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Commissioner of Central Excise, Belapur Versus UPM Kymmene India Pvt Ltd

2015 (6) TMI 617 - CESTAT MUMBAI

Manufacture - cutting and slitting of imported self-adhesive film and self-adhesive paper - Manufacturing activity or not - assessee argued that in the process of slitting and cutting no new, distinct or different commodity comes into existence. The use of the goods also do not change - Held that:- Mere mention of a product in a tariff heading does not necessarily imply that the said product was obtained by the process of manufacturing. That, just because the raw material and the finished produc .....

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unted to manufacture.

Manufacture on the basis of value addition of 180% - Held that:- There is no change in the nature or characteristics of the tissue paper in the jumbo roll and the nature and characteristics of the tissue paper in the table napkin, facial tissues etc. Therefore, without such change in the nature or characteristics of the tissue paper, value addition on account of transport charges, sales tax, distribution and selling expenses and trading margin cannot be an indici .....

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AT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Similarly, we are of the view that no penalty is required to be imposed on Shri Shailesh Nema, Director of the respondent-company under Rule 26 of the Central Excise Rules, 2002. - Decided against the Revenue.

CENVAT credit has been utilised in the clearance of the final products which are now held to be non-dutiable, Revenue cannot seek to demand the credit so utilised. - Held that:- appellant should furnis .....

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K Jain, Member (T) And Ramesh Nair, Member (J),JJ. For the Appellant : Shri V K Agarwal, Additional Commissioner (AR) For the Respondents : Shri D B Shroff, Sr. Adv. with Shri Mihir Mehta, Adv. ORDER Per: P K Jain: This is an appeal filed by Revenue. 2. Brief facts of the case are that the respondents are engaged in the process of cutting and slitting of imported self-adhesive film and self-adhesive paper. Respondents import these films and paper in jumbo rolls in the size of 1000mm/1070mm/1530 .....

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tc. The respondent-assessee was paying excise duty on the slitted self-adhesive film and self-adhesive paper and was availing CENVAT credit of the duty paid on the inputs. Revenue is of the view that the said process does not amount to manufacture in terms of Section 2(f) of the Central Excise Act, 1944 and hence the final products are not dutiable and therefore, the respondent-assessee is not eligible to avail CENVAT credit on inputs and capital goods. 3. Accordingly a demand notice dated 04/10 .....

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Rule 14 read with Section 11AB and penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was also proposed. Similar show cause notice dated 20/04/2012 was also issued for the subsequent period viz. May 2011 to December 2011. A penalty was also proposed on Shri Shailesh Nema, Director of the respondent-assessee. The case was adjudicated by the Commissioner wherein he dropped all the proceedings against the respondents. Revenue is in appea .....

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oods imported are in marketable condition and the activity carried out by the assessee did not further enhance the marketability of the processed goods and, therefore, the activity did not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. 5. The learned AR relied upon the hon'ble Supreme Court decision in the case of Commissioner of Central Excise, New Delhi vs. S.R. Tissues Pvt. Ltd. reported in 2005 (186) ELT 385 (SC). In the said decision hon'ble Supreme Court .....

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manufacturing process and hence the vital fact about the exact manufacturing process was suppressed. It was submitted that in view of the said decision of the Hon'ble Supreme Court, the show cause notice issued is correct and requires to be upheld. It was further submitted that the Commissioner has observed that the process involved in the present case is that jumbo rolls of the self-adhesive film and self-adhesive paper are loaded on slitting machine for slitting as per the customer's .....

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submitted all these process does not bring into existence a new commodity having distinct name, character and use. As per the criterion laid down by the Hon'ble Supreme Court for the manufacture, these cannot be considered as amounting to manufacture. It was also submitted that the Commissioner has taken a view that as per Section 2(f) any process incidental to the completion of the manufacturing process would amount to manufacture but the Commissioner has incorrectly applied the provisions .....

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Kores India Ltd. vs. Commissioner of Central Excise reported in 2004 (174) ELT 7 (SC) is mis-placed, as in the said case, the appellants were importing jumbo rolls and thereafter converting the same into typewriter ribbons. Typewriter ribbon is a different commodity having a specific width and specific length and is fixed in the typewriter. This is not the case in the present case as the slitting is done as per the requirement of the customer and therefore the reasoning in the Kores India Ltd. .....

