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TMI Blog1999 (3) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... e for confiscation and the bond under which they were provisionally released has been enforced on the Bank Guarantee furnished therein to the extent of Rs. 50,000/-. Learned Collector has also imposed a penalty of Rs. 30 lakhs on the appellants under Rule 173Q. 3. Briefly, the issue concerns the dutiability of two items as alleged in the show cause notice dated 22-3-1993 covering period as follows :- (a) Carbon paper for the period 1-3-1988 to September, 1992. (b) Typewriter/Telex Ribbons for the period 1-4-1988 to September, 1992. 4. The main contention of the appellants before us is that the nature of activity which results in the production of both the carbon paper as well as the ribbons is such that it does not amount to manufacture under Central Excise law and, therefore, they denied all allegations contained in the show cause notice. 5. Heard Dr. P.V. Jois, learned Advocate along with Ms. S. Vijayadharani, Advocate for the appellants and Smt. Dolly Saxena, Joint Chief Departmental Representative and Shri R.K. Sharma, Senior Departmental Representative for the Revenue. 6. Learned Advocate submits that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then in Mumbai unit when the royal size/brief size was further slit by half to obtain the fullscape size they would be eligible to duty exemption thereon under Notification 217/86 and when the same was done at Madras they would be eligible for Modvat benefit. He submits that though this has been conceded by the learned Collector in the Order-in-Original, they have yet been denied the benefit of Modvat credit in the order impugned. 7. In support of these submissions, learned Advocate cites the following decisions :- (i) In the case of Kores India Ltd. v. CCE as reported in 1982 (10) E.L.T. 253 (Bom.), wherein, it has been held that while interleaving of paper may amount to manufacture, slitting of paper is not amounting to manufacture. He submits that the learned Collector has not considered the full import of this decision in the Order-in-Original impugned. (ii) The decision in the case of DCM Ltd. v. CCE as reported in 1997 (92) E.L.T. 315 (S.C.), wherein, according to learned Advocate a Constitutional Bench of the Apex Court has upheld the findings in the case of Moti Laminates and has reiterated the legal position th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inked packing and slitting in this case is only for the betterment of that article and, therefore, would not amount to manufacture. (xiv) In the case of Final Order No. ED/SB/1464/83 dated 11-5-1984, the Hon'ble Tribunal has held that cutting of rough marble blocks does not amount to manufacture. He submits that this has been followed in the case of Amruthsheele as reported in 1995 (80) E.L.T. 13 (Raj.). 8. Ld. Advocate submits that Order-in-Original issued by Collector of Central Excise, Calcutta bearing No. 55 (Ch. 48) 93 COMM NR 45/96 dated 12-7-96 wherein on a similar issue the ld. Commissioner has held that for both these products at Calcutta unit there is no manufacture involved and therefore no excise duty is attracted. Ld. Advocate submits that to the best of his knowledge this Order-in-Original has acquired finality as this has not been appealed against by the department. He also refers to Trade Notice No. 56/89 based on a Board Circular wherein the CBEC has clarified that cutting /slitting does not amount to manufacture as reported in 1989 (42) E.L.T. T 32. 9. To a query from the Bench, ld. Advocate replied that such a view that cutting and packing is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extended period would be applicable. But as in this case there was a bona fide belief that no manufacture is involved, therefore, the extended period is not applicable. He also refers to the above noted Trade Notice which also contributed towards harbouring this bona fide belief apart from the fact that the Order-in-Original of Calcutta noted above issued in 1996 also was in their favour. 12. Ld. Advocate further submits that in the event it is held that either of these two products would pay duty at Madras, then since duty had been paid earlier at Mumbai, Modvat credit would be available to the Madras unit thereon. In this connection he cites the decision of Formica India as reported in 1995 (77) E.L.T. 511 (S.C.). 13. Ld. D.R. Shri Sharma commenced his submissions with a brief resume of the items involved, and the nature of operations done at Madras. With respect to carbon papers, he submitted that these operations included sizing, cutting, packing in butter paper and thereafter in boxes and finally also shrink wrapping these boxes, i.e. removal of air to preserve shelf life. With respect to typewriter ribbons, he submits that jumbo reels of required length up to 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sizing, cutting, sophisticated packing, etc. would also qualify to be incidental and ancillary to the completion of the manufactured product and therefore falling within the ambit of the definition of manufacture under Section 2(f) of the Act. (c) He also cites the case of Karnataka Graphic Industries as reported in [1997 (91) E.L.T. 394 (T) = 1996 (67) E.C.R. 370 (T)] wherein it was held that Telex and Teleprinter rolls were different from printing and writing paper. (d) He also cites the case of Garware Plastics and Polymers as reported in 1993 (67) E.L.T. 670 (T) and applies the ratio thereof towards the decision as to whether the full-scape size carbon paper would fall under 4816.00 or not. (e) He cites the case of Shyam Oil Cake as reported in 1999 (104) E.L.T. 268 (T) and submits where there is a separate Tariff entry under the new Tariff, i.e. Central Excise Tariff, 1985, the same cannot be ignored as the new Tariff is based on the internationally acclaimed H.S.N. System. (f) He also cites the case of S.N. Sundarson as reported in 1995 (75) E.L.T. 273 (M.P. High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be preclude it to be taxed. Similar ratio is also available in the case of J.G. Glass Industries as reported in [1998 (97) E.L.T. 5 (S.C.) = 1998 (78) E.C.R. 761]. 