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341/CE/Appl/Ldh/05 dated 4.7.05 Commissioner (Appeals), Central Excise, Ludhiana
8. 1828 of 2005
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Commissioner of Central Excise, Rohtak 83-86/AKG/RTK/2005 dated 21.2.2005 Commissioner (Appeals), Central Excise, Delhi III, Gurgaon
9. 1829 of 2005
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Commissioner of Central Excise, Rohtak 83-86/AKG/RTK/2005 dated 21.2.2005 Commissioner (Appeals), Central Excise, Delhi III, Gurgaon
10. 1830 of 2005
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Commissioner of Central Excise, Rohtak 83-86/AKG/RTK/2005 dated 21.2.2005 Commissioner (Appeals), Central Excise, Delhi III, Gurgaon
11. 1831 of 2005
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Commissioner of Central Excise, Rohtak 83-86/AKG/RTK/2005 dated 21.2.2005 Commissioner (Appeals), Central Excise, Delhi III, Gurgaon
12. 494 of 2006
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Commissioner of Central Excise, Rohtak 436/GRM/RTK/2005 dated 30.11.2005 Commissioner (Appeals), Central Excise, Delhi III, Gurgaon For Approval and Signature:
Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?2
Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?3
Whether their Lordships wish to see the fair copy of the Order?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes Appearance:
Shri B.L. Narasimhan, Advocate for the appellants Shri B.K.Singh, Authorized Departmental Representative (Jt.CDR) for the Revenue Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Technical Member Oral Order No.____________________ Per Shri Justice R.M.S. Khandeparkar:
Since more than six months period had expired from the date of the last hearing of the matter, the matter was required to be fixed for rehearing. However, learned Advocate for the appellants as well as the Jt.CDR submitted that they did not wish to reargue the matter and the matter be decided on the basis of whatever was argued earlier and written submissions filed on behalf of both the parties. Accordingly, this order is being pronounced.
2. Heard at length the Advocate for the appellants and the Joint CDR for the respondent. Perused the written submissions.
3. The particulars in brief about the number of each of the appeals with reference to the date of show cause notice, the period for which they relate to, the dates of the original orders and those of the lower appellate authoritys orders and the amount involved in each of the matters are as under: -
Sl.No. Appeal No. SCN date Period of Dispute OIO & OIA dates Demand in rupees
1.
E/2214/02 7.8.2001 1.7.1996 to 31.12.2000 OIO dated 7.6.2002 Duty :2,01,26,595 Penalty:2,01,26,595
2. E/181/04 E/2820/05 6.2.2002 1.10.2002 25.4.2003 1.10.2001 to 31.3.2002 1.4.2002 to 30.9.2002 OIO dated 29.9.2003 After remand OIO dated 10.12.2004 AND OIAdated 16.5.2005 Duty :73,61,677 Penalty: 73,61,677 Duty :42,60,312 Penalty: 15,00,000
3. E/550/05 27.4.2004 1.4.2003 to 31.12.2003 OIO dated 24.6.2004 AND OIA dated 26.10.2004 Duty :37,38,868 Penalty :15,00,000
4. E/4370/04 E/3522/05 2.9.2003 1.10.2002 to 31.3.2003 OIO dated 31.1.2003 OIA dated 29.4.2004 After remand OIO dated 18.3.2005 AND OIA dated 4.7.2005 Duty :21,79,114 Penalty: 10,00,000 Duty :5,13,074 Penalty: 1,25,000
5. E/1828-1831/05 27.2.2002 22.3.2002 26.2.2003 6.2.2004 Seizure on 1.9.2001 1.3.1997 to 31.1.2002 1.2.2002 to 31.12.2002 1.1.2003 to 31.1.22003 OIO dated 6.7.2004 (seizure) AND OIO dated 6.4.2004 OIA dated 21.2.2005 Duty: 68,977 Duty: 41,99,645 Duty: 11,51,568 Duty: 16,37,418 + Penalties R. Fine
6. E/494/06 10.1.2005 1.1.2004 to 31.1.2004 OIO dated 29.3.2005 AND OIA dated 30.11.2005 Duty :12,48,669 Penalty : 12,48,669
4. All these matters have been heard pursuant to the order passed by the Honble Supreme Court on 25.2.2009 in Civil Appeal No.5604/04 and connected matters. By the said order, the Honble Supreme Court, while setting aside the earlier order of the Tribunal dated 5.5.2004, has remanded the matter to deal with the following issues:
i) Whether in the facts and circumstances of the case, the activity undertaken by the assessee constitutes manufacture conceptually/first principle while applying the twin test of manufacture and marketability?
ii) Whether the activity undertaken by the assessee stands covered by the provisions of Section 2(f) of 1944 Act read with Note 11 of Chapter 29?
iii) What is the meaning of the word consumer in Note 11 to Chapter 29?
5. While formulating the above questions for consideration by the Tribunal in these appeals, the relevant facts noted by the Honble Supreme Court are that the assessees are engaged in the manufacture of various food products and one of those products being infant foods which is sold under the brand name lectogen and cerelac and chargeable to nil rate of duty. For the purpose of manufacture of infant food products, the assessees buy various vitamins like Vitamin A, Vitamin D, Vitamin E, etc. on payment of excise duty from the manufacturers of those vitamins. Thereafter, depending upon the requirement of particular vitamin contents to be present in the finished product, the various vitamins so procured are mixed in a pre-determined ratio with the help of electro mechanical device by effecting uniform dispersion of liquid, semi-solid or solid ingredients of mixture by means of mechanical agitation, and the product so obtained is called intermixture of vitamins. Such product is stored by the assessees in plastic drums/aluminium bottles in their factory. In order to identify the particular intermixture of vitamins which are used in a particular grade of the finished product, a sticker is affixed on the drums/aluminium bottle containing intermixture of vitamins giving details regarding the contents of the drums/aluminium bottles. These intermixture of vitamins are used in the manufacture of infant foods.
6. As regards the earlier order of the Tribunal the Honble Supreme Court has observed that the same was cryptic and did not deal with the points which were specifically raised by the assessee. While formulating the questions for determination as quoted above, the Honble Apex Court had held thus:
As stated above, the vitamins A, Vitamin D, Vitamin E etc. are undoubtedly bought out items.They were undoubtedly marketable. These vitamins were converted into recipe which according to the assessee was not marketable, therefore, Note 11 is not applicable. According to the asseseee, no evidence has been led by the Department to show that the said recipe is marketable. On this aspect also, there is no finding of the Tribunal.
7. The learned Advocate for the appellants submitted that neither the show cause notice had alleged nor the impugned order has given any finding that the process undertaken by the assessee would amount to manufacture in terms of Clause 2(f)(i). According to the appellants, the process of mere mixing the vitamins would not be a manufacture and could not be subjected to the excise duty. The vitamin premix is proprietary to the appellants and is not marketable as such in that condition to any consumer including the manufacturer of food products. This fact submitted to the Commissioner was not rebutted by the Department. The request by the appellants to draw the sample of the product and to compare the same with the product sold in the market was refused by the Commissioner. It is the contention on behalf of the appellants that the burden of proving the issue of marketability of the product which is an intermediate one was squarely upon the Revenue which it failed to discharge. Reliance is placed in the decision of Board of Trustees vs. C.C.E., A.P. reported in 2007 (216) ELT 573, Hindustan Zinc Ltd. vs. C.C.E., Jaipur reported in 2005 (181) ELT 170, Cadia Laboratories vs. C.C.E., Vadodara reported in 2003 (152) ELT 262, Cipla Ltd. vs. C.C.E., Bangalore reported in 2008 (225) ELT 403 and Moti Laminates vs. C.C.E. reported in 1995 (76) ELT 241. It is also sought to be contended that the product in question is not marketable to anybody because the same has to be kept in the controlled condition and the recipe is exclusive to the appellants. Reference to the invoices raised by M/s Redimix Pharma Pvt. Ltd., Bangalore on Smithkline Beechem Healthcare are of no help as the same related to special products suitable for specific use of the user and not the same as intermixture in question. The Bill of Entry dated 15.12.2000 in relation to the imported vitamins premix from Germany also does not support the case of the Department as it was NAN-1 which was delicate and sensitive product being manufactured for the freshness and was of one time use. On the basis of the said two imports, it cannot be concluded that the intermixtures in question factory were marketable goods. Reliance is placed in the matter of Syam Oil Cake Ltd. vs. C.C.E., reported in 2004 (174) ELT 145 (SC), C.C.E.vs. Markfed Vanaspati & Allied Indus. Reported in 2003 (153) ELT 491 (SC)and Crane Betel Nut Powder Works vs. C.C.E., Tirupathi reported in 2007 (210) ELT 171.
8. On the other hand, the Joint CDR after taking us through the definition of the term manufacture under Section 2(f) and various paras of the show cause notices issued to the appellants describing the activity in relation to the product in question submitted that the said process clearly discloses the activity of mixing of the individual vitamins in proper proportions in such a manner that the resultant product is complete intermix of all those vitamins as desired by the assessee. The individual products which are mixed are specifically identified and known individually by its character and components and are individually known by particular name of vitamin such as vitamin A, Vitamin D, vitamin E etc. and the product which emerges after the said process is known as the intermixture of vitamins or vitamin mix or mixture of vitamins. The intermixtures of vitamins do not have the same name such as that of individual vitamins. Each ingredient of such mixture of vitamins is known by a particular name, such as vitamin A, or Vitamin D etc. and has the characteristic attached to that particular vitamin and can be used only for removing or supplementing particular deficiency in the human body. The intermixture of vitamins is required to fulfill multifarious deficiency. Each of the vitamins, individually has a different name, characteristic for specific use. By mixing such vitamins, the characteristics of individual vitamins get merged with the vitamin mix in such a manner that the final product that is vitamin mix fulfills multifarious needs of the user. The characteristic of the final product does not remain the same as that of individual ingredient of the final product. The characteristic of vitamin mix needs to be examined vis-`-vis that of individual vitamin. If one tests the product manufactured by the appellants on touchstone of the ruling of the Apex Court in Union of India vs. DCM reported in 1077 (1) ELT 199 it would be evident that the product in question satisfies them all. The vitamin mix has all the characteristics put together of each of the individual ingredients and is known to the market not as one particular vitamin but as the vitamin mix. The fact that the product is known in the market as the vitamin mix or intermixture of vitamin has been clearly admitted by the officer of the assessee. Reliance has been placed in number of decisions.
