1984 (4) TMI 306 - AT - Central Excise

Summary

Issues Involved:
1. Whether the process of waxing paper amounts to "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944.
2. Whether the appellants are liable to pay excise duty on the waxed paper.
3. Applicability of exemption notifications No. 71/76 and No. 80/80.
4. Correctness of the quantum of assessment.
5. Applicability of Rule 9(2) of the Central Excise Rules, 1944.
6. Limitation period for issuing a demand notice.

Issue-wise Detailed Analysis:

1. Whether the process of waxing paper amounts to "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944:
The Tribunal examined whether the conversion of ordinary paper into waxed paper constitutes "manufacture." The appellants argued that the process does not amount to manufacture, citing various Supreme Court and High Court judgments which held that mere changes in a product do not constitute manufacture unless a new and distinct article with a different name, character, or use emerges. However, the Tribunal referred to previous decisions, including M/s. Kiran Printing and Packaging and M/s. Uma Laminated Products, which held that waxing paper amounts to manufacture because the treated paper is a distinct product known in the market as waxed paper.

2. Whether the appellants are liable to pay excise duty on the waxed paper:
The Tribunal concluded that the process of waxing paper results in a new product known as waxed paper, which falls under tariff item No. 17(2) of the Central Excise Tariff. Therefore, the appellants are liable to pay excise duty on the waxed paper. The Tribunal also noted that waxed paper is specifically mentioned in Notification No. 71/76, indicating its distinct identity and confirming its liability to excise duty.

3. Applicability of exemption notifications No. 71/76 and No. 80/80:
The appellants claimed eligibility for exemption under Notifications No. 71/76 and No. 80/80. However, the Tribunal found that the appellants did not provide sufficient proof that all conditions for these exemptions were met. Specifically, Notification No. 71/76 exempts certain treated papers, including waxed paper, from excise duty in excess of 12.5% ad valorem, provided the base paper has already paid appropriate duty. The Tribunal upheld the lower authorities' decision that the appellants did not satisfy all conditions for these exemptions.

4. Correctness of the quantum of assessment:
The appellants challenged the quantum of assessment, arguing that they did not process papers valued at Rs. 50,135.00 as mentioned in the impugned order. The Tribunal noted that the appellants did not provide evidence to substantiate their claim. The Tribunal directed the Collector to furnish a detailed calculation chart of the duty payable for the periods before and after 16-3-1976 separately.

5. Applicability of Rule 9(2) of the Central Excise Rules, 1944:
The Tribunal confirmed the applicability of Rule 9(2), which allows for the recovery of duty on goods removed without payment of duty. Since the appellants did not obtain an excise license for manufacturing waxed paper, Rule 9(2) applies, and the appellants are liable for the duty assessed.

6. Limitation period for issuing a demand notice:
The dissenting opinion by Member M. Gouri Shankar Murthy highlighted the issue of limitation, noting that the demand notice was issued more than ten months after the relevant period. Rule 9(2) requires the demand to be issued within the period specified in Rule 10, which is six months unless fraud, collusion, or wilful misstatement is alleged and proved. Since these elements were not alleged or proved, the demand was barred by limitation.

Separate Judgment:
Member M. Gouri Shankar Murthy dissented, arguing that the appellants were not the manufacturers, as they merely performed job work for others. He also noted that the demand was barred by limitation and that the appellants were entitled to the benefit of Notification No. 71/76. He concluded that the appeal should be allowed, contrary to the majority opinion.

Conclusion:
The majority upheld the decision of the lower authorities, classifying the product as waxed paper under item 17(2) of the Central Excise Tariff and directing the Collector to provide a detailed calculation chart of the duty payable. The dissenting opinion argued for allowing the appeal based on the appellants not being manufacturers and the demand being barred by limitation.