2016 (6) TMI 1233 - HC - Central Excise

Manufacture - conversion of the new raw materials into finished goods - business in cutting and slitting of jumbo rolls of crep tissue paper into paper napkins, serviettes, tissue rolls, towels, facial tissue, etc - Held that - the issue is squarely covered by the decision in the case of Commissioner of Central Excise-I, New Delhi v. S.R. Tissues Pvt. Ltd. 2005 (8) TMI 111 - SUPREME COURT OF INDIA , where it was held that the process of slitting/cutting of jumbo roll of plain tissue paper/aluminium foil into smaller size will not amount to manufacture on first principles as well as under Section 2(f) of the said Act - the process adopted by the petitioner does not amount to manufacture and accordingly, there is no basis for issuing a show cause notice for demanding Central Excise duty - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to show cause notice proposing levy of Cenvat duty on conversion of raw materials into finished goods.

Analysis:
The petitioner, a registered Company under the Companies Act and TNVAT Act, challenged a show cause notice proposing Cenvat duty on converting raw materials into finished goods. The case was compared to a Supreme Court decision involving cutting/slitting of tissue paper jumbo rolls. The Supreme Court held that such activities did not amount to manufacture as they did not change the characteristics or end-use of the material. The Court emphasized that the mere mention of a product in a tariff heading does not imply manufacturing. The process of cutting/splitting jumbo rolls of tissue paper did not constitute manufacture. The Court remitted the matter to ascertain if the petitioner was manufacturing wet and fragranced tissues.

The respondent alleged that the petitioner converted tissue/napkin rolls into various finished products. The process mirrored the one in the Supreme Court case of S.R. Tissues Pvt. Ltd. The Court, following the Supreme Court's decision in the mentioned case, concluded that the petitioner's activities did not amount to manufacture. Therefore, the show cause notice for demanding Central Excise duty was deemed baseless and quashed. The writ petition was allowed, and no costs were imposed.