1990 (1) TMI 257 - AT - Central Excise

Summary

Issues:
1. Appeal against the order of the Collector of Central Excise (Appeals) Bombay regarding liability of Bituminised waterproof paper to Central Excise duty.
2. Interpretation of the manufacturing process of bituminised waterproof paper.
3. Conflict between the decision of the Larger Bench of the Tribunal and the Bombay High Court regarding the classification of bituminised waterproof paper.

Analysis:

The appeal before the Appellate Tribunal CEGAT, New Delhi involved a dispute over the liability of Bituminised waterproof paper to Central Excise duty. The Collector of Central Excise, Baroda appealed against the order of the Collector of Central Excise (Appeals) Bombay, which had allowed the appeal of the respondents by ruling that the manufacture of Bituminised waterproof paper did not attract Central Excise duty. The respondents claimed a refund on the grounds that the processing of duty-paid paper into bituminised paper did not constitute manufacturing, thus exempting them from duty payment. The Collector (Appeals) sided with the respondents, stating that bonding kraft paper with bitumen did not amount to a manufacturing process.

The Departmental Representative argued that the issue of assessability of bituminised waterproof paper to duty had been settled by a Larger Bench decision of the Tribunal in the case of Guardian Plasticote Ltd. v. Collector of Central Excise, Calcutta. The Tribunal, after considering Tariff Item 17, the Supreme Court's decision in Empire Industries v. Union of India, and relevant technical literature, concluded that bituminised paper was a distinct commodity attracting duty liability under Tariff Item 17-CET.

On the other hand, the respondents relied on a decision of the Bombay High Court in Union of India v. Babubhai Nylchand Mehta, where it was held that bituminised waterproof paper did not lose its identity as kraft paper during the bituminisation process and thus did not undergo a manufacturing process. The Tribunal noted that the Larger Bench decision in Guardian Plasticote Ltd. extensively analyzed the process of manufacturing and the emergence of a new distinct product with unique characteristics. The Tribunal emphasized the criteria set by the Supreme Court, stating that if a new commodity with distinct characteristics emerged, it constituted manufacturing. The Tribunal highlighted industry standards, specifications, and definitions supporting the classification of bituminised waterproof paper as a separate commodity.

Ultimately, the Tribunal held that the decision of the Larger Bench was binding and decisive in classifying the bituminisation of kraft paper as the manufacturing of bituminised paper, contrary to the Bombay High Court's ruling. Consequently, the impugned order of the Collector (Appeals) was set aside, and the department's appeal was allowed.