1989 (9) TMI 237 - AT - Central Excise

Summary

Issues Involved:
1. Classification of printed and waxed twist wrap paper.
2. Eligibility for duty exemption under Central Excise Notification 49/87.
3. Determination of whether slitting amounts to manufacture.
4. Applicability of penalties under Central Excise Rule 173Q(1).

Issue-wise Detailed Analysis:

1. Classification of Printed and Waxed Twist Wrap Paper:
The central issue is whether printed and waxed twist wrap paper, slit to size, is classifiable under Heading 4811.40 of the Central Excise Tariff Act, 1985 (CET) with the benefit of duty exemption in terms of Notification 49/87. The appellants argued that their goods fall under Heading 4811.40 as a converted type of paper. The Collector, however, classified the goods under Heading 4818.90 as "other articles of paper," not eligible for the notification's benefit. The Tribunal concluded that the goods were indeed cleared in reel form and not cut to size, supporting the appellants' claim. The Tribunal further held that the printed waxed paper in rolls falls under sub-heading 4811.40 due to the specificity of the description, rejecting the Collector's classification under Heading 4818.90.

2. Eligibility for Duty Exemption under Central Excise Notification 49/87:
Notification 49/87 exempts converted types of paper and paperboard falling within Chapter 48 of the CET from the whole of the duty of excise, provided the base paper is duty-paid and not produced out of pulp within the factory. The Tribunal found that the base paper procured by the appellants was duty-paid and not produced in-house, thus meeting the notification's conditions. The Tribunal rejected the Revenue's argument that the notification does not apply because the final product was made from printed and waxed paper, not directly from base paper. The Tribunal held that the notification does not require direct conversion from base paper, thus granting the exemption to the appellants.

3. Determination of Whether Slitting Amounts to Manufacture:
The Revenue argued that slitting larger rolls into smaller widths amounts to manufacture, citing the Bombay High Court's judgment in Kores (India) Ltd. and the Supreme Court judgment in Ujagar Prints. The Tribunal, however, distinguished these cases, noting that the process of slitting did not result in a new product with a distinctive name, character, and use. The Tribunal concluded that slitting did not make a substantial difference to the character of the original article and did not amount to manufacture for excise levy purposes.

4. Applicability of Penalties under Central Excise Rule 173Q(1):
Given the Tribunal's findings on the classification and eligibility for duty exemption, the issues of duty liability and penalties became irrelevant. The Tribunal set aside the Collector's order demanding duty and imposing a penalty of Rs. 1,50,000 under Central Excise Rule 173Q(1).

Conclusion:
The Tribunal allowed the appeal, classifying the printed and waxed twist wrap paper under Heading 4811.40 of the CET and granting duty exemption under Notification 49/87. The Tribunal also concluded that slitting did not amount to manufacture and set aside the penalties imposed under Central Excise Rule 173Q(1).