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TMI Blog1995 (3) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... rla Road, Bombay-400072, during the period from 1-4-1981 to 30-9-1985 and 1-10-1985 to 31-12-1985 is confirmed under Section 11A(2) of the Central Excises and Salt Act, 1944 and it shall be paid by the assessee immediately. I impose a penalty of Rs. 5.00 lakhs (Rupee Five Lakhs only) on M/s. Johnson Johnson Ltd., Bombay 400072, under Rule 173Q(1) of the Central Excise Rules, 1944." 2. Briefly stated the facts of the case are that appellants are engaged in the manufacture of Coated, Printed and Paper Backed Aluminium Foils. It was alleged by the Deptt. that such Coated, Printed and Paper Backed Aluminium Foils, before they are cut to label size are excisable goods and classifiable under Tariff Item 27(c) of the Central Excise Tariff upto 31-7-1984, and under the Tariff Item 27(7) of the then Central Excise Tariff from 1-8-1984. It was alleged that the appellants have neither filed classification list nor paid duty under the aforesaid tariff item on such coated, printed and paper backed Aluminium Foils manufactured and captively consumed by the appellants in the manufacture of labels. The appellants were, therefore asked to show cause to the Asst. Collector as to why : (1) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reinforcing material. The ld. Sr. Counsel submitted that under Notification No. 155/72 of 15-5-1972 and Notification No. 183/84, dated 1-8-1984 printed aluminium foils were fully exempt if : (1) Manufactured out of duty paid foils, and (2) The total quantity of bare aluminium foils used did not exceed 5 MT during the preceding financial year. 6. The ld. Sr. Counsel argued that Coating, Printing and Backing with paper of Aluminium Foils does not amount to manufacture; that pre-cut coated and printed labels do not come into existence as goods; that exemption under Notification No. 155/72 and Notification. No. 183/84 was applicable to Printed Aluminium Foils if the weight of bare Aluminium Foils used did not exceed 5 MT during the preceding financial year; that use of such foils admittedly did not exceed 5 MT in the appellant`s case; that duty cannot be demanded twice under the same sub-heading. 7. On the findings rendered by the Collector in his Order-in-Original, the ld. Sr. Counsel submitted that bare assertion that printing etc., constituted manufacture and the conclusion that a new product came into existence cannot be accepted; that the Collector relied on the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twice; that in the case of Rotopack reported in 1986 (24) E.L.T. 604, the Tribunal had held that, the words embossed, cut to shapes, perforated, coated, printed do not sanction duty from one process to another such as can be performed when a plain foil is printed, and then subjected to another visitation if it is cut to shape, and so on and so forth. They only say that whatever may be done to the foil, duty must be paid. Further, when the foil is printed, coated, a manufacture takes place and new product is born namely, printed/coated foil. But a manufacture to be relevant to Central Excise must be manufacture that brings out goods or a product that has not paid duty before. There must first of all be a duty, meaning thereby a head on description prescribing a duty of excise for such product. Contrary to popular belief, the judgment of the Supreme Court in the DCM does not say, that whenever a manufacture is perceived, a produced article must be subject to excise no matter whether it had paid very same duty or not. Therefore, the order of the Collector based on such mistaken belief is set aside and no duty is leviable under Item 27(c) on the Printed Aluminium Foil made from Alum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. 352 (Cal.) E.L.T. 308 (Tribunal) and 1992 (60) E.L.T. 195 (Mad.). 9. The ld. Counsel submitted that even assuming that the Coated, Printed and Paper Backed Aluminium Foils were goods, the fact remains that they were fully exempt from duty under Notification. No. 155/72 and 183/84; that this contention was raised before the ld. Collector; that the ld. Collector has not dealt with this contention at all. 10. On limitation, the ld. Sr. Counsel submitted that proviso to Section 11A(1) cannot be invoked as no allegation of suppression has been brought out in the show cause notice. Referring to the various decisions of the Tribunal namely, the case of Patna Graphics reported in 1989 (40) E.L.T. 62, Lucas TVS reported in 1989 (41) E.L.T. 267 (T), and Universal Autocrafts reported in 1987 (31) E.L.T. 912, the ld. Sr. Counsel submitted that the Tribunal had held that, it is now well settled that in the absence of allegations of suppression, wilful mis-statement and violation of the Act or Rules with an intention to evade payment of Central Excise Duty, the longer period under proviso of Section 11A cannot be invoked Arguing further, the ld. Sr. Counsel submitted that reliance on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects, there is no case made out by the Department and therefore, prayed that the appeal may be accepted and consequential relief may be granted to the appellants. 12. Sh. Somesh Arora, the ld. JDR appeared for the Respondent and submitted that the appellants have stated that Printed, Coated, and Paper Backed Aluminium Foils were goods and that the process of printing, coating and packing is undoubtedly the process of manufacture. In support of his contention, the ld. DR relied on the ratio of the judgment of the Hon`ble Supreme Court in the case of Laminated Packing (P) Ltd. reported in 1990 (49) E.LT. 326 wherein the Apex Court had held that, Lamination of duty paid kraft paper with polyethylene resulting in polyethylene laminated kraft paper amounts to manufacture for the purpose of Section 2(f) of the CESA, 1944" and that for arriving on this ruling the Hon ble Apex Court followed their own decision in the cases reported in 1985 (20) E.L.T. 179 and 1988 (37) E.L.T. 490 [sic]. 13. On double taxation, the Id. DR submitted that in the case of British India Corporation Ltd. v. CCE reported in 1986 (25) E.L.T. 727 (T), the Hon ble Tribunal had held that, Tariff Item 43 makes it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n intent to evade the payment of Central Excise duty. Further, finding is that the party did not disclose the manufacture of excisable goods falling under sub-heading 2107.91 and suppressed the material evidence in respect thereof. On these findings the proviso to Section 11A of the Act envisaging the period of limitation to be five years from the relevant date is surely attracted. The ld. DR argued that the suppression is further established as the appellants did not give any classification list nor did they disclose the detailed process of manufacture of printed labels indicating therein that printed, coated paper backed foils came into existence. The Id. DR submitted that in view of the fact that certain points were not properly dealt with in the order in original it was a fit case for remand. 