Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Indian Dyestuff Industries Ltd. on 5 September, 1986
Equivalent citations: 1986(10)ECC132, 1986(26)ELT936(TRI-DEL)
ORDER
G. Sankaran, Vice President
1. The captioned three appeals have been filed by the Collector of Central Excise, Thane against the three Orders-in-Appeal passed by the Collector of Central Excise (Appeals),. Bombay noted against each appeal.
2. The Assistant Collector by his Order No. V(14D)17- 129/PLVC/ 83/1305 dated 28-2-1984 held that Central Excise duty was payable by M/s. Indian Dyestuff Industries Ltd. (the respondents before us) on formulated dyes and that value for the purpose of assessment of duty should be the value of formulated dyes in which state they were sold and not the value at the stage of wet cake. In appeal, this order was set aside by the Collector (Appeals) by his order dated 7-2-85. Appeal No. 965/85-C is against this order.
3. By order No. V-140(18)81/84 dated 5-2-85 the Asstt. Collector held that the action of the excise officers of levying, assessing and collecting excise duty at the formulation stage was in order, as per the definition of "manufacture" in Section 2(f) of the Central Excises, and Salt Act (hereafter, the Act). Accordingly, he rejected the refund claim for Rs. 1,28,40,383.03 for the period from 1-4-83 to 31-3-84. In appeal, the Collector (Appeals) set aside the order by his order dated 16-5-85 with consequential relief to the respondent Appeal No. 2038/85-C is against this Order.
4. By Order No. V(14D)RC-64/82/1304 dated 1-3-84, the Assistant Collector rejected four claims dated 12-10-81, 30-6-80, 2-12-82 and 16-9-82 for refund of Rs. 58,26,470.21, Rs. 23,90,624.37, Rs. 33,41,009.54, and Rs. 69,19,511.76 respectively for reasons similar to those noted in para 3 above. This order was set aside- with consequential relief to the respondent by the Collector (Appeals). Appeal No. 2298/85-C is against this Order.
5. The facts of the case, briefly stated, are that the respondents were engaged in the manufacture of synthetic organic dyestuffs (S.O. Dyestuffs) falling under Item No. 14D of the First Schedule (GET, for short), to the Central Excises and Salt Act, 19M. They used to manufacture concentrates of disperse dyes which were further formulated to diluted disperse dyes and sold on payment of excise duty on the, basis of the wholesale price of such formulated, dyes. The price lists submitted by them on this basis were approved by the excise authorities from time to time. With effect from 1-4-81 and 1-4-83, the respondents filed revised price lists in respect of concentrates of disperse dyes contending that the manufacturing process of dyes was complete at the stage prior to formulation of the concentrates and that the addition of dispersing agents or diluents to produce formulated dyes was not an activity of manufacture, or production attracting excise duty which was payable only at the stage of concentrate's, namely, the wet cake stage. In the adjudication proceedings held by the Assistant Collector, the respondents relied on the Bombay High Court's judgment in Sandoz India Ltd. v. Union of India and Ors. - 1980 ELT 6% in support of their contention that manufacture of dyes was complete at the -wet cake stage, that the formulation of the wet cake into diluted disperse dyes was not a manufacturing, activity attracting excise duty and that the value for the purposes of assessment should b6 that at the wet cake stage. The Assistant Collector held that the judgment in the Sandoz case was not applicable to the instant case, that the formulation of the wet cake into disperse dyes amounted to manufacture within the meaning of Section 2(f) of the Act, and that the assessable value should be that of the formulated dyes. In this view of the matter, he rejected the prices claimed in the price lists effective from 1-4-81 and 1-4-83.
6. The above order was challenged by the respondents before the Collector (Appeals). It was contended inter, alia that the dyes in the wet cake form as well as the formulations would fall under the same Tariff Item No. 14D, that the liability to excise duty attached itself to the wet cake stage and that no further duty liability attached to the formulations. Following the ratio of the Bombay High Court judgment in Sandoz case (Supra), the Collector (Appeals) held that duty was leviable on the dyes at the wet cake stage and that no further duty was leviable on the formulated dyes since, in their production, no manufacturing process was involved. Consequently, he set aside the Assistant Collector's order and allowed the appeal before him. As already noted, the Assistant Collector also rejected two refund claims which orders were also set aside by the Collector (Appeals).