17. Ld. DR further submits that the appellant's premises at Madras though called as depot by them, has been registered under the Factories Act in view of the machineries installed therein and in view of the fact that the number of workers employed allows it to be qualified under the Factories Act as a factory. He submits that the appellants were aware that the nature of activities undertaken by them could also be done in a factory under that law, yet no query was made in writing with the department as to whether excise duty would be attracted. 18. He further submits that price as available on the packages of the fullscap size, i.e. fullscap carbon paper indicated is the same as the price of the product at Mumbai and is inclusive of excise duty. 19. He further submits that the carbon paper which is obtained from Mumbai has a different dimension and a different use and while Royal/Brief sizes answer to the description under heading 4809 whereas the fullscap carbon paper sheets produced at Madras are answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise gate pass, in respect of these ribbons, they were receiving them from the two depots of these two companies "under Invoice only". He deposed that no excise gate pass was received and these are supplied to them from the depots. 24. Ld. D.R. also submits that in his statement dated 5-11-92 the Branch Manager of the appellants at Madras Shri Jacob Ittycheriah has deposed that their unit at Madras had licence under Factories Act; that whenever royal size carbon paper is required by the consumer, they ordered the same from their Mumbai factory, but this is in very rare cases. With regard to the conversion of ribbons into spool form, this is as per the requirement of consumers in different spools like for Godrej M.12, Remington Standard, Halda Standard, etc. It is deposed that the size to which the jumbo reels are cut depends upon the requirement of the customer. He further gives details of the blister packing and that the automatic spooling machine with cutter (power operation) is used for these purposes. Ld. D.R. in this connection submits that the appellants have at no stage either during the original proceedings or before this Tribunal led any evidence to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that since in either of these items no manufacture is involved, therefore Rule 9(2) as also Rule 9(1) are not at all involved in their case. He further submits that in para-13 of page-113 of the Paper Book in their reply to show cause notice before the Collector's adjudication stage, this has been made clear. He further submits that neither the show cause notice nor the said order clearly shows that the such Jumbo Ribbons were received without payment of duty in their Madras unit. Therefore such a presumption is without any base. He again reiterated the decisions in the case of Systems Packaging and also Reelco (supra). Therefore, ld. Advocate again reiterated his above noted submissions and concluded that both on merits as well as on time bar they had established a very strong case in their favour and prayed that the appeal may be allowed. He also submits that under these circumstances, there should be no imposition of penalty. 27. We have carefully considered the rival submissions as well as records of the case. As there are two products involved in the dispute, we propose to take them one by one for consideration. 28. With respect to the product Carbon Paper in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting of this carbon paper from royal or brief size into fullscap size i.e. by cutting it merely into half or quarter, the said carbon paper does not become a new and distinct identity i.e. a product which is known differently in the market other than carbon paper. To do that, appellants would have had to engage into a more substantial form of operations whereby a new product would have emerged into existence instead of confining themselves to mere cutting and packing. There is no change of character of the carbon paper noticed by us here. (3) Learned D.R. has very ably contended that since the end-use is a different one in these two cases, therefore when this difference in end-use is read with a different tariff sub-heading namely 48.16, then the said operations would result in the emergence of a commercially distinct item known to the market as such. On careful consideration of this argument, we find that while on the face of it, this certainly seems an attractive one, going deeper into the matter, we find that end-use, by itself, would not change the nature of the commodity. 29. In this connection, we find that the aforesaid findings are supported by the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fed into the process is carbon paper and albeit of larger dimensions and the outcome is also carbon paper and therefore the product remains carbon paper despite this process and no new distinct product emerges. 