TMI Blog1999 (3) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... ribbons under the same law. Also seized goods of both varieties totally valued at Rs. 5,36,276.36 have been held liable 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 Repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se law. He further submits that if this constitutes manufacture, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 not amounting to manufacture would not hold sub-heading 48.16 redundant or otiose for the reason that where the final product desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 210 metres were put on spoolying machines which automatically cut pieces of desired length of 5 or 10 metres and wound them on a metallic spool. Thereafter, they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture 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 Court) wherein it is held conversion from rocks to slabs constitutes manufacture. (g) He cites the case of Hindustan Polymers as reported in 1989 (43) E.L.T. 165 (S.C.) which has been followed in the case of India Cements as reported in 1995 (75) E.L.T. 493 (Mad.) which holds that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstalled 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 answering to the description under sub-heading 48.16. By no stretch of imagination, they can be called as identical goods. Therefore, the latter should be paying duty under 48.16 as is also held in the Order-in-Original impugned. 20. He submits that with respect to sub-heading 48.09 and 48.16, the scheme in the Central Excise Tariff is that two diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 the jumbo reels received from these two companies noted above had discharged duty in terms of duty paying documents. He submits that this is also a view taken by the ld. Collector in the Order-in-Original impugned (para 39) wherein he has observed that the appellants have not produced the required documentary evidence to prove that the entire quantity of inputs used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 full-scape size as it emerges from the operations at the unit at Madras, we find that on a detailed consideration of the nature of the activities undertaken to produce the same, as well as the nature of the goods which emerged therefrom, we are in agreement with learned Advocate s submission that the same does not amount to a process of manufacture thereby attracting duty of excise for the following reasons : - (1) The tariff headin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by Govt. of India in appellants own case in Order No. 43/1982 dated 16-1-82 as reported in 1982 E.L.T. 480A (G.O.I) wherein it has been held with respect to paper that cutting to size is not manufacture under Section 2(f) of the Act. In this case also, the department s main contention that since royal size/brief size is cut into full-scape size therefore a new product emerges and therefore it amounts to manufacture. This is directly an argument in contradiction with Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven 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 findings of the Hon ble High Court of Bombay are contained in para-20 of the said judgment which is reproduced as below :- 20. The observations would clearly indicate that the facts of that case were entirely different from the facts of the present case. In that case all that was done was to cut large size paper, that is, jumbo rolls into suitable sizes as per the requirements of the customers. No process or operation was carried out by power driven machine and the paper was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as reported in [1999 (107) E.L.T. 337 (Tribunal) = 1999 (31) RLT 5 (CEGAT)] which after taking into consideration a large number of decisions on this subject has held as follows :- 13. In view of the foregoing discussions, we are of the view that in the aforesaid appeals manufacture of goods does not take place in the light of the aforesaid decisions of the Apex Court, the High Court and the CEGAT; notwithstanding the fact that some of the items are specified in Central Excise Tariff Heading 730 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clearly a distinct commodity known in the market as such and were used for filling the Cassette, therefore even mere cutting of the ribbon into the required sizes and rewinding as pancakes would amount to manufacture. In the instant case, we find that similar ribbons in jumbo rolls are cut into required sizes and then re-wound on spools and the product that emerges is suitable for use as Typewriters/Telex ribbons on specific machines, therefore the facts are found to be identical in both the cases. We therefore res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IL 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 have discharged nil duty. It was further submitted that since the goods were not directly received from the factory but from the Depots therefore any duty paying documents were not available. With respect to the appellants claim for Modvat credit at Madras on duty paid on the Jumbo ribbon reels at their Mumbai Unit, we are therefore in complete agreement with the learned Collector in the Order-in-Original that Modvat credit is not available to them for the following reasons :- (i) No duty paying documents were produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paper. At this stage learned DR submits that the amount is already available on record as Rs. 54,335/-. If this is the amount on this issue, the same is confirmed. 44. As regards the imposition of penalties in the Order-in-original impugned, it is but necessary to re-consider the same in view of our findings above with respect to the carbon paper and which covers the major quantum of the duty demand confirmed in the Order-in- Original impugned. 45. Taking all the facts and circumstances into consideration, we reduce the penalties to a t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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