2012 (9) TMI 816 - AT - Central Excise

Whether biris manufactured by assessee are manufactured with or without the aid of machines - Manufacturers of handmade labelled biris - higher rate being applicable to biris manufactured with the aid of machines Held that - Where the packing materials were manufactured with the aid of machines - manufacture of packing materials through job worker using machines will not tantamount to use of machines in the manufacture of biris In favor of assessee

Summary

Issues: Classification of handmade labelled biris under Central Excise Tariff Act, 1985 - Whether biris manufactured with or without the aid of machines - Interpretation of Circular No. 840/17/2006-CX dated 6-12-2006 - Burden of proof in exemption notification cases.

Classification of Handmade Labelled Biris:
The case involved appeals by the Department against Orders-in-Original concerning the classification of handmade labelled biris under Chapter 24 of the Central Excise Tariff Act, 1985. The dispute centered around whether the biris were manufactured with or without the aid of machines, as this classification determined the applicable duty rates. The respondents, manufacturers of tendu leaf-rolled biris, purchased duty paid paper and sent it to job workers for cutting and printing, processes conducted with machines. The Department issued show-cause notices proposing to classify the biris under a sub-heading that attracted higher duties for being manufactured with machine aid. However, the Commissioner dropped the proceedings based on a Tribunal decision and the Department appealed.

Interpretation of Circular No. 840/17/2006-CX:
The Tribunal considered the use of machines in cutting and printing paper for packing handmade biris. The respondents argued that such processes did not amount to manufacturing biris with machine aid, citing a Tribunal decision and a Board circular. The circular clarified that handmade biris packed with labels made by job workers using machines should still be classified as manufactured without machine aid. The Board's rationale was that since the core biri manufacturing processes were manual and not machine-assisted, the classification should reflect this, even if packing materials were machine-produced. This clarification was deemed applicable to ongoing cases.

Burden of Proof in Exemption Notification Cases:
The Department's appeals relied on a Tribunal decision related to an exemption notification case concerning fireworks manufacturing. However, the Commissioner correctly distinguished this case, noting the distinction between using machines in core manufacturing processes versus in ancillary tasks like producing packing materials. The subsequent Board clarification further supported the position that manufacturing packing materials with machines through job workers did not constitute using machines in biri manufacturing. Consequently, the Tribunal found no grounds to overturn the Commissioner's orders, and the Department's appeals were rejected.

This detailed analysis of the legal judgment addresses the issues of classification of handmade labelled biris under the Central Excise Tariff Act, interpretation of relevant circulars, and the burden of proof in exemption notification cases, providing a comprehensive overview of the Tribunal's decision-making process and the application of legal principles in this matter.