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TMI Blog2017 (10) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... slits are not goods or product known in the market and hence not marketable. The slide/slits in the facts of the present case are specific to the appellant as manufactured by them for their own brand separately and cannot be inter-used by other cigarettes manufacturers for their brands. In the facts of the case that the slides/slits are also not interchangeably usable by the appellant itself for its various cigarettes being manufactured under different brands. These slides/slits are not manufactured separately and or purchased from outside by any of the cigarette manufacturers including the appellant. These are manufactured in a continuous process at the stage of packing of the cigarettes by automatic machines in the course of packaging of cigarettes. There is no output which can be called as slide/slits cleared by the appellant or any cigarettes manufacturer. Accordingly, appeals are allowed with consequential benefits by holding that slides/slits are not capable of being marketable and accordingly are not excisable/dutiable. Appeal allowed - decided in favor of appellant. - E/Cross/153/2007, E/1207, 1205 & 1206/2007-EX [DB] - A/71184 71186/2017-EX[DB] - Dated:- 27-9-2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta who was the production manager of the appellant company posted at the cigarette factory at Saharanpur since May, 2002, being affidavit dated 24/09/2004. The contents of the said affidavit are quoted herein below being relevant to the facts and circumstances: I am the Production Manager of the Appellant Company, M/s ITC Ltd., posted at the Cigarette factory of the said company at Saharanpur since May, 2002. Earlier also I have worked in several factories manufacturing cigarettes of M/s ITC Ltd. at different locations and I have experience in the field of the production of cigarettes and packing thereof for the last over 20 years. I am fully conversant with the entire process involved in packing of cigarettes including the process of preparing shell type and hinge lid type of cigarettes packets as well as the products and the equipment available in India for the manufacture and packing of cigarettes. The facts set out herein were prevalent during the relevant period from 1986 to 2000. On account of my long experience in this field, I am competent to depose as under: 'Shell type of Cigarettes packets' Cigarettes are packed in different types of packets. One su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s done first and the cutting and creasing is done subsequently on the same machine. The cut outs for each brand of cigarettes are 'design specific.' The printed 'cut out' for each brand of Cigarettes has a distinct and different marking thereon which contains particulars and details applicable only to a particular brand of cigarettes. The markings and printing material is specified to also comply with the legal formalities of the declarations to be made on the packet for each brand of cigarettes as prescribed under Rule 93 of the Central Excise Rules, 1944 as well as the provisions of the Packaged Commodity Rules framed under the Standard of Weights and Measure Act. Apart from the aforesaid markings compulsorily required by law to be printed, other matters like the slogans, are also separately specified for each brand of Cigarettes, which are also printed thereon. Keeping these factors into consideration, the following details were required to be printed for each brand of Cigarettes during the period relevant for the above appeals, for each brand of Cigarettes:- (i) Brand name like Capstan Standard (ii) MRP like ₹ 4.00 incl. of all taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity' or 'goods'. No distinct and different commercial commodity known to the market comes into existence upon cutting of paper board. This process cannot be treated as manufacture to attract duty of excise. The twin tests for excisability of marketability and manufacture is not satisfied in respect of such 'cut out. CUT OUT' FOR HINGE LID TYPE OF PACKETS. Cigarettes are also packed in hinge lid type of packets. In order to ensure that such packets, when opened, can be firmly closed again, a paper board 'cut out' is pasted on the inner front side of the packet, so that when the lid of the packet is closed, the lid gets stuck by the said 'Cut Out' and the packet gets firmly closed. In the absence of paper board 'Cut Out', the lid when closed, would not get stuck and would remain half open. This paper board 'Cut Out' is nothing but duty paid paper board cut to specific size and shape. For want of better description, this paper board 'cut out' is also described as a 'slit' or 'inner frame . For different brands of Cigarettes, the size and design of the hinge lid type of packet is different. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red shape and specifications is installed in the machine as a component part thereof. The paper board fed into the machine is cut within the same machine by this automatic cutter at extremely high speed so as to provide the requisite number of cut outs for hinge lid packet of cigarettes, which are prepared in numbers ranging from 110 to 420 packets per minute. In yet another stream within the same machine, cigarettes of a particular brand, which have been separately made, are fed in bulk into a hopper. The desired quantity of cigarettes i.e. 10 or 20 are placed automatically on top of a flat aluminium foil within this stream of the same machine. The aluminium foil is then automatically folded, to fully cover the cigarettes from all sides so as to form a bundle containing cigarettes. The bundle of cigarettes in aluminium foil comes from one stream of the same machine. The paper board 'Cut Out' comes from the other stream of the same machine, which is put on top of the aluminium bundle containing cigarettes. From another stream of the same machine, the printed HL Blanks in flat form comes, on which glue has been put at specified places on the inner portion includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturer of cigarettes or any other producer in India who has any equipment to separately produce such paper board 'cut out's to be supplied to any other manufacturer of cigarettes for packing them in hinge lid type of packets. It is also not possible to do so. There is no possibility of any cigarette manufacturer using any such paper board 'Cut Out' from any outside source. Keeping in view the high speed automatic process of packing of hinge lid type of cigarettes and the special sophisticated, automatic and high speed machines required to prepare the same, buying and selling of such paper board 'Cut Out' is not at all conceivable. Trading of such cut outs is not done in the cigarette industry. The preparation of paper board 'Cut Out' at an intermediary stage within the automatic machine involves only cutting of paper boards to the desired size and shape and nothing more. Mere cutting of paper board to a particular size and shape cannot amount to manufacture. No new commercial commodity known to the market comes into existence. Such cut outs are also not capable of being marketed and cannot be described as a marketable commodity. They are not g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes into existence and that the same are used in a continuous process within the factory premises itself is not tenable in view of the ruling of Hon ble Delhi High Court in M/s Zupiter Printing versus Union of India, 1991 (34) E.C.R. 7, where it has been observed that it is a common practice for the manufacturers of cigarettes to acquire cigarette packets and parts thereof from parties who are engaged mainly in the manufacture of cigarette packets and their parts. In the case of the M/s Zupiter Printing the party was manufacturing only outer shells of cigarette packets for the cigarette manufacturer. Thus, the marketability of cigarette packets and parts thereof, that is inner frames is established beyond doubt as the same is manufactured by the manufacturers other than the cigarette manufacturer has been found in the case in M/s Zupiter Printing. The Learned Commissioner has also made reference to the Larger Bench ruling of this Tribunal in C.C.E. Versus G.T.C.