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Issues involved: Whether bitumenised waterproof paper is liable to be assessed to excise duty under entry 17(2) of the First Schedule to the Central Excises and Salt Act, 1944.
Summary: The petitioners, who are manufacturers of bitumenised waterproof paper, challenged the levy of excise duty on this product following a notification issued by the Government of India in 1976. The petitioners argued that bitumenised waterproof paper is essentially ordinary kraft paper bonded with bitumen, and therefore, should not be subject to excise duty as it would amount to double taxation on the paper and bitumen components. On the other hand, the respondents contended that the process of treating kraft paper with bitumen results in a distinct commercial commodity, justifying the imposition of excise duty. The central question was whether the treatment of kraft paper with bitumen constitutes manufacturing under entry 17(2) of the Act. The court analyzed previous judgments and legal definitions of 'manufacture' to determine if the process resulted in a new and different article emerging. It was observed that the essential character of kraft paper remains unchanged even after treatment with bitumen, and therefore, the process does not amount to manufacturing a new product attracting excise duty. Referring to relevant case laws, including Dalhousie Jute Co. v. Union of India and Navgujarat Paper Industries v. Superintendent of Central Excise, the court emphasized that mere treatment or coating of paper does not transform it into a new commodity known in the market. The court also cited Swastic Products, Baroda v. Superintendent of Central Excise to highlight that coloring or printing on already manufactured paper does not constitute a manufacturing process for the purpose of excise duty. Based on these principles, the court concluded that the respondents were not justified in levying excise duty on bitumenised waterproof paper under entry 17(2). The notification imposing the duty was deemed invalid and quashed, ruling in favor of the petitioners without costs.
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