7. We have heard Shri V. Laxmikumaran, Advocate and Shri A.S. Sundar Rajan, Departmental Representative for the Revenue and Shri K.S. Cooper, Advocate, assisted by Shri A.N. Haksar and Ms. Pallavi Shroff/Advocates for the respondents.
8. The chief contention for the Revenue is that the Bombay High Court judgment in the Sandoz case (supra) is not applicable to the facts of the present case. The facts in that case were that Sandoz: were manufacturers of synthetic organic dyes. They also used to' purchase S.O. dyes from the market. Sandoz used to formulate the dyes from either the S.O. dyes manufactured by them or those purchased by them. The process of formulation involved the addition of dispersing agents or diluents. This process was with a view to break the pigment particles using dispersing agents and water without any chemical change taking place. The question before the Court was whether the process of formulation of S.O. dyes, manufactured or purchased by the petitioners, could be said to be a manufacturing process resulting in the emergence of a new article which 'was independently liable to excise duty. After considering at length the submissions made before the Court and technical authorities, the Court came to the conclusion that it was not possible to hold that the formulation of the concentrated dyes into the liquid form with the aid of dispersing agents and diluents had resulted in the manufacture of a new article which was distinctive in name, character and use. It w-as held that the pigment had only undergone a change in form. In arriving at this conclusion, the Court inter alia relied on the Supreme Court decision in Union of. India v. Delhi Cloth and General Mills Company Ltd. AIR 1963 SC 791, in the South Bihar Sugar Mills case AIR 1968 SC 922 and the Gujarat High Court in Vijaya Textiles v. Union of India 1979 ELT 3181. Shri Laxmikumaran's contention is that the law laid down by the Bombay High Court in Sandoz case is no longer good law in the context of the Supreme Court judgment in Empire Industries Ltd. and Ors. v. Union of India and Ors., 1985 (20) ELT 179. On the other hand, Shri Cooper's contention is that the ratio of the Bombay High Court decision in Sandoz case squarely applied to the facts of the present case and that the -said ratio is not affected in any manner by the Supreme Court's decision in the Empire Industries case (supra).
9. The facts in the Sandoz case have already been briefly noted. After considering the material placed before it and the submissions and technical authorities, the Bombay High Court held that the process of formulation of concentrated S.O. Dyestuffs into the liquid form by the use of dispersing agents and diluents, which did not result in any chemical change but only a change in the form of the dyestuff in that the dyestuff particles were dispersed uniformly in liquid media, did not amount to a manufacturing process within the meaning of Section 2(f) of the Act and consequently the liquid form of the dyestuffs which was cleared by the petitioners was not liable to be changed to duty under Item No. 1D GET. On the face of it, the facts in the present case are similar. Concentrated dyestuffs are Converted or formulated into diluted disperse dyestuff by the addition of dispersing agent and diluents. Prim a Facie, therefore, the ratio of the judgment in the Sandoz case would seem to apply to the facts of the present case.
10. Shri Laxmikumaran contends that if the concentrated dyes are cleared as such, duty would be attracted under item 14D GET on the assessable value of such concentrated dyes. On the other hand, if concentrated dyes are formulated and the formulated dyes are cleared, then, duty would be attracted on such formulated dyes on their assessable value.
