ORDER
Shiben K. Dhar, Member (T)
1. This appeal is directed against Order-in-Appeal No. V-2(39 Ch) 2631/88-B II, dated 5-7-1989, The issue for determination is whether under Chapter 39 the conversion of granules into powder form would amount to manufacture during the period prior to 1-3-1988.
2. Arguing for the Revenue, the Ld. SDR submits that Collector erred in holding that during the period prior to 1-3-1988 conversion of granules into powder, another primary form, would not amount to manufacture under Section 2(f) of Central Excises and Salt Act, 1944 in view of Chapter Note 3 of Chapter 39. He, therefore, erred in setting aside the order of the Assistant Collector who has held that in view of Chapter Note 6 of Chapter 39 the conversion would amount to manufacture. Ld. DR submits that Chapter Note 6 to Chapter Note 39 even prior to amendment categorically states that conversion of one primary form into another primary form amounts to manufacture . In this case granules are converted into powder. Conversion of granules, a primary form, into powder, another primary form in these circumstances, therefore, amounts to manufacture.
3. Ld. Advocate for the respondents submits that amendment was made on 1-3-1988 precisely for the purpose of neutralising the effect of Chapter Note 3 of Chapter 39. Chapter Note 3 specifically says that Tariff Heading 39.01 would apply only to goods of a kind produced by chemical synthesis falling into categories specified therein. They converted the granules through pulverising of polyethylene which is not a chemical synthesis. Since powders are produced only through pulverisation Chapter Heading 39.01 would not cover such powder before 1-3-1988 and in these circumstances conversion of granules into powder would not amount to manufacture. It is only with effect from 1-3-1988 that Chapter note 6 was amended to provide that notwithstanding anything contained in Note 3 of Chapter Heading 39.01 to 39.14 shall also include primary forms falling under the same heading, and such conversion shall amount to manufacture. The purpose of this amendment, therefore, was to specify that even if such conversion is not a result of as provided in Chapter Note 3, chemical synthesis, it would nevertheless amount to manufacture. He also submitted that the product continues to remain under Chapter Note 6(ii)(b), since granules are converted into powder; only one form remains and there is no conversion to liquid as such.
4. We have heard both sides. For the sake of clearity Chapter Note 6 and Chapter Note 3 of Chapter 39 are reproduced below as these existed before the amendment on March 1,1988.
“6. In Heading Nos. 39.01 to 39.14, the expression ‘primary forms’ applies only to the following forms:-
(a) Liquids and pastes, including dispersions (emulsions and suspensions) and solutions;
(b) Blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms, and the conversion of any one primary form into another shall amount to ‘manufacture’.”
“3. Heading Nos. 39.01 to 39.11 apply only to goods of a kind produced by chemical synthesis, falling in the following categories:-
(a) Liquid synthetic polyolefins of which less than 60 per cent by volume distils at 300°C, after conversion to 1,013 milibars when a reduced pressure distillation method is used (Heading Nos. 39.01 and 39.02);
(b) Resins, not highly polymerised, of the coumarone-indene type (Heading No. 39.11);
(c) Other synthetic polymers with an average of atleast 5 monomer units;
(d) Silicones (Heading No. 39.10);
(e) Resols (Heading No. 39.09) and other prepolymers.”
4.1. Chapter Note 6 indicates that conversion of any one primary form into another primary form shall amount to manufacture. Primary forms are illustrated as including blocks of irregular shape, lumps, powders (including moulding powders, granules, flakes and similar bulk forms). Plainly, it means that if any one of these primary forms is converted into another primary form such conversion would result in manufacture. Chapter Note 3 only indicates that the goods would be covered under Chapter Headings 39.01 to 39.11 only if these are goods of a kind produced by chemical synthesis. Ld. Advocate laid considerable emphasis on the fact that powder is produced only by pulverising the polyethylene granules and was not produced as a result of chemical synthesis. And, therefore, by virtue of the Chapter Note 3 the conversion into powder would not amount to manufacture. We are not able to persuade ourselves that this indeed is a correct proposition.
4.2 It is not denied that moulding powder itself is originally a product of chemical synthesis. If for instance respondents were manufacturing moulding powder as such from the basic raw-materials in an integrated factory they would not argue that it is not a product of chemical synthesis. It is true that from 1-3-1988 Chapter Note 6 was specifically amended through addition of a non substante clause to clarify that notwithstanding anything in Chapter Note 3, Headings 39.01 to 39.14 shall also include primary forms obtained from conversion of one primary form to other, and such conversion shall amount to manufacture. In our view this amendment was only of clarificatory nature which only made explicit what was already otherwise implicit in the statue. Moreover, we find that classification as such is not in dispute before us Primarily Chapter Note 3 relates to classification by indicating which are the kinds of goods under primary form which would be covered under Heading 39.01 to 39.14.
4.3 We are also not able to appreciate the arguments of the Ld. Advocate that the moulding powder continued to remain under Chapter Note 6(b) and was not converted into liquid specified under Chapter Note 6(a). Chapter Note 6(b) clearly indicates the types of primary forms and that conversions of any one primary form into another shall amount to manufacture. Admittedly granules in this case had been converted into powder and, a therefore, would be squarely covered by Chapter Note 6(b) and would attract duty liability.
5. In view of this we allow the Revenue Appeal and set aside the impugned order.