Circular No. 247/81/96-CX dated 3/10/96

Government of India
Ministry of Finance Department of Revenue
Central Board of Excise & Customs,
New Delhi

Subject: CE - Process of tinting of duty paid base white, etc. paint with duty paid stainer to obtain paint of different shades, whether amounts to manufacture - Clarification

I am directed to say that doubts have been expressed as to whether the process of tinting of duty paid base white paint with duty paid stainer to obtain paint of different shades amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944.

2. This activity of tinting of base white paint is carried out by the companies in their tinting centres or the sale depots. This process of tinting involves adding required quantity of stainer with acrylic emulsion/enamel base whites and mixing them in order to obtain the desired shade of the emulsion/enamel paint. Both the base white emulsion/enamel paint as well as stainer used in this tinting are goods falling under Chapter 32, and are cleared from the factories of origin after discharging the appropriate excise duty. At present, they are paying excise duty on the various base white shades on assessable value based upon the final selling price of the paint.

3. The Board has carefully examined the matter in consultation with the Commissioners of Central Excise. A majority of the CCEs have expressed the view that the process of tinting does not bring about any new commodity with different commercial identity as the resultant emulsion/enamel paint in various shades obtained continue to remain as emulsion/enamel paint and, hence it may not be appropriate to consider this process as amounting to manufacture specially in the absence of Chapter Notes to that effect.

4. The Board has taken note of the following facts:

(i) The emulsion/enamel paint of white colour is itself a complete product on which due duty has been discharged. Changing of colour of the emulsion/enamel paint from white to any other shade with the help of duty paid stainer does not bring into existence a new and different product with distinctive name, character and use as the resultant product will be nothing but only an emulsion/enamel paint of a different shade.

(ii) There are no Section Notes or Chapter Notes to suggest that the process of tinting amounts to manufacture.

(iii) Packing of the final emulsion/enamel paint in various shades continue to be the same in which base white paint is cleared from the factory and no repacking is done.

(iv) Duty is being discharged on the various base white paints while clearing from their plants on the assessable value based on the final selling price of the paint.

5. The Board has also taken note of the Judgement of Hon"ble Supreme Court in the case of Delhi Cloth and General Mills. Ltd.: 1977 ELTJ (199) wherein it has been held that:

"Manufacture implies change, but every change is not manufacture and yet every change in an article is a result of treatment, labour and manipulate but something more is necessary and there must be transformation; a new and different article must emerge having distinctive name, character and use."

In view of the aforesaid judgement of Supreme Court it is felt that in instant case no new and different commodity having distinctive name, character and use emerges as the resultant emulsion/enamel paint in various shades" continue to remain as emulsion/enamel paint.

6. The Board has also taken note of the judgement of Supreme Court in the case of M/s. Laminated Packagings Ltd., 1990 (49) ELT 326 (SC). It is found in re M/s. Laminated Packaging case, a new and different product emerges, whereas in the case under consideration on tinting of base white paint, the resultant emulsion/enamel paint in various shades continue to remain emulsion/enamel paint and no new product with a different commercial identity emerges.

7. The Board has also taken note of Circular No. 5/92-CX.3 dated 13.7.92 wherein it has been clarified that conversion of plain plastic granules into coloured plastic granules would not amount to manufacture.

8. Therefore, keeping in view the above facts, majority opinion of the CCEs, Board"s Circular No. 5/92-CX.3 dated 13.7.92 and Hon"ble Supreme Court"s judgement in the case of Delhi Cloth & General Mills Ltd. as cited above it is felt that the criterion of change of nomenclature and usage before a "process" can amount to "manufacture" is not satisfied in the instant case. Moreover, there is no Chapter Note to hold this activity as manufacture.

9. Therefore, it is clarified that the process of tinting of base enamel/emulsion paint with stainers to obtain paint of different shades does not amount to "manufacture" within the meaning of Section 2(f) of the Central Excise Act, 1944 and if the base emulsion/enamel paint and the stainer are duty paid then the resultant product obtained after tinting would not attract any fresh duty I liability.

10. All pending disputes/assessments on the issue may be settled in the light of these guidelines.

Sd/-
(P.K. Sinha)
Under Secretary to the Government of India

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