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2026 Supreme(Online)(CESTAT) 2856
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, KOLKATA REGIONAL BENCH – COURT NO.1
Ashok Jindal, Judicial Member, K. Anpazhakan, Technical Member
Kolkata North Commissionerate – Appellant
Versus
Sika India Pvt Ltd – Respondent
Excise Appeal No.77221 of 2018 | Cross Objection No.E/Cross/75028/2019
For the Appellants/Petitioners: Taniya Ray
For the Respondents: S.K. Dikshit
Dilution of a product without altering its chemical composition does not constitute 'manufacture' as no new product emerges. Furthermore, the Revenue cannot adopt a contrary legal position for subsequent periods once a position has been accepted and attained finality for the same assessee.
Headnote:(A) Central Excise - Manufacture - Dilution and addition of preservatives - The process of diluting Styrene Butadiene Latex with water and adding preservatives without altering the chemical composition does not result in the emergence of a new and different article; therefore, it does not amount to 'manufacture' under Section 2(f) of the Central Excise Act, 1944. (Para 7)
(B) Administrative Consistency - Departmental Position - Once the Revenue accepts a particular legal position in an assessee's case for a specific period, it is precluded from taking a contrary view for a subsequent period on the same issue. (Para 9)
Issues: Whether the process of adding water and preservatives to inputs amounts to 'manufacture' and whether the Department can take a contrary view for subsequent periods after accepting the position for prior periods.
| Table of Content |
|---|
| 1. facts regarding the dilution process and previous adjudication of the same issue. (Para 1) |
| 2. arguments on the finality of prior orders and the principle of departmental consistency. (Para 3 , 4) |
| 3. dilution without chemical change does not constitute manufacture. (Para 6 , 7 , 8) |
| 4. department cannot take contrary legal views for different periods. (Para 9) |
| 5. dismissal of appeal based on prior settled legal positions. (Para 10) |
Per Ashok Jindal :
The Revenue is in appeal against the impugned Order dated 30.01.2018 passed by the Commissioner of CGST & Central Excise, Kolkata North Commissionerate.
The facts of the case are that the respondent is inter alia engaged in the sale of various products that are classifiable under Chapters 32,38,39 and 40 of the Central Excise Tariff Act,1985 (CETA).
2.1 The respondent inter alia purchased duty paid“ Styrofan ID 604” and “Apcotex TSN 400”, which are Styrene Butadiene Latex falling under Chapter Heading 40.02 of the CETA, from M/s BASF India Limited and Apcotex Industries Ltd., respectively.
2.2 Apart from the above, the respondent also purchased duty paid “Navdeecide-91” which is an Organic Bromine Biocide (preservative) falling under the Chapter Heading 38.08 of the CETA, from M/s. Navdeep Chemicals Ltd.
2.3 In the instant case, the respondent merely diluted the Styrene Butadiene Latex with water and added preservative and thereafter repackaged the resultant product under the brand names “Sika Latex” and “Sika Latex Power” and cleared it for sale.
2.4 It is pertinent to mention that Sika Latex is a mortar and slurry modifier cum bonding aid & Sika Latex Power is a SBR based multipurpose polymer for waterproofing and repair.
2.5 During the investigation on the above-described process undertaken by the respondent by the anti-evasion unit of the department, it was stated by the Department that the activity undertaken by the respondent tantamount to a manufacturing activity and thus, the respondent is liable to discharge duty on the resultant products.
2.6 The investigation resulted in issuance of a Show Cause Notice dated 08.06.2007 for the period June 2002 to March 2007 involving a demand of duty amounting to Rs.1,93,22,348/- wherein the department sought to classify the resultant products under Chapter 38.2 of CETA on the premise that the process undertaken by the respondent amounted to manufacture and accordingly the same ought to have suffered excise duty, when cleared by the respondent.
2.7 A detailed reply was filed challenging the Show-Cause Notice (SCN) dated 08.06.2007. The said SCN was adjudicated vide Order-in-Original dated 14.02.2008 wherein the proceedings initiated by the department were dropped by holding that the process undertaken by the respondent is only dilution and addition of preservatives, with branding of the product and the same shall not amount to manufacture.
2.8 Thereafter, the Department issued 11 SCNs covering the underlying period of April 2007 to September 2015 seeking demand of excise duty amounting to Rs.10,81,44,684/-under Section 11A of the Central Excise Act, 1944 along with interest under Section 11A B of the said Act and penalty under Rule 25 of the Central Excise Rules,2002 on the ground that the dilution and subsequent addition of preservatives to styrene butadiene latex and thereafter packaging the same in small containers amounts to manufacture in terms of Chapter Note 9 of Chapter 38 of CETA. It was also alleged that final products were classifiable under tariff heading 3824 4010 and not 4002 1100.
2.9 The Respondent filed a detailed reply against the underlying SCNs contesting the allegations raised by the Department.
2.10 After considering the replies filed by the respondent, the Ld. Commissioner, CGST&CX, North Kolkata adjudicated the 11 SCNs vide a common Order-in-Original dated 31.01.2018 thereby dropping the proceedings initiated by the Department. The Ld. Commissioner inter alia placed reliance upon the earlier Order-in
