Customs, Excise and Gold Tribunal - Delhi
S.D. Fine Chem Pvt. Ltd. vs Collector Of Central Excise on 25 June, 1991
Equivalent citations: 1991ECR370(TRI.-DELHI), 1991(56)ELT393(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. This is an appeal directed against the order dated 4-3-1987 passed by the Collector, Central Excise (Appeals) Bombay by which the Collector had allowed review application made by the Collector of Central Excise, Bombay-II before him under Section 35E(4) of the Central Excises & Salt Act and had set aside the order of the Assistant Collector of Central Excise Division IX of the Bombay-II Collectorate dated 30-3-1984. The brief facts are the Appellants herein manufactured Chemical laboratory and fine chemical. They are also engaged in the activity and of repacking and purification of laboratory and fine chemicals. The purification is carried out by them by process of recrystallisation and distillation. In their classification list from 1 -4-1983 they had shown that such process of purification and distilation were not process of manufacture and they claimed exemption for such goods under Notification 77/83 dated 1-3-1983 as the value of all excisable goods cleared by them during the period 1982-83 amounted to Rs. 22,24,272/- excluding value of packed and purified goods which was Rs. 2.11 crores. A show cause notice was issued on 23-7-1983 by the Assistant Collector, in which it was alleged that the products repacked and purified are of high quality chemicals subjected to process like recrystallisation grinding etc. to achieve purity and that therefore this refined chemicals are much purer as compared to those of technical or commercial grade. It was further noted in the show cause notice that these products are for selected and specialised uses such as analytical testing in laboratories etc. Therefore the processes were held to be processes for manufacture and the goods excisable goods after the value of their clearance were to be added to the value of excisable goods already declared by Applicants in their classification list the total value exceeded Rs. 40.00 lakhs during 1982-83, and because of this, in terms of the Notification 77/83 the Applicants were alleged to be ineligible for the exemption as claimed by them in classification list for the period 1983-84.
2. On considering their submissions the Assistant Collector, by his order dated 30-3-1984 dropped the proceedings holding that the process of purification/refinement of chemicals by distillation and recrystallisation does not amount to manufacture within the meaning of Section 2(f) of Central Excises & Salt Act, 1944. In coming to this conclusion the Assistant Collector considered the opinion given by the Deputy Chief Chemist, and the Chief Chemist of the Central Revenue Laboratory, as also opinion given by the National Chemical Laboratory, Pune and relied upon the opinion of National Chemical Laboratory according to them as far as basic Chemical Industry is concerned the term manufacture implies conversion of raw material into finished product by chemical reaction following chemical changes by use of energy and labour. From this it was concluded by the Assistant Collector that process of distillation and recrystallisation do not amount to manufacture. A review application was filed before the Collector .(Appeals) under Section 35E(4) against the Assistant Collector's order above and the Collector (Appeals) allowed the application holding that the products in question have distinct identity and use as compared to raw materials used for their production and that these arc also known in the trade parlance as distinct from raw materials. The present appeal has been preferred against this order.
3. Sh. Lakshmi Kumaran, Ld. Counsel appearing for the appellants submitted that the appellants had only undertaken purification of bought out duty paid chemicals by the process of simple distillation (not fractional) and recrystallisation and contended that such a process, as rightly held by the Assistant Collector, will not amount to a process of manufacture. Reference was made to the definition of the terms distillation and crystallisation in textual authorities Encyclopaedia of Science & Technology and the Condensed Chemical Dictionary. The Ld. Counsel urged that even after purification there is no change in the chemical formula of the product which remain chemicals. Reliance was also placed on the CEGAT decision in the case of CCE, Aurangabad v. Anil Chemicals -1985 (21) ELT 889 which has been accepted by the Govt. holding that merely improving the quality or purity of the goods does not amount to manufacture with reference to the production of prilled ammonium nitrate 99% from ammonium nitrate 75 to 82%. The Ld. Counsel further cited the CEGAT decision in the case of Bush Boake Allen v. CCE, Madras in its order No. 1246/90-C dated 13-11-1990 holding that mere dilution of duty paid food colours ready for direct use by individual consumers will not amount to a process of manufacture. Ld. SDR Shri Jayaraman on the other hand urged that by the processes of crystallisation and distillation the final product is a fine laboratory chemical different from the smarting material and as such a process of manufacture had occurred and as has been observed by the Collector (Appeals) the resultant product has a distinct identity commercially. The facts of the case in Bush Boake Allen case and Anil Chemicals according to Ld. SDR are distinugishable.
