2023 (7) TMI 1 - AT - Central Excise

SSI exemption availed - production of two commodities, namely Notebooks and Exercise Books and Writing and Printing Paper Sheets falling under Chapter Heading Nos. 4820 and 4820 respectively - Department alleged that the Appellant has treated the manufacture of writing and printing paper as trading activity and did not include their value in the total value of clearances, for the purpose of availing the said exemption. Whether the process adopted by the Appellant amounts to manufacture or not, as per the definition of manufacture as defined in section 2(f) of the Central Excise Act, 1944 read with the Section and Chapter Notes of the First Schedule to the Central Excise Tariff Act, 1985? - HELD THAT - In the instant case, the Appellant purchased Jumbo Paper Rolls from traders as well as from manufacturers. The raw material, i.e. Jumbo Paper Rolls cannot be used in the same roll form for use as Writing Paper. It needs to be cut into smaller size, may be ruled or not, depending upon its end use, and organized into set of papers for selling in retail market. The Appellant with the aid of machines cut those rolls into different sizes - the activities undertaken by the appellant does not change the nature of paper. It does not bring a new commodity with a distinct name, character and use. The writing paper remains as writing paper only, even after cutting. Hon ble Supreme Court has decided a similar issue in S.R. Tissues 2005 (8) TMI 111 - SUPREME COURT wherein the Hon ble Apex Court has held that the process of cutting/slitting of Jumbo Roll of Plain Tissue Paper into smaller size will not amount to manufacture as defined in Section 2(f) of the Central Excise Act, 1944 - the decision in the case of S.R Tissues squarely covers the present case on hand. In this case the Hon ble Supreme Court held that cutting/slitting of Jumbo Roll of Plain Tissue Paper into smaller size will not amount to manufacture. Thus, the activity of converting jumpo rolls into writing and paper sheets undertaken by the Appellant does not amount to manufacture. Accordingly, the clearance of such goods will be considered as Trading and the value of traded goods will not includable in the assessable value for the purpose of computing the value of clearances to determine the eligibility of the benefit of the notification 8/2003 dated 01.03.2003. After excluding the value of traded goods, the value of clearances of the Appellant was within the limits prescribed for availing the benefit of the exemption under Notification 8/2003 dated 01.03.2003, in the respective Financial Years during the period under dispute. The demands confirmed in the impugned orders are not sustainable - Appeal allowed.

Summary

Issues involved:
The judgment involves determining whether the process adopted by the Appellant, converting Jumbo Paper Rolls into Writing and Printing Paper Sheets, amounts to 'manufacture' for the purpose of central excise duty exemption under Notification 8/2003 dated 01.03.2003.

Issue 1 - Process of Conversion:
The Appellant converted Jumbo Paper Rolls into Writing and Printing Paper Sheets, treating it as a trading activity, resulting in non-levy of central excise duty. The department alleged that this conversion process amounts to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944.

Issue 2 - Legal Interpretation:
The primary issue to be decided was whether the cutting of Jumbo Paper Rolls into sheets by the Appellant constitutes 'manufacture' as per the relevant legal provisions. The Appellant argued that this process did not lead to the creation of a new product, relying on judgments such as S.R. Tissues and decisions by various Tribunals.

Issue 3 - Extended Period of Limitation:
The Appellant contended that the extended period of limitation cannot be invoked as there was no willful suppression or misdeclaration on their part. They maintained that they genuinely believed their activities did not amount to 'manufacture' and that there was no evidence of concealment by them.

Judgment Summary:
The Appellate Tribunal held that the conversion of Jumbo Paper Rolls into Writing and Printing Paper Sheets by the Appellant did not amount to 'manufacture' as defined in the Central Excise Act, 1944. The Tribunal relied on the decision of the Hon'ble Supreme Court in S.R. Tissues, where it was held that cutting/slitting of paper rolls into smaller sizes does not constitute 'manufacture'. Consequently, the Tribunal set aside the impugned orders and allowed all three appeals filed by the Appellant. The demands for central excise duty confirmed in the impugned orders were deemed unsustainable, as the value of the cleared goods did not need to be included in the assessable value for availing the benefit of the exemption notification.