ORDER
Shri S.L. Peeran
1. The Revenue is aggrieved with the Order-in-Appeal No. 39, 40 & 41/97 (CBE) dated 10.2.97. Revenue was required to have filed two more appeals. This appeal is restricted to the Order-in-Original dated 13.6.95. As the Order-in-Original is single one, therefore the 3 appeals field was in terms of then practice of the Tribunal to file as many appeals as per the number of show cause notices. Now the practice has been changed to file the number of appeals as per the Orders-in-Original. As there is only one Order-in-Original, this appeal is taken up to be properly filed.
2. The department initiated proceedings against the respondents for levy of duty on the process of conversion of technical material into formulation on the ground that it amounts to manufacture and a new commercial commodity with separate identity comes into existence. The assessee had taken a view that dilution of the concentrated basic pesticidal chemicals did not bring into existence a process of manufacture in terms of Section 2(f) of the Central Excise Act and they were not classifiable under Chapter Sub Heading 3808.10. The Commissioner noting the Tribunal judgment rendered in the case of Markfed Agro Chemicals [1993 (68) ELT 848 (T) as well as the Trade Notice NO. 10/95 dated 8.2.95 issued by Ahmedabad Collector upheld the assessee’s contention in para 4 to 7 which is reproduced herein below:-
4. I have given my careful consideration to all the submissions of the appellants and I have also seen the impugned order. The question that arises in these appeals is whether the activity carried out by the appellants viz., conversion of the technical material in concentrate form into formulations would amount to manufacture and liable to duty as ordered by the AC, or not.
5. The appellants have urged in the grounds of appeal that the processing of concentrated technical material carried out by them through addition of inert carriers, solvents and dispersing and stabilising agent results only in dilution rendering the item suitable for use and that the formulation retains the name of the basic chemical. In their view, no new product having a district name, character or use has resulted by the above process and so no ‘manufacture’ is involved. They have also cited Trade Notice No. 10/95 dt. 8-2-95 issued by the Collector of Central Excise, Ahmedabad and also relied upon the Tribunal decision in the case of CCE vs Markfed Agro Chemicals reported in 1993 (68) ELT 848 (T).
6. I find force in the above pleading of the appellants. In the cited case law, the Tribunal has held that the process carried out results only in the dilution rendering the item suitable for use either directly or after addition of water and so it did not constitute manufacture within the meaning of Section 2 (f) of the central Excise Act. Subsequently, the Board issued a circular dt. 27.7.95 which is reported in 1995 (9) RlT M 85, wherein it was mentioned that the process such as the one carried out by the appellants herein would amount to manufacture within the meaning of Section 2 (f) of Central Excise Act, and that the formulations would be classifiable under 38.08 of the Tariff. However, this was challenged before the Delhi High Court and the Boards’ circular cited above was set aside by the High Court vide case law reported in Kissan Chemicals – 1996 (14) RLT 629. Apart form the above, as pointed out by the counsel for the appellants, a new chapter note has been added with effect from 23-9-96 as part of the Budget for 1996 to make the process of making the formulation out of pesticides concentrate as covered by “manufacture”. In other words, it is only after Budget 1996, ie 23-9-96 that making of formulations is treated as manufacture and not for the earlier period. In view of the above, the AC’s order holding that conversion of technical material into formulation amounts to manufacture as per the impugned order, cannot be sustained in law, and has to beset aside.
7. In the light of the above discussion, I allow all the three appeals.
3. Ld. SDR submits that the Budget of 1996 has brought a change in the Section Note with a clarification that this process is to be treated as a process of manufacture and it should be considered as a clarificatory in nature having retrospective effect and hence the order requires to be set aside and the demands raised in the show cause be confirmed as held by the Order-in-Original.
4. We have considered the submissions made by Ld. SDR and also the grounds raised in this appeal. We have gone through the impugned order passed by the Commissioner (Appeals) and notice that he has taken a clear and unambiguous findings that the process of dilution did not result into manufacture of the new product for classification under Chapter 38. To this effect there was a Board Circular and the Tribunal had also upheld he assessee’s contention in the said case, i.e. Markfed Agro Chemicals (supra). The fact that the Board Circular was set aside and subsequent changes brought in the Chapter Note will have only prospective effect as it is a legislative change. All legislative changes, cannot be considered as clarificatory and is required to be held as a new piece of legislation and intended to be operative from the date of passing of the legislation. Therefore, the contention raised that changes brought in the Budget and the assessee’s process of manufacture have retrospective effect is required to be rejected. In that view of the matter, respectfully following the citation already noted supra, we find there is no infirmity in the order and the Revenue appeal is, therefore, rejected.
(Dictated and Pronounced in open Court)