9. The contention that neither in the show cause notice it was alleged nor there is finding in the impugned order to the effect that the process undertaken by the assessee would amount to manufacture is to be rejected firstly as being irrelevant in the facts and circumstances of the case in as much as that the matter is being considered pursuant to remand by the Supreme Court with specific direction to deal with specific issues and the those issues have been formulated by the Honble Supreme Court in the remand order itself. Accordingly, it is necessary to ascertain whether in the process as disclosed from the materials on record reveal to be manufacture conceptually within the meaning of the said expression as defined under Section 2(f) of the said Act. Therefore, the contention about absence of such allegation in the show cause notice or finding to that effect in the impugned order is of no consequence .The Tribunal is bound by the order of the Supreme Court and the scope of the inquiry and the adjudication has to be within the parameters prescribed by the Honble Supreme Court under the remand order for consideration by the Tribunal.
10. Even otherwise, suffice to observe that the contention is not borne out from the records. The facts relating to the activity of mixing of vitamins and the result thereof were precisely stated in the show cause notices issued to the assessees. It was clearly stated in the show cause notice that the required vitamins were mixed in pre-determined ratio with the help of electromechanical device such as mixture/Blender by effecting a uniform dispersion of liquid, semi-solid or solid ingredients of mixture by means of mechanical agitation. It was also specified in the show cause notice that when different vitamins are mixed in certain proportions then the original property of a particular ingredient is lost and is mixed with properties of other ingredients with the result a new and different product having distinct name, character or use emerges which is know intermixture of vitamins. Undisputedly, the said facts were neither denied nor disputed. It is also admitted fact that the product so obtained has shelf-life and is captively consumed by the appellants.
11. Similarly in relation to the process of oil soluble vitamins, it was stated in the show cause notice that for oil soluble vitamins namely , vitamin A, Vitamin D 3, and Vitamin E, the vitamins are taken from the refrigerator from individual bottles and after preheating at specific range of temperature, the specific quantity of each vitamin is taken and transferred to stainless mixture and mixing is done for 20 minutes with electrically operated agitator in an inert atmosphere created by flushing nitrogen gas. The mixture is filled in 1 kg. container which is ready for sue after lab testing. Likewise, as regards the process of manufacture of intermixture of water soluble vitamins it was stated in the show cause notice that specific quantities of individual vitamins, namely, B 1, B 2, C, D 12, B 6, Niacin, Folic Acid, Calcium Pento thenat, Biotin are used besides, lactose and everyday dairy 5 p. The required quantity of some or all about listed vitamins and specific quantity of lactose and everyday dairy powder 5 p. is taken and sieved then the various intermediates are mixed for various duration for outer mixtures and finally all intermediate batches are mixed in final mixture, namely are Ribbon, Blender for 3 minutes the lactose of everyday diary powder of 5 p is added a base for making homogenous. This product is then emptied into bags lined with folic liner.
12. The above stated facts in the show cause notices were not disputed by the assessees which apparently reveal that the activity undertaken by the appellants to be the process of manufacture of product in question.
13. Admittedly, consequent to mixing of various vitamins a product emerges as the intermixture of those vitamins. Before undergoing such process, each of the vitamins possesses different characteristic, identity and use. When all those vitamins are mixed together, the end-product which emerges out of such process does not retain the individual characteristic of any one or more of those vitamins but all those characteristics are also intermixed. The resultant product is a mixture of all those characteristics together with a distinct identity and use. As far as the use is concerned, undoubtedly, each vitamin product has different use as each vitamin is consumed to overcome or to remedy the specific deficiency in the human body. In the case of intermixture of vitamins, the same is not meant to overcome any one deficiency but it is meant to deal with the problem of multifarious deficiencies in the human body at one and the same time. Obviously, therefore, the function of each vitamin is different from the function of intermixture of vitamins. Consequently, the use of each vitamin is different from the use of intermixture of vitamins. The identity of each vitamin differs from the intermixture of vitamins. Each vitamin is known by specific category of vitamin to which it belongs to. If it belongs to A category, it would be vitamin A, if it belongs to D category, it would be vitamin D and the like. In the case of intermixture of vitamins, it is known as the intermixture of vitamin or vitamin mix and not by individual name of any one or more of vitamins. All these facts are neither denied nor disputed. Being so, the fact that the product which emerges out of the process of intermixture of different vitamins in a given proportion does not carry the same identity as that of each of such vitamins intermixed, and that the process of intermixing of various vitamins in given proportion bring out another product having distinct identity with different characteristics and use in comparison to each of vitamins which are mixed together, is clearly established. Therefore, the basic ingredients of the definition term manufacture of a product stand proved from the records.
14. It is to be noted that the process of intermixing of vitamins is not done in the course of process of manufacture of final product i.e. baby food. But it is an independent process, as a result of which a distinct commodity emerges which is thereafter utilized as and when required as the input for the manufacture of final product. The process of intermixing of vitamins is an independent process, distinct and different from the process of manufacture of final product and this is also a relevant factor to be considered while dealing with the issue of excisability of the product.
15. While understanding the meaning of the term manufacture one cannot overlook the decision of the Delhi High Court in the matter of Metal Forgings Pvt. Ltd. vs. Union of India reported in 1987 (32) ELT 15 and confirmed by the Apex Court in the order reported in 1998 (102) ELT 224. The Delhi High Court had ruled that the word manufacture for the purpose of central excise has to be construed in its material and plain meaning but shall also include any process incidental or ancillary to the completion of the manufactured product. This ruling was given after considering various decisions of the Apex Court including in the matter of Delhi Cloth and General Mills Mills vs. Union of India reported in 1977 ELT 199, South Bihar Sugar Mills Ltd. vs. Union of India reported in 1978 ELT 336 and Allenberry Engineering Pvt. Ltd. vs. Ramkrishna Dalmia reported in1973 (2) S.C.R. 257. Further, it was observed that while analyzing this aspect of the transformation of the product undergone, it should ascertain the nature of the work carried out, alteration or change undergone in its nature and character and whether the product requires further process to make it marketable. All these factors are to be ascertained depending upon the facts and circumstances of each case.
16. While explaining as to how to understand the change in original identity of the product, the Delhi High Court in Metal Forgings Pvt. Ltd. after taking note of the decision in Tata Yudyog Ltd. vs. Assistant Collector of Excise reported in 1983 ELT 17 (Patna) , Deputy Commissioner of Sales Tax (Law) , Board of Revenue (Taxes), Ernakulam vs. Pio Food Packers reported in 1980 ELT 343 (SC), Chowgule & Co. Pvt. Ltd. and anr. vs. Union of India and others reported in (1981) 1 SCC 65 and P.C. Cheriyan vs. Mst. Barfi Devi reported in 1979 ELT 593, warned that even processing of pineapple fruit and canning them it still retains its original identity of pineapple fruit (Pio Food case, supra), even after blending of ores, it still remains ore (Chowgules case , supra), the retreated tyres still remain tyres (P.C. Cheriyan case, supra).
17. The Delhi High Court after taking note of various judgments of the Supreme Court and referring to the facts of the case in Metal Forgings Pvt. Ltd. held thus Flanges cannot be properly called shapes and sections. There is no substance in the contention that because flanges are shapes and sections at initial stage of forging, they always remain so even after processes of machining, polishing and drilling are undertaken. Flanges are forged shapes and sections before aforesaid processes and after these processes become merchandise of a very different kind, namely, machinery part. The essence of manufacture is that what is made shall be a different article from that out of which it is made. Flanges are made out of forged shapes and sections. Both are different articles. It is also clear that to flanges nothing more is required to be done at the customers end and they are straightaway identifiable as machinery parts. They are known and are regarded in the market as finished machine parts. The appellants want us to hold that these machine parts are not machine parts, but are forged shapes and sections. Forged shapes and sections are only the raw material for these machine parts. If the contention of the appellants was to be accepted, then every item, however small it may be, and whatever process it may undergo, would remain a forged shape and section although in the market it is known, sold and regarded as machine parts.
