TMI Blog2000 (11) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... paper rolls etc. which were believed to be liable to confiscation. On 15-10-1998, they visited the factory premises of S.R. Tissues and found therein machinery for converting jumbo rolls of tissue paper to various sizes of napkin, rolls and facial tissue paper. They also verified the stock of finished goods and found that the goods were bearing S.R. brand name with the logo of a bird-in-club, besides the product name. The goods were believed to be liable to confiscation and hence seized. In a simultaneous search in the office premises of the party also, a stock of similar finished goods bearing the same brand name/logo was found and the same was also seized on similar grounds. Statements of Shri Rishi Gupta (director of S.R. Tissues) and Shri Rakesh Gupta (authorised signatory of the company) were also recorded under Section 14 of the Central Excise Act. On the basis of all the evidence gathered as above by the officers, the Department issued show-cause notice (SCN) dated 12-4-1999 to S.R. Tissues proposing, inter alia, to confiscate the goods seized from the vehicle, factory premises and office premises and to impose penalty on them. Later on, another SCN was issued to them on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal action under Rule 209-A for his acts of omission and commission. 3. The SCNs were contested by the noticees. The jurisdictional Commissioner of Central Excise passed a common order in adjudication of both the SCNs. It is this order which has been challenged before the Tribunal by M/s. S.R.Tissues and Shri Rakesh Gupta in appeal Nos. E/839/2000-C and E/840/2000-C respectively. The appellant-company is aggrieved by (i) confiscation of the seized goods with option for redemption on payment of fine of Rs. 15,000/- (in respect of the 65 cartons of goods seized from the vehicle), Rs. 1,50,000/- (in respect of the stock of goods seized from the factory premises) and Rs. 7,000/- (in respect of the goods seized from the office premises); (ii) confirmation of the demand of duty to the tune of Rs. 18,18,551/- on the goods cleared during the period 1-8-1997 to 14-10-1998, under Rule 9(2) of the Central Excise Rules read with the proviso to Section 11-A(1) of the Act; (iii) order for levy of interest on the duty amount under Section 11-AB of the Act; and (iv) imposition of penalty of Rs. 18,18,551/- under Rule 173-Q of the Rules read with Section 11-AC of the Act. Shri Rakesh Gupta s chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. S.R. Foils on tissue paper products as well as aluminium foil manufactured/traded by them since 1993 and ownership over the same came to be claimed by M/s. S.R. Tissues since August 1997 only and, that too, on the strength of a mere application for registration under the Trade and Merchandise Marks Act. The adjudicating authority found no sufficient evidence in support of the claim of M/s. S.R. Tissues and, further, took the view that; in such circumstances, the issue of ownership of trade mark should be decided on the ground of prior use. Support to this view was drawn from Bharat Solar Industries (Supra). Dealing with the applicability of the proviso to Section 11-A(1) of the Act to the case on hand, ld. Commissioner recorded a finding that M/s. S.R. Tissues, by not filing any declaration under Rule 174, suppressed the fact of their manufacturing activity with intent to evade Central Excise duty. He found that the party was engaged in the clandestine manufacture and clearance of excisable goods bearing the brand name of another person. 5. Carefully examined the grounds of the appeals and heard both sides. 6.1 Shri Lakshmikumaran, ld. Advocate for the appellants spelt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the end-use of the goods falling under the two entries was statutorily fixed as no change of normal use was discernible on a textual comparison of TH 48.18 with TH 48.03. According to the Counsel, the expression, of a kind used , occurring in the text of each of the two Tariff Headings meant normally used . Ld. Counsel also urged us to note that no change of name was brought out by such comparison and that no change of characteristics of material was also revealed by examination of the meanings of the terms (such as toilet tissue , facial tissue etc.) used under the two Tariff Headings, with reference to THE DICTIONARY OF PAPER ibid. He relied on the Supreme Court s decision in Prabhat Sound Studios v. A.C.C.E [1996 (88) E.L.T. 635 (S.C.)] in support of his contention that the mere existence of a separate Tariff entry (TH 48.18) for the tissue paper products of smaller size obtained by the activity of slitting/cutting of jumbo rolls of such paper (TH 48.03) would not necessarily lead to the inference that such activity on the duty-paid jumbo rolls of tissue paper amounted to manufacture. Yet another submission of Counsel was that there was no Section Note or Chapter Note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E [2000 (116) E.L.T. 43]. 6.3 Adverting to the limitation issue, ld. Counsel contended that the appellants case did not attract the proviso to Section 11-A(1) of the Act as they were under a bona fide belief that their activity in question did not amount to manufacture. It was the departmental authorities themselves who occasioned such belief. In this connection, Counsel referred to Board s Circular and Bombay Collectorate Trade Notice which clarified that the activity of cutting and slitting of X-ray films, sensitized paper etc. did not amount to manufacture. Ld. Counsel also pointed out that, if duty were to be paid on the products in question, it would only lead to a revenue-neutral situation on account of Modvat credit being admissible on the duty-paid inputs (jumbo rolls of tissue paper). On these grounds, Counsel ruled out any intent to evade excise duty on the part of M/s. S.R. Tissues. He, therefore, contended that the extended period of limitation was not invocable in the appellants case. The demand of duty was entirely time-barred, he added. Ld. advocate also invoked the aforesaid grounds for challenging confiscation and penalty as well. He prayed for allowing the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar dispute had arisen in the case of Computer Graphics (supra) before the Madras High Court. The petitioners in that case had imported jumbo rolls of graphic art film on payment of customs duties, slit the same into various widths (20 , 30 etc.), cut them into various lengths (10 , 200 etc.), packed the products (called flats) in separate cartons and marketed the packs in India. The imported jumbo rolls were covered by the erstwhile Central Excise Tariff Item 37.02 and the flats fell under Tariff Item 37.01. The High Court negatived the Revenue s contention that, there being a separate 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 duty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of levy of Central Excise duty. The blank tapes were covered by entry (3) under Tariff Item 59 of the erstwhile Central Excise Tariff, while the sound-recorded tapes stood classified under entry (4) of the said T.I. 59. Their Lordships observed that a manufacturer of cassette tapes might manufacture the tapes and, at his option, sell the blank tapes or record sound on them and thereafter sell the sound-recorded tapes. It was to cover both these eventualities that the above two entries were provided under T.I. 59. A separate entry for recorded tapes did not suggest that the process of recording sound on blank tapes amounted to manufacture. Shri Lakshmi Kumaran 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 Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in J.G. Glass Industries (supra), so as to be held to be manufacture . Ld. Commissioner s decision on the point is patently erroneous. The Tribunal s decisions in the cases of Reelco Paper Products, Purolator India and Hindustan Photo Films (supra) also support the appellants case. In Reelco Paper Products, the activity in question was slitting of jumbo reels of duty-paid paper into small sizes followed by perforation. Similar activity was carried out on jumbo rolls of cinematographic film (unexposed) in the case of Hindustan Photo Films. In Purolator India, the process considered was slitting, pleating and cutting of impregnated filter paper (in reels) to requisite small sizes. In all the case, the respective processes were held to be not amounting to manufacture. 8.5 In Foils India Laminates (supra) cited by ld. DR, a co-ordinate Bench of the Tribunal held that the process of slitting/cutting of jumbo rolls of aluminium foils [Tariff Sub-Heading 7607.10] into smaller sizes [TSH 7607.30] called house foils amounted to manufacture. We note that the Bench took such a view without considering the Madras High Court s decision in Computer Graphics (supra) which had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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