Customs, Excise and Gold Tribunal - Delhi
Modi Paint And Varnish Works vs Collector Of Central Excise on 28 April, 1994
Equivalent citations: 1994(74)ELT879(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 30-9-1992 passed by the Collector of Central Excise (Appeals) Ghaziabad. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of paints, varnishes and other products classifiable under Chapter 32 of the Schedule to the Central Excise Tariff Act, 1985. 'Aluminium Paint' manufactured by the appellants has two constituents viz. aluminium paste and medium. Since Aluminium Paste and Medium are required to be mixed only at the time of use, there has been a long standing trade practice to pack aluminium paste and liquid medium in separate containers and to market the product in a single composite container. This practice is followed only in the case of containers upto the capacity of 4 litres each. However, larger quantities are packed and marketed separately as aluminium Paste and medium. The appellants do not manufacture aluminium paste which is acquired by them from other manufacturers in bulk containers of 25 kgs each against gate passes for being repacked in unit containers of the requisite size as per the requirements of the customers. The Assistant Collector by his order dated 4-4-1990 held that aluminium paste and medium when packed and supplied in quantities exceeding 4 litres in separate containers would constitute 'manufacture' and attract duty as 'Aluminium Paint'. On the basis of this finding he confirmed six demands. Being aggrieved by the order passed by the Assistant Collector, the appellants preferred an appeal before the Collector (Appeals) who by the impugned order confirmed the findings of the Assistant Collector.
2. On behalf of the appellants, Shri L.P. Asthana Learned Advocate appeared before us. He stated that the finding of the Collector (Appeals) that aluminium paste when supplied by the appellants in quantities exceeding 4 litres would be liable to duty as 'aluminium paint' is erroneous since the appellants only repack into such smaller containers duty paid aluminium paste = purchased in bulk from other manufacturers. He contended that the Collector (Appeals) finding that such repacking of duty paid 'aluminium paste' into smaller containers for being supplied along with the medium which is also packed separately would constitute manufacture of 'aluminium paint' in terms of Note No. 2 inserted below Section VI of the Schedule to the Central Excise Tariff Act, 1985 is also not sustainable since in terms of Section 2(f)(ii) a process only when specified in the relevant section or Chapter Notes to the Schedule to the Central Excise Tariff can constitute manufacture, whereas Note 2 to Section VI invoked by the Additional Collector relates only to classification of goods put up in sets consisting of two or more separate constituents. He submitted that the Board's Tariff Advice F. No. 95/13/78-CX. 3, dated 23-2-1981 which required the assessment of 'aluminium paste' and 'liquid medium' packed in separate containers and placed together in a single carton to be treated as a composite product for being assessed as 'aluminium paint' is also not relevant to the present case since duty paid aluminium paste is only repacked by the appellants and it is not supplied in a common carton along with the medium. He reiterated his stand that 'aluminium paste' in quantities exceeding 4 litres supplied by the appellants was not dutiable since all that is done by the appellants is to repack duty paid aluminium paste purchased in bulk from other manufacturers into smaller containers and such repacking does not amount to manufacture of 'aluminium paint'. In support of his contentions he cited the following case law :-
Garware Paints Ltd. v. Collector of Central Excise -1992 (62) E.L.T. 178; Collector of Central Excise v. Kalinga Paints & Chemical Industries -1989 (44) E.L.T. 548; Varun Industries v. Collector of Central Excise & Customs - 1993 (44) E.C.C. 243 (M.P.)
3. On behalf of the respondents, Shri Somesh Arora, the Learned JDR stated that the facts in the appellants' case are different from the facts in the case of Collector of Central Excise v. Kalinga Paints and Chemical Industries (supra) relied upon by the appellants since in that case only aluminium medium was being manufactured by the assessee and such duty paid medium was being packed outside the assessee's factory along with duty paid aluminium paste in common cartons. He added that the case of Garware Paints Ltd. v. Collector of Central Excise (supra) cited by the Learned Counsel is also distinguishable on facts since in that case duty paid goods were being repacked into smaller packings after clearance from the assessees' factory. He stated that as observed by the Collector (Appeals) that in the appellants' case the repacking of the bulk aluminium paste purchased from outside into smaller containers has to be deemed as 'manufacture' since repacking of aluminium paste was being done not for supplying it as 'aluminium paste' but along with the medium as 'aluminium paint'. He stated that Note 2 to Section VI of the Central Excise Tariff provides that goods when put up in sets consisting of two or more separate constituents intended to be mixed together for obtaining any product of Section VI or VII are to be classified under the appropriate heading provided the constituents are identifiable as being meant for mixing together. He contended that this provision has to be deemed as constituting a legal fiction, in terms of which the appellants' activities would constitute "manufacture". He also referred to the order passed by the Assistant Collector and stated that according to the appellants' Senior Marketing Manager the appellants were not selling aluminium paste and the orders received by them and supplies made were entirely of aluminium paint. He added that the Assistant Collector has also pointed out that the appellants were manufacturing aluminium paste as per technical formulation for being supplied as aluminium paint and on this ground he had held that repacking of bulk aluminium paste into smaller packing in measured quantities in accordance with the formulation would amount to "manufacture". On these grounds he pleaded that the order passed by the Collector (Appeals) may be confirmed.