18. The appeal filed against the said order of the Delhi High Court was dismissed by the Apex Court without upsetting any of the findings [vide Metal Forgings Pvt. Ltd. vs. U.O.I. 1998 (102) ELT A 224 (SC)]
19. In Collector of Central Excise, Bombay vs. S.D. Fine Chemicals Pvt. Ltd. reported in 1995 (77) ELT 49 (SC), the Apex Court after observing that under the definition under Section 2(f) of the said Act, the term manufacture is an inclusive one and the purpose thereof is to include certain processes and activities within the ambit of the said definition which may not otherwise amount to manufacture as ordinarily understood and the inclusion is in addition to the normal meaning and context to the expression manufacture . Taking note of its earlier decisions on the relevant subject, it was held as under:-
13. The decisions aforesaid make it clear that the definition of the expression `manufacture under Section 2(f) of the Act is not confined to the natural meaning of the expression `manufacture but is an expansive definition. Certain processes, which may not have otherwise amounted to manufacture, are also brought within the purview of and placed within the ambit of the said definition by the Parliament. Not only processes which are incidental and ancillary to the completion of manufactured product but also those processes as are specified in relation to any goods in the section or chapter notes of the Schedule to the Central Excise Tariff Act, 1985 are also brought within the ambit of the definition. As has been repeatedly observed by the Court, though the principles enunciated are clear, it is their application that presents difficulties and it does not help to draw any sharp or intrinsic distinction between `processing and `manufacture, which would only result in an oversimplification of both and tends to blur their interdependence in cases such as the present one" (Ujagar Prints). It would also be not right, as pointed out in Ujagar Prints to try to restrict the sweep of the definition with reference to Entry 84 List-I of the Seventh Schedule to the Constitution. Since the constitutionality of the said definition has been repeatedly upheld with reference to both Entries 84 and 97 of List-I (Empire Industries and Ujagar Prints), the definition must be understood in terms it is couched. It should also be remembered that the question whether a particular process does or does not amount to `manufacture as defined under Section 2(f) is always a question of fact to be determined in the facts of a given case applying the principles enunciated by this Court. One of the main tests evolved by this Court is whether on account of the processes employed or applied by the assessee, the commodity so obtained is no longer regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the processes (Ujagar Prints).
20. In Collector of Central Excise vs. Carbide Chemicals reported in 1993 (68) ELT 125, the Tribunal while dealing with the question as to whether the process of making cross linkable polyethylene from polyethylene granules by addition of dicumyl peroxide and an antioxidant amounted to manufacture or not, while noting that chemical reaction is not must to bring about transformation of one product into commercially different product so as to amount to manufacture, ruled that:-
The three attributes of the transformation referred to in the DCM case are distinctive name, character or use. In the present case, the name of the product does not change in the sense that it continues to be called polyethylene, though, of course, vulcanizable polyethylene. But its properties (character) as well as its uses undergo material change. This fact is fully explained in the note on the manufacturing process submitted by the respondents (reproduced in para-6) and, highlighted by the learned DR and indicated in para-10. It is also clear from the Encyclopaedia of Chemistry by Hampel & Hawley cited by the learned DR referred to in para 9. In view of these factors, we are of the considered view that vulcanizable polyethylene is a distinctly different product from polyethylene in terms of the tests prescribed by the Supreme Court.
21. In Union of India vs. Hindu Undivided Family Business Known as Ramlal Mansukhrai , Rewari and another reported in 1970 (2) SCC 472, the Apex Court was dealing with a matter wherein the assessees were manufacturing kansi and brass utensils. For that purpose, they were procuring copper , tin and zinc. Kansi was prepared as an alloy of copper and tin and bras as an alloy of copper and zinc. These alloys were prepared by melting the metals and by mixing them together. These alloys were then converted into billets. These billets were thus of two kinds, viz., of kansi and of brass. These billets were then sent to the agents who run a rolling mill and the rolling mill used to roll the billets into uncut circles. Subsequently, they were trimmed and after further work on them, they were converted into utensils and sold as such in the market. The Department sought to impose duty at the stage when the rolling mills prepared circles from billets. It was objected on the ground that the circles were prepared without undergoing any change as such to hold it amounts to manufacture. It was the contention on behalf of the assessees that conversion of billets into circles did not bring any new substance into existence, nor did it bring into existence any completed product, and hence there was no process of manufacture which could render the article liable to excise duty. The contention was rejected being based on misunderstanding of law. It was specifically held that :-
The word manufacture is defined in Section 2(f) of the Act as including any process incidental or ancillary to the completion of a manufactured product. The rolling of a billet into a circle is certainly a process in the course of completion of the manufactured product viz. circles The appeal against the said order was dismissed by the Apex Court and the same is reported in Carbide Chemicals vs. Collector 1995 (78) ELT A 33 (SC).
22. In Brook Bond India Ltd. vs. Union of India and others reported in 1984 (15) ELT 32 (AP) the Andhra Pradesh High Court, after taking stock of various decisions of the Apex Court, held that the test for determining manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognized in the trade as a new and distinct commodity. It was further held that it is only when the change, or a series of changes, take the commodity to the point when commercially it can no longer be regarded as the original commodity but instead is regarded as a new and distinct article that a manufacture can be said to take place . It was also held that Once there is mixture or blend of two distinct commodities and particularly when they were blended mechanical process involving consumption of power the identity of each is lost and such mixture cannot be called by the name as one of the ingredients constituting mixture. It is altogether different of nature whether the mixture has emerged in a distinct commercial commodity attracting liability to excise duty, but the fact remains that such mixture cannot be called by the name of one of the ingredients.
23. In State of Punjab vs. Chandulal reported in AIR 1969 SC 1083, it was held by the Supreme Court that conversion of unginned cotton into ginned cotton by a mechanical process was a manufacturing process , resulting in the production of two distinct commercial goods.
24. The Madras High Court in Imperial Fertilizers & Co. vs. State of Madras reported in (1973) STC 370 held that the produce got by the petitioner by mixing one or more chemical manure with one or more organic manure will have different properties of its own and it cannot be said that it retains the same characteristics or properties of one of the chemical manure or organic manure which were used to make up the resultant mixture. This decision was followed in State of Tamil Nadu vs. Rolling India Ltd. reported in (1974) STC 532 and State of Tamil Naduvs. Pyare Lal Malhotra reported in 1983 ELT 1582.
25. In Devi Dass Gopal Kushum vs. State of Punjab reported in (1967) 20 STC 430 (SC) it was held that when the iron scrap is converted into rolled steel, the same undergo a vital change in the process of manufacture and are converted into a different commodity.
26. The Apex Court in Shaw Wallace & Co. vs. State of Tamil Nadu reported in (1976) 37 STC 523, approving the High Court decisions in Imperial Fertilizers & Co. and Rolling India Ltd. and relying upon its earlier decision in Pyare Lal Malhotra held that fertilizer mixture is not the same article as the ingredients comprising it. It is sold as a different commercial product. It is put to a different use as has different chemical properties. As such, it has to be treated as a different article from its component parts.
27. In Goyal Gases Private Ltd. vs. C.C.E., Meerut reported in2000 (115) ELT 467 and C.C.E. Meerut vs. Goyal Gases Private Ltd. reported in 2000 (119) ELT 5 (SC), the process of mixing of oxygen and nitrogen was held as not amounting to manufacture because of absence of evidence to establish that it amounted to manufacture. The said decision was followed in Modi Alkalies Chemicals Ltd. vs. C.C.E., New Delhi reported in 2002 (146) ELT 555. The decision in Laljee Godhoo & Co. vs. C.C.E., Mumbai reported in2001 (132) ELT 287 was on the ground that there was no chemical reaction in the process undertaken. However, it has been clearly held by the Tribunal that the absence of chemical reaction in the process of mixture of the components is no criteria to decide whether the process amounts to manufacture or not.
28. In C.C.E., Indore vs. Pure Pharma Ltd. reported in 2002 (143) ELT 386 it was held that medicines supplied to Government by placing those manufactured by the assessee along with the bought out items in a Medicine Kit does not amount to manufacture in terms of Chapter Note 5 to Chapter 30 of Central Excise Tariff Act, 1985.
29. In Dol Sun Containers Pvt. Ltd. vs. C.C.E., Jaipur reported in 2003 (151) ELT 624 it was held that changing the product from one form to another while the basic product remains the same, it does not amount to manufacture .
30. In Elson Machines Pvt. Ltd. vs. Collector of Central Excise reported in 1989 Supp.(1) SCC 671 while dealing with the point of time when the manufacture can be said to be complete to classify the products as excisable goods while rejecting the contention that goods were employed in the manufacture of monoblock pump within the factory itself therefore, there was no clearance of goods, it was held by the Apex Court that As soon as the manufacture of the goods was completed, they must be regarded as goods available for clearance from the factory. The goods in question in the said case were rotors and stators used as components of monoblock motors.
31. In S. Narendra Kumar vs. Collector of Central Excise reported in 1992 (57) ELT 466, the Tribunal held that after grinding the nuts and mixing other ingredients, the product that is formed is called milk masala and has a distinct name, character and use. It ceases to retain its identity as edible nuts because it is not known, described and marketed by that name.
32. In Shri Bhadrada Chemicals Ltd. vs. Collector of Central Excise reported in 1990 (47) ELT 652, the Tribunal held that though the process of mixing of imported silicone with other ingredients thereof does not involve chemical synthesis, it results in a distinct product leaving a distinct name, character and use, and therefore, the process amount to manufacture under the meaning of the Section 2(f) of the said Act.
33. In Nestle India Ltd. vs. Collector of Central Excise, Chandigarh reported in 1994 (71) ELT 850, the Tribunal held that the mixture of coffee and chicory cannot be called by individual name of either coffee or chicory and the appeal filed against the said decision was dismissed by the Apex Court reported in 1995 (76) ELT A 233 (SC).
34. In A.P. Products vs. State of Andhra Pradesh reported in 2007(214) ELT 485, it was held by the Apex Court that in the process of grinding and mixing of ingredients to prepare masala powder, the ingredients thereof loose their own identity and character in the final product that emerges and therefore, the process amounts to manufacture within the meaning of the said expression under the said Act.
35. The Apex Court in Aspinwall & Co. Ltd. vs. Commissioner of Income Tax , Ernakulam reported in 2001 (132) ELT 18 (SC) while observing that if the activity or process brings out a completer transformation in the input material so as to produce a commercially different article or commodity, it will be a manufacturing activity and therefore, conversion of raw berries plucked from the plant into coffee beans is a manufacturing activity.
