PAULSON POLYMERS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of lubricating preparations by blending base oils and additives on its own account as also on job work basis. There is no dispute that these lubricating preparations are being cleared by the appellants on payment of duty. Apart from the above activities, the appellant is also receiving duty paid lubricating preparations imported by M/s. Motul Mafatlal Lubricants Limited (Motul) on payment appropriate customs duty and additional duties of customs, in bulk for repacking the same into various sizes on job work basis. While packing, the appellant is blending the said imported oils with a colouring material. The main question in the present appeal as to whether said activity of blending the lubricating oil with colouring material amounts to manufacture in terms of Section 2(f) of Central Excise Act, 1944.

(2.) COMMISSIONER in his impugned order has held that as per definition of 'manufacture' given in Section 2(f) of the Act, the manufacture includes any process incidental or ancillary to the completion of manufactured products. In the present case, the assessee has blended the oil with dye. Such addition of colour and blending is considered essential for rendering such goods marketable. He also observed that in trade parlance, such colour blended oil is known as lubricating oil having specification of Motul brand. As such, he has concluded that blending of lubricating oil with imported material has its own identity and trade name. He has also observed that the appellant has availed Modvat credit of additional duty paid on the imported lubricating oil. As such, he has confirmed the demand of duty of Rs. 6.57 lakhs on this ground. The said reasoning of the adjudicating authority has been reiterated by Shri R.B. Pardeshi, learned JDR for the Revenue.

(3.) ASSAILING the above findings of the Commissioner Shri C.S. Lodha, learned Advocate appearing for the appellants submits that mere addition of colour in the lubricating oil, which is already fully manufactured, will not amount to manufacture. He submits that colour is being added just for the ease of identification. The lubricating preparation is an identifiable product and was fully manufactured and in marketable stage without any addition of dyes. In fact, the good percentage of such lubricating preparations (almost to the extent of 70%) are being packed and marketed without any blend of colour, which fact is sufficient to show that addition of dye is not incidental or ancillary to the manufacture of lubricating preparations. There was no change in nature of the product and no transformation resulting in emergence of a new product having distinct name, character and use. Prior to addition of dye in the product, the same was known as lubricating preparations in the market and trade. The addition of dye has resulted neither in any physical change nor in chemical change nor in any change in the nature of the product nor a change in its ultimate use. As such, the activity of blending cannot be equated with manufacture so as to charge duty on the resultant product for the second time. He clarifies that such addition of red and green dye in the oil is only to differentiate between 2T and 4T lubricating oils. In support of the above submissions, reliance has been placed upon various decisions of the Tribunal as well as High Courts and Supreme Court.