4. On a careful consideration of the submissions made by the parties herein it is seen that the appellants undertake the process of purification of duty paid chemicals by recrystallisation and simple distillation. The question is whether such purification which makes the chemicals as fine chemicals suitable for use as Laboratory chemicals can be held to be a process of manufacture bringing into existence new and distinct product having its own name, characteristics and use so as to be exigible to duty applying the well-settled cirteria laid down by the Supreme Court in this respect. It is an admitted position vide Chief Chemist's opinion referred to in the Assitant Collectors' order that the chemical formula of the substance remains unaltered when high quality laboratory chemicals are obtained from a chemical of lesser purity by process like precipitation, distillation and recrystallisation. The Tribunal dealt with similar situation in the Anil Chemicals case cited supra and it was held that mere improving the quality of purity does not amount to manufacture. It was observed, "It may perhaps be said that there has been processing and a manufacture but if the result is in the production of the same goods, even of a higher purity, then the manufacture/processing cannot have the effect of making the purer product liable, by that fact alone to excise duty. A manufacture under the Central Excises and Salt Act, 1944 is required to be a manufacture that creates "excisable goods". A manufacture that does not have this effect is of no interest to Central Excise". In the present case another aspect is that the chemicals, even after purification, are known by the same name, and as opined by the Chief Chemist, there is no change in the chemical formula even after purification. In the circumstances, what emerges after the processes of simple distillation and recrystallisation of the chemicals undertaken by the appellants are only chemicals having much higher purity without any change in their name or in their chemical formula, and as such, the ratio of the Anil Chemicals decision of the Tribunal is applicable to the facts of the present case and, following it, it is held that the process of purification of bought out chemicals by the appellants herein is not one of manufacture creating excisable goods. The impugned order is, therefore set aside and the appeal is allowed.
S.L. Peeran, Member (J)
5. I have gone through the order proposed by my learned brother Shri K.S. Venkataramani, but I could not persuade myself to agree to the said conelusions.
6. The facts of the case as stated in the order-in-original are stated herein. The appellants are manufacturers of Chemical laboratory and fine chemicals. They are also engaged in the activity of repacking and purification of laboratory and fine chemicals. The purification is carried out by them by methods like recrystallisation, distillation etc. They had filed a classification list with effect from 1-4-1983 for their manufactured products under T.I. 68. In Part III of the said classification list, the process of dilution, repacking and purification were shown as process which does not amount to manufacture. Hence, they claimed exemption vide Notification No. 77/83 dated 1-3-1983 as value of all excisable goods cleared by them during the period 1982-83 ... excluding the value of repacked and purified goods which is Rs. 2,10,43,705/-. The Department issued a show cause notice dated 23-7-1983 asking them to explain as to why the claim should not be rejected. By their reply dated 12-9-1983, they contended that the process of distillation and recrystallisation does not amount to manufacture within the meaning of Section 2(f) of the Central Excises & Salt Act, 1944. An opinion of Deputy Chief Chemist, Bombay was sought by the Department who opined that the process of purification/refinement i.e. reprecipitation of recrystallisation and distillation etc. amounts to manfuacture as a very special grade of chemicals for selected uses are obtained. At the request of the appellants, the Department got two more technical opinions from the Chief Chemist and National Chemical Laboratory, Pune. The Chief Chemist opined that chemical formulae of substance remain unaltered when high quality laboratory chemicals are obtained from a chemical of lesser purity by process like precipitation, distillation and recrystallisation. On the other hand, National Chemical Laboratory, Pune opined that so far as the basic chemical industry is concerned, the term 'manufacture' implies conversion of the raw material into finished products by chemical reaction involving chemical change by use of energy and labour and that the processes of purification/refinement by way of distillation and recrystallisation do not amount to manufacture. The Assistant Collector passed a very cryptic order after recording the above facts in these words -
"After careful examination and consideration it is observed that the opinions of Dy. Chief Chemist and Chief Chemist, Delhi are not elaborate, relevant and precise on the subject-matter. The opinions given by National Chemical Laboratory, Poona is more precise, authentic and convincing. I, therefore, consider that the process of purification/refinement of chemicals by distillation and recrystallisation method does not amount to manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. The show cause notice in question is therefore, set aside."
