G. Sankaran, Member (T)
1. The captioned appeal was initially filed as a Revision Application before the Central Government which, under Section 35-P of the Central Excises and Salt Act, 1944, has come as transferred proceedings to this Tribunal, for disposal as if it were an appeal filed before it.
2. The dispute before us is whether the product "EMULSIFIER T" manufacthred by the appellants (to be referred to hereinafer as HPC) was excisable, during the material period, having regard to the definition of "manufacture" in Section 2 (f) of the Central Excises and Salt Act (to be referred to hereinafter as the Act.). HPC's contention before the Assistant Collector was that "EMULSIFIER T'' was an intermediate product obtained in a continuous process and that it was not a finished product. This contention did not find favour with the Assistant Collector and he held that the product was excisable and fell under Item No. 15AA of the Central Excise Tariff Schedule (C.E.T., for short). The appeal against this order was rejected by the Appellate Collector. It is this order of the Appellate Collector that is now under challenge before us.
3. In the appeal, the salient submissions are :
(i) "EMULSIFIER T" is an intermediate product processed out of fatty acids and polyglycols for being used as a raw material in the manufacture of speciality oils.
(ii) The product was at no lime marketed or intended to be marketed by the HPC.
(iii) It could not be termed as a "manufactured product" for the purpose of Section 2 (f) of the Act.
(iv) Even in 1972 (5 years before the Assistant Collector's order), HPC had advised the Superintendent about the said product. But they were not asked to obtain Central Excise licence for the manufacture of the product. It was only on 12-8-1976, that the Superintendent advised HPC that, as per the Deputy Chief Chemist's test report, the product was classifiable under Item 15AA CET and the HPC should comply with the excise formalities for the manufacture of the product.
(v) The lower authorities had erred in equating "processing" with "manufacture" despite the ratio of the Supreme Court decisions in the Delhi Cloth and General Mills' case. What HPC did was only processing resulting in an intermediate product in a continuous process. It was not known to the market as an "Organic Surface Active Agent".
(vi) In support of the above contention, reliance was placed also on the Supreme Court decision in the South Bihar Sugar Mills case - 1968 AIR 922.
(vii) It is prayed that "EMULSIFIER T", an intermediate product, be declared as not excisable under Item No. 15AA, setting aside the Appellate Collector's order with consequential relief to HPC.
4. The appeal was heard on 25-10-83. Shri D.P. Bhave, on behalf of HPC, besides reiterating the aforesaid submissions, contended that-
(i) For years together, since 1966, the Department did not tax the product under Item 15AA CET though HPC had disclosed the fact of manufacture of the product to the Department again on 1-12-72. The Department did not take any objection.
(ii) The product was an intermediate one arising in the course of manufacture of speciality oils.
(iii) It was produced only for captive consumption and not for sale. The product was not "goods".
(iv) The full text of the test report was not disclosed to HPC but only extracts therefrom.
(v) Reference was made to Boards' Tariff Advice 22/82 dated 21-4-82. The Department and HPC were, for a long time, considering that only wholly water-soluble substances would be classifiable under Item 15AA CET till issue of the above Advice to the effect that a product need not be wholly water-soluble to come under Item 15AA. HPC's product was not wholly water soluble. Technically, it may perhaps fall under Item 15AA in the light of the 1982 Tariff Advice but it was not commercially known as "Organic Surface Active Agent",
(vi) The guidelines laid down by the Supreme Court in the DCM (VNE Oil) case and South Bihar Sugar Mills (Kiln Gas) case were being followed by Government even after the amendment of Rules 9 and 49 of the Central Excise Rules with retrospective effect by Section 51 of the Finance Act, 1982.
(vii) Chargeability to duty has to be determined with reference to the First Schedule Act (Section 3) and not any notification.
5. In reply, Senior Departmental Representative submitted that-
(i) There was no cotention from HPC till date that the product was not an emulsifier. The very name "EMULSIFIER T" was indicative of its true nature. The test report was not, at any time, challenged by the HPC.
(ii) The question whether a product was marketable or being marketed was not at all relevant for deciding whether it was "goods". In this connection, the decision of the Madras High Court in ELT 1978 p. 653 was cited as also 1978 ELT p. 1.
