ORDER
G. Sankaran, Senior Vice-President
1. M/s. Sulphur Refinery Private Ltd., Bombay, the respondents to this appeal, are engaged in the manufacture of silicone products and emulsions. Classification List No. 1/82 classifying the goods under Item 68 of the First Schedule to the Central Excises & Salt Act, 1944 (the Schedule is referred to hereinafter as the ‘CET’ and the Central Excises & Salt Act as the ‘Act’ for brevity’s sake), was provisionally approved by the Assistant Collector on 27-4-1982. By order dated 23-8-1982, the Assistant Collector finally classified the goods under Item 15A(1), CET. However, the respondents continued to clear the goods on payment of duty under Item 68 till 10-9-1982. Thereupon, the Superintendent of the concerned Range issued a show cause notice for a sum of Rs. 3,79,486.77 being the differential amount of duty for the clearances effected from 1-3-1982 to 10-9-1982. In due course, the Assistant Collector, by order dated 10-5-1984, confirmed the demand and imposed a penalty of Rs. 1500 on the respondents. The matter was pursued in appeal. It was contended, inter alia, that no new article emerged by the process of adding water and a small quantity of emulsifying agent to the imported silicone oil (as well as duty-paid imported silicone oil purchased by the respondents) and subjecting this mixture to high speed stirring in a homogeniser or collodial mill, resulting in only a physical change i.e., conversion into silicone emulsion for use in textile and other industries. Therefore, the resultant goods could not attract duty under Item 15A(1), CET. It was also contended that the amount of duty had not been correctly worked out; the pride charged by the respondents should have been taken for the purpose of calculation of duty. The Collector (Appeals) held, by his impugned order, that the goods to be classified under Item 15A(1), CET, must be synthetic resins or plastic materials primarily produced by the process of condensation etc. as mentioned in the entry. Since the goods in question did not possess resinous character or plasticity, they rightly fell under Item 68, CET. In this view, the demands against the respondents were set aside.
2. We have heard Shri A.S. Sunder Rajan, DR, for the appellant-Collector. The respondents were not present during the hearing but they had furnished written submissions.
3. It is contended for the appellant-Collector that the processes to which the imported silicone oil is subjected by the respondents result in a new product, namely, silicone emulsions having a distinct name and use, different from those of silicone oil. As such there is “manufacture” within the meaning of Section 2(f) of the Act. It is further contended that the Collector (Appeals) erred in holding that for a substance to fall under Item 15A(1), CET, it should have resinous character or plasticity. All the materials enumerated in the entry are not resins or plastics (example, Linoxyn, Alginic Acid etc.).
4. Shri Sunder Rajan submitted that the issue of classification has been settled in favour of the Revenue by the Tribunal in its decision in the case of Collector of Customs, Bombay v. Hico Products Co. Ltd. – 1988 (34) E.L.T. 643. He prayed that in the light of this decision the impugned order be set aside and the case be remanded to the Collector (Appeals) for decision on the other issues involved.
5. On behalf of the respondents it is contended that the Collector (Appeals) was right in his decision on the classification of the goods for the reasons set out in his order. The Tribunal’s decision in the case of Hico Products Ltd. v. Collector of Central Excise, Bombay – 1985 (19) E.L.T. 214 has been cited and it has been urged that the subject goods would fall under Item 15AA, CET, and would be completely exempt from duty.
6. Appeal No. E/205/86-C. – This appeal involves similar issues and the arguments are also similar as in the other appeal.
7. In view of the above position, both the appeals are disposed of by this common order.
8. In the Hico Products case 1988 (34) E.L.T. 643, the question for determination was the classification of silicone fluid. The Tribunal negatived the Collector (Appeals)’s view that Item 15A of the CET did not cover silicone oils because they did not have the character and properties of resins and plastic materials, namely, capability of being formed under heat and/or pressure. It was held that silicone fluids being polymers, albeit low degree polymers having no resinous or plastic properties, fell under Item 15A, CET, because of their being specified therein. It may be seen that the goods were silicone oils in their primary form. That is not what is before us in the present case. This decision is, therefore, of no relevance except to the extent that it lays down, contrary to the respondents’ contention, that a product specifically included in Item 15A, CET, by name, or otherwise meriting classification thereunder, would not go out of the Item for the mere reason that it does not have resinous or plastic properties.
9. The respondent’s contentions is that the process of emulsifying silicone oil would not amount to “manufacture” for the purpose of Section 2(f) of the Act. It is only a physical mixing. No chemical synthesis takes place. The process does not bring into being a new product. Without prejudice to this contention, it is urged that the resultant silicone oil emulsion is classifiable under Item 68 and not 15A(1), CET. On a proper interpretation of Explanations II and III to Item. l5A, silicone emulsions cannot be charged to excise duty again under Item 15A(1) if made out of silicone oil on which duty has already been paid under the same sub-item. It is further contended that while there can be no dispute that silicone oil, a product of chemical synthesis, fell under Item 15A(1) and would be liable to duty thereunder [because of Explanation II to Item 15A(1)], by virtue of Explanation III, silicone oil is liable to duty in the forms specified only, namely, liquid or pasty (including emulsions, dispersions and solutions). This would not mean that a change of form, from silicone oil to emulsion, would attract duty again on the product. In fact, both oil and emulsion are in liquid forms only. There is no change of form. It is well-settled that a product cannot be charged to duty again under the same sub-item. In the case of a factory where only silicone emulsions is manufactured, duty would be leviable thereon. It would not, however, follow that silicone emulsions even when made out of duty-paid silicone oil would be liable to duty again under Item 15A(1). Finally, it is submitted that the respondents’ products are used as surface-active preparations in the textile and other industries as de-foaming or anti-foaming agents and, following the Tribunal’s decision in Hico Products case 1985 (19) E.L.T. 214, would be classifiable under Item 15AA.
