2015 (4) TMI 567 - SC - Central Excise

Manufacture - Denial of exemption under Notification No.67/95-CE dated 16.3.1995 - assessee had cleared final product i.e. coated paper at nil rate of duty under Notification No.3/2001-CE dated 1.3.2001 - whether coating on uncoated paper, would amount to manufacture - Held that - Tribunal found that on coating uncoated paper, an article with different name commercially may have emerged but it is not a distinct article with different character or use and therefore no manufacturing process was involved when uncoated printing and writing paper is coated. - conclusion of Tribunal is legally sustainable and there is no error in the view taken by the Tribunal - Decided against Revenue.

Summary

Issues involved:
Interpretation of manufacturing process for excise duty exemption on coated and uncoated paper.

Detailed Analysis:

1. Manufacturing Process and Excise Duty Exemption:
The case revolved around the question of whether coating uncoated paper amounts to a manufacturing process for excise duty exemption. The respondent, engaged in manufacturing coated and uncoated paper, faced allegations that uncoated paper used for coated paper production was not eligible for exemption under Notification No.67/95-CE. The Department contended that as the final product, coated paper, was cleared at a nil rate of duty, the exemption did not apply. Show cause notices were issued, demanding excise duty, which was confirmed by the Commissioner along with a penalty. The Tribunal, however, found that coating uncoated paper did not result in a distinct article with different character or use, hence not constituting a manufacturing process. The Tribunal referred to a previous decision to support this stance, emphasizing that the objective of the exemption was to promote the use of non-conventional raw materials in paper production.

2. Tribunal's Decision and Legal Justification:
The Tribunal concluded that the process of coating uncoated paper did not amount to a manufacturing process, as no distinct commodity emerged after coating, and the coated paper retained its original purpose for printing and writing. It rejected the Commissioner's view that the assessee was manufacturing two separate products, highlighting that uncoated paper was an intermediate stage in the production of coated paper. By analyzing the exemption notification and its objective, the Tribunal found that accepting the Revenue's interpretation would defeat the purpose of promoting non-conventional raw materials in paper manufacturing. Consequently, the Tribunal set aside the demand under the show cause notice, ruling in favor of the assessee. The Supreme Court upheld the Tribunal's decision, deeming it legally sustainable and without error, leading to the dismissal of the appeals.

In conclusion, the judgment clarified the interpretation of the manufacturing process concerning excise duty exemption for coated and uncoated paper, emphasizing that coating uncoated paper did not constitute a distinct manufacturing process. The decision highlighted the importance of considering the purpose and objective of exemption notifications in determining the applicability of duty exemptions in manufacturing scenarios.