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Collector of Central Excise Vs. Coromandel Paints and Chemicals - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1987)(29)ELT727Tri(Chennai)
AppellantCollector of Central Excise
RespondentCoromandel Paints and Chemicals
Excerpt:
.....the assistant collector was maintainable.3. the advocate for the respondent drew our attention to trade notice no. 119/82, dated 10-6-1982 issued by the collector of central excise, guntur in which it has been stated that credit of duty on goods falling under t.i. 68 and used in the manufacture of alkyd resins as an 'intermediate product for ultimate manufacture of dutiable paints in an integrated paint factory, has to be allowed, even though it may place those manufacturers who make alkyd resins only at a disadvantage.' he also referred to trade notice no. 194/84, dated 29-12-1984 explaining the scope of 'any other operations' occurring in rule 56a(7) and claimed that the preparation of alkyd resin was for the preparation of paints and varnishes and would be covered by the term 'other.....
Judgment:
1. The appellants, M/s Coromandel Paints and Chemicals Ltd., are manufacturers of paints and varnishes falling under Item 14 of the C.E.T. They had sought permission to send alkali refined linseed oil and refined castor oil brought into their factory under the proforma credit procedure to the factory of Corocem for the manufacture of alkyd resins, classifiable under Item 15A of the Tariff and receive back in the factory of the appellant for further manufacture of paints and varnishes. A request was made in terms of Sub-rule (7) of Rule 56A of the Central Excise Rules, 1944. This was rejected by the Assistant Collector of Central Excise, Visakhapatnam I Division, by his order No.87/83, dated 9-1-1984. An appeal against this order was allowed by the Collector of Central Excise (Appeals), Madras who directed the.

Assistant Collector to grant permission to the appellant. He noted that the manufacture of alkyd resins was a process necessary for the manufacture of paints and varnishes; Sub-rule (7) does not stipulate that operations which are necessary and which are carried out on the materials received under Rule 56A are operations, which do not amount to manufacture, or which do not result in emergence of an intermediate product which itself is classifiable under some other tariff item. The Collector of Central Excise, Guntur has come up in appeal against this order.

2. In support of the appeal the S.D.R. referred to the decision of this Bench of the Tribunal in the case of "Coromandel Paints and Chemicals Ltd. v. Collector of Central Excise, Guntur" - Appeal No. ED(MAS) 467/83, dated 21-3-1984 - read with MA(MAS) No, 101/84. In the main order this Bench of the Tribunal has held that alkyd resin is an excisable product and was exempt from payment of duty at the material time. Hence the provisions of notification No. 201/79 are not admissible in respect of the two inputs (Pentaerythritol and Phthalic Anhydride) used in the manufacture of alkyd resins which in turn are used in the manufacture of paints and varnishes. He also referred to the decision of the Special Bench of the Tribunal in appeal No.ED(SB)(T) 484/81-C in the case of "Madras Rubber Factory v. Collector of Central Excise, Madras" wherein a claim for concession under Notification No. 201/79 structured more or less on the same lines of Rule 56A - was refused on the score that the procedure set out in terms of the notification has not been followed and perhaps was not capable of being followed in the circumstances of that case. What cannot be allowed directly cannot be permitted indirectly. Hence he urged that refusal of the permission under Rule 56A(7) by the Assistant Collector was maintainable.

3. The advocate for the respondent drew our attention to Trade Notice No. 119/82, dated 10-6-1982 issued by the Collector of Central Excise, Guntur in which it has been stated that credit of duty on goods falling under T.I. 68 and used in the manufacture of alkyd resins as an 'intermediate product for ultimate manufacture of dutiable paints in an integrated paint factory, has to be allowed, even though it may place those manufacturers who make alkyd resins only at a disadvantage.' He also referred to Trade Notice No. 194/84, dated 29-12-1984 explaining the scope of 'any other operations' occurring in Rule 56A(7) and claimed that the preparation of alkyd resin was for the preparation of paints and varnishes and would be covered by the term 'other operations'.

4. SDR in reply mentioned the notice 194/84 has been further modified by Trade Notice No. 83/85, dated 29-4-1985 wherein the purpose of Trade Notice No. 194/84 is further explained in para 3 in the following terms: "only after the goods have been further used can the manufacture of the excisable goods be completed." The explanatory trade notice of 29-4-1985 was issued to remove difficulties experienced by manufacturers. He, therefore, urged that as alkyd ' resin is for use in the manufacture of paints and varnishes, in terms of Trade Notice No. 194/84, as elucidated by Trade Notice No.83/85 which sets out "the provision of Sub-rule (7) clearly implies that the operation should not be such as to render the excisable goods fit for marketing." In the present case alkyd resin is a marketable commodity.

5. We have considered the arguments of both sides. Rule 56A(7,) is an enabling provision which permits the removal of material which; has been partially processed during the course of manufacture of the excisable goods, to a place outside the factory in which raw material has been received for the purposes of tests, repairs, refining, reconditioning or carrying out any other operations necessary for the manufacture of excisable goods. No doubt it is true that any operation necessary for the manufacture of final excisable goods could be allowed to be done outside the factory in which raw materials have been received but the nature of such other operations has to be examined in the light of the various processes referred to in Sub-rule (7) itself namely, tests, repairs, refining, reconditioning. As rightly pointed out by the SDR, Trade Notice No. 194/84 as modified by No. 83/85, clearly provides that when a marketable product arises at the second factory, permission under Rule 56A(7) could hardly be considered. As already decided in the case of 'Coromandel Paints and Chemicals Ltd.' in ED(MAS)No. 467/83 referred to supra, alkyd resin is an excisable product which continues to be exempt from payment of duty at the relevant time. If the alkyd resins were produced in the factory into which the chemical inputs are received in terms of Rule 56A or for that matter the notification No. 201/79, the concession would not be available. What is not admissible directly cannot be allowed indirectly by the adoption of a method of receiving the raw material in the first factory taking credit for the duty paid and sending the raw materials straight away to another factory for manufacture of the intermediate product. We do not think that Trade Notice No. 119/82 lays down proper law not is that the Trade Notice binding on this Tribunal. We also note that the Trade Notice is worded in a very guarded manner as, "The above opinion is purely an advice intended to bring to the notice of the trade as well as the departmental authorities the line of reasoning and the likely conclusion that could be reached. This advice is issued without prejudice to the quasi-judicial functioning of original/appellate authorities." 5. Quite apart from the above, we notice that Rule 56A requires the removal of partially processed goods from such factory to the second factory for various purposes. Raw materials received have not been shown to be partially processed in any manner before their removal to the second factory. Even from this angle the request of the respondent could not have been allowed.

6. In the result we find that the request for permission to send goods such as alkali refined linseed oil and refined castor oil, received in the factory of the respondent to be taken to another factory for the manufacture of alkyd resins and the receipt of alkyd resins back in to the factory of the respondent for being used in the manufacture of paints and varnishes has been correctly refused by the Assistant Collector. Accordingly we set aside the order of the Collector (Appeals) and restore the order of the Assistant Collector.


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