10. The contention of the respondents that Item 15A(1), CET, as it stood at the relevant time, taxed silicones in any form i.e., liquid or pasty (including emulsions, dispersions and solutions) but not at the stage of change from one form to another, in our opinion, appears to have substance. Item 15A(1), CET, specifically lists silicones as one of the examples of condensation, polycondensation and polyaddition products. Explanation II fu-ther clarifies that in this sub-item “condensation, polycondensation, polyaddtion, polymerisation and co-polymerisation products” are to be taken to apply only to goods of a kind produced by chemcial synthesis answering to one of the three descriptions given in the Explanation. One of the descriptions is silicones. By virtue of Explanation III, sub-item (1) is to be taken to apply to materials in the specified forms only, the relevant ones for the present purpose being “liquid or pasty (including emulsions, dispersions and solutions)”. The respondents’ contention is that if a manufacturer clears silicone oil as such, the product will undoubtedly be liable to tax under the sub-item. Similarly, if a manufacturer clears from his factory not silicone but its emulsion, then, the emulsion will be liable to be taxed for, that is the form in which silicone is sought to be cleared. In other words, whatever be the form in which silicone manufactured in a factory is cleared, it will be liable to be taxed under the sub-item so long as the form is one which is provided for in Explanation III. In the present case, the silicone oil which is used as the starting material by the respondents is admittedly not manufactured by them. It is procured from outside and there is no dispute that it is duty paid. They emulsify the product and, therefore, it is not liable to tax under the sub-item.
11. The above contention finds support in the Tribunal’s decision in the case of Indian Paint Colour & Varnish Co. Ltd., Calcutta v. Collector of Central Excise, Calcutta -1983 (13) E.L.T. 998 (CEGAT). The observations in para 4 of the said order are relevant. It has been held that the law merely recognises that resins can be made in various forms, some being solid while others are not removed and used except as powder or paste. The Excise authorities must levy and collect duty when duty has not been collected, regardless of the form in which the resin is cleared. To charge duty on a duty-paid resin is not what the law envisages. It has been further held that the entry does not refer to change of a duty-paid resin from one form to another but to the form in which it is excised. Thus a resin may be solid or liquid or pasty or in any other form but whatever be the form, it must be charged to duty under the Tariff. The form does not matter as far as the question of chargeability to duty (when it has not paid the duty) is concerned. But this is not the same thing as saying that duty-paid resin must pay duty afresh if its form is changed from the form in which it suffered duty.
12. The above considerations would have applied provided the products under consideration were silicone emulsion simpliciter. The respondent’s case as put forth in the Memo of Appeal before the Collector (Appeals), and this position has not been disputed by the Department, is that their products are not silicone emulsions simpliciter but have additives like silica. They are used in rubber, textile, chemical and pharmaceutical industries as de-foaming/anti-foaming agents, softening agents for textiles and as mould release agents. If this be so, it follows that what we are concerned with in the instant case is not silicone emulsions but preparations containing silicone which are used as de-foaming/anti-foaming agents and not silicone oil in emulsion as such. In fact, the respondents have relied on this Tribunal’s decision in the case of Hico Products Ltd. v. Collector of Central Excise, Bombay – 1985 (19) E.L.T. 214. It has been held therein that such preparations are classifiable as surface active preparations under Item 15AA of the CET. The claim for classification of the goods under Item 15AA has been made before us also. However, all the facts necessary for determination of this claim are not available before us. The question of applicability of Notification No. 101/66, dated 17-6-1966 has also to be considered with reference to the parameters set out therein and the physical and other characteristics of the respondents’ products. Necessarily, this exercise has to be left to the Assistant Collector since there are no findings of fact nor other materials on record that would enable us to go into the claim.
13. The respondents have also raised certain points about the assessable value adopted by the Department in regard to the instant products. We find that the Collector (Appeals) had no occasion to deal with these points because he had allowed the appeals on the issue of classification. In view of our observations on the question of classification, the point about the correctness of the assessable value adopted by the Department may assume relevance. The grievance of the respondents is that the assessable value has been based on the price charged by the respondents on a solitary consignment of 5 kgs. out of the total quantity of goods ignoring the price range at which they were normally selling the goods. We do not wish to express any opinion on this point because we have no material to go by. Furthermore, the Assistant Collector has not given adequate consideration to the respondents’ contentions.
14. In the light of the foregoing discussion, we set aside the orders of the Lower Authorities and remand the matters to the Assistant Collector for de novo adjudication of the dispute after giving the respondents due opportunity to put forth their case.