1984 (1) TMI 327 - AT - Central Excise

Issues Involved:
1. Classification of Teleprinter Rolls, Teleprinter Tapes, Waxed Paper, and Kraft Ammunition Paper under Central Excise Tariff.
2. Whether the process of cutting and interleaving paper constitutes "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944.
3. Applicability of Rule 9(2) versus Rule 10 read with Rule 173J of the Central Excise Rules, 1944.
4. Limitation period for the demand of duty.

Detailed Analysis:

1. Classification of Products:
The appellants, M/s Ramsay India (Pvt.) Ltd., were engaged in manufacturing various paper products. The Central Excise Officers found that the appellants had manufactured and removed 3,38,608.06 Kgs. of such paper without obtaining a Central Excise Licence and without payment of duty. The Collector of Central Excise classified these items under Central Excise Tariff No. 17(2) and 17(4) and demanded duty under Rule 9(2) of the Central Excise Rules. The appellants contended that they purchased duty-paid writing and printing paper from the market and merely cut it into rolls and tapes, which should not be classified as a new product. The Central Board of Excise & Customs upheld the Collector's classification, leading to the present appeal.

2. Process of Manufacture:
The appellants argued that their activities did not constitute "manufacture" as defined under Section 2(f) of the Central Excises and Salt Act, 1944. They referenced Supreme Court decisions in Union of India v. Delhi Cloth and General Mills Co. Ltd. and South Bihar Sugar Mills Ltd. v. Union of India, which state that "manufacture" implies a change that results in a new and different article with a distinctive name, character, and use. The Tribunal found that teleprinter rolls and tapes are distinct commodities from the base material and are known in the market as separate items. Therefore, the process of converting writing and printing paper into teleprinter rolls and tapes constitutes "manufacture" under Section 2(f) and attracts duty under Central Excise Tariff Item No. 17(2).

3. Applicability of Rule 9(2) vs. Rule 10:
The appellants claimed that the demand for duty was barred by the one-year limitation under Rule 10 read with Rule 173J. They argued that the differential duty should have been demanded within this period. The Tribunal noted that the appellants did not obtain an Excise licence and cleared the goods without payment of duty under the bona fide belief that the products were not excisable. Citing N.S. Metal Industries v. Union of India and other precedents, the Tribunal held that Rule 9(2) applies when goods are removed without payment of duty and without informing the excise authorities. Since the appellants did not disclose the manufacture or removal of goods, Rule 9(2) was applicable, and the demand was within time.

4. Limitation Period:
The appellants argued that no duty could be charged for clearances before 14-2-1974 due to the one-year limitation under Rule 10 read with Rule 173J. The Tribunal found that the appellants never informed the excise authorities about the manufacture and removal of goods, distinguishing this case from N.B. Sanjana v. E.S. & W. Mills and Murugan & Co. Pudukottai v. Dy. Collector of Central Excise. The Tribunal upheld the applicability of Rule 9(2), stating that the demand was within time as there was no prior assessment and the Department had no knowledge of the removal of goods.

Separate Judgment on Kraft Ammunition Paper:
The Tribunal found that the Department did not provide evidence of the chemical treatment of Kraft paper to establish that a new product was manufactured. The Indian Standard Glossary did not list Ammunition Kraft paper as a distinct item. Therefore, the Tribunal set aside the order regarding Kraft Ammunition Paper and directed that any recovered duty be refunded within three months.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the classification and duty on teleprinter papers and tapes but set aside the demand for Kraft Ammunition Paper. The appeal was dismissed regarding the excise duty on teleprinter papers and tapes, and the differential duty on Kraft Ammunition Paper was ordered to be refunded if recovered.

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