15. In the rejoinder, the Id. Sr. Advocate submitted that there was no case for remand in as much as all the points were agitated before the Adjudication Authority. It was further argued by the Id. Sr. Counsel that manufacture is not only requirement for levy of Central Excise duty, what is required is the coming into existence of excisable goods which are capable of being bought and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a verb is generally understood to mean as `bringing into existence a new substance and does not mean merely `to produce some change in a substance, however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases Vol. 26, from an American Judgment. The passage runs thus :- `Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use. 19. We also observe that to become goods, an article must be something which can ordinarily come to the market to be bought and sold. This ruling was given by the Apex Court in the case of Union Carbide India Ltd. v. U.O.I. Ors reported in 1986 (24) E.L.T. 169 (SC). Examining the facts of the case before us in the light of the above rulings, we find that Printing and Coating and Backing with Paper of Bare Aluminium Foils brings into existence a new product namely, Printed, Coated and Paper Backed Aluminium Foils. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft paper with polyethylene, liable to excise duty in the following terms :- 5. Counsel for the appellant sought to contend that the kraft paper was duty paid goods and there was no change in the essential characteristic or the user of the paper after lamination. The fact that the duty has been paid on the kraft paper is irrelevant for consideration of the same before us. If duty has been paid, then benefit or credit for the duty paid would be available to the appellant under Rule 56A of the Central Excise Rules, 1944. (c) Whether goods could be charged twice to duty if they are classified under the same entry as under :- 6. The further contention urged on behalf of the appellant that the goods belong to the same entry, the goods are different identifiable goods, known as such in the market. If that is so, the manufacture occurs and if manufacture takes place, it is dutiable. `Manufacture is bringing into being goods as known in the excise laws, that is to say, known in the market having distinct, separate and identifiable function. On this score, in our opinion, there is sufficient evidence. If that is the position, then the appellant was liable to pay duty. We are, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses as where there is doubt whether a product or an article is what it is claimed to be or whether it is of the quality that Indian standards has laid down standards for. It is for this reason that this Institution has a scheme for stamping goods placed on the market as a guarantee that the product stamped conforms to specifications laid down by it, for the safety or satisfaction of customers. It does not mean that the goods not so stamped are not goods of the same generic description. Indeed, there are goods that bear no Indian Standards marks. But whether stamped or not, all the goods are equally liable to Central Excise levy. 24. We also get support of the above even from the Hon ble Kerala High Court judgment in the case of The Western India Plywood Ltd. v. U.O.I reported in 1982 (10) E.L.T. 447 (Ker.) in which the Hon ble Kerala High Court had held :- 9. The question next arises whether for goods to be excisable as falling in a particular item in Schedule I of the Act, it is necessary that the goods must be actually put in the market. This question is of importance in deciding whether an intermediate manufacture of another product is also excisable. As already pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 1934 (32 of 1934) has already been paid and the total quantity of such foils taken for the process of manufacture in one or more of his factories, in any financial year does not exceed 5 MT. .The above goes out to show that Coating, Printing and Backing with paper has been accepted as a process of manufacture for the purpose of this exemption Notification. Needless to say that manufacture has a definite connotation for the purpose of duty, once the goods are considered to be manufactured they become liable to duty. 26 From the above citations and case laws and other material we observe that the Tribunal had dealt with Aluminium Foils which is a specific issue also before us and the Apex Court had dealt with identical issues in respect of lamination of kraft paper, we find that the conclusion of the Tribunal was altogether different from the one delivered by the Hon`ble Supreme Court. It may be mentioned on the issue of manufacture, the Tribunal had held that, Coating, Printing and Paper Backing amounted to manufacture. Having regard to the rulings of the Hon`ble Supreme Court and other materials as discussed above, we hold as under :- (a) Printing, Coating and Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants submitted that, the ld. Collector nowhere discussed this aspect. On a perusal of records, we find that this issue was taken up before the ld. Collector. On perusal of the impugned order we observe that this issue was not at all discussed by the Collector in his order. However, the issue being that of exemption under Notification even if not discussed by the Collector can be taken into consideration by the Tribunal. Having regard to the facts that the two notifications exempted Coated, Printed and Paper Backed Aluminium Foils if the total quantity of Bare Aluminium Foils used for manufacture of the above item did not exceed 5 MT during the preceding financial year. We also find that the condition of the notification was complied with by the appellant as the figures given in the statements submitted before the Adjudicating Authority have not been controverted. In view of these exemption Notifications, we hold that no duty was chargeable on the Printed, Coated and Paper Backed Aluminium Foils as the condition prescribed in the Notification was fully met by the manufacturers. 28. On the question of limitation, it was argued by the appellants, that there was no allegation of supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 1978 (2) E.L.T. (J 159) wherein, the Apex Court had held, An order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender not liable to act in the manner prescribed by the statute. Having regard to all the facts of the case and the Rulings of the Apex Court we hold that in the circumstances no penalty could be imposed on the appellants in this case and we order acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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