IMPORTANT POINT
“Manufacture” can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use. It is well settled that mere improvement in quality does not amount to manufacture.

JUDGMENT

D.K. Jain, J.:

1. This batch of appeals by the revenue, under Section 35L(b) of the Central Excise Act, 1944 (for short “the Act”) arises out of final orders dated 23rd December, 2008 in Appeal No. E/379/2007; 25th September, 2008 in Appeal Nos. Excise/522 & 523/2007 and 28th October, 2009 in Appeal No. E/225/2009 passed by the Customs, Excise & Service Tax Appellate Tribunal South Zonal Bench, Bangalore (for short “the Tribunal”). By the impugned orders in cross-appeals by the revenue and the assessee, the Tribunal has held that the mechanical mixing of polymer with heated bitumen does not amount to manufacture of a new commercially identifiable product and therefore, is not exigible to Excise duty under the Act.

2. Since these three appeals involve a common question of law, these are being disposed of by this common judgment. However, in order to appreciate the controversy, the facts emerging from C.A. Nos. 4055-4056 of 2009, which was treated as the lead case, are being adverted to.

The respondent in this appeal (for short “the assessee”) is engaged in the supply of Polymer Modified Bitumen (for short “PMB”). We may note that in one of the appeals (C.A. No.5633/2009), the assessee additionally supplies Crumbled Rubber Modified Bitumen (for short “CRMB”), stated to be a different kind of modifier. The assessee entered into a contract with one M/s Afcons Infrastructure Ltd. (for short “Afcons”) for supply of PMB at their work site at Solur Village, Viswanathpura Post, Bangalore. As per the agreement, the base bitumen and certain additives were to be supplied by Afcons to the assessee directly at the site, where the assessee, in its mobile polymer modification plant, was required to heat the bitumen at a temperature of 1600C with the help of burners. To this hot bitumen, 1% Polymer and 0.2% additives were added under constant agitation, for improving its quality by increasing its softening point and penetration. The process of agitation was to be continued for a period of 12 to 18 hours till the mixture becomes homogenous and the required properties were met. The said bitumen in its hot agitated condition was mixed with stone aggregates which was then used for road construction. The resultant product was considered to be a superior quality binder with enhanced softening point, penetration, ductility, viscosity and elastic recovery.

3. ‘Bitumen’ is classifiable under Chapter Sub Heading 271320.00 and ‘Polymers’ are classifiable under Chapter Sub Heading 390190.00 of the Central Excise Tariff Act, 1985 (hereinafter referred to as “the Tariff Act”). The relevant tariff items read as follows:

“Tariff Item Description of goods 2713 Petroleum coke, petroleum bitumen and other residues of petroleum oil or of oils obtained from bituminous minerals. 2713 20 00 Petroleum bitumen 2715 Bituminous mixtures based on natural asphalt, on natural bitumen, on petroleum bitumen, on mineral tar or on mineral tar pitch (for example, bituminous mastics, cut backs) 2715 00 90 Other 3901 Polymers of ethylene, in primary forms 3901 90 Other “

4. The assessee had been paying Central Excise duty on the PMB processed at their factory in Mumbai but had not paid the same for the conversion done at the work site. Consequently, a show cause notice was issued to them by the Commissioner of Central Excise, Bangalore (hereinafter referred to as “the Commissioner”), demanding duty in respect of PMB falling under sub-heading 271500.90 of the Tariff Act, for the period from 18th August 2004 to 19th September 2006. The Commissioner adjudicated upon the said show cause notice and vide Order-in-original, dated 23rd April 2007, held that the aforesaid process carried out by the assessee amounted to manufacture of PMB in terms of Section 2(f) of the Act, irrespective of the fact whether such process was carried out on their own account or on job work basis and therefore, was dutiable. He accordingly, confirmed the demand indicated in the show cause notice. A