1990 (1) TMI 194 - AT - Central Excise

Summary

Issues Involved: Classification of 'gummed paper tapes' under Central Excise Tariff Item 60 or Item 17(2).

Issue-wise Detailed Analysis:

1. Classification under Tariff Item 60 or 17(2):
The primary issue was whether 'gummed paper tapes' manufactured by the appellants should be classified under Item 60 of the Central Excise Tariff as "adhesive tapes all sorts..." or under Tariff Item 17(2). The Assistant Collector of Central Excise classified the tapes under Item 60, stating that the gummed paper tapes have adhesive coatings activated by water and are used for holding materials together. This decision was upheld by the Appellate Collector of Central Excise.

2. Argument by the Appellants:
The appellants argued that they manufacture gummed paper, which is exempt from central excise duty. They contended that slitting gummed paper into tapes does not constitute 'manufacture' and thus, the tapes should remain classified under Item 17(2). They cited several judgments, including the Supreme Court's decision in Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers, which held that a mere change in physical form does not amount to manufacture.

3. Argument by the Respondents:
The respondent argued that Item 60 specifically includes paper-backed adhesive tapes and thus, the product should be charged under this item. They relied on the Tribunal's decision in Hindustan Petroleum Corporation Ltd. v. Collector of Customs & Central Excise, which stated that intermediate products in a continuous process are liable for excise duty. They also cited the Bombay High Court's decision in Kores (India) Limited v. Union of India, which held that cutting large rolls of paper into specific sizes amounts to manufacture under Section 2(f) of the Central Excises & Salt Act.

4. Tribunal's Analysis:
The Tribunal considered the records and arguments. They noted that sub-item (2) of Item 17 includes paper subjected to treatments like coating, which applies to the appellants' gummed paper. They also referenced the Supreme Court's decision in Collector of Central Excise, Bombay-II v. M/s. Kiran Spinning Mills, which held that cutting running lengths of man-made fiber into shorter lengths does not constitute manufacture. They concluded that slitting gummed paper into tapes does not amount to manufacture and thus, the tapes should not fall under Item 60.

5. Definition and Trade Understanding:
The Tribunal referred to definitions and trade understandings, noting that adhesive tape typically refers to self-adhesive tapes not requiring a solvent. They cited IS:4661-1968, which defines gumming as applying a layer of adhesive to paper for subsequent use after moistening, supporting classification under Item 17(2). They also referenced the Harmonized Commodity Description and Coding System and the Supreme Court's decision in Collector of Central Excise, Kanpur v. Krishna Carbon Co., which classified coated paper under Item 17(2).

6. Conclusion:
The Tribunal classified the tapes under Item 17(2) of the erstwhile Central Excise Tariff, setting aside the impugned order and allowing the appeal with consequential relief. They noted that the process of slitting does not change the fundamental nature of the gummed paper, and thus, it remains classified under Item 17(2).

Separate Judgment:
The Senior Vice President agreed with the classification under Item 17(2) and added that the slitting operation is merely for convenience of use and does not change the character of the gummed paper. They emphasized that Item 60 is a residuary item and since gummed paper tape falls under Item 17(2), it is excluded from Item 60. They also noted that trade documents describe the goods as gummed paper, not adhesive paper tapes.

Final Decision:
The appeal was allowed, and the gummed paper tapes were classified under Item 17(2) of the Central Excise Tariff, with consequential relief to the appellants.