36. The decision of the Madhya Pradesh High Court in S.N. Sunderson (Minerals) Ltd. vs. Superintedent (Preventive), Central Excise, Indore reported in 1995 (75) ELT 273 was to the effect that the operation of crushing limestone to bring into existence the limestone chips of a particular size amounted to manufacture as the new product with different name, character and use was formed and the said decision was confirmed by the Apex Court in the appeal arising from the said decision reported in 2002 (143) ELT 483 (SC).
37. In Aditya Mills Ltd. vs. Union of India reported in 1988 (37) ELT 471, the assessees contention that since the assessees had already paid duty on polyester spun yarn manufactured by them in their factory and they had purchased duty paid Rayon Filament Yarn and they were merely doubling two piles of duty paid polyester spun yarn with arc ply of rayon filament yarn, that thereof there was no manufacture as no new product came into being, was rejected and the process was held to be manufacture, while placing reliance on various decisions of the Supreme Court in relation to the meaning of the term manufacture under the said Act.
38. In Crane Betel Nut Powder Works vs. C.C. & C.Ex, Tirupathi reported in 2007 (210) ELT 171, relied upon by the Advocate for the appellants, the Apex Court was dealing with an issue as to whether the crushing of betel nuts into smaller pieces amounted to manufacture or not and the same was answered in negative because the process involved did not result in change of the nature in the end product as the end product remained betel nut which was also the status of the product prior to the process undergone. The decision is clearly distinguishable. In the appellants case, the end product does not remain the product as an individual vitamin but it turns out to be a mixture of all the vitamins taken together. The ingredients of such mixture are individual vitamins which belong to each of the classes of the vitamins.
39. The materials on record as analysed above and applying thereto the law laid down in the above referred decision on the point in issue, the same clearly bring out that conceptually and on the first principle, the activity undertaken by the assessee is nothing but the manufacture.
40. The next question which arises for consideration is whether such a product is marketable one. In this regard, it is the contention of the appellants that there is absolutely no evidence placed on record by the Department and therefore, the same should be answered in negative. On the other hand, the Departments case is that the product is captively consumed by the appellants and that it has shelf life that it is fact that there was import of similar product for similar use by the appellants, coupled with total absence of rebuttal evidence in that regard by the assessee, and further corroborated by the statements of the officers of the appellants and all these materials on record sufficiently prove that the product is commercially known to the market.
41. Undoubtedly, the burden to prove the issue of marketability lies upon the Department. But the mode of discharging this burden may not necessarily be by producing evidence in that regard by the department itself. Time and again, the Tribunal and the various other Courts have held that when the burden lies upon a party to prove any fact in support of its case, the same can be discharged by leading evidence by the same party on whom the burden lies as well as by pointing out the evidence led by the opposite party which can establish such fact. To discharge the burden of proof, the party on whom the burden lies need not necessarily lead evidence by itself. The burden can be discharged even by relying upon the evidence produced by the other party. It can also be discharged by relying upon the admitted facts or undisputed facts. Bearing this in mind, one has to analyse the materials on record to ascertain whether the issue of marketability of the product in question stands established or not.
42. Undisputedly, in the case in hand, there are statements recorded of the officers of the assessees and also other documentary evidence placed on record. It is the case of the Department that the fact that the vitamin mix is known in the market as vitamin premix or intermixture of vitamin has been admitted by the officers of the assessees. Specific assertion in that regard in the course of argument before the Tribunal and reiterated in the written submissions has not even been disputed on behalf of the assessee. It is also revealed from the records.
43. It is undisputed fact that the intermixture of vitamin produced on completion of the process of intermixing is captively used by the appellants for manufacture of the final product namely the baby food.
44. It is also undisputed fact that the intermixture of vitamin has shelf life and this has been admitted by the officers of the appellants in their statements recorded in the course of investigation.
45. Further, the invoices issued by M/s Redimix Pharma Pvt. Ltd., Banaglore on Smithkline Consumer Healthcare under which vitamin mix was sold and the assessee had imported vitamin mix from Germany vide bill of entry dated 15.12.2000 and the said product has been used for the same purpose and as substitute for vitamin premix/intermixture which is otherwise used by them captively and a clear admission in this regard by the officers of the assessees obviously disclose that vitamin premix and intermixture of vitamins are the same product used for the manufacture of the final product and therefore, is capable of being bought and sold in the market and satisfies the required criteria of marketability of the product.
46. Each of the above narrated facts, by itself may not be sufficient to establish the issue of marketability. But when all the above facts considered in totality, the same evidently disclose the marketability of the product in question. It is more so when on taking stock of the decisions hereinafter considered and applied to the said facts in totality.
47. In Union of India vs. Sonic Electrochem Pvt. Ltd. reported in 2002 (145) ELT 274 it was held by the Apex Court that the essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be produced.
48. In Gillooram Gaurishanker vs. C.C.E.., Jamshedpur reported in 2001 (136) ELT 434 it was held by the Tribunal that the marketability is essentially to be looked into for holding the excisability of the product, however, it is not the factum of actual marketing of the product which is required to be satisfied. As long as the goods are capable of being marketed, they have to be held as excisable goods. In the said case it was held as under:-
The appellants are engaged in the manufacture of? Aluminium Conductors (A.A.C.) and Aluminium Conductor Steel Reinforced (A.C.S.R.) and single wires in their factory. The appellants purchased the Aluminium Wire Rods from different manufacturers for the purposes of manufacture of their final product. They also imported Aluminium Ingots under D.E.E.C. Scheme, against the exports made by them. A part of the Aluminium Ingots thus received by the appellants was sent to other job workers for conversion into wire rods under the provisions of Notification No. 214/86 and/or Rule 57F(2) procedure with the prior permission of their jurisdictional Central Excise Authorities. The Wire Rods were brought back in their factory and were used in the manufacture of Aluminium Wires.
The appellants also converted the Aluminium Ingots? into Wire Rods which were subsequently drawn by them into wires. Aluminium Wires, which are the final products of the appellant firm were cleared without payment of duty under the provisions of Notification No. 180/88-C.E., dated 13-5-1988. The present duty has been confirmed against the appellants on the Wire Rods which the Department alleges were got manufactured out of the Aluminium Ingots and were used captively by the appellants in the manufacture of Aluminium Wires without payment of duty. As per the Revenue, inasmuch as the final product, Aluminium Wire was exempted, the appellants were required to pay duty on the Aluminium Wire Rod which has emerged at the intermediate stage of manufacture of Aluminium Wires. Accordingly, the demand has been confirmed against the appellants by invoking the longer period of limitation against them, i.e. for the period - 1990 to February, 1994. It was specifically held that We have considered the submissions from both sides.? The appellants have used the Aluminium Ingots received by them under D.E.E.C. Scheme for the manufacture of their final product, Aluminium Wire on which no duty of excise has been paid inasmuch as the same were exempted under the provisions of Notification No. 180/88-C.E., dated 13-5-1988. While converting the Aluminium Ingots into Aluminium Wires, Aluminium Wire Rods have come into existence, which the Revenue contends are independent excisable goods and leviable to duty of excise. These Wire Rods have been manufactured by the appellants by a process of melting and casting and rolling. These were also got manufactured from various job workers under the provisions of Rule 57F. It is the contention of the appellants that such Wire Rods are not marketable and hence cannot be considered as excisable goods. We find that the Aluminium Wire Rods are covered by a specific sub-heading: 7604.10 of the Schedule to Central Excise Tariff Act, 1985. There is no definition of Wire Rods in the Tariff. The appellants have referred to various decisions of the Honble Supreme Court as also of the Tribunal in support of its submission that marketability is the essential criterion for holding any item leviable to duty of excise. We find that there can be no quarrel about the above legal proposition. Marketability is essentially to be looked into for holding the excisability of the product. However, it is not the factum of actual marketing of the product, which is required to be satisfied. But as long as the goods are capable of being marketed, they have to be held as excisable goods. In the instant case, admittedly, the appellants are themselves manufacturing the Wire Rods from the Ingots. These Wire Rods are stored by them and ultimately, issued for the manufacture of Aluminium Wires, as observed by the adjudicating authority. The appellants are also sending the Aluminium Ingots to their job workers for conversion into Wire Rods. These Wire Rods so manufactured by the job workers were being sent back by them to the appellants and they were further using the same in the manufacture of Aluminium Wires. Thus, the factum of receipt of Wire Rods by the appellants from their job workers and further utilisation in the manufacture of their final product duly establish the capability of the Wire Rods to be marketed. It is seen that the Honble Supreme Court in the case of Andhra Pradesh State Electricity Board v. Collector of Central Excise, Hyderabad reported in 1994 (70) E.L.T. 3 (S.C.) = 1994 (1) RLT 44 (S.C.) has observed that the marketability is a question to be decided in the facts and circumstances of each case and there can be no generalisation. Further, as long as the goods are marketable, the same are goods for the purposes of Section 3 of the Act and the actual fact of putting the goods in the market is not the criterion. For better appreciation of the law laid down by the Honble Supreme Court in the above decision, we reproduce para 10 of the said judgment :-
10. It would be evident from the facts and ratio of the above?decisions that the goods in each case were found to be not marketable. Whether it is refined oil (non-deodorised) concerned in Delhi Cloth and General Mills, or kiln gas in South Bihar Sugar Mills, or aluminium cans with rough uneven surface in Union Carbide, or PVC films in Bhor Industries or hydrolysate in Ambalal Sarabhai, the finding in each case on the basis of the material before the court was that the articles in question were not marketable and were not known to the market as such. The marketability is thus essentially a question of fact to be decided in the facts of each case. There can be no generalisation. The fact that the goods are not in fact marketed is of no relevance. So long as the goods are marketable, they are goods for the purposes of Section 3. It is not also necessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, it makes no difference so long as they are available for purchasers. Now, in the appeals before us, the fact that in Kerala these poles are manufactured by independent contractors who sell them to Kerala State Electricity Board itself shows that such poles do have a market. Even if there is only one purchaser of these articles, it must still be said that there is a market for these articles. The marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country. The appellants own case before the excise authorities and the CEGAT was that these poles are manufactured by independent contractors from whom it purchased them. This plea itself - though not pressed before us is adequate to demolish the case of the appellant. In our opinion, therefore, the conclusion arrived at by the Tribunal is unobjectionable. The said decision of the Tribunal was confirmed by the Apex Court while dismissing the appeal against the same which is reported in 2006 (204) ELT A 88 (SC).
