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2019 (8) TMI 421 - AT - Central ExciseProcess amounting to manufacture - cutting of jumbo roll into small sizes and then packs the same as paper napkins and facial tissues in the unit containers - time limitation - HELD THAT - The definition of manufacture contained in section 2(f) of the Central Excise Act, 1944 was amended with effect from 01 March, 2003 and under the Third Schedule to the Central Excise Act, it has been mentioned that Central Excise Tariff, Chapter Heading 4818 covers cleansing or facial tissue paper, handkerchiefs and towels of paper pulp, paper cellulose wadding or webs of cellulose fibre. The amendment in the definition of manufacture under section 2(f)(iii) of the Central Excise Act, 1944 came into effect from 01 March, 2003 - The type of activity undertaken by the respondent-assessee would amount to manufacture and Central Excise duty was required to be paid on the clearance of paper napkin, paper towel, etc. manufactured by it from Jumbo roll after packing / repacking of the same in the consumer packs. The issue before Supreme Court in COMMISSIONER OF CENTRAL EXCISE, NEW DELHI-I VERSUS S.R. TISSUES PVT. LTD. 2005 (8) TMI 111 - SUPREME COURT was regarding the position existing prior to 01 March, 2003. Thus, the judgement of Supreme Court in the S R Tissues , in view of the amendment made in the definition of manufacture, which included cutting, slitting, packing, repacking of the products falling under 4818, would not be applicable after 01 March, 2003. Time Limitation - demand of Central Excise duty which was made under the extended time limit of 5 years under the proviso to section 11A(4) of the Central Excise Act, 1944 - HELD THAT - The Department merely by stating that the respondent-assessee had mis-declared, suppressed facts and had evaded Central Excise duty, issued the show cause notice. It cannot be said that the assessee had earlier suppressed and mis-declared facts with an intent to evade payment of duty. Thus, the extended time period under section 11A(4) of the Central Excise Tariff Act, 1944 could not have been invoked. Supplies of finished goods manufactured by the appellant were made to Institutional consumers - HELD THAT - The issue whether the goods are infact supplied to the Institutional consumers in bulk packs or in retail packs is the subject matter of verification, which can only be done by the field formation. Though the show cause notice mentions that the goods in question are liable for assessment as per the provisions of section 4A of Central Excise Act, 1944, but it does not elaborates the type of consumer packs that have been made by the respondent-assessee - This claim can only be verified by field formations for which purpose it needs to provide the necessary documents, like order of supply, invoices etc. It has also to be ascertained as to how much quantity out of the total quantity manufactured by the respondent-assessee was supplied to the Institutional consumers and how much was supplied to the normal customers. This also needs to be verified by field formations. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Whether the activity of cutting, slitting, and repacking jumbo rolls into smaller sizes amounts to "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944. 2. Whether the extended time limit for demand under Section 11A(4) of the Central Excise Act, 1944 is applicable. 3. Applicability of the provisions of the Legal Metrology Act, 2009 and Section 4A of the Central Excise Act, 1944 to the goods supplied to institutional consumers. Detailed Analysis: Issue 1: Definition of Manufacture The respondent-assessee is engaged in the manufacture of cleansing or facial tissues, handkerchiefs, and towels by cutting jumbo rolls into smaller sizes and packing them. The respondent claimed exemption from Central Excise duty based on the Supreme Court judgment in CCE, Delhi vs. S R Tissues Pvt. Ltd., which held that slitting/cutting jumbo rolls does not amount to manufacture. However, the Department argued that a specific amendment was made in Section 2(f)(iii) of the Central Excise Act with effect from 01 March 2003, which included the process of packing or repacking of napkins after cutting and slitting of jumbo rolls under the definition of "manufacture." The Tribunal agreed with the Department, stating that the amendment in the definition of manufacture under Section 2(f)(iii) post-01 March 2003 made the earlier Supreme Court judgment inapplicable. The Tribunal cited the Supreme Court judgment in CCE, Mumbai vs. Fitrite Packers, which laid down tests to determine whether a process amounts to manufacture. The Tribunal concluded that the activity undertaken by the respondent-assessee amounts to manufacture as the final products are perceived differently in the market from the jumbo rolls. Issue 2: Extended Time Limit for Demand The Department issued a show cause notice invoking the extended time limit under Section 11A(4) of the Central Excise Act, 1944, for the period 2011-2012 to November 2015. The respondent-assessee argued that a similar issue was previously adjudicated by the Commissioner in 2007, and thus, the Department was aware of the activity. The Tribunal agreed with the respondent-assessee, citing the Supreme Court judgment in M/s. Nizam Sugar Factory vs. CCE, which stated that the extended time period could not be invoked if the Department was aware of the facts. The Tribunal held that the extended time limit under Section 11A(4) could not be invoked, but the demand for the normal period could be confirmed on a denovo basis. Issue 3: Applicability of Legal Metrology Act and Section 4A of Central Excise Act The respondent-assessee claimed that the goods were sold to institutional customers like government, airlines, and railways, and thus, the provisions of the Legal Metrology Act, 2009, and Section 4A of the Central Excise Act, 1944, would not apply. The Department contended that no duty exemption notification exists for goods sold to institutional customers and that the assessment should be based on retail sale price with 30% abatement as per Notification No. 49/2008-CE (NT). The Tribunal noted that the issue of whether the goods were supplied to institutional consumers in bulk or retail packs needs verification by field formations. The Tribunal directed the lower adjudicating authority to decide on a denovo basis by verifying the nature of the clearances and the type of packing used. Conclusion: 1. The activity of cutting, slitting, and repacking jumbo rolls into smaller sizes amounts to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. 2. The extended time limit under Section 11A(4) of the Central Excise Act, 1944, could not be invoked as the Department was aware of the activity. However, the demand for the normal period can be confirmed on a denovo basis. 3. The issue of whether the goods were supplied to institutional consumers and the applicability of Section 4A of the Central Excise Act, 1944, needs to be verified by the lower adjudicating authority on a denovo basis. The appeal was allowed to the extent indicated, and the respondent-assessee was directed to cooperate with the adjudicating authority for a decision within three months.
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