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TMI Blog2005 (8) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(f) of the said Act. As regards the manufacture of wet tissues and fragranted tissues, the matter is remitted to the Commissioner to ascertain whether the assessee has the requisite infrastructure, facility, machines etc. for manufacturing fragranted and wet tissues and, if so, whether the process amounts to "manufacture". Civil appeals filed by the department are dismissed - Civil Appeal No. 5293 & 5294 of 2001, Civil Appeal No. 8436 to 8438 of 2001, Civil Appeal No. 194 & 195 of 2002, Civil Appeal No. 6535 of 2002, Civil Appeal No. 9274 & 9275 of 2003, Civil Appeal No. 4682 of 2004, Civil Appeal No. 5709 & 5710 of 2004 - - - Dated:- 5-8-2005 - B.P. Singh and S.H. Kapadia, JJ. [Judgment per : S.H. Kapadia, J.]. - A short question which arises for determination in these civil appeals filed by the department under Section 35-L(b) of the Central Excise Act, 1944 (for short "the said Act") is - whether the process of unwinding, cutting and slitting to sizes of jumbo rolls of tissue paper would amount to "manufacture" on first principles or under Section 2(f) of the said Act? 2.The above question arises in this batch of civil appeals. For the sake of convenience, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999, a show cause notice was issued to the assessee by the department in which it was alleged that the assessee was engaged in the manufacture and storage of tissue paper rolls, napkins and facial tissues, which were liable to be seized and confiscated for non-compliance of the provisions of the said Act. On 12-7-1999, another show cause notice was issued to the assessee by the department alleging that during the period 1-8-1997 to 14-10-1998, the assessee was engaged in the manufacture of toilet rolls, napkins and facial tissue papers, from jumbo rolls of tissue paper, falling under Tariff sub-heading 4818.90 of the Act, 1985. 6.The assessee replied to the said show cause notices. The assessee submitted that cutting and slitting of jumbo rolls of tissue paper into specific width and different shapes did not amount to manufacture. According to the assessee, there was no change in the characteristics or the end-use of the tissue paper. According to the assessee, such a reduction in the width on the duty-paid jumbo rolls cannot amount to manufacture. The assessee also denied the allegations of the department that they were manufacturing/making tissues of wet type. The assessees al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the duty-paid jumbo rolls of tissue paper were bought by the assessee from M/s. Ellora Paper Mills and M/s. Padamjee Paper Mills etc. It was also not in dispute before the Tribunal that the jumbo rolls of tissue paper were classifiable under Tariff Heading 48.03. It was also not disputed before the Tribunal that the table napkins and facial tissues obtained by cutting and slitting of jumbo rolls fell in Tariff Heading 48.18. The only dispute before the Tribunal was - whether conversion of duty-paid jumbo rolls of tissue paper into table napkins and facial tissues by the process of unwinding, cutting slitting and packing constituted "manufacture". The Tribunal held that the above process of cutting/slitting of jumbo rolls of tissue paper into facial tissues and table napkins did not constitute "manufacture"; that there was no section note/chapter note in Chapter 48 to bring in the activity of slitting and cutting of jumbo rolls of tissue paper into smaller sizes within the ambit of Section 2(f) of the said Act; that a mere existence of a separate Tariff Entry 48.18 would not, by itself, make facial tissues and table napkins excisable. The Tribunal further held that by the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture". 11.At the outset, it may be pointed out that according to the Commissioner, the assessee on its own admission was engaged in the manufacture of various items from tissue paper like table napkins, toilet rolls and dry, wet and fragranted facial tissues. However, in their counter affidavit, the assessee has stated that they are not having any infrastructure to carry out the process of making wet and fragranted type of facial tissues. This issue has not been examined by the Tribunal. Therefore, we are confining our judgment only to the question of conversion of jumbo rolls of tissue paper into tissue paper napkins, tissue rolls, toilet rolls and facial tissues excluding wet and fragranted facial tissues. 12.At the outset, we may point out that the assessee is one of the downstream producers. The assessee buys duty-paid jumbo rolls from M/s. Ellora Paper Mills and M/s. Padamjee Paper Mills. There are different types of papers namely, tissue paper, craft paper, thermal paper, writing paper, newsprints, filter paper etc. The tissue paper is the base paper which is not subjected to any treatment. The jumbo rolls of such tissue papers are bought by the assessee, which under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own, which it did not bear earlier, then the process would amount to manufacture under Section 2(f) irrespective of the fact whether there has been a single process or have been several processes." 14.Applying the above tests, we hold that no new product had emerged on winding, cutting/slitting and packing. The character and the end-use did not undergo any change on account of the above-mentioned activities and, therefore, there was no manufacture on first principles. 15.Similarly, there was no deemed manufacture under Section 2(f) of the said Act. In order to make Section 2(f) applicable, the process of cutting/slitting is required to be recognized by the legislature as a manufacture under the chapter note or the section note to Chapter 48. For example, the cutting and slitting of thermal paper is deemed to be "manufacture" under Note 13 to Chapter 48. Similarly, Note 3 to Chapter 37 refers to cutting and slitting as amounting to manufacture in the case of photographic goods. However, slitting and cutting of toilet tissue paper on aluminium foil has not been treated as a manufacture by the legislature. In the circumstances, Section 2(f) of the Act has no application. 16.In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were not marketed or capable of being marketed. 18.In the case of Union of India v. J.G. Glass Industries Ltd. reported in 1998 (97) E.L.T. 5, this Court has succinctly drawn a distinction between manufacture vis-a-vis process and in the course of the judgment, it has been observed as follows : On an analysis of the aforesaid rulings, a"16. two-fold test emerges for deciding whether the process is that of "manufacture". First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity already in existence will be of no commercial use but for the said process. In the present case, the plain bottles are themselves commercial commodities and can be sold and used as such. By the process of printing names or logos on the bottles, the basic character of the commodity does not change. They continue to be bottles. It cannot be said that but for the process of printing, the bottles will serve no purposes or are of no commercial use." 19.Applying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Collector of Central Excise, Bangalore reported in 1996 (86) E.L.T. 186, this Court held that the process of application of phenol resin on duty paid plywood under 100% heat amounts to manufacture and in that connection observed that value addition and separate use are also relevant factors which the Courts should consider in deciding the applicability of Section 2(f) of the Act. Therefore, value addition based on price difference only without any change in the name, character or end-use is a dangerous criteria to be applied in judging what constitutes "manufacture". Lastly, the end-use in both the entries 4803 4818.90 is the same, namely, for sanitary or household purposes. In the circumstances, value addition criteria as applied by the Commissioner is erroneous. 23.In the present case, learned Counsel for the department has vehemently urged that the Tribunal should have referred the dispute to a Larger Bench particularly in view of the fact that the co-ordinate Bench of the Tribunal in the case of Foils India Laminates (supra) had held that the process of cutting/slitting of jumbo rolls of films into flats constituted manufacture. We do not find any merit in this argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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