49. In Collector of Central Excise, Bombay vs. Kohinoor Mills reported in 1995 Supp (2) SCC 411, taking into consideration Rule 9 of the Central Excise Rules relating to the subject of time and the manner of payment of duty, the Apex Court held that it makes clear that if a manufactured item covered by the charge of excise duty by the charging provisions of the Central Excise Act is captivity consumed, it would amount to removal of such manufactured item. It was further held that Consequently once the yarn is manufactured in the weaving department of the composite textile mill and is taken to the spinning department for being captively utilised by way of consumption in spinning department, and gets consumed, it is deemed to have been removed within the meaning of Rule 9(1). Once that happens, the liability of such manufactured yarn to pay excise duty at the then prevalent rate of duty is crystallized.
50. In Aggarwal Rolling Mills vs. C.C.E. , New Delhi reported in 1997 (93) ELT 615 , the Tribunal held that Ld. Counsels contention that untrimmed? circles/sheets are not marketable commodity is not acceptable inasmuch as beyond making an assertion to this effect no material has been produced in support of the above contention.
The Central Excise schedule is a schedule? describing the goods which are excisable therefore, in the normal course, an item mentioned therein is to be treated as excisable unless proved otherwise i.e. to say in case of mention of the item in the tariff, there is an initial presumption in favour of it being excisable product but it is a rebuttable presumption and therefore, it was for the party claiming it to be non-excisable, in spite of its mention in the tariff, to discharge its burden.
51. In Plasmac Machine Manufacturing Co. Pvt. Ltd. vs. C.C.E. , Bombay reported in 1991 Supp (1) SCC 57, it was held by the Supreme Court as under:-
The submission that the Tie Bar Nuts manufactured? by the appellants to specifications of Injection Moulding Machines for captive use and not for sale is also, in our view, untenable, as such use is not determinative of the question. If the goods are capable of being sold that would be enough. In Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay - 1989 (40) E.L.T. 280 (SC) = (1989) 1 SCC 602, the crude PVC films as produced by the appellants were not known in the market nor could they be sold in the market. Sabyasachi Mukharjee, J., as he then was, while considering the submission that it was only the goods as specified in the Schedule to the Act that could be subjected to the duty in Para 6 observed :
For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. That was necessary. The appellants themselves have called the goods Tie Bar Nuts and those are admittedly used for fixing platens at appropriate distances. It cannot be said that the Tie Bar Nuts after their manufacture did not constitute goods; their actual sale in the market was not necessary.
In M/s. Ujagar Prints and Ors. v. Union of India and Ors . - 1989 (39) E.L.T. 493 (SC) = (1989) 3 SCC 488, it has been held that excise duty is levied on manufacture and production of goods and the liability to pay such duty is not dependent on whether the manufacturer is the owner or not. The question whether the producer or the manufacturer is or is not the owner of goods is not determinative of the liability.
52. The Larger Bench of the Tribunal in Mahindra & Mahindra vs. C.C.E., Aurangabad, Chandigarh , Kanpur & Chennai reported in 2005 (190) ELT 301 after taking note of the various decisions including the decision delivered by the Apex Court had held that the fact that the goods are not in fact marketed is of no relevance. Even if the goods are available from one source or a specified market, it makes no difference so long as they are available for purchasers. Even if there is only one purchaser, the article must be held to be marketable. The marketability of the articles does not depend upon the number of purchasers nor the market is confined to any territorial limit.
53. The Supreme Court in A.P. State Electricity Board vs. C.C.E., Hyderabad reported in 1994 (70) ELT 3 had ruled that so long as the goods are marketable they are goods for the purpose of Section 3 of the said Act. It is not necessary that the goods should be generally available in the market. Even if the goods are available from one source or from specified market, it makes no difference.
54. In Union of India vs. Sonic Electrochem (P) Ltd. reported in 2002 (145) ELT 274 (SC) , it was ruled by the Apex Court that it is difficult to lay down a precise test to determine the marketability of the article. Marketability of goods has certain attributes. The essence of marketability is neither in the form nor in shape or condition of the article in which the manufacturer of articles are to be found, it is the commercial identity of the article known to the market for being bought and sold. The fact that the product is generally not being bought and sold or has no demand in the market are irrelevant.
55. The decision of the Apex Court in the matter of C.C.E., Baroda vs. United Phosphorous Ltd. reported in 2000 (117) ELT 529 was in different set of facts. Therein during the process of manufacture of the final product, certain intermediate product came into existence. The manufacturer disputed the duty liability in respect of such product which was manufactured in the continuous process of production of the final product. While dealing with the said aspect, it was observed that actual sale of article is not at all required but it must be capable of being bought and sold. Intermediate product even if so capable, thenthe same may be liable to excise duty as it satisfies the test of being goods on the touchstone of marketability.
56. The constitutional Bench of the Apex Court in Delhi Cloth and General Mills case had held that before the product can be subjected to duty liability, it must be a product known to the market.
57. The Apex Court in Union of India vs. J.G. Glass Industries Ltd. reported in 1998 (97) ELT 5 (SC) held that two fold test to decide that the process is a manufacture or not is that whether by the said process a different commodity comes into existence and whether the identity of the original commodity cease to exist.
58. In Commissioner of Central Excise, Chandigarh I vs. Markfed Vanaspati & Allied Indus. reported in 2003 (163) ELT 491 (SC) , the Apex Court had rejected the contention that merely because an item falls in the Tariff Entry it must be deemed that there is manufacture.
59. In Crane Betel Nut Powder Works vs. C.C. & C.Ex, Tirupathi reported in2007 (210) ELT 171 (SC), the Apex Court had held that crushing betel nuts into smaller pieces and sweetening the same with essential/non-essential oils, menthol, sweetening agents etc. did not result in manufacture of a new and distinct product having a different character and use as end product continues to retain its original character though in a modified form.
60. The Apex Court in Board of Trustees case was dealing with the question as to whether the cement, concrete armour units installed in the harbor area constituted excisable goods. In the said case, the cement, concrete armour units were used for port trust for installation of break waters in the outer harbor for the purpose of keeping the water calm and tranquil. Each of these units was weighing 50 MTs.. They were like tripods used to keep the water calm and tranquil. They were essentially in prisomoid form and they were manufactured with certain specifications and were harbour or location specific. Besides, there was no evidence to show that those units could be used in any other harbour or that they could be bought or sold in the market. In that context, it was held by the Apex Court that the point on marketability of those units was not established.
61. In Hindustan Zinc Ltd. case (supra), the question before the Apex Court was whether the intermediate product produced in the manufacture of zinc was marketable. The facts reveal that in the course of extraction of zinc silver concentrate, a mixture or a combination of zinc chloride, silver chloride, lead and other materials was emerging from which by further treatment all other materials were filtered out leaving behind the residue of silver chloride. According to the Department, the silver chloride was assessable commodity. According to the assessee, the product was emerging in the form of slurry and not in the powder form and such slurry had no market and was not capable of being used in photography, ceramics etc. to which silver chloride was sold in the market and was capable of being sold and, therefore, the product was residue and not a compound. While observing that the marketability is essentially a question of fact and the burden in that regard was upon the Department, it was held that though the records disclosed that some market enquiry was made, it could not reveal as to what was the market enquiry and the Department had not made any efforts to ascertain whether the silver chloride emerging from the treatment adopted had any market or not and therefore, the issue was answered against the Department. The decision was squarely in the facts of the case.
62. In Cipla Ltd. case, the issue essentially was in respect of the classification of the product and in that regard, the marketability aspect the product was also considered. While deciding the matter by the Commissioner (Appeals), the authority held the product to be marketable on the ground that the product was transported from the factory at Bangalore to Patalganga and it had shelf life. In those circumstances, it was held that in the absence of any evidence regarding marketability or capable of being marketed, the issue of marketability could not be said to have been established.
63. In Cadila Laboratories Pvt. Ltd. case, it was clearly ruled that the expression marketable does not mean that the goods must be actually bought and sold in the market. The goods must be capable of being bought and sold in the market. The law also is that the goods which are in crude or unstable form and which require a further processing before they can be marketed cannot be considered to be marketable goods merely because they fall within the schedule of the Tariff Act. It was specifically recorded that the Department had made no efforts to ascertain whether any of the intermediate product was available in the market, even if available whether or not the product available in the market are the same as produced by the assessee and none of the intermediate product manufactured by the assessee were analysed by the expert.
64. In Moti Laminates Pvt. Ltd. case , the issue was whether the goods mentioned in the schedule to the Tariff Act were dutiable as such or they were excisable goods as defined under the Act only when they are marketable or capable of being marketed. In that case, in the course of manufacturing process, a solution was emerging as a result of continuous reaction and such solution was collected in the semi-processed condition and was used without further processing in the manufacture of the final product. Such semi-processed solution was neither marketed nor sold by the assessees and it was used captively in the same condition in the process of manufacture of the final product. In the background of those facts and circumstances since the product was not a complete product, but it was in incomplete and semi-processed condition, it was held that it could not be considered as goods on which excise duty could be levied.
