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TMI Blog2001 (5) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... paper rolls, napkins and facial tissue consigned by M/s. S.R. Tissues Pvt. Ltd., Hari Nagar, New Delhi to the same consignee. The officers, after recording the statement of the driver of the vehicle and examining the documents produced by him, seized the consignment of aluminium home foils and cling film of plastic, which were believed to be liable to confiscation, on 15-10-1998. In follow-up action, the officers visited the factory premises and office premises of M/s. S.R. Foils. In the factory premises, they found aluminium home foils, cling film etc., besides machines installed for converting jumbo rolls of aluminium foil into smaller rolls of aluminium home foils by the process of cutting into length of 9 mtrs. or 18 mtrs. In the office premises, the officers found branded goods cleared from the factory. All these (allegedly manufactured) goods were also seized as in the case of the aforesaid consignment. During the further course of enquiry, statements of Shri Rakesh Gupta, Director, S.R. Foils Pvt. Ltd., were recorded under Section 14 of the Central Excise Act. On the basis of those statements and other materials gathered in the course of enquiry by the officers, two SCNs we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period 1-4-1994 to 31-3-1999 under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excise Act, 1944 by invoking the extended period of five years. (v) I impose a penalty of Rs. 96,19,320 upon the party under Rules 9(2), 173Q and 226 of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944. (vi) I also order to charge interest at appropriate rate on the leviable Central Excise duty under Section 11AB of the Central Excise Act, 1944. (vii) I also impose a penalty of Rs. 2,00,000 on Shri Rakesh Gupta, Director of the party under Rule 209A of the Central Excise Rules, 1944. Appeal No. 841 filed by the company and Appeal No. 843 filed by Shri Rakesh Gupta are against the above order of the Commissioner. 3. A third SCN dated 5-10-1999 had also been issued to S.R. Foils Ltd. demanding duty of Rs. 54,14,306/- on the clearances of aluminium home foils effected during the period, April to September, 1999, on the basis of allegations similar to those made in the earlier SCNs. This SCN was within the normal period of limitation under Section 11A(1) of the Act. It was in adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had proposed to demand duty on aluminium home foil under Tariff Sub-heading (TSH) No. 7607.90 but the Commissioner s order confirmed the demand under TSH 7607.30. Duty could not be demanded under a classification not proposed in the SCN. Counsel sought to draw support to this argument from the decisions of the Supreme Court in the cases of Hindustan Polymer Co. Ltd. v. CCE, Guntur [1999 (106) E.L.T. 12] and Warner Hindustan Limited v. CCE, Hyderabad [1999 (113) E.L.T. 24 (S.C.) = 1999 (34) RLT 595] as well as the Tribunal s decision in the case of Usha Industrial Corporation v. CCE, Ahmedabad [2001 (130) E.L.T. 785 (Tri.) = 2000 (37) RLT 374 (CEGAT)]. 5.2 Harping on the point of limitation, ld. Counsel submitted that the company was, throughout the material period, under the bona fide belief that the process of cutting jumbo rolls into smaller lengths did not amount to manufacture and hence the products in question were not products of manufacture within the meaning of this expression under Section 2(f) of the Act. In Trade Notice No. 56/89, dated 9-6-1989 of Bombay-I Collectorate, the department itself had taken the view that the process of cutting and slitting of jumbo rolls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of confirming demand of duty under TSH 7607.30, by raising a plea that the aluminium home foils obtained from jumbo rolls were only cut to size and not cut to shape inasmuch as the appellants had not slit the jumbo rolls for reducing width thereof, nor perforated. Counsel also faulted the Adjudicating authority s demand for payment of duty on Cling film and Aluminium Service Trays (seized from the office and factory premises of the Company) notwithstanding the finding that the said goods were not manufactured but only traded in by the appellants. He also challenged the confiscation of these goods, for the same reason. 5.4 Ld. Advocate further challenged the Commissioner s order imposing penalty on the Company under Section 11AC of the Act and levying of interest on duty amounts under Section 11AB. He submitted that Sections 11AC and 11AB were introduced in the statute, by the Finance Act, 1996, w.e.f. 28-9-1996 only and that the provisions had no retrospective effect. He cited case law in support of the plea that the provisions of Section 11AC were not applicable to a case of demand of excise duty for any period prior to 28-9-1996. 6. Ld. JDR, Shri M.P. Singh submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erformed any slitting operation on the jumbo rolls of aluminium foil. Their only activity on the jumbo rolls was cutting, as could be gathered from the evidence. There are mainly three issues before us, firstly whether the activity of cutting jumbo rolls of aluminium foil of specified widths into shorter lengths (9 mtrs., 18 mtrs.), rewinding the resultant foils over cardboard cores and repacking the same in cardboard monocartons for being marketed as aluminium home foils amounts to manufacture under Section 2(f) of the Central Excise Act; secondly whether the activity of cutting jumbo rolls of aluminium foil of width 25 cms into rectangular pieces of size 25 cms X 22 cms and then making what is called Chapati Wrap by placing a sheet of paper between two sheets of the rectangular pieces of aluminium foil amounts to manufacture under Section 2(f) of the Act and thirdly, whether the demand of Central Excise duty raised in SCN dated 12-7-1999 is barred by limitation 7.2 On the first issue aforesaid, we note that the issue is identical with the main issue decided by us in the case of S.R. Tissues Pvt. Ltd. v. CCE, New Delhi as per Final Order Nos. 518-519/2000-C, dated 28-9-2000 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tariff entry for the flats as distinct from the jumbo rolls, the flats could be classified as a manufactured product. The Court s reasoned observation on the point runs thus - Tariff Entry 37.01 and Tariff Entry 37.02 deal with two different resultant products of manufacture. If a person manufactures photographic film rolls, such manufacturing process would attract the levy of duly under Entry 37.02. If another person manufactures photographic flats and films, then that manufacturing process would attract Tariff Entry 37.01. But, if photographic flats or films are not manufactured