Hence a review was filed by the Asstt. Collector of Central Excise, Dn.-IX, Bombay under Section 35E(4) of the Act before the Collector (Appeals), Bombay who has also passed the order in the following words -
"I have carefully gone through the case records, various arguments contained in the application in form EA-2, cross-objection memo/written submission and those argued by the representatives of both the parties during the course of personal hearing. In the instant case the products in question have a distinct identity and use as compared to the raw materials used for their production and these are known in the trade parlance as distinct from the raw materials. The Hon'ble Supreme Court in the case of Union of India v. D.C.M. 1977 (1) ELT J-199 and in the case of South Bihar Sugar Mills v. Union of India 1978 (2) ELT J-326 has taken above view, order-in-original passed by the lower authority is not correct, so it is set aside and application under Section 35E(4) is allowed."
7. Shri Lakshmi Kumaran, learned Advocate arguing for the appellants, relied on the extract of the definition of term 'Distillation and crystallization' appearing at pages 340 and 801 respectively of McGraw Hill Encyclopaedia of Science and Technology, 5th Edition which is reproduced below :-
"The process of producing a gas or vapour from liquid or solid. However, the term sublimation is used ordinarily to describe the vaporization of a solid. Heat is generally supplied to the liquid during the distillation although in special cases the latent heat required for the vaporization may be obtained from the internal energy of the liquid.
The main purpose of distillation is either the separation of volatile components from non-volable materials or the separation of a mixture of volatile components. The separation of volatile components from non-volatile materials is carried out by a simple distillation in which the material is placed in a still and heated and the vapour removes and condensed. Simple distillation is similar to the process of evaporation but the former term usually describes the operation in which the volatile material is a desired product. Whereas evaporation generally is applied to aqueous solutions of non-volatile materials in which the nonvolatile material is the desired product. Simple distillation is frequently used for high boiling organic compounds to prevent thermal degradation of the product; the operation is usually carried out either at reduced pressure, termed simple vacuum distillation or with the additional of steam termed steam distillation".
"The formation of a solid from a solution, melt, vapour, or a different solid phase. Crystallization form solution is an important industrial operation because of the large number of materials marketed as crystalline particles. Fractional crystallization is one of the most widely used methods of separating and purifying chemicals. This article discusses crystallization of substances from solutions and melts. Not discussed is biological, crystallization involving formation of teeth and bone, utoconia in the inner ear renal calculi kidney 'stones, biliary calculi in gallstoned crystals in some forms of arthiritis and dental phase. For crystallization in glass, a supercooled melt, obtained from solutions are used to study the properties of these crystals. While crystallization of polymer melts dramatically intelligence polymer properties of preparing large crystals. For crystallization from other relations between solids and liquid phases."
The definition of "Crystillization" as appearing at page 289 of the Condensed Chemical Dictionary is also relied upon which is reproduced below -
"The phenomenon of crystal formation by nucleation and accretion. The freezing of water into ice is one of the commonest examples of crystallization in nature. Industrially, it is used as a means of purifying materials by evaporation and solidification. The sugar of commerce is made in this way. Similarly, salt cake is derived from crystallization of natural brines (series lake) Nucleated crystallization is also used to form polycrystalline ceramic structures."