65. Considering the above facts of the case in hand, it is absolutely clear that the product in question is for all purposes a complete product, and it does not require any further processing for its consumption in the manufacture of the final product. Similar such product was procured by the appellants from the market which is established by the invoices placed on record, and the fact stands corroborated by the statement of the officers of the appellant company. All the ingredients of the marketability aspect of the product in question stand fully satisfied and established.
66. As regards the second point for consideration, the rival contentions are in relation to Charter Note 11 to Chapter 29. The said note reads thus :
In relation to the products of this chapter, labeling or re-labelling of containers and re-packing from bulk to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture
67. Referring to the said note, it is the contention of the Advocate for the assessee that the same creates legal fiction and it treats the activity like labeling or re-labelling as containers intended for consumer and repacking from bulk to retail pack as well as adoption of any other treatment render the product marketable to the consumer to be amounting to manufacture. Being artificial definition of the term manufacture, it has to be strictly construed more particularly in view of the fact that the same seek to extend to levy. It is further contention on behalf o f the assessee that the show cause notice involved the first portion of the note, but it was given up by the Commissioner while passing of the order and confirming the demand on the basis of second part of the note. It is the contention on behalf of the appellants that second part of the Note deals with the situation where a treatment will render the product marketable to the consumer. It presupposes the product to be not suitable to be marketed and therefore, requires the treatment to make it marketable. In this regard, the attention is sought to be drawn to the word render in the second part of the said Note. It is the contention on behalf of the assessee that the term render implies that before treatment, the product was not marketable to the consumer and it is only due to the process undergone that the product is rendered marketable to the consumer. To make good this submission, attempt is made to redraft the second sentence of the note to the affect that any treatment to render the product not marketable to the consumer shall not amount to manufacture. It is therefore, contention that the legislature deemed to have said that the process undertaken by the appellants does not amount to manufacture. Reliance is placed in the matter of Lakme Lever Ltd. vs. C.C.E., Mumbai III reported in 2001 (127) ELT 790, Lupin laboratories Ltd. vs. C.C.E., reported in 2002 (132) ELT 366 and Dol Sun Containers Pvt. Ltd. vs. C.C.E., reported in 2003 (151) ELT 624 and Conybio Healthcare (India) Pvt. Ltd vs. C.C.E., Chennai reported in 2007 (216) ELT 586. Further, referring to the word consumer in the said Note it is sought to be contended that the same refers to retail consumer and therefore, in the facts of the case, it is submitted that by virtue of mixing of various vitamins, the product cannot be said to have rendered marketable to any retail consumer.
68. On the other hand, it is submitted on behalf of the Department that fiction created by the Note covers two different situations. However, the full effect has to be given to any such fiction created by a statute. Referring to the word consumer it is contended that it refers to a person or thing that consumes or uses the product. In the instant case, admittedly, the assessees are using vitamin mix or intermixture of vitamin. There cannot be any restriction that the manufacturer or producer of the article cannot be the consumer to consume the article. The Note nowhere indicates that the person who manufactures a particular commodity and uses the same in his own factory would not be the consumer of the product. There is no justification to give any such a narrow meaning to the word consumer as sought to be contended on behalf of the assessee. The word consumer implies a person or a thing that eats or uses the product. A consumer need not necessarily be a person different from the one who manufactures the product. It is further contention on behalf of the Department that it is not necessary that the ingredients consumed in the final product should necessarily loose their individual characteristics. The requirement is that the final product should have different characteristics. The Note nowhere prescribes requirement of transformation of non-marketable product in marketable product. The Note nowhere requires that the ingredients of the final product should have been non-marketable products prior to their consumption in the final product. The decisions relied upon are sought to be distinguished on behalf of the Department, while placing reliance in the decision in C.C.E. vs. Phil Corporation Ltd. reported in 2008 (223) ELT 9 (SC), S.K.B. Dryfruits Marketing Co. Ltd. vs. C.C.E. reported in 2008 (224) ELT 339 (SC).
69. It is settled law that while interpreting a provision creating legal fiction, one has to ascertain the purpose for which the fiction is created and after ascertaining the same while understanding the scope of the fiction, it is expected to assume all those facts and consequences, which are incidental or inevitable corollary to give effect to the fiction, provided that it should not extend beyond the purpose for which it is created, nor should travel beyond the language used in the provision of law by which the fiction is created. Having ascertained the purpose, full effect must be given to the fiction and it should be carried to its logical conclusion. In the words of Lord Asquith in East End Dwelling Co. Ltd. vs. Finsburry Borough Council reported in (1951) 2 All E.R. 587, it can be said that if you are bidden to treat imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. The statute says that you must imagine certain state of affairs, it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. In the State of Bombay vs. Pandurang Vinayak reported in AIR 1953 SC 244, it was held that after ascertaining the purpose, full effect must be given to the statutory fiction and it should carry to its logical conclusion. However, it was also ruled in C.I.T. , Delhi vs. S. Teja Singh reported in AIR 1959 SC 352 that it would be proper and even necessary to assume of those facts on which alone the fiction can operate..
70. While applying the law laid down by the Apex Court in relation to legal fiction created by the statutory provision under Note 11 of Chapter 29 quoted above, we will have to primarily ascertain the purpose behind introducing the said Note 11. The Note certainly relates to connotation of the term manufacture and it seeks to widen the scope thereof by including the activities which would otherwise fall outside the scope of the definition of the said term under Section 2(f) of the said Act. Therefore, the purpose for which the said Chapter Note has been introduced in Chapter 29 is to widen the scope and the meaning of the term manufacture in relation to the products covered by the said Chapter 29 of the Tariff Act. Mere process of labeling or relabeling of the containers and even repacking from bulk to retail pack are described as amounting to manufacture and, therefore, the resultant product would attract the duty under the said Act. Likewise, any process adopted for rendering the product marketable would also amount to manufacture even though such activity may not come within the purview of the definition of the term under Section 2(f). In other words, the Chapter Note attempts to remove any doubt about the activity described therein as being manufacture and sufficient to attract duty under the said Act.
71. The point to be considered with reference to the said Note is whether the process of mixing of the vitamins, collecting the resultant product in the containers , labeling them and storing them to be consumed for manufacture of final product as and when required would amount to treatment rendering the product marketable to a consumer. The Note uses four expressions namely, any other treatment, rendering, marketable, and consumer. The term treatment signifies a process by which someone would deal with something. The term rendering implies giving or providing or performing something. The word marketable discloses suitability of the product being bought and sold. The term consumer means a person or thing that eats or uses something. These are the dictionary as well commonly understood meaning of the concerned terms used in the said Note.
72. It is the contention on behalf of the appellants that proper reading of the Note would disclose the term rendering implies that the product must not be marketable to the retail consumer prior to the treatment. The arguments in support of this contention is that the crucial requirement of the last portion of the said note is the non-marketability status of the product prior to adoption of the treatment and the process undertaken by the appellants in relation to the product in question does not satisfy the same.
73. Plain reading of the Note discloses the crucial requirement thereof to be the treatment which would confer upon the product those attributes of marketability which it had not possessed prior to such treatment. The Note neither requires the product to be incomplete product nor being totally non-marketable one prior to any such treatment. Certainly, the activity of labeling or relabeling or retail packing of a product could be for the purpose of finding the market, but it need not be unless the product is ready to be marketed. The purpose of labeling or repacking can certainly improve the marketability status of the product. That does not mean that in the absence thereof, the product has necessarily to be a non-marketable.
74. The Note merely speaks of rendering the product marketable to a consumer. Rendering the product marketable may mean as well as may not mean to render the product marketable to any particular class of consumer or for a consumer from a particular area or even to improve or change the marketability for that product from the existing nature of marketability to another, or to acquire that type of marketability which the product did not have. Being so, the fact that the product has marketability and it is sought to be subjected to some treatment either to suit the requirement of a particular class of consumer or consumers from a particular locality or for a particular event or for some other purpose, that by itself will not make any difference as far as applicability of the Note to such treatment is concerned. The Note essentially meant to bring every such process by which any marketability is sought to be attributed to the product within the ambit of the term manufacture.
75. If the contention sought to be canvassed on behalf of the appellants is accepted, it would virtually defeat the very purpose which the legal fiction seeks to attain. Besides, reading something in Note which is not provided thereunder is certainly not permissible. It would be absurd and illogical to read the word treatment with qualification which the appellants want us to be subjected to, knowing well that the lawmakers have refrained from imposing any such restriction. If the contention of the appellants sought to be canvassed is accepted, the Note would read as adoption of any other treatment to render non-marketable product to be marketable to the consumer. One should not forget that the said Chapter Note is intended to enlarge the scope of the term manufacture in relation to certain processes which normally would not fall within the ambit and scope of the said term in respect of the products enumerated under Chapter 29 and it does not deal with the term marketability thereof. The word marketable has been essentially used to describe the purpose of the treatment which would result in manufacture which otherwise would not fall within the ambit of the definition of the said term.
76. The Importers (Control) Order, 1955 was issued consolidating all the relevant orders in one place while repealing of previous orders and it provided all the licenses under repealed orders were to be deemed to have been issued under the new order. The Apex Court in State of West Bengal vs. Motilal Kanoria reported in AIR 1966 SC 1586 held that the deemed condition of licence under the new order became also the condition of licence issued under the repealed order deemed to be issued under the new order. While interpreting the fiction created under the Income Tax Act, 1922 whereby Section 43 provided under certain circumstances, an agent for all the purposes of the Act, be deemed to be such agent of non-resident person and whereby Section 42 further provided that such agent shall be deemed to be for all purposes of the Act, the assessee, it was held by the Privy Council that such agent was the assessee for all purposes of the Act and hence chargeable to income tax and the term assessee being defined by Section 2(2) as the person by whom the income tax is payable (vide C.I.T. , Bombay vs. Bombay Corporation reported in AIR 1930 Privy Council 54). In short, the intended effect of the legal fiction should not be allowed to be defeated by prescribing artificial restrictions to the deeming fiction.