11. Shri Laxmikumaran's contention is that the Gujarat High Court decision in the Vijaya Textiles case (supra) on which, among others, reliance was placed by the Bombay High Court in the Sandoz case (supra) has been overruled by the Supreme Court. In the Vijaya Textiles case, the question was whether processing of cotton or man-made fabrics by independent processors (who had not manufactured the fabrics themselves) would constitute manufacture within the meaning of Section 2(f) of the Act and whether the processed fabrics would be liable to duty as cotton fabrics or man-made fabrics under the same tariff item under which the grey fabrics had discharged their duty liability prior to their purchase by the independent processors. It is seen from the Supreme Court's judgment in the Empire Industries case (supra) that while the Gujarat High Court's view that such processing did amount to manufacture was upheld, the view that such manufacture resulted in goods falling under the residuary Item No. 68 GET was not approved by the Supreme Court On the other hand, the decision of the Bombay High Court disposing of similar issues in New Shakti Dye Works Pvt Ltd. v. Union of India and Anr. 1983 ECT 1736 holding that the process of bleaching, printing and dying etc. by independent processers would amount to "manufacture" within the meaning of Section 2(f) of the Act and that the processed fabrics would be liable to duty under the same tariff items under which the grey fabrics had discharged their duty liability, was. approved. It follows, therefore, that if the process of formulating concentrated dyes with the aid of dispersing agents and diluents can be considered as, a process of manufacture or as a process incidental or ancillary to the completion of the manufactured product within the meaning of Section 2(f) of the Act, the contention of the revenue would be acceptable. If it cannot be so considered, the respondent must succeed.
12. Many authorities have been cited by both sides. We shall take them up one by one.
Shri Laxmikumaran, relied on certain 'observations of the Gujarat High Court in para 15 of its judgment in Ballabh Glass Works Company Ltd. v. Union of India and Ors. 1980 ELT 437. That case turned on the question of assessable value of glass products. The petitioners subjected, depending upon customers requirements, sheet glass to a grinding process in order to round up its corners and edges so as to ensure its smooth use. Similarly, depending on customers' requirements, holes were bored into the glass sheets. Charges for grinding and boring holes were being Separately recovered in such cases. The petitioner's contention was that grinding and hole-making did not form part of the manufacturing, process of sheet glass nor were they incidental and ancillary to the manufacturing process as contemplated in Section 2(i) of the Act The Court held that such glass sheets became marketable to the customers (and excisable) only after the process of grinding or hole-making. It did not matter whether a particular manufacturing process had been applied in the same transaction in which glass was manufactured or it was applied afterwards. The Court further held that merely because a glass sheet to which no grinding or hole-making process was applied was otherwise marketable, it did not mean that the application of grinding and hole-making processes did not form part of the manufacturing process of those glass sheets to which they had been applied.
Shri Laxmikumaran draws analogy to the case before us where, though the wet cake is itself marketable, it is. also marketable after formulation and in respect of the formulation, the process of formulating is a manufacturing activity.
The reply of the Counsel for the respondent is that this decision is based on a test which is opposed to the test laid down by the Supreme Court and that, in any event, it cannot have the effect of making the process of conversion of dye concentrates into liquid form a manufacturing process.
It is not in dispute that both the wet cake form and the formulations are marketable. If so, in respect of the latter, the process of formulation, applying the ratio of the Gujarat High Court decision, would be a process of manufacture as one incidental and ancillary to the completion; of th? manufactured product, namely, the dye formulation. 13. Another decision cited by the learned Counsel for Revenue is of the Assam High Court in Assam Hard Boards Ltd. v. Union of India and Ors., 1979 ELT 3606. This turned on the question whether duty was leviable on the water content of certain synthetic resins. We agree with the learned Counsel for the respondent that this decision is of no relevance to the instant case.
14. Similarly, the Tribunal's decision in National Organic Chemicals Industries Ltd. v. Collector of Central Excise, Bombay, 1985 (21) ELT 252, does not seem to be relevant. It pertains to the interpretation of the duty concession to "job work" in excise notification No. 119/75, more particularly, the expression "manufacturing process" used therein, the application of the notification itself being limited to articles falling under the residuary item 68 GET.
15. Yet another decision relied upon by Shri Laxmikumaran is that of the Tribunal in Indian Cable Company Ltd. v. Collector of Central Excise, Calcutta, 1984 (15) ELT 434. It was held therein that the conversion of PVC resin into PVC compound involving the addition of fillers, plasticisers, stablisers and lubricant and intimate and homogenous mixing with the aid of heat and machines into sheet which is then broken up into granules or chips, amounted to manufacture within the meaning of Section 2(f) of the Act The Tariff Item 15A which was construed in that decision specifically covers resins and plastic material "in any form whether solid, liquid or pasty or as powder, granules or flakes, or in the form of moulding powders". The decision rendered in the context of this phraseology used in the tariff item is of no help in coming to a decision on the matter now before us.
