1981 (5) TMI 30 - HC - Central Excise

Paper - Tissue paper used for interleaving the aluminium foils for tea chest linings are not liable to duty

Summary

Issues:
Interpretation of Notification exempting excise duty on foils, Double taxation on tissue paper, Benefit of Notification, Definition of manufacture under the Central Excises and Salt Act, Applicability of Notification to tissue paper.

Analysis:
The case involved a dispute regarding the levy of excise duty on tissue paper used for interleaving aluminum foils for tea chest linings. The petitioner, a company manufacturing aluminum foils, claimed exemption from excise duty on the tissue paper under a specific Notification. The Excise authorities rejected the claim, leading to a series of appeals.

The petitioner argued that the tissue paper did not undergo a manufacturing process when used for interleaving and cutting to shape, as it retained its identity and character. Referring to Supreme Court decisions, the petitioner contended that taxing the tissue paper would amount to double taxation, which is impermissible under the law.

The respondents, representing the Excise authorities, argued that the tissue paper was used as raw material in manufacturing tea chest linings, creating a new excisable commodity liable for excise duty under the Central Excises and Salt Act. They also contended that the Notification exempting duty was not applicable to the tissue paper used by the company.

The Court analyzed the definition of "manufacture" under the Act, emphasizing that a new substance must come into existence for a process to be considered manufacturing. It highlighted that the tissue paper did not undergo a transformative process and remained distinct from the aluminum foil.

Additionally, the Court clarified that the Notification exempting duty applied only to aluminum foils, not to tissue paper. Therefore, the petitioners were not entitled to the benefit of the Notification for the tissue paper used in interleaving.

Ultimately, the Court ruled in favor of the petitioner, directing the authorities not to levy further excise duty on the tissue paper already subjected to excise duty under a specific Tariff Item. The Court emphasized that the tissue paper did not undergo a manufacturing process and should not be subject to double taxation. All interim orders were vacated, and no costs were awarded in the case.