2017 (10) TMI 552 - AT - Central Excise

Parts of cigarette packets - excisability/marketability - Whether parts of cigarette packets namely slides/slits (inner frame) are excisable goods within the meaning of CETA 1985? - Natural Justice. Held that - The ruling in the case of M/s Zupiter Printing versus Union of India 1991 (3) TMI 394 - DELHI HIGH COURT supports the case of the appellant herein, as the issue therein was taxability of cigarette shells only manufactured by M/s Zupiter Printing by way of job work for the cigarette manufacturer. The question in that case was limited to whether the cigarette shells are excisable if they are considered as a box. the findings of the Apex Court in the case of M/s Sonic Electrochem Private Ltd. (2002 (9) TMI 104 - SUPREME COURT OF INDIA) are squarely applicable, wherein the Apex Court held that the plastic body of the EMR is specific to a particular manufacturers as per their design and logo and as such is not marketable or a product known in the market, hence not marketable. In the facts of the present case slide/slits are not goods or product known in the market and hence not marketable. The slide/slits in the facts of the present case are specific to the appellant as manufactured by them for their own brand separately and cannot be inter-used by other cigarettes manufacturers for their brands. In the facts of the case that the slides/slits are also not interchangeably usable by the appellant itself for its various cigarettes being manufactured under different brands. These slides/slits are not manufactured separately and or purchased from outside by any of the cigarette manufacturers including the appellant. These are manufactured in a continuous process at the stage of packing of the cigarettes by automatic machines in the course of packaging of cigarettes. There is no output which can be called as slide/slits cleared by the appellant or any cigarettes manufacturer. Accordingly, appeals are allowed with consequential benefits by holding that slides/slits are not capable of being marketable and accordingly are not excisable/dutiable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether parts of cigarette packets, namely slides/slits (inner frames), are excisable goods within the meaning of CETA 1985.
2. Whether the slides/slits (inner frames) are marketable and satisfy the criteria of being a distinct commercial commodity.
3. Whether the process of creating slides/slits constitutes manufacture under the Central Excise Act.

Detailed Analysis:

1. Excisability of Slides/Slits:
The primary issue in this appeal is whether the slides/slits (inner frames) used in cigarette packets are excisable goods within the meaning of the Central Excise Tariff Act (CETA) 1985. The Tribunal examined the process of creating these slides/slits and their role in cigarette packaging. The appellants argued that these components are not marketable commodities and are not bought and sold in the market. They are specific to each brand of cigarettes and are manufactured in a continuous process within the factory, making them unsuitable for sale as independent items.

2. Marketability of Slides/Slits:
The Tribunal considered the affidavit of Mr. Aniruddha Sengupta, which detailed the specific manufacturing process and the unique characteristics of the slides/slits for each brand of cigarettes. The affidavit emphasized that these components are not standard items, are not available in the market, and are not generally dealt with in the market. The Tribunal found that the slides/slits are specific to the appellant's brands and cannot be interchanged or used by other cigarette manufacturers, thus failing the test of marketability.

3. Manufacture Process:
The Tribunal also examined whether the process of creating slides/slits constitutes manufacture under the Central Excise Act. The process involves cutting, slitting, folding, and creasing paperboard to create slides/slits specific to each brand of cigarettes. The Tribunal noted that this process is part of an integrated and continuous packaging operation within the factory and does not result in a new commercial commodity known to the market. The Tribunal relied on precedents such as Union of India vs. M/s Sonic Electrochem (P) Ltd. and Board of Trustees vs. Collector of Central Excise, which established that for an item to be dutiable, it must satisfy the twin requirements of manufacture and marketability.

Judgment:
The Tribunal found that the slides/slits (inner frames) are not marketable commodities and do not constitute a distinct commercial product. The process of creating these components does not result in the manufacture of a new product known to the market. Consequently, the slides/slits are not excisable under the Central Excise Act. The Tribunal allowed the appeals, set aside the impugned order, and held that the slides/slits are not subject to excise duty. The cross-objection by the Revenue was also disposed of.

Conclusion:
The Tribunal concluded that the slides/slits (inner frames) used in cigarette packets are not marketable commodities and do not constitute a new product through the process of manufacture. Therefore, they are not excisable under the Central Excise Act, and the appeals were allowed with consequential benefits. The impugned order was set aside, and the cross-objection by the Revenue was disposed of.