77. While considering the Chapter Note No. 6 of Chapter 34 which provided that in relation to the product sub-heading number 3402 90, packing or repacking into smaller pack including packing or repacking of bulk pack to the retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture, the Apex Court in Mercantile Company vs. C.C.E., Calcutta reported in 2007 (217) ELT 330 (SC) held that the term manufacture with reference to repacking from bulk packing to retail packs introduced by the Finance Act, 1994 clearly points to the fact that even if the bulk material is identifiable as excisable goods, the fact of repacking from bulk to retail pack would render the product separately classifiable, while rejecting the plea that the marketing of the product in smaller containers under different name shall also not amount to manufacture unless the nature and identity of the product is changed and in the case before the Supreme Court there was no such change in the product. It was specifically held that the same was of no consequence in view of the said Note.
78. The point now is whether the marketability should necessarily relate to the retail consumer. Is there any such restriction contemplated under legal fiction created under the said Note? Plain reading of the Note nowhere discloses the word consumer having been qualified by any pre-fix like retail. The appellants want us to read the said prefix to the word consumer only on the ground that in the first part of the Note, the activities mentioned therein are essentially in relation to the product to be cleared to the retail consumers. Apart from the said contention, no other arguments have been canvassed in this regard.
79. As already observed above, the Note relates to all the products enumerated in Chapter 29. Neither it is the contention of the appellants nor the Chapter 29 deals with the product which can only be consumed by the retail consumers. Neither the word consumer is defined under the Act nor in the Rules to mean as the retail consumers unless specified otherwise. The word has been used as consumer simplicitor. Merely because the fiction refers to the treatment to render the product marketable and the first part of the Note relates to the activities which may at first glance appear to be referring to those which could be manufactured for the retail consumers, it cannot be said that the term relates to the retail consumers only. Plain reading of the Note would make it absolutely clear. Repacking in smaller packs need not necessarily be for retail consumer. It may be for hotel industry, airlines industry, etc. also. It may be for the benefit of the companies engaged in rendering catering services. Same is the case of labeling or relabeling. Same principle would apply in case of any other treatment to the goods and it would include industrial customers also.
80. In Lakme Lever Ltd. case, it was held by the Tribunal, while dealing with the Note 4 of Chapter 33 of the Tariff Act that the word render signifies that the process to fall within the scope of any other treatment, it must be one which confers upon a product the attributes of marketability which it did not possess earlier. In other words, if certain attributes of the marketability which were lacking in the product are made available to the product that process would be a treatment amounting to manufacture. That does not necessarily mean that such product ought not to have any of the attributes of marketability prior to undergoing such process. It might had or not or it might had some of those attributes but not those which are necessary to cater to a particular market or class of consumer. It was also held in the said case that the word consumer refers to one who purchases the product for consumption. This observation is apparently consistent with what is provided under the Note. The Note nowhere speaks of necessity of consumers of a particular class. It can be consumed captively by the manufacturer itself. Nothing prevents the manufacturer himself from becoming the consumer of such product. To presume that the word consumer refers only to retail consumer would result in creating another fiction which is not contemplated under the legal fiction created by the lawmakers.
81. In Lupin Laboratories case, the subject matter for consideration was Note No.5 of Chapter 30. The said Note provided that in relation to the drugs under Heading 30.03 conversion of powder into tablets or capsules, labeling or relabeling of containers intended for consumer and repacking from bulk pack to retail packs or adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture. It was sought to be contended that as a result of packing of two or three separate medicaments together a new product emerges and therefore, though it may be covered by the said Note but would be entitled for the exemption benefit under the Notifications namely, Notification No.75/94 and No.30/88 and therefore, the product was not liable to duty. The Tribunal after taking note of the decision in Lakme Lever Ltd. case observed that it was relevant to note that four or three tablets were initially packed after their manufacture into the said combination of packing and it was not as if they were first packed into separate packing and thereafter, drawn from such packing and put into subsequent packing which was under consideration. Having so observed, it was held that the intention of the law maker was to ensure that the value addition which is sometimes substantiated which results as a consequence of packing the product into retail pack should be subject to duty. Each of the processes referred to in the Note, conversion of powder into tablets labeling or relabeling of container intended for consumer, repacking from bulk pack to retail packs obviously results in or facilitates sale of the product to the retail consumer. The adoption of any other treatment refers to in each of these processes referred in the Note would be such treatment that would render the product marketable to a consumer. The decision was not on the point as to whether the marketability aspect was necessarily related to retail consumer or not. The observation that the repacking from bulk pack to retail packs facilities sale of a product to retail consumer cannot be understood to mean that the term consumer in the Note necessarily refers to a retail consumer or that the Tribunal has held so. One cannot understand the ratio of an order ignoring the facts of the case and the points which were considered in the matter while deciding the same.
82. In Dol Sun Containers Pvt. Ltd. case, the company was engaged in manufacture of corrugated boxes/containers. The company was purchasing corrugation gum in powder form from the market. That gum powder was converted by the company into liquid gum by simply adding and mixing water therein without the aid or use of any chemical. Such liquid gum was captively used by the company for manufacture of corrugated boxes/containers. The gum powder purchased by the company was used as adhesive and even after converting into liquid form by mixing water therein, it remained the adhesive. No new distinct marketable product was brought out into existence by them by mere converting the gum powder into liquid gum with the help of simple water. The said activity was held as not amounting to manufacture in terms of Section 2(f) of the said Act. The Tribunal while dealing with the Note 3(f) of Chapter 35 which provided that in relation to products of this chapter note, labeling or relabeling of containers and repacking from bulk pack to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture held that water was mixed by the company in the powder with a view to bring it to their use in the manufacture of corrugated boxes and there was nothing to suggest that the liquid gum powder had any shelf life or the same was in any manner marketed. It was further held that the expression render indicates that the product must not be marketable before any activity carried out in respect thereof. It must become marketable only by virtue of any act performed in respect of thereof by the assessee and it is only in that event, it would amount to manufacture of a new product in terms of Note 3 and not otherwise. It cannot be said that the Tribunal has laid down any law as such as regards the term render used in the said Note contrary to the view that we are taking in the matter. The observation that the product must become marketable by virtue of the treatment relates to the process by which the marketability attribute was adopted and not to the status of the product prior to adoption of such processes. In other words, the observation related to the process by which the particular attributes of marketability was attributed to the product and not about total absence of any sort of marketability to the product.
83. In Conybio Healthcare (India) Pvt. Ltd. the Tribunal was considering Chapter Note 4 of Chapters 61 and 62. The Note provided that in relation to a product of this chapter, affixing brand name on the product labeling or relabeling of its containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture. It was held that the language used in the chapter note clearly indicates repacking from bulk pack to retail packs would not by itself amount to manufacture. Besides, there must be labeling or relabeling or affixing of brand name also. Applying the ruling in the matter of C.C.E., Mumbai vs. Johnson & Johnson Ltd. reported in 2005 (188) ELT 467, it was held that Chapter Note 5 of Chapter 30 which was the subject matter of Johson & Johnsons case was in pari materia to the said Note 4 and therefore applying the ruling of the Supreme Court there could be no denial of the fact that the firms to which the garment was sold by the assessee in the said case were their distributors and their product was not directly marketed to the consumer. The distributors had to pack the garments in respective printed cartons before retail sale to the consumers. In other words, it was the activity of the distributors which rendered the product marketable directly to the consumers so as to attract Chapter 4 and therefore, there was no repacking from bulk pack to the retail pack rendering the product marketable directly to the consumer by the assessee and therefore, the applicability of Chapter Note 4 was ruled out. Apparently, the decision was given in the peculiar facts of the case established before the Tribunal. That is not the case in the matter in hand.
84. In Johnson & Johnsons case (supra), the Apex Court while considering the scope of Chapter Note 5 of Chapter 30 which extended the meaning of the term manufacturers while providing that in relation to products of Heading No.30.03, conversion of powder into tablets and capsules, labeling and relabeling of containers intended for consumer and repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture, held that repacking would have to be from bulk packs to retail packs so as to render the product marketable directly to the consumer. In other words, the Supreme Court has clearly held that the Note specifically provided that the treatment should be to render the product marketable directly to the consumer. The word consumer has not been qualified with only retail consumer. It is the product which should be rendered marketable to the consumer. It may be to any consumer either retail or wholesale; that is immaterial. It is the pack which should be retail, and not the consumer.
85. The decision in Johnson & Johnsons was followed by the Supreme Court in Commissioner of Central Excise, Mumbai vs. BOC (I) Ltd. reported in 2008 (226) ELT 323 (SC) while considering the applicability of Chapter Note 10 of Chapter 28 which provided that in relation to products of this Chapter, labeling or relabeling of containers and repacking from bulk packs to retail packs, or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture, it was held that not only labeling or relabeling that is necessary but it should be repacking from bulk packs to retail packs. It was essentially because of the word and in between the words containers and repacking in the Note. That does not mean that retail packs are necessarily meant only for the retail consumers. They can be also for consumers like hotel industries, companies engaged in rendering catering services, airlines etc. who may purchase the product packed in retail packs, but in bulk.
