2015 (10) TMI 1047 - SC - Central Excise

Manufacturing activity or not - process of printing of GI paper - classifiable under Chapter heading 4811.90 or not - Held that - A cursory look into the same may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end use was still the same, namely, wrapping/packaging. However, a little deeper scrutiny into the facts would bring out a significant distinguishing feature; a slender one but which makes all the difference to the outcome of the present case. No doubt, the paper in-question was meant for wrapping and this end use remained the same even after printing. However, whereas blank paper could be used as wrapper for any kind of product, after the printing of logo and name of the specific product of Parle thereupon, the end use was now confined to only that particular and specific product of the said particular company/customer. The printing, therefore, is not merely a value addition but has now been transformed from general wrapping paper to special wrapping paper. In that sense, end use has positively been changed as a result of printing process undertaken by the assessee. Process of particular kind of printing has resulted into a product, i.e., paper with distinct character and use of its own which it did not bear earlier. Thus, the test of no commercial user without further process would be applied as explained in paragraph 20 of Servo-Med Industries (2015 (5) TMI 292 - SUPREME COURT). - there has first to be a transformation in the original article and this transformation should bring out a distinctive or different use in the article, in order to cover the process under the definition of manufacture . These tests are satisfied in the present case. - Decided in favour of Revenue.

Summary

Issues:
1) Classification of goods under Chapter heading 4811.90 or Chapter heading 4901.90.
2) Whether printing on duty paid GI paper amounts to manufacture.

Issue 1 - Classification of Goods:
The Tribunal classified the goods under Chapter heading 4811.90, as 'printing in rolls or sheets,' which was not challenged by the assessee, thus finalizing the classification. The dispute was whether the printing process on GI paper should be classified under Chapter heading 4901.90.

Issue 2 - Printing as Manufacture:
The Tribunal held that printing on GI paper did not amount to manufacture. The Revenue appealed this decision, arguing that the printing process transformed the paper into a product with a specific use, making it different from plain paper. The Tribunal relied on the principle that the primary use of the paper remained as wrapping, even after printing colorful logos and names of products.

Analysis:
The Supreme Court referred to the case of Union of India v. J.G. Glass Industries Ltd. and discussed the distinction between manufacture and marketability. It emphasized that for a process to amount to manufacture, there must be a transformation resulting in a product with a distinctive name, character, or use. The Court outlined four categories of cases to determine whether a process constitutes manufacture.

In this case, the Court analyzed the printing process on GI paper. While the paper's primary use remained for wrapping, the printing of specific logos and names restricted its end use to a particular product. This transformation from general wrapping paper to specialized wrapping paper with distinct character and use constituted manufacture. The Court applied the 'test of no commercial user without further process,' as explained in Servo-Med Industries Pvt. Ltd. v. Commissioner of Central Excise, Mumbai.

The Court clarified that for a process to be considered manufacture, there must be a transformation in the original article resulting in a product with a different use. As the printing process in this case led to a distinct product with a specific purpose, the Court held that it amounted to manufacture. Consequently, the appeal was allowed, setting aside the Tribunal's decision and reinstating the Order-in-Original passed by the Adjudicating Authority.