2018 (8) TMI 14 - AT - Central Excise

Manufacture - activity of printing of plain PVC sheet - whether printing of PVC sheet amounts to manufacture? - Held that - It is clear that whether the PVC sheet is printed or unprinted it is falling under the same category and under same chapter heading, therefore, the legislature consciously categorized the printed PVC sheet and unprinted PVC sheet in the same class of the goods, therefore, on the bought out manufactured PVC sheet mere printing activity will not amount to manufacture - the printing of PVC sheet is held to be activity not amounting to manufacture. The identical issue has been considered by Hon ble Supreme Court in the case of J.G. Glass Industries 1997 (12) TMI 110 - SUPREME COURT OF INDIA wherein the facts involved was whether the printing decoration carried out on the already manufactured glass bottles is amount to manufacture, where it was held that as the process of printing is being carried out in a separate premises as found by the Tribunal and such process is not manufacture within the meaning of the Act. Extended period of limitation - Held that - There were catena of judgments on the same set of facts moreover, on the same activities and same product, therefore, the matter involved is pure interpretation of law - Extended period cannot be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the activity of printing on PVC sheets amounts to "manufacture" under the Central Excise Act.
2. Applicability of the extended period for raising the demand.
3. Imposition of penalties under Rules 25 and 26(1) of the Central Excise Rules, 2002.

Detailed Analysis:

1. Manufacture of PVC Sheets:
The primary issue in this case was whether the printing on PVC sheets constitutes "manufacture" under the Central Excise Act. The appellant argued that the activity of printing does not result in a new product with a different commercial identity, and therefore, it should not be considered as manufacture. They relied heavily on the Supreme Court's judgment in the case of Caprihans India Ltd. vs CCE, which held that printing on PVC sheets does not amount to manufacture as it does not result in a distinct product.

The Tribunal noted that Chapter Note 10 of Chapter 39 of the Central Excise Tariff Act specifies that PVC sheets, whether printed or unprinted, fall under the same classification. This indicates that the legislature did not intend for the mere act of printing to constitute manufacture. The Tribunal also referred to multiple Supreme Court judgments, including J.G. Glass Industries and Alembic Glass Industries, which similarly held that printing on a product does not change its essential character and hence does not amount to manufacture.

2. Extended Period for Raising Demand:
The appellant contested the invocation of the extended period for raising the demand, arguing that the issue was purely a question of law and involved substantial litigation, including the landmark case of Caprihans India Ltd. The Tribunal agreed, noting that the appellant had a bona fide belief, supported by various judicial precedents, that their activity did not amount to manufacture. Therefore, the extended period for raising the demand was not justifiable.

3. Imposition of Penalties:
Penalties were imposed under Rule 25 and Rule 26(1) of the Central Excise Rules, 2002. Given the Tribunal's finding that the activity of printing on PVC sheets does not amount to manufacture, the basis for imposing penalties was invalidated. The Tribunal held that since there was no manufacture, there was no liability for duty, and consequently, penalties could not be imposed.

Conclusion:
The Tribunal concluded that the activity of printing on PVC sheets does not amount to manufacture and thus is not liable for any duty. The extended period for raising the demand was also found to be unsustainable. Consequently, all impugned orders were set aside, and the appeals were allowed.