at all, but only made out of jumbo rolls by cutting into smaller pieces, then there being no manufacturing process involved, Tariff Entry 37.01 cannot be made use of to hold that the petitioner should take out a licence The ld. Single Judge, relying on the interpretation of manufacture given by the Supreme Court in Union of India v. Delhi Cloth and General Mills, AIR 1963 S.C. 791 and by the Madras High Court (Division Bench) in the case of Brakes India Ltd., 1986 (26) E.L.T. 211, held that the process of slitting/cutting jumbo film rolls into smaller sizes called flats did not result in a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tapes amounted to manufacture. Shri Lakshmikumaran has heavily relied on this view of the apex court after drawing an analogy between the recording of sound on blank cassette tapes [in which process the cassette tapes falling under entry (3) get converted to sound-recorded cassette tapes falling under entry (4) under T.I. 59 ibid] and the activity of slitting and cutting of jumbo rolls of tissue paper [in which the jumbo rolls falling under Chapter Heading 48.03 get converted to smaller sizes falling under Chapter Heading 48.18 of the new Central Excise Tariff]. We note that the analogy is befitting the context and it could very well be held that the provision of a separate Chapter Heading (48.18) for tissue papers of smaller sizes than those in jumbo rolls (48.03) did not, by itself, purport to enact that the process of the jumbo rolls being slit and/or cut to the smaller sizes amounted to manufacture . 8.4 . We find that, by the said activity of slitting and cutting, no new commodity with different name, character, end-use or commercial identity emerged. Therefore, following the decision of the High Court in Computer Graphics (supra), we hold that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o rolls of audio tapes into tapes of narrower width called pancakes amounted to manufacture. We note that this decision was rendered on the touchstone of marketability alone. By applying the yardstick of the High Court s decision in Computer Graphics (supra) and the Supreme Court s decision in Prabhat Sound Studios (supra), we find that the reliance placed by ld. DR on the Tribunal s decision in Electronics Mechanicals Industries (supra) is not acceptable. 7.3 In the instant case, in the SCN as well as in the order of adjudication, the aluminium foil in jumbo roll was held to be classifiable under TSH 7607.10. As regards the aluminium home foil obtained by cutting the jumbo roll, the SCN held it to be classifiable under TSH 7607.90, but the adjudicating authority held it to be classifiable under 7607.30. As regards chapati wrap, the SCN considered it to be classifiable under TSH 7607.20, 7607.30 or 7607.60 depending upon whether it was embossed, cut-to-shape or backed with paper. The Tariff Heading and its sub-headings are as under : 76.07 Aluminium foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excludi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logous. The lines of arguments of the two sides have also been similar. In such circumstances, we think, we will be justified in following the ratio of our decision in S.R. Tissues (supra) and holding that the activity of the present appellants viz. cutting jumbo rolls of aluminium foil into smaller lengths followed by rewinding on card board core and repacking did not amount to manufacture under Section 2(f) of the Central Excise Act in the absence of Section Chapter Notes defining such cutting/rewinding/repacking activity as amounting to manufacture. Therefore, we hold that the aluminium home foils cleared by M/s. S.R. Foils during the material period and those which were seized from their factory/office premises and eventually confiscated by the Commissioner were not excisable goods and hence there was no question of demanding any duty of excise on those goods. In view of this finding of ours, it is not necessary for us to go into the question whether it was permissible for the Commissioner to classify the home foils under TSH 7607.30 instead of TSH 7607.90 proposed in the SCN. 7.4 Now, we shall turn to chapati wrap. Each chapati wrap consists of two rectangular pieces of alum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall now deal with the third issue pertaining to limitation. The SCN dated 12-7-1999 demanding Central Excise duty on the aforesaid products relates to the period 1-4-1994 to 31-3-1999. The appellants have submitted that a major part of the demand is beyond the normal period of six months prescribed under Section 11A of the Central Excise Act. They have further submitted that the extended period of limitation of five years under the proviso to Section 11A(1) was not invokable against the company inasmuch as they had no intent to evade payment of duty on the goods. They were under the bona fide belief that the process of cutting of jumbo rolls did not amount to manufacture and, therefore, the home foils and chapati wrap were not excisable. Such a belief is claimed to have been occasioned by the Department s view as conveyed in Bombay-I Collectorate Trade Notice No. 56/1989, dated 9-6-1989 to the effect that cutting and slitting of jumbo rolls of X-ray films, graphic art films etc. did not amount to manufacture. The appellants have also relied on similar view taken by the Department in the cases of M/s. Miracle Foils (P) Ltd. and M/s. Foils India Laminates (P) Ltd. They have also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994 to 31-3-1999 is not hit by limitation. The appellants have no case that the demand raised by SCN dated 5-10-1999 is time-barred. Hence the company has to pay duty of excise on the chapati wraps manufactured and cleared from their factory during 1-4-1994 to 30-9-1999 as also on those seized by the department from their office/factory premises during such period. However, as we are unable to sustain the classification of the goods confirmed by the Commissioner under TSH 7607.30 for the reason that he has not stated any reason for preferring this Sub-heading to the other Sub-headings for chapati wrap, we would set aside the demand raised under that Sub-heading and remit the classification part of the dispute relating to chapati wrap back to the adjudicating authority for fresh reasoned decision and for re-quantification of duty demand on that basis. 7.7 In the light of our decision on excisability of aluminium home foil, the said goods cannot be confiscated. The Commissioner s order of confiscation of chapati wrap also will be set aside in view of our decision recorded in para (7.6) and the question of confiscability of the goods will also be remanded to the adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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