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the question that arises for consideration in this case is whether repacking of duty paid aluminium paste received in bulk by the appellants into packing of 4 litres and above for being used as aluminium paint after mixing with medium manufactured and packed separately by the appellants would constitute "manufacture" within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944 and would be liable to duty as 'aluminium paint'.
5. In this case it is an admitted fact that the appellants are purchasing duty paid aluminium paint in bulk container of 25 kg and for packing it into unit containers of the requisite size as per requirements of the customers who use such repacked aluminium paste along with medium manufactured in the appellants' factory for the preparation of aluminium paint since aluminium paste if kept in mixed condition becomes hard and is not marketed as ready-mixed paint. For this reason it has been the long standing trade practice to put aluminium paste and liquid in separate containers. In fact aluminium paste and medium packed in separate containers of capacity upto 4 litres are marketed by manufacturers in a single carton to facilitate their use as paint by the consumers. We are inclined to agree with the Learned Counsel for the appellants that re-packing of duty paid 'aluminium paste' into smaller containers would not constitute 'manufacture' in terms of Note No. 2 to Section VI of the Schedule to the Central Excise Tariff Act, 1985 since the said Note only relates to classification of goods put up in sets consisting of two or more separate constituents and it cannot be deemed as a specified "process" constituting 'manufacture' in terms of Section 2(f)(ii). However, we are of the view that the activity of repacking of bulk aluminium paste received by the appellants from other manufacturers into containers of capacity upto 4 litres and above would be a process incidental or ancillary to the manufacture of aluminium paint in terms of Section 2(f) if as observed by the Assistant Collector the appellants were receiving orders only for the supply of aluminium paint consisting of both aluminium paste and medium and were not selling aluminium paste separately.
6. We are inclined to agree with the Learned JDR that the case law cited on behalf of the appellants is distinguishable on facts since in the case of Garware Paints Ltd. v. Collector of Central Excise (supra), the question that arose for consideration was whether repacking of goods after clearance into smaller packing amounted to manufacture. Similarly, in the case of Collector of Central Excise v. Kalinga Paints & Chemical Industries (supra) aluminium medium after clearance from the assessee's factory was being packed with aluminium paste in a common container in a premises outside the factory.
7. The question whether the activity of repacking bulk duty paid aluminium paste into smaller packing of 4 litres and above would constitute manufacture and whether such repacked aluminium paste would be assessable as 'aluminium paint' along with the medium manufactured by the appellants would depend on whether the orders received by them are actually in respect of aluminium paint and whether the two items are invariably cleared and marketed together in sets by the appellants as aluminium paint. From the case records we find that documents such as relevant orders received by the appellants, the invoices prepared by them, the relevant A.R. 1 and R.T. 12 etc. which would be material for determining whether the process of repacking by the appellants of bulk aluminium paint into smaller packing of 4 litres and above would amount to a process incidental or ancillary to the manufacture of aluminium paint and whether the paste together with the medium would in terms of Note 2 to Section VI of the Tariff would be assessable as aluminium paint, as held by the Collector (Appeals), are not available on the records.
8. It is seen that the lower authorities have not examined the question of excisability of the disputed goods having regard to the marketing and invoicing pattern of the appellants on the basis of relevant documents such as A.R. 1, Gate Passes and R.T. 12 etc. They have also not examined in details the other instructions given by the manufacturer on the containers. We are therefore of the view that the impugned order shows non-application of mind and is not based on proper appreciation of facts.
9. In view of the above discussion, we set aside the impugned order and remand the matter to the Assistant Collector for readjudication in accordance with law and having regard to the observations made by us in this order. We direct that before deciding the matter the adjudicating authority should grant personal hearing to the appellants.
10. The appeal is therefore allowed by way of remand.