86. In Phil Corporation Ltd. case, the assessees were manufacturing processed cashew nuts, peanuts, almonds etc. manufactured by dry roasting, oil roasting, salting, seasoning and were packing the same in different containers and they were cleared under their brand name. The assessees did not register with the Excise authorities and cleared the goods without payment of excise duty. Consequently, show cause notice came to be issued which was sought to be defended by the assessee contending that the products were classifiable under Chapter Heading 0801.00 and were chargeable to nil rate of duty and therefore, the there was no requirement of registration with the Excise authorities. The Excise authorities under its order dated 31.10.2000 held that the goods were classifiable under Chapter Heading2001.90 were chargeable to duty and therefore, the duty was demanded. When the matter came up before the Tribunal, the same was allowed and it was held that the goods cleared by the assessees were not assessable to duty. The Apex Court after considering the rival contentions and taking note of the decisions in the matter of Amit Agro Industries Ltd. vs. C.C.E., Ghaziabad reported in 2007 (210) ELT 183 (SC), Collector of Central Excise, Shillong vs. Wood Craft Products Ltd. reported in (1995) 3 S.C.C. 454, Collector of Central Excise, Bombay vs. S.D. Fine Chemicals Pvt. Ltd. reported in(1995) Supp. 2 SCC 336, O.K. Play (India) Ltd. vs. Commissioner of Central Excise, New Delhi II reported in (2005) 2 SCC 555, Union of India and Another vs. Delhi Cloth & General Mills Co. Ltd. (supra) held that Central Excise Tariff Act is broadly based on the system of classification from the International Convention called the Brussels Convention on the Harmonised Commodity Description and Coding System (Harmonized System of Nomenclature) with necessary modifications. HSN contains a list of all the possible goods that are traded (including animals , human hair etc.) and as such the mention of an item has got nothing to do whether it is manufactured and taxable or not. It was further held that the authority has to ascertain from the process undertaken by the manufacturer as to whether the process undertaken amounts to manufacture or not by referring to the definition clause as well as other statutory provisions and have to make serious endeavour to ascertain the spirit and intention of the Parliament in enacting the provision of law and once the legislative intention is properly gathered then the bounden duty and the obligation of the Courts is to decide the cases in consonance with the legislative intention.
87. In SKB Dryfruits Marketing Co. Pvt. Ltd. vs. C.C.E., New Delhi reported in 2008 (224) ELT 339 (SC), it was observed that since the products involved were similar to those in the case of Phil Corporation Ltd. by following the said decision , no further adjudication was required.
88. In Sant Lal Gupta vs. Modern Co-operative Group Housing Society Ltd. reported in 2010 (262) ELT 6 (SC), it was held that It is the exclusive prerogative of the legislature to create a legal fiction meaning thereby to enact a deeming provision for the purpose of assuming the existence of a fact which does not really exist. Even if the legal fiction is created by the legislature, the Court has to ascertain for what purpose the fiction is created, and it must be limited to the purpose indicated by the context and cannot be given larger effect. More so, what can be deemed to exist under legal fiction are merely facts and legal consequences which do not flow from the law as it stands. It is settled legal proposition that in the absence of any statutory provision, the provision cannot be construed as to provide for a fiction in such an eventuality. More so, creating a fiction by judicial interpretation may amount to legislation, a field exclusively within the domain of the legislature. Reference was made to the earlier decision of the Apex Court in the matter of Ajab Singh vs. Sirhind coop. Marketign-cum-processing Service Society Ltd. and others reported in (1999) 6 SCC 82.
89. In C.C.E., Bombay vs. S.D. Fine Chemicals Pvt. Ltd. reported in 1995 (77) ELT 49 (SC), it was held that the definition of the expression manufacture under Section 2(f) of the Act is not confined to the natural meaning of the expression manufacture but is an expansive definition. Certain processes, which may not have otherwise amounted to manufacture are also brought within the purview and placed within the ambit of the said definition by the Parliament. Not only the processes which are incidental or ancillary to the completion of manufacture product but also those processes as are specified in relation to any particular goods in the Section or Chapter Notes to the Tariff Schedule to the Central Excise Tariff Act, 1985 are also brought within the ambit of the definition.
90. In Collector of Central Excise, Bombay vs. French Dyes & Chemicals (P) Ltd. reported in 1997 (90) ELT 411, the Tribunal while dealing with the Chapter Note 6 of Chapter 32 held that the same would prevail over the general concept of manufacture as the legal fiction has been created under the said Chapter Note to understand as to what amounts to manufacture. By applying the said legal fiction, one can find that even diluting of a unformulated dye will amount to manufacture if this diluting is done for making it ready for use. It was also observed that decreasing of colour power also amounted to manufacture in view of said legal fiction created under the said Chapter Note.
91. While disputing the applicability of the deeming fiction under Note 11 to the product of the appellants, the learned Advocate for the appellant submitted that the appellants product was neither marketed nor being bought and sold in the market, but it was captively consumed and therefore, applying the law laid down by the Apex Court by Delhi Cloth and General Mills case, the product cannot be subjected to duty liability. On the other hand, it is the contention of the Jt.CDR that in order to consider the product to be marketable, it is not necessary that the product should, in fact, be marketed. If the product can be bought and sold in the market that would satisfy the test of marketability.
92. Taking into consideration the various decisions relied upon on behalf of the appellants as well as the respondents and particularly the decision in the matter of Mahindra and Mahindra Ltd. vs. C.C.E., Aurangabad reported in 2005 (190) ELT 301, A.P. State Electricity Board vs. C.C.E., Hyderabad reported in 1994 (70) ELT 3 (SC), Oriental Construction Co. vs. C.C.E., Pune II reported in 2006 (199) ELT 503, Union of India vs. Sonic Electrochem (P) Ltd. reported in 2002 (145) ELT 274 (SC), Gilooram Gaushanker vs. C.C.E., Jamshedpur reported in 2001 (136) ELT 434 and Indofil Chemicals Ltd. vs. Union of India reported in 1994 (73) ELT 9, it is settled law that in order to consider the product to be marketable, the same should not a transient product but it should be a product commercially identifiable one. The fact that the product is not actually marketed is not relevant and even if there is only one customer to purchase or consume the product then such product can be considered as a marketable product. Undisputedly, as already seen above, the product in question is clearly commercially identifiable one. It is captively consumed by the appellants. Similar type of the product was also purchased by the appellants and consumed by the appellants for the same purpose for which the product in question is consumed. The product in question has shelf life. Considering all this aspect, it cannot be denied that the provisions of the Note in question are squarely applicable to the product of the appellants. Rather, the vitamins mix produced by the appellants satisfies all the necessary attributes to make it a marketable product.
93. Merely because the product in question is not being bought and sold in the market or that there is no activity of repacking from the bulk packs to the retail packs, the product cannot escape the applicability of the latter portion of the Note 11 of the said Chapter. It is not only the activity of mixing of different vitamins but the collection thereof in containers and labeling with specific name followed by the product being stored in the shelf and used as and when required by the appellants and thus is captively consumed and at the same time, the materials on record disclose that similar type of product was procured by the appellants under invoices from the market and was used for similar purpose for which the product in question has been used and all these aspects clearly satisfy the requirement of second part of the said Note.
94. The fallout of the above discussion is that the points formulated for consideration in these appeals in terms of the direction by the Honble Supreme Court in the remand order in relation to the process undertaken by the appellants are to be answered in affirmative. The product vitamin mix or intermixture of vitamin emerges out of the process of mixing of vitamins and it results in manufacture of commercially recognized product different from the ingredients used in the process of mixing having independent characteristics, identity and use. Taking into consideration the facts and circumstances of the case, the activity undertaken by the assessees has to be held as amounting to manufacture conceptually and by applying first principle as well by application of twin test of manufacturing and marketability. The activity undertaken by the appellants is covered by the provisions of Section 2(f) of the Central Excise Act, 1944 read with Chapter Note No.11 of Chapter 29 of the Central Excise Tariff Act, 1985. Once the goods are considered as marketable merely because they are actually not marketed and are captively consumed by the manufacturer that itself will not be sufficient to hold goods to be non-excisable goods. The word consumer in the said Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985 means any consumer including an industrial consumer and the said word is not related exclusively to retail consumer. The expression any other treatment is not confined to treatment in the nature adopting the attributes of the marketability to a product having absolutely no marketability prior to such treatment. The said expression includes any treatment including the treatment adopted to acquire of those attributes of marketability which the product did not possess prior to such treatment even though the product might have possessed other attributes of marketability. It is immaterial whether the product which are to be treated for rendering them marketable were having any attribute of marketability or not prior to adoption of any such treatment. The expression retail pack which does not relate to retail consumer. It refers to the circumstances in which the retail pack is made available to a consumer who may procure such goods even in bulk.
95. The next point that is sought to be raised relates to bar of limitation. It is the contention on behalf of the appellants that the demand for the period from May 1997 to September 2001 is barred by limitation as the show cause notice was issued only on 22.3.2002 in Appeal No.E/1828, 1829, 1830 and 1831/2005. In fact, the Apex Court while dealing with the said issue has already held that the view taken by the Tribunal in the earlier order that the extended period of limitation was not invokable was justified. Consequently, the said issue already stands concluded by the decision of the Apex Court and is neither need to be considered nor in fact can be considered as we are dealing with the matter on remand to consider the specific issues referred for consideration under remand order. The enquiry in the appeal at this stage is confined to the issues formulated by the Honble Supreme Court in the remand order, and cannot travel beyond those issues.
96. As regards the penalties are concerned, the question of going into the said issue also does not arise as the remand order does not permit the said issue to be considered afresh. Needless to say that the quantification of the penalty in the cases covered by the order of the Apex Court will have to be redone bearing in mind the order of the Apex Court holding that there was no scope for invoking extended period of limitation.
97. The question of re-quantification of the demand on the ground of incorrectness also is no more open for consideration in this appeal. As already observed above, the scope of adjudication in the appeal is confined to the issues formulated by the Apex Court in the remand order.
98. The points for consideration are, therefore, answered in above terms and accordingly, the appeals are disposed of.
(Pronounced in the open Court on 8.4 .2011) (Justice R.M.S. Khandeparkar) President (Rakesh Kumar) Technical Member scd/