16. In Amar Dye Chem Ltd. v. Union of India and Ors. 1980 CEN-CUS 242D, decided by the Bombay High Court, it was held that dyes in lump and/or crystal Were sold in the market and were known to dealers and consumers. It could not, therefore, be said that the process of blending and/or pulverising was necessary to complete the manufacture of the dyes in question. The Court also took notice of the fact that the Revenue had not produced any affidavit of any dealers or consumers to show that the dyes in lump or crystal form were not capable of being used in any dyeing process before the same were blended and/or pulverised and standardized. The process we are concerned with is not one of blending and/or pulverization but one of formulating with dispersing agents and diluents. As such, the Amar Dye Chem case may not be of direct relevance here.
17. Of all the decisions cited, the most relevant is that of the Bombay High Court in the Sandoz case (supra), since the goods involved therein were also dyes and the tariff item interpreted was item 14D, GET. It needs, therefore, to be studied closely. The Sandoz case involved formulation of concentrated dispersible insoluble azo-dyestuffs (brand name: Foron) with the aid of dispersing agents and water, with the object of breaking the pigment particles. The petitioner's contention was that the result of the process was only to disperse the dye which was in the concentrated (or wet cake) form by addition of dispersing agents and solvent to emulsify the dye. Even after the process, the dye continued to remain the same without any change in its composition or characteristics. The Court considered the concept of "manufacture" for excise purposes, as expounded by the Supreme Court in the Delhi Cloth and General Mills Co. Ltd. case 1977 ELT 3199 and South Bihar Sugar Mills case 1978 ELT 336 and held that merely because a change had been brought about in the state of the (Foron) pigment and it had been, converted into a liquid state by the addition of diluents and dispersing agents, the article in its liquid form (Foron liquid) would not become liable to excise duty. The Court also noted that the wet cake was a commercial commodity as such. If Foron dyestuff or pigment did not cease to be Foron dyestuff or pigment even after the addition of the dispersing agent, then, Foron liquid could not be treated as a different article manufactured from the Foron pigment itself. The Court then considered the difference between processing and manufacture as brought out by the Gujarat High Court in Vijaya Textiles v. Union of India 1979 ELT a 181. In that case, the Court held that the petitioners (who were independent processors who purchased grey cotton fabrics from powerloom factories or other weaving textile units and subjected them to the process of bleaching, dyeing or printing) began with cotton fabrics before they started processing, and ended with cotton fabrics and that such processing did not amount to manufacture of any commodity of cotton fabric. (The; Court, however, held that such activity of processing would attract duty under the residuary Item No. 68 GET). The Bombay. High Court (in the Sandoz case) then held that a mere change in the form of a substance or commodity would not, by itself, lead to the conclusion that a new article had been manufactured. Merely because Foron pigment had been converted from its solid state into the liquid state by the use of solvent and made properly usable with the aid of a dispersing agent, an inference that a new product or commodity had been manufactured could not be drawn. On the basis of the material available, the Court said that it was not possible to hold that Foron liquid was obtained as a result of a manufacturing process or that it was an article which was distinctive in name, character and use.