-2005 (184) E.L.T. 29 with reference to aluminium foil, in which cigarettes are packed is cut to shape and size and embossed with the word Pull it was held that the product is a result of an integrated and continuous pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under clause 5(f) of the Notification, plastic body a part of EMR is liable to excise duty. The Apex Court observed that for an item to be dutiable, there are twin requirements under the Tariff Act. Being (a) manufacture and (b) marketability. There is no dispute as regards the manufacture, that the plastic bodies are manufactured by the assessee, but the germane question is whether it has marketability. The plastic body is being manufactured to suit the requirements of the EMR of the respondents and is not available in the market for being bought and sold. It is not a standardised item or goods known and generally dealt with in the market. It has been manufactured by the respondent assessee for its captive consumption. It is not a product known in the market with any commercial name. Further observed that the plastic body of EMR does not satisfy the criteria of marketability, taking notice of the fact that different manufacturer of the same product have a different plastic body to suit its design and requirement. If one goes to the market to purchase plastic body of EMR of a particular manufacturer either for replacement or otherwise one cannot get it in the market because it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falls within the schedule by itself does not make it marketable. Actual sale is not necessary, but articles must be capable of being sold in market or known in market as goods. 8. The Learned counsel also referred to the ruling of the Apex Court in the case of C.C.E. versus M/s I.T.C. Ltd. (their own case) reported at 2003 (152) E.L.T. 241 , wherein the question before the Apex Court was whether cigarette packets would be other packing containers or boxes within the meaning of Tariff Item No. 17 of Central Excise Tariff Act, in view of the contention of the Revenue that cigarette packet is a small paper box and cannot be termed as a container which is relatively large enclosure. The contention of the assessee was that cigarette packet would be neither packaging container nor a paper box. Under the tariff as relevant during the said period, paper and paperboard, all sorts (including paperboard, mail board, store board, cardboard and Corey wooded board) and articles thereof specified below, in or in relation to the manufacture of which any processing is carried on with the aid of power, where exempt. Whereas boxes cartoons bags and other packing containers (including flatt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Tariff Item 17(4). 9. The Learned counsel also relied on the ruling in the case of M/s Zupiter Printing and other Versus Union of India (supra) , wherein the issue before the Hon'ble Delhi High Court was whether outer shells of cigarette packet are neither boxes nor containers, being open at both ends and these are not goods, known to the market, hence not excisable under Tariff Item 17(4). M/s Zupiter Printing filed writ petition before the Hon'ble Delhi High Court challenging the order on the ground inter alia that the Board has no authority under the law to give direction to a quasi judicial authority like the Assistant Commissioner, who was seized of the matter on the judicial side nor can outer shells of the cigarette packet which are open from both sides be classified as box or container. The fact in the said case was that M/s Zupiter Printing was manufacturing outer shells of printed sheets supplied to it by Godfrey Philip India Ltd, a manufacturer of cigarettes on job work basis. M/s Zupiter Printing was only charging conversion charges that is converting the printed sheets into outer shells. The outer shells prior to the introduction of the Finance Bill, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observations of the Apex Court in M/s Mehta Parikh Company versus Income Tax Commissioner, 1956 SC 554 clearly suggest that when affidavits are filed before an officer, normally speaking, if he so desires to challenge the correctness of the averments made in these affidavits, he should call the deponent for being cross-examine or test the correctness of the averments by any other means open to him and it would not be proper for the officer to arbitrarily reject the affidavits as incorrect. Further observed that the method followed by the Assistant Collector in dealing with the experts affidavit and trade opinion is clearly contrary to the observations of the Apex Court. 10. The Learned counsel also referred to the ruling in M/s Asia Tobacco Company Ltd. Versus Union of India, 1992 (58) E.L.T. 418 wherein the Hon'ble Madras High Court held that it is clear from Notification No. 66/1982 C.E. that the intention was to exempt all containers and boxes falling under Tariff Item No.17(4) relating to paper and paperboard and articles thereof except printed cartons and printed boxes. Further held that carton box could not be in any way used to describe a packet of cigarettes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and size and undergoes processing of creasing, folding and printing before being made suitable for its use as a slide/slit to be used with the shell. In the process paperboard loses its identity and gets a new name that is slide/slit. Further the process of manufacture of slide/slit does not involve mere cutting of paperboard into smaller sizes. So far the contention of the appellants that the Commissioner (Appeals) has mixed the issue of inner frames and slides/slits is not correct as the Learned Commissioner (Appeals) in his order has discussed both type of items and given his findings. Accordingly, further placing reliance on the ruling in the case of Delhi Cloth, General Mills, an entirely new product has emerged after cutting slitting, folding and creasing of paperboard known as a slides/slits (inner frame) in the tobacco trade, industry and further in view of the M/s Zupiter Printing (supra), the marketability of cigarette packets and part thereof is established. The Learned Commissioner (Appeals) have elaborated the point of marketability, by observing - Therefore, to accept the claim that slides/slits (inner frames) are neither a manufactured product nor marketable will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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