2004 (2) TMI 387 - SC - Central Excise

Manufacture - Film - Duty liability - Classification list - Refund - Erroneous filing of classification list

Issues Involved
1. Classification of goods under the correct Tariff Item.
2. Determination of whether the process of metallising/lacquering/laminating films constitutes "manufacture" under excise law.
3. Entitlement to exemption under Notification No. 53/88-C.E.
4. Burden of proof regarding the occurrence of manufacture.

Detailed Analysis

1. Classification of Goods
The Appellants filed a Classification List showing the item as falling under Tariff items 3920.36 and 3920.38, claiming the benefit of Notification No. 53/88-C.E. The Show Cause Notices issued contended that the goods did not fall under Item 35 but under Item 32.3 of the Notification. The Assistant Collector and the Tribunal concluded that the product fell under Item 32.3, not Item 35, as the product was not produced from goods falling under Heading 39.01 to 39.15. The Tribunal's decision was based on the interpretation of the Circular and the classification of the product as distinct items under different sub-headings.

2. Process of Metallising/Lacquering/Laminating as "Manufacture"
The Appellants argued that merely metallising/lacquering/laminating films did not constitute manufacture. The Assistant Collector avoided addressing this contention, while the Tribunal held that the process did amount to manufacture, citing that the tariff recognized the items as distinct and classifiable under different sub-headings. However, the Supreme Court found this conclusion unsustainable, relying on previous judgments such as Garware Plastics & Polyester Ltd. v. Union of India and Rexor India Ltd. v. Collector of C. Ex., which held that such processes do not amount to manufacture as no new distinct commercial commodity emerges.

3. Entitlement to Exemption under Notification No. 53/88-C.E.
For the product to fall under Item No. 35 and thus be eligible for exemption, it must be a "film" produced from goods falling under Heading 39.01 to 39.15. The Appellants' product, being a film that undergoes metallisation or lamination, did not meet this criterion. Therefore, the Appellants were not entitled to the exemption under Item No. 35 but were correctly classified under Item 32.3.

4. Burden of Proof Regarding Manufacture
The Supreme Court reiterated that the burden of proving manufacture lies with the Revenue. In this case, the Assistant Collector failed to address the Appellants' contention that no manufacture occurred. The Supreme Court emphasized that merely filing a Classification List does not obligate payment of duty if no manufacture has taken place. The Tribunal erred in placing the burden on the Appellants to prove the absence of manufacture. The Supreme Court held that the process undertaken by the Appellants did not result in a new distinct product, thus no manufacture occurred.

Conclusion
The Supreme Court set aside the Tribunal's order, holding that no process of manufacture had taken place and the Appellants were not liable to pay any duty on the product. The appeals were allowed without any order as to costs. However, the Court clarified that the Appellants, having initially proceeded on the mistaken footing that there was manufacture, would not be entitled to claim any refund based on this judgment.

← Previous Next →