8. His contention is that the chemicals despite the simple processes of crystallization and distillation remain the same without any change in chemical formula except, gets purified for the laboratory needs. To a query from the Bench, he admitted that the Trade understanding of ordinary chemicals and laboratory chemicals are different and that laboratories cannot use ordinary chemicals as there will be variance in results. He has relied on the ruling of this Bench in the case of Bush Boake Allen (India) Ltd. v. Collector of Central Excise, Madras - Order No. 1246/90-C dated 13-11-1990. He has also relied on the ruling of Collector of Central Excise, Aurangabad v. Anil Chemicals 1985 (21) ELT 889 and also that of Transpower Corporation v. Collector of Central Excise as reported in 1989 (43) ELT 299.
9. Shri Jayaraman, learned DR contended that the purification of chemicals to make it fit for laboratory chemicals, will change its name, character and use and it is also traded in a different name. The laboratory chemicals are commercially different and hence the test laid down by Supreme Court in the case of Union of India v. Delhi Cloth & General Mills Co. Ltd. and Ors. as reported in 1977 (1) ELT J-199 is fully applicable to this case. He submitted that the ratio of Bush Boake Allen's case and that of Anil Chemicals case are not applicable to the facts of this case.
10. I am inclined to agree with the reasoning given by the learned Collector in the impugned order. The rulings and citations relied on by the learned Advocate are clearly distinguishable. In the case of Bush Boake Allen, the Bench held that dilution of "Food colour preparations" does not result in a new product as the goods continued to be traded and sold as food color preparation.
11. In Anil Chemicals case, the Bench was considering the question of improving the quality and purity in manufacture of prilled ammonium nitrate to 99% from ammonium nitrate 75% to 82%. It was held that Prilled ammonium nitrate is not different from ammoniun nitrate. The ratio is clearly distinguishable.
In Transpower Corporation's case, the Bench held that process of galvanisation of steel sections will not amount to manufacture.
12. In this case, it is not a simple process. The process brings in a transformation which will change the name, character and use. The ordinary chemicals cannot be used in laboratory without its undergoing purification. They are traded in different commercial name and has altogether different use. So long as the trade recognises it as a different commodity and its uses are different, the item has to be recognised as a different goods and becomes exigible. The Supreme Court in the case of Union of India v. Babubhai Nylchand Mehta 1991 (51) ELT 182 (SC) has held at Paras 6, 7 and 8 as follows -
"We have given our careful consideration to the arguments advanced by learned Counsel for both the parties. In our view the above decision in Laminates Packings (P) Ltd. v. Collector of Central Excise, Guntur (supra) is an authority directly clinching the issue involved before us. In the above case the short question for consideration was whether the lamination of duty paid kraft paper with polyethylene resulting in polyethylene laminated kraft paper would amount to manufacture and excisable under law or not. Dealing with the above question it was observed as under -
Lamination, indisputably by the well-settled principles of excise law, amounts to manufacture. This question in our opinion is settled by the decisions of this Court. Reference may be made to the decision of this Court in Empire Industries Ltd. v. Union of India. Reference may also be made to the decision of this Court in CCE v. Krishna Carbon Paper Co. We are therefore, of the opinion that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper.
Counsel for the appellant sought to contend that the kraft paper was duty paid goods and there was no change in the essential characteristic or the user of the paper always lamination. The fact that the duty has been paid on the kraft paper is irrelevant for consideration of the issue before us. If duty has been paid, then benefit or credit for the duty paid would be available to the appellants under Rule 56A of the Central Excise Rules, 1944;
It is no doubt correct that in the above case it was also observed that manufacture is bringing into being goods as known in the excise law i.e. to say known in the market having distinct separate and identifiable function. On this score in our opinion, there is sufficient evidence. On the basis of the above observations, it was strenuously contended by Mr. Lalit that in the above case there was sufficient evidence on record to hold that after manufacture the goods were known in the market having distinct separate and identifiable function but there is no such evidence on record in the case in hand before us.
