2022 (8) TMI 537 - AT - Central Excise

Process amounting to manufacture or not - conversion of jumbo paper rolls into smaller sheet by the activity of slitting, cutting - adjudicating authority has contended that the use of the paper sheet converted from jumbo rolls is different from the paper in the paper jumbo rolls - time limitation - HELD THAT - From Chapter Notes 13 of Chapter 48, it is clear that the process of slitting and cutting of thermal paper is amount to manufacture. However, the similar chapter note is not provided in respect of paper, which is the product in question. Therefore, in absence of the similar chapter note the slitting, cutting and conversion from bulk jumbo roll to sheet form of paper cannot be termed as manufacturing activity in terms of section 2(f) of Central Excise Act, 1944. Slitting, cutting of a already manufactured goods does not amount to manufacture as held in catena of judgments. It is settled that slitting, cutting of jumbo paper rolls to smaller sheet of already manufactured goods does not amount to manufacture - reliance can be placed in the case of COMMISSIONER OF CENTRAL EXCISE, VAPI VERSUS KNOWELL CONVERTERS 2008 (8) TMI 725 - CESTAT, AHMEDABAD - thus, the activity of slitting, cutting in conversion of jumbo paper roll into paper sheet does not amount to manufacture. Time Limitation - HELD THAT - The appellant have been categorically declaring their activity in each and every invoices as Jumbo Rolls converted into small rolls and small Rolls to Sheet, does not amount to Manufacture as per Section 2(f) of Central Excise Act, 1944 hence, no duty is leviable . The appellant had a bonafide belief that the activity of conversion from jumbo paper rolls to paper sheet is not amount to manufacture, therefore, the appellant have not suppressed the fact or misdeclared with intend to evade payment of duty. Therefore, the entire demand which is raised beyond the normal period is also hit by limitation. The demand raised by the adjudicating authority is not sustainable on merit as well as on limitation - Appeal allowed.

Summary

Issues:
1. Whether the conversion of jumbo paper rolls into smaller sheets through cutting and slitting amounts to manufacture under Section 2(f) of the Central Excise Act, 1944?
2. Whether the demand for excise duty on the converted paper sheets is sustainable?
3. Whether the demand is barred by limitation?

Analysis:
Issue 1:
The case involved the appellant engaging in activities of slitting duty paid Jumbo paper Rolls into smaller paper sheets. The department contended that this conversion amounted to manufacture, justifying the imposition of excise duty. The appellant argued that no manufacturing occurred as the paper remained the same, only the size changed. The Tribunal examined various judgments and found that cutting and slitting of already manufactured goods do not constitute manufacturing. It highlighted that there was no specific chapter note regarding paper conversion, unlike thermal paper, where such activities were considered manufacturing. The Tribunal concluded that the conversion of jumbo paper rolls into smaller sheets did not amount to manufacture under Section 2(f) of the Act.

Issue 2:
The Tribunal also addressed the sustainability of the excise duty demand. The appellant had consistently declared in their invoices that the conversion did not amount to manufacture, indicating a bona fide belief. As there was no intent to evade duty and no suppression of facts, the demand was deemed unsustainable. Therefore, the Tribunal held that the demand for excise duty on the converted paper sheets was not justified.

Issue 3:
Regarding the limitation, the Tribunal noted that the appellant's clear declaration in invoices about the non-manufacturing activity showed no intent to evade duty. As a result, the demand raised beyond the normal period was considered barred by limitation. Consequently, the Tribunal ruled that the demand and the personal penalty imposed on the director were unsustainable. The impugned order, holding the activity as manufacturing, was set aside, and the appeals were allowed.

In conclusion, the Tribunal found that the conversion of jumbo paper rolls into smaller sheets through cutting and slitting did not amount to manufacture under the Central Excise Act, 1944. The demand for excise duty was deemed unsustainable due to the appellant's genuine belief and lack of suppression of facts, and the demand was barred by limitation.