Per Jyoti Balasundaram :

This matter has come up before me as a result of Hon'ble Supreme Court's directions dated 30.3.1995 in Civil Appeal No. 2532 (NM) of 1992 reported in (1995 (77) ELT 49 (SC).

2. The appellants, who are a Central Excise licensee, filed a classification list under Rule 173-B of the Central Excise Rules, 1944 effective from 1.4.1983. In this classification list, they declared as items manufactured by them laboratory and fine chemicals (list of items as per Annexure-A) under Tariff item 68 of the erstwhile First Schedule to the Central Excises and Salt Act, 1944. The present case does not relate to these manufactured items. The appellants also undertake repacking of bought out chemicals from bulk back to small retail packs. The appellants call this activity of repacking as direct pack. There is also no dispute in the present case as far as this acuity of the appellants is concerned. Apart from the above, the appellants also undertake purification of bought out chemicals by way of distillation/recrystallisation. This was declared in the classification list as chemicals purchased from market further repacked/purified (Annexure C), Annexure C to the classification list described the chemicals purchased from the market and further repacked/purified. The entire dispute in the present case relates to this activity of purification of chemicals undertaken by the appellants.

3. The dispute before me is confined to the purification process undertaken by the appellants through distillation/recrystallisation as this was the question posed before me as Third Member for resolving the difference of opinion in the order of the Hon'ble Members of this Tribunal who heard the matter originally and which judgement is reported in (1991 (56) ELT 393 (T)).

4. The appellants were issued with a show cause notice dated 30.3.1983 alleging that the process of purification amounts to process of. manufacture. The appellants filed their reply dated 2.9.1983. Relevant portion of the reply is extracted below :

4.1 The facts in brief of the cases are that we are manufacturers of laboratory and fine chemicals like Ammonium oxalate. Ammonium acetate etc. the details of which are given in Annexure 'A' to our Classification list submitted with effect from 1.4.1983. We also purify certain products purchased by us from the open market b\ various methods namely, simple distillation. Alteration, crystallization. etc. Some of the products purchased by us from open market are subjected to processes like grinding, sieving etc. We enclose herewith the actual processes carried out for purification, grinding etc. as Annexure 1. As will be seen from the said Annexure, we are not manufacturing any new product and the process of distillation is not that of fractional distillation so as to obtain different products from the original one which is subjected to the process of distillation.

4.2 The processes of crystalisation and grinding are simple processes and do not amount to process of manufacture within the meaning of Section 2 (f) of the Central Excises and Salt Act, 1944 as explained hereinafter. The process of distillation consists of simple distillation and not fractional distillation. We submit that the process carried out on goods which are subjected to grinding. crystalisation of refinement does not amount to a process of 'manufacture" within the meaning of Section 2 (f) of the Central Excises and Salt Act. 1944.

4.3 We further submit that, if necessary, your good self will be kind enough to visit our factory and see the actual processes carried out by us to appreciate the fact that by carrying out the activity of crystalisation. purification, grinding etc., we do not bring into existence any new product and only remove negligible quantity of impurity which remains in the original product purchased from open market. On your visit, we will also convince you that we have not got machinery to manufacture the products which are merely purified, cryitallse