32. In the appellants' own case, the Hon'ble High Court at Bombay [1982 (10) E.L.T.253 (Bom.)] had held that process of cutting jumbo or large rolls of paper into specific sizes and dimensions and then to roll them into the Teleprinter Rolls with the aid of power driven machines amounts to manufacture under Section 2(f) of the Central Excise Act. We find that in this case, the process considered is not merely cutting of larger rolls of paper into specific sizes but also a further process is involved i.e. to further roll them into the Teleprinter rolls with the aid of power driven machine. This amounted to manufacture under Section 2(f) because the teleprinter rolls were known as a distinct commodity in the market which was different from mere paper rolls. The High Court also noted that slogan printing was done on the roll itself and there was an additional process of inter-leafing these rolls with carbon paper according to the requirements of the customers. These f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory. 33. We also note that the aforesaid judgment of the Hon'ble High Court at Bombay has since been supported by the Hon'ble Apex Court vide in Civil Appeal No. 3519/20 of 1990 decided on 22-1-1997 and as reported in 1997 (93) E.L.T. 322 (S.C.). 34. Learned DR has also submitted strenuously that the two sub-headings under chapter 48 noted above have statutory force under the scheme of things under the Central Excise Tariff. Therefore, because the full-scap carbon paper in boxes cleared by the appellants' unit at Madras falls under the description of sub-heading 4816.00, ipso facto, the product becomes dutiable under the said sub-heading. 35. We are unable to agree to this submission. Simply because a product is specified in this tariff sub-heading, and an end product satisfies that definition, it cannot be said, per se, that the product would attract Excise Duty. This is because excise duty is on manufacture. Therefore, the fact of manufacture has to be read with the tariff entry and mere mentioning in tariff entry alone does not lead to a levy of excise duty. This position has been confirmed by this Tribunal in the case of Elecon Engineering Co. Ltd. & Others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at these ribbons in the form in which they are received by the Madras unit cannot be supplied to their various customers by merely reducing the length by cutting. The product becomes a saleable commodity in the market only when it is spooled according to the desired sizes which is suitable to the particular model and make of the machine. Hence the product which emerges after spooling and packing namely a Typewriter/Telex ribbons has acquired a new and distinct identity from the Jumbo rolls, which has now become a specific commodity namely Typewriter/Telex ribbons in spools of specified lengths. It is not disputed that these would fall under Chapter heading 96.12 of the Schedule to CETA, 1985. 38. This view is supported by the decision of the Hon'ble Tribunal in the case of Dipen Textiles (P) Ltd. as reported in 1992 (62) E.L.T. 430 (T) wherein the issue which was considered was whether slitting of Jumbo rolls of Audio/Video tapes into pancakes of a smaller length and wound as such would amount to manufacture or not. The view taken therein was that even though Jumbo rolls as well as pancakes are both covered under the same Tariff heading namely 8523.13, yet since pancakes were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se manufacturers. In this connection, we also note that these facts were recorded after due consideration by the learned Collector in the Order-in-Original impugned in Para 39 thereof wherein the learned Commissioner while considering the issue relating to availability of Modvat Credit by the Madras Unit on the duty paid on the Jumbo reels of ribbons at Mumbai had observed as follows :- "The fourth issue relates to availing of Modvat credit of the duty paid on the inputs used in the manufacture of finished product. M/s. KIL have contended that the inputs/raw materials used have already suffered excise duty and if any duty is payable on the finished products, they should be allowed the Modvat credit and the proportionate amount on account of such credit should be deducted from the proposed demand. I have considered the above submissions. I would like to observe that M/s. KIL have not produced the required documentary evidence to prove that the entire quantity of inputs used have suffered duty." To a query from the Bench, learned Advocates submitted that it is possible that these manufacturers were operating under exemption available to SSI Units and therefore these goods would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured or not, would have under normal prudence of business activities, either approach the Department in writing for a clarification or better still, applied for registration under Central Excise and then filed a Classification list claiming the goods to be non-dutiable. There is nothing on record to show that all these steps were taken even though they were fully aware of Central Excise procedures. Therefore we find that the demand is not hit by time bar. The case law cited by the learned Advocate applies to situations where there is a short levy or non-levy due to suppression, etc., or not due to contravention of Rule 9(1) pertaining to clandestine removal. 43. In view of the aforesaid discussions, we confirm the Order-in-Original to the extent that the duty demand for Rs. 42,77,308.03 is confirmed. For this reason, the duty on the seized Typewriters/Telex ribbons of spool is also confirmed. Since the Order-in-Original has ordered a composite duty amount covering both such ribbons of spool as well as carbon paper of fullscape sizes, the Department shall re-compute the exact duty amount only on the seized ribbons on spool leaving out the duty amount on the seized carbon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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