18. In Empire Industries Ltd. and Ors. v. U.O.I. and Ors. 1985 (20) ELT 179, the Supreme Court had occasion to go into the question of what constitutes "manufacture" for the purpose of excise levy in the context of the Gujarat High Court decision in the Vijaya Textiles case (supra) and the Bombay High Court decision (in a similar matter but holding that the process of bleaching, dyeing or printing undertaken by an independent processer on grey cotton fabrics which had discharged duty liability under item, 19 GET result in manufacture of bleached dyed or printed fabrics falling under sub-item 19 GET attracting duty liability again contrary to the Gujarat High Court view) in Mew Shakti Dye Works Pvt. Ltd. and Ors. v. U.O.I. 1983 ELT 1736. Even at the outset in its judgment, their Lordships of the Supreme Court stated that they were in agreement with the conclusions as well as the reasoning of the decision of the Bombay High Court. It should be noted here that the latter had come to its conclusions (as briefly set out earlier) on the basis of first principles ;as well as, in the light of the retrospective legislation [The Central Excises & Salt and Additional Duties of Excise (Amendment) Act, 1980] undertaken by Parliament to overcome the effects of the Gujarat High Court decision. The Court took into account many of its previous decisions including U.O.I. v. Delhi Cloth and General Mills 1977 ELT J199 ["... if a new substance is brought into existence or if a new or different article having; a distinctive name, character or use results from particular processes, such process or processess would amount to manufacture" - para 23 of the report in 1985 (20) ELT]; Commissioner of Sales Tax, Lucknow v. Harbilas Rai & Sons (1968) STC VoL 21 p. 17; Chowgule & Co. Pvt Ltd. and Anr. v. U.O.I and Ors. (1981) 1 SCC 653; and several other decisions, and observed inter alia as follows :
"The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having -its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted." (Para 30, page 193 of the report);
"Whatever may be the operation, it is the effect of the operation on the commodity that is material for the-purpose of determining whether the operation constitutes such a process which will be part of 'manufacture'. Any process or processes creating something else having distinctive name, character and use would be manufacture". (Para 31, page 193 of the report);
"It appears in the light of the several decisions and on the construction of the expression that the process of bleaching, dyeing and printing etymologically also mean manufacturing processes". (Para 33, page 194 of the report).
19. It is Revenue's contention that the Bombay High Court decision in the Sandoz case must be read and understood now in the light of the Supreme Court's recent decision in the Empire Industries case. Shri Cooper, however, contends that the 'latter decision does not in any way detract from the applicability of the former decision.
20. The question which fell for decision in the Siandoz case (supra) was -
"... whether the process of formulation of synthetic organic dye which is manufactured or purchased by the petitioners can be said to be a manufacturing process so that a new article comes into being as a result of such manufacture."
The finding of the Court was that there was only a change in form from Foron solid to Foron liquid that, on the basis of the material available, it was not possible to hold that that Foron liquid was obtained as a. result of a manufacturing process or that it was an article which was distinctive in name, character and use. The Court also found, as a matter of fact, that wet cake was a marketable commodity.
21. As stated earlier, it is not in dispute that the dyestuff in both wet cake form and the formulated form is marketable. There is no doubt that, following the ratio of the judgment in the Sandoz case (Supra), the wet cake are concentrated form is excisable. But that is not the key to the problem here. The Respondents before us are marketing not the wet cake (there is no claim that they are) but formulated dyes. The dispute before us, it needs to be recollected, arose out of the Asstt. Collector's order of 28- 2- 84 holding that the value for the purpose of assessment in the Respondents case would be the value of the formulated dyes i.e., the form in which the dyes were sold in the course of wholesale trade and not the value at the wet cake, stage. It was on this basis that he rejected the prices declared in the two price lists effective from 1-4-81 and 1-4-83, It was this order which was set aside by the Collector {Appeals). In the matter of assessable values, we have the authoritative interpretation of the Supreme Court in Union of India and Ors. v. Bombay Tyre International Ltd., etc. 1983 ELT 1896 (SC), In para 35 on page 1647 of the report,, their Lordships of the Supreme Court have observed that that excise "is a tax on a manufacture or production of goods and not on anything else" is an undisputable proposition. But they proceed to observe that the proposition that the exclusion of post manufacturing expenses and post manufacturing profit is necessarily involved in the aforesaid proposition does not inevitably follow. "The exclusion of,-post manufacturing expenses and post manufacturing profits is a matter pertaining to the ascertainment of the value" of the. excisable article and not to the nature of the excise duty, and as we have explained, the standard adopted by the legislature for determining the "value" may possess & broader base than that on which the charging provision proceeds. It, therefore, follows, in our opinion, that when the excisable article in the