We find no force in the above contention. Once we hold that the coating lamination and other process applied by the Company in its factory amounts to manufacture, new products come into being. It does not remain an ordinary kraft paper and as such it is liable to excise duty of 40% ad valorem as provided under Central Excise Tariff Item No. 17(2). In the above Laminated Packings case, it was clearly held by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct separate and different goods known in the market as such from the kraft paper."
The ratio of the Supreme Court case is fully applicable to the facts of this case and applying the said ratio, I order for dismissing the appeal.
K.S. Venkataramani, Member (T)
13. In view of the separate orders of the two members, the following point of difference has arisen :
Whether the process of purification of chemicals by the methods of recrystallisation and distillation to make them fit for use as high purity laboratory chemicals will amount to a process of manufacture under Section 2(f) of Central Excises & Salt Act, 1944 bringing into existence goods commercially different from the starting material.
14. The above point of difference is referred to the Ld. President under Section 129C(5) Customs Act, 1962 as made applicable to Central Excises & Salt Act, 1944.
Jyoti Balasundaram, Member (J)
15. With reference to the President's order dated 28-4-1991 by which the point of difference between the two Members who heard this appeal was referred to me, I heard both sides on 31-5-1991. The point of difference as set out by the Members is as under :
"Whether the process of purification of chemicals by the methods of recrystallisation and distillation to make them fit for use as high purity laboratory chemicals will amount to a process of manufacture under Section 2(f) of Central Excises and Salt Act, 1944 bringing into existence goods commercially different from the starting material."
16. I have heard Shri V. Sridharan, learned Advocate for the appellants and Shri L.C. Chakraborty, learned DR for the respondent.
17. The definition of recrystallisation and distillation as found in the McGraw Hill Encyclopaedia of Science and Technology and in the Condensed Chemical Dictionary by Hawley have been reproduced already by the learned Member (J). Simple distillation has been defined in Hawley's Condensed Chemical Dictionary, 10th Edition at Page 926 as follows :
"Distillation in which no appreciable rectification of the vapour occurs i.e. the vapour formed from the liquid in the still is completely condensed in the distillate receiver and does not undergo change in composition due to partial condensation or contact with previously condensed vapour."
18. My attention has been drawn to the reply to the show cause notice dated 25-11-1983 in which the appellants have submitted that the chemicals purchased by them and distilled and recrystallised are already of high purity and there is only a very fractional or marginal increase in purity after the processes of recrystallisation and distillation are carried out by them. The relevant extract from the reply is reproduced below:
"We do not agree to the contention that the purpose of these two process is to obtain chemicals of high purity confirming to particular specification so as to meet the needs of chemical industry."
"On the basis of above, the chemicals which have undergone distillation and recrystallisation will be deemed to be manufacture of special grade of very pure chemicals for special purposes."
As such we give herein our comments :
Acetic acid glacial LR direct pack by us, is of purity 99.5% and we distill and marketing as AR grade is of purity 99.7% and EL grade is also 99.7%.
Benzyl alcohol LR direct pack item is 99% whereas distilled material marketed by us as EP is 99%, AR is 99% and IP 99%.
For recrystallised items we give hereunder examples :
Aluminium ammonium sulphate LR direct pack by us is 99% and recrystallised as AR is 99.5%. Same way ammonium chloride technical is 98.8%/99% recrystallised by us as LR is 99%, AR 99.5%, IP 99%.
How can any one call all these purification a very high purity where the purity increased is by fraction."