(iii) Emulsifiers were Organic Surface Active Agents. The question whether "manufacture was involved in the production of "EMULSIFIER T" was, therefore, irrelevant.
(iv) Notification No. 101/66 was, like all statutory notifications, to be read as part of the statute.
6. We have carefully considered the submissions of both sides.
(i) In his letter dated 12-8-1976 to the HPC, the Superintendent, of Central Excise has referred to the test report of the Deputy Chief Chemist to the effect that the surface active tension of "Emulsifier T" was more than 20 dynes. This seems to be the basis of the Department's holding that the product fell under Item 15AA, CET.
(ii) HPC seems to have asked for a re-test. The appeal filed before the Appellate Collector does not make any reference to this aspect of the matter. However, it is seen from the Appellate Collector's order that as HPC was not satisfied with the manner in which samples were drawn, which they thought were not representative samples, the Assistant Collector had samples drawn again and tested by the Deputy Chief Chemist who confirmed his earlier findings that the product was an organic surface active agent, not qualifying for exemption under Notification No. 208/69 dated 27-8-1969. HPC, apparently, did not dispute the findings of the Deputy Chief Chemist. Even in the appeal before us, HPC has not disputed the Chemists' findings. Nor did Shri Bhave press before us the point that a full copy of the Test Report was not made available to the HPC. HPC's whole case is based on this contention that there was no ."manufacture" involved in the process of production of "EMULSIFIER T" which was but an intermediate product in the continuous process of manufacture of speciality oils from fatty acids and polyglycols. We would, therefore, proceed to consider this case from this angle.
7. Hawleys', "Condensed Chemical Dictionary (10th Edition), which is a standard book of reference, says at page 408 -
"Emulsifier -A surface active agent.
See emulsion". At page 409, it says -
"Emulsion-A stable mixture of two or more immiscible liquids held in suspension by small percentages of substances called emulsifiers..."
At page 986, it says-
"surface-active agent"- (surfactant). Any compound that reduces surface tension when dissolved in water or water solutions, or which reduces interfacial tension between two liquids, or between a liquid and a solid". There are three categories of surface active agents ; detergent, wetting agents and emulsifiers ..."
8. HPC's case is not that the product is not an emulsifier but that it is not known or marketed as an organic surface active agent, that it is not "goods" and that the production process does not amount to "manufacture". We have, in the circumstances, to go on the basis that the subject product was an emulsifier, as its very name indicates. HPC's contention that it is an intermediate product and does not, therefore, constitute excisable goods is devoid of substance, it is to be noted in this connection that the amendment of Central Excise Rules 9 and 49 effected by Section 51 of the Finance Act, 1982 makes it clear that intermediate products coming into existence in the course of a continuous process or otherwise are liable to be charged to excise duty on their removal within the factory of production for use in further manufacture of goods so long as such intermediate products are excisable goods within the meaning of the Act. If "EMULSIFIER T" is an Organic Surface Active Agent, the question whether the process resulting in its production constitutes manufacture is no longer open to investigations since "Organic Surface Active Agents" figure specifically in Item No. 15AA of the CET. This is the ratio of the Delhi High Court decision in the Hyderabad Asbestos and Cement Products case-1980 E.L.T. 735 (Del.) It was held that if Parliament has specifically included a particular product in the Central Excise Tariff Schedule its validity cannot be questioned on the ground that the process resulting in the production of the product does not amount to manufacture.
9. Likewise, the contention that the goods are not marketed and have been produced only for captive consumption is also of no avail. In 1978 E.L.T. (./ 653), the Madras High Court held that Section 3 of the Act does not make a distinction between goods manufactured for one's own consumption and those for sale and that in the matter of levy of excise duty, the notion of trade or commerce cannot be imported.
10. We have thus seen that the subject goods are Organic Surface Active Agents, falling under Item No. 15AA of the CET. that the question of "manufacture" is not relevant and that the goods do not cease to be liable to excise duty on the ground that they are produced not for sale but for captive consumption. In this view of the matter, the ratio of the Supreme Court judgments in the Delhi Cloth and General Mill case,-1977 E.L.T, J199 and South Bihar Sugar Mill case,-(1968 AIR 922) has no application to the facts of the present case.
11. In the result, the appeal fails and is hereby rejected.