respondent's case, namely, the concentrates in the wet cake form are cleaned and, sold in the course of wholsale trade not in that form but after formulation, such formulations being only the more readily usable forms of the dye than the concentrated wet cake form, it is the value of the formulations that would be relevant for the purpose of assessment of the respondent's products to duty. It is nobody's case that the formulations are not dyestuff. In fact, the formulations are called and sold by the Respondents by the name of disperse dyes, the contention/however, being that duty is attracted only at the wet cake stage and not at the formulated stage. The finding of the Bombay High Court that the wet cake stage is the stage at which the excisable article comes into being and that the process of formulation is not manufacture would not, in our respectful opinion, detract in any way from the position set out above, in the light of the Supreme Court judgment in the Bombay Tyre International case: This is because "value" in Section 4 of the Act, as interpreted by the Supreme Court, takes in not merely the costs 6f the bare processes which, strictly and literally speaking, can be said to result in the manufacture or production of the excisable commodity. In the words of the Supreme Court, "It is apparent that for the purpose of determining the "value", broadly speaking both the old S.4(a) and the new S.4(1)(a) speak of the price for sale in the course of wholesale trade of an article for delivery at the time and place of removal, namely, the factory gate. Where the price contemplated under the old S.4(a) or under the new S.4(1)(a) is not ascertainable, the price is determined under the old S.4(b) or the new S.4(1)(b). Now, the price of an article is related to its value (using the term in a general sense) and into that value have poured several components, including those which have, enriched its value and given to the article its marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges,, outward handling charges, interest on inventories (stocks carried by the manufacture after clearance), charges for other services after delivery to the buyer, namely aftersales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted." (Para 50, page 1654. of the Report in 1983 ECR). For example, the court held that the cost of primary packing was includible in the "value". In coming to its conclusions on the- cost of packing, the court was conscious of the position that "while packing is necessary to make the excisable article marketable, the statutory provision calls for strict construction because the levy is sought to be extended beyond the manufactured article iself." One does not have to consider, for the purpose of Section 4, whether packing comes within the definition of "manufacture" in Section 2(f) of the Act. It may come, it may not but quite irrespective of that, the cost of packing (as, and to the extent, laid down by the Supreme Court) is includible in the assessable value of the goods which are sold in packed condition. The result of the application of the principles laid down by the Supreme Court to the facts of the present case would, in our opinion, be that if wet cake is sold not as a wet cake but in its formulated form, then, the cost of processing the wet cake into formulations which is the commodity marketed by the respondent, would have to be included in the assessable value of the goods.
22. There was some discussion before us with reference to the changes brought about by the Finance Bill, 1986 Whereby the conversion of unformulated, in standardised or unprepared forms (for example, wet cakes) of synthetic organic dyes has been expressly deemed to amount to manufacture. It is not necessary, for our purpose, to consider these changes which have come into force on 1-3-86.
23. There has been some spirited discussion with reference to Central Excise Rules 9 and 49. Revenues' submission is that, in the case of the respondent's factory where the concentrated wet cake form of the dye and formulated dyes are manufactured under one roof, there is no "removal" in terms of Rule 9 when the wet cake is cleared for captive consumption for production of the formulated dye, since both are one and the same commodity. Therefore, duty is chargeable on the formulated dyes which are the goods cleared from the factory. Shri Cooper, on the other hand, contends that the moment manufactured goods which are a marketable commodity come into' existence (wet cake in the present case) and are utilised thereafter as "such, in the form in which they are, and/or consumed as such, then, the law presumes that there has been removal of the goods and the goods become liable to excise duty at that point of time or stage. He refutes Revenue's contention that it could not be said that wet cakes are removed for manufacture of another commodity when alone there could be deemed removal in terms of Rule 9.
24. In the view we have taken that the formulated dyes are liable to be charged to duty on their value ascertained under Section 4, it is not necessary to go into the merits of the above debate.
25. In the result, we hold that the Collector (Appeals) was in error in setting aside the Asstt. Collector's orders (rejecting the Respondents' price lists and holding that duty was payable on the value of the formulated dyes and, consequently, rejecting their refund claims). We set aside the impugned orders and allow the appeals.
M. Gouri Sankara Murthy
26. I agree that the appeals should be allowed. I would like to set out my own reasons, even if they may appear, in some respects, merely a re-statement of the reasons advanced by our learned Brother Sankaran.