19. The learned DR attempted to contest the extent of purity of the chemicals purchased by the appellants. However, the percentage of purity was never challenged earlier even though this has been brought to the notice of the Department at the earliest stage i.e. at the time of reply to the show cause notice and, therefore, it is not open to him to now challenge the purity content. In the case of Collector of Central Excise v. Anil Chemicals Private Ltd. 1985 (21) ELT 889 (Tribunal) this Tribunal was concerned with the issue whether the production of prilled ammonium nitrate 99% from AN 75% to 82% amounts to manufacture and it was held therein that the process does not amount to manufacture and that mere concentrating a product will not by that fact produce a different product. In paragraph 16, the Tribunal observed as follows :
"It would be easy to say that prilling results in a higher concentration and amounts to manufacture. It is difficult to see why this would be so. There is no authority whatever for saying that concentrating a product will by that fact alone produce a different product. It may perhaps be said that there has been processing and a manufacture but if the result is the production of the same goods, even a higher purity then the manufacture/processing cannot have the effect of making the purer product liable by that fact alone to excise duty. A manufacture under the Central Excises and Salt Act is required to be manufacture that creates an excisable goods. A manufacture that does not have this effect is of no interest to Central Excise."
20. The argument of the learned DR that the decision supra does not discuss test of commercial understanding which is extremely relevant to determine whether the recrystallisation and distillation of chemicals are understood differently in the market from the less pure chemicals cannot be accepted. The trade understanding of the chemicals in this case is with reference to the different end-use - the chemicals prior to recrystallisation and distillation remain chemicals after the above-mentioned processes are carried out although their purity increases. Much has been made of the admission made by the learned Counsel for the appellants and recorded in paragraph 4 of the order of the learned Member (Judicial). The admission is to the effect that the trade understanding of the ordinary chemicals and laboratory chemicals are different and that the laboratory chemicals cannot be used as ordinary chemicals as there will be variance in result. This admission has to be read in its entirety as meaning that the trade understanding is with regard to end-use and not as amounting to admission that both ordinary chemicals and laboratory chemicals are different products. At this stage Shri Sridharan draws my attention to the reply to the show cause notice dated 25-11-1983 (which has been referred to earlier in this order) in which the appellants had set out several uses of ammonium chloride as under :
"Dry batteries, Mordant (dyeing & printing), Soldering flux, manufacture of various ammonia compounds, fertilizer, pickling agent in zinc coating and tinning, electroplating, washing powders, snow treatment, resins & adhesive of urea formaldehyde, medicine and food industry, etc."
21. The learned Counsel cited the decision of the Tribunal in the case of ILAC Ltd. v. Collector of Central Excise, Bombay 1985 (21) ELT 532 (T) wherein it was held that calcium carbide in that case though sub-standard, was still calcium carbide and was used as calcium carbide. Therefore, it must be treated under the excise law as calcium carbide with all the consequences that follow. He sought to emphasise the point that purity and grade of the chemical is not material for determining excisability but the test is whether the goods continue to remain the same even after purification i.e. whether the chemicals like ammonium chloride continue to remain ammonium chloride, etc. even after the processes of recrystallisation and distillation.
In the case of Collector of Central Excise v. Bakul Aromatics & Chemicals Ltd. -1989 (43) ELT 758 (Tri.) the Tribunal was concerned with the question whether concentration of 65% formic acid to 85% formic acid by removing excess water would amount to manufacture and it was held therein that the product subjected to the process of removal of excess water and the product obtained by removal of excess water are one and the same, viz. formic acid and no new commodity emerges out of this process so as to amount to manufacture. The Bench in that case followed the ruling of Anil Chemicals case.
22. The Hon'ble Supreme Court in the case of Dy. Commercial Superintendent Sales Tax v. Pio Food Packers -1980 (6) ELT 343 (SC) laid down that manufacture is the end result of one or more processes through which the original commodity is made to pass and although the nature and extent of processing may vary from one case to another yet it is when the change or a series of changes take the commodity to the point where commercially that article is recognised as new and distinct article that a manufacture can be said to have taken place.