27. It would appear on the submissions made and the papers on record that -
(a) the issue that arises for consideration in these appeals, in a correct perspective, is one of valuation for purposes of assessment of manufactured goods - rather than one either of manufacture or rate of duty. The question as to whether formulation of dyes in wet cake form was "manufacture" per se or a process incidental or ancillary to the completion of the manufactured product so that it falls within the inclusive definition of "manufacture" in S.2(f) of the Act is beside the point. It is not a case of one manufacture or two manufactures. Nor is it, admittedly, a case where it is sought to levy duty twice over - once at the wet cake stage and again after formulation, when alone the case calls for a determination of a question as to whether formulation involved or amounted to "manufacture". Far from it. The question really is how and when the assessable value of the manufactured product is to be determined, for, it cannot be overlooked that, after all, it is a price list that has all along to be adjudicated and not a classification list. The rate of duty applicable is not in dispute. The issue of manufacture in the preparation of formulations, if one may say so with respect, is not merely not germane but one that ingeniously serves to confuse the issue;
(b) the various decisions cited and relied upon by either side on the question of what Constitutes "manufacture" are irrelevant for a determination of the real issue in the appeals;
(c) conceding, therefore, that there was no "manufacture" involved - in the preparation of formulation from the wet cake, still the question is when exactly is the value of the product to be determined for purposes of assessment. Obviously at the time, and place of removal of the manufactured goods, for in terms of S.4 of the Act, the assessable value is the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal. Rule 9A is even more specific in saying, as it does, that the rate of duty and tariff valuation, if any, applicable to any excisable goods shall be /the rate and valuation in force, on the date of actual removal in the case of goods removed from a factory or a warehouse;
(d) What then "are the "time and place of. removal", or the date Of "actual removal"? What is "removal"? "Place of removal" had been defined to mean a factory or any other place of production or manufacture of goods ... from where such goods are removed [S.4(4)(b) of the Act], although "removal" itself had not been defined in the Act or in the Rules. However, in terms of Rule 9,. a removal can be for consumption, export or manufacture of any other commodity. Such removal is from any place where they are produced, cured or manufactured, or any premises appurtenant thereto. Accordingly, the assessable value has to be determined when the goods are removed for consumption, export or manufacture from any place where they had been produced, cured or manufactured;
(e) when according to the Respondents, the manufacture of the dye was complete with the production of wet cakes, their assessable value is, obviously, the valuation applicable on the date of the actual removal of the manufactured dye. Can the movement of the wet cake for formulation amounts to removal for consumption, export or manufacture? They were not utilised for manufacture. It is not the case of the Respondent that formalisation was "manufacture". Nor does formalisation, which is merely a dilution of the manufactured dye amount, in law, to manufacture, the use to which the original wet cake could be put was also the use to which the formulated dye could be put and since the relevant item in the First Schedule referred to the broad expression "synthetic organic dyestuffs", formulation did not bring about a new manufactured product. [AIR 1961 S.C. 412 - Tungabhaclra Industries v. C.T.O.];
(f) nor can the goods be said to have been consumed. "Consumption" can occur only if there remains nothing of the goods themselves. The goods are, in other words, used up. That is not the case either. Dilution by formalisation is hardly consumption;
(g) the actual removal of the manufactured dye, in the premises, did not occur at any time before the formalisation and, accordingly, the assessable value of the manufactured dye is not its value before the formalisation but; its- value at the time "f its removal after formalisation;
(h) it would follow, therefore, that the revised price lists, filed for the period between 1-4-81 and 1-4-83 could not have been approved and the order of the Assistant Collector was right in ~f refusing to accord his approval to it, though, for a wrong reason;
(i) the applications for refund are as well misconceived and do not sustain. Apart from merits, the refunds claimed were in respect of price lists duly approved and assessments made in accordance with such approved price lists. The Respondent was obviously not aggrieved because the determination of the assessable value was fully in accord with the declaration in the price lists filed. The approval of the price lists and the -assessments had become final not having been appealed against. An application for refund, if allowed, will be directly inconsistent and conflicting with the orders in assessments which had become final and cannot, therefore, sustain.
28. The Appeals, therefore, succeed and are allowed.
K. Prakash Anand
29. I fully concur with the views expressed by my learned Brother G. Sankaran and further elaborated by my Brother M. Gouri Shankar Murthy.
The appeals, therefore, succeed and are allowed.