23. The learned DR cited the decision of the A.P. High Court in Brooke Bond India Ltd. v. Union of India and Ors. reported in 1984 (15) ELT 32 (AP) to drive home his point that duty on raw material and subsequently on the resultant article is taxable if manufacture is involved - The High Court has held that duty on mixture of coffee and chikory resulting in a distinct commercial commodity did not amount to double taxation on the same commodity. In paragraph 50 of the judgment, the High Court held that the principle which emerges is that a process is adopted for convenience of sale or making the article of more use to the customers, if the article in question retains its essential character, it has to be taxed as such article only and the processing would make no difference. The physical stage or even composition may change, but so long as the essential character of the article continues to remain the same, it has to be taxed as that commodity alone. The test for determining whether '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 recognised in the trade as a new and distinct commodity. The test laid down by Pathak, J in Pio Food Packers' case (1980) (46) STC 63 (SC) should be the guiding principles in determining the question whether a particular commodity has been subjected to the process of manufacture. Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. The test that is required to be applied is : does the processing of the original commodity being into existence a commercially different and distinct commodity. On an application of this test it is clear that the blending of different qualities of one possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive, but with each process suffered the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The nature and extent of the change is not material.
24. As can be gathered, the key test is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity. In my view in the instant case this test has not been satisfied as the chemicals prior to the two processes concerned herein continue to remain the same after being subjected to the processes, admittedly with only a change in increase in purity. The commodity retains its identify substantially through the processing stage. Therefore, it cannot be said to have been manufactured.
25. The citations relied upon by the learned DR do not advance the case of the Department. I have already discussed how the Andhra Pradesh High Court decision in Brooke Bond (supra) will not be of assistance to the Department. DR's reliance on the decision of the Tribunal in 1988 (37) ELT 369 (T) Unique Beautycare Products Pvt. Ltd. v. Collector of Central Excise also is misplaced. In that case raw materials were butter, vegetable black, camphor and preservatives and the resultant product is kajal which is a new product in name, use and character. This case is not applicable to the facts of the present appeal where there is no transformation of the product after the process of recrystallisation and distillation. The decision of the Tribunal in the case of Singareni Collieries Co. Ltd. v. Collector of Central Excise - 1988 (37) ELT 361 (T) is also distinguishable as in that case the Tribunal was concerned with the processes of mixing ammonium nitrate and fuel oil resulting in emergence of ANFO a high explosive having its distinct name, character and use. The Tribunal held that by mixing the two a new product known by the description ANFO and in trade this product is described by this name. The situation here is vastly different. The product both prior to and subsequent to the process remain chemicals - only purity varied i.e. there was an increase in purity to the extent of approximately 2%.
26. The decision in the case of Collector of Customs v. Air Control Systems reported 1988 (33) ELT 568 (T) is also distinguishable, as the Tribunal therein was seized with the question of whether blending of sodium hexametaphosphate with teph-guard would amount to manufacture and this issue was answered in the affirmative on the ground that blending was necessary for dispersion and that the operation of blending amounted to manufacture of a highly refined and sensitive product.
27. The learned DR sought to emphasise that it is not the nature of the process that is material but the impact of the operation to determine whether a process amounts to manufacture. However, in this case the test of transformation of an object into a commercial commodity which has been held to be a manufacture has not been satisfied -commercial commodity remains the same. The increase in purity of sacchrine 330 to 550 was held not to amount to manufacture in the case of Michical v. Pinch -1906 (2KB 352).
28. Therefore, the argument of the DR that grade being distinguishable is relevant for holding that a process of change in grade amounts to manufacture is not tenable.
29. In the light of the above discussions of the relevant case law on the issue I agree with the view expressed by the learned Member (Technical) that the process of purification by recrystallisation and distillation will not amount to a process of manufacture under Section 2(f) of the Central Excises and Salt Act, 1944.
30. Now the point of difference having been resolved, the file may placed before the original Bench for further orders.
31. In view of the majority decision, the impugned order is set aside and the appeal is allowed.