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ile manufacturers. It has been further discussed that - by adopting a particular process if transformation takes place, which makes the product to have a different character and use of its own, then such a process would amount to manufacture. In the present case, slitting self-adhesive film or self-adhesive paper before slitting and after slitting remains the same. The slitting is done only to satisfy the specific requirement of the customers. It was submitted that the decision of the hon'bl .....

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e in respect of each type of films individually in view of different entries for the said product and the decision of the hon'ble Supreme Court in the case of Empire Industries Ltd. vs. Union of India 1985 (20) ELT 179 which inter alia has held that whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will part of manufacture. It was further submitted that after .....

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of Central Excise vs. Tarpaulin International 2010 (256) ELT 481 (SC) were also referred in support of the department's contention. Hon'ble Supreme Court in the case of Commissioner of Central Excise vs. Osnar Chemical Pvt. Ltd. 2012 (276) ELT 162 (SC) was also referred. 8. It was submitted that keeping in view the catena of decisions, the order passed by the Commissioner is wrong and is required to be set aside. 9. The learned Senior Counsel, on behalf of the respondent-assessee submit .....

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ge number of steps and for that purposes they have installed number of machines. Keeping in view these facts, it cannot be said the process is a simple one. On the contrary, the process itself would indicate that it amounts to manufacture. The learned Senior Counsel further submitted that the Hon'ble Supreme Court's judgment in the case of Kores India Ltd. (supra) is squarely applicable in their case as in the said case cutting of jumbo rolls of typewriter/telex rolls were considered as .....

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o Engineers (2010) 1 SCC 72 is per incuriam on two grounds. Firstly, the judgment inHindustan Petroleum Corpn. Ltd. (2003) 6 SCC 503 though refer to, has not been distinguished but at the same time is not followed. The judgment in P. Anand Gajapathi (2000) 4 SCC 539was not even brought to the notice of the Hon'ble Court. The learned Sr. Counsel submitted that in the case of S.R. Tissues Pvt. Ltd. (supra) the hon'ble Supreme Court's judgment in the case of Kores India Ltd. (supra) was .....

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clearance of the slitted self-adhesive tapes and films and therefore, denial of CENVAT credit on the ground that the activity not amounting to manufacture is not correct in view of the judgment of the Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise vs. Creative Enterprises 2009 (235) ELT 785 (Guj.). The said judgment has been affirmed by the Hon'ble Supreme Court as reported in 2009 (243) ELT A120 (SC). The learned Sr. Counsel also submitted that even the Hon .....

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ents were also referred to by the learned Sr. Counsel. 10. Another contention of the learned senior counsel was that extended period of limitation cannot be invoked as at the time of taking registration they have submitted the manufacturing process/flow chart. Thus, the Revenue was in the knowledge about their activity and hence extended period cannot be invoked. 11. We have carefully considered the rival submissions. The undisputed facts are that the appellants are importing self-adhesive films .....

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sive films and self-adhesive paper and the final product is also the same and are falling under the same Tariff entry. All that is being done is to reduce the width of such films. Number of machines used in the process is irrelevant to determining whether it amounts to manufacture. 12. We have gone through the judgment of Kores India Ld. (supra). In that case the jumbo rolls of 210 meters or more length fed into cutting and spooling machines wherein ribbons of standard length of 10 meters and 5 .....

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interchangeable. The ribbon in jumbo rolls cannot be used in a typewriter and similarly a person who requires 30 pieces of spool ribbon would not be satisfied if he is offered jumbo rolls of equal length. In fact the assessee has a separate unit, machinery and work force to manufacture in spool form. In view of the mater it was held that the process involved amounted to manufacture. Similarly, in the case of Brakes India Ltd. (supra) the hon'ble Supreme Court has observed that by adopting a .....

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e for a particular product and the printing industry. If there is a printing machine which can take up the jumbo rolls then such self-adhesive films and self-adhesive tapes can straightway be printed. On the contrary, we are of the considered view that the facts in the present case are almost similar to that of S.R. Tissues Pvt. Ltd. (supra). In the said case the hon'ble Supreme Court has observed as under: 14. Applying the above tests, we hold that no new product had emerged on winding, cut .....

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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 the case Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur reported .....

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on which arose for determination was - whether refining of edible vegetable oil, as a process, constituted "manufacture". It was held that the product even after refining continued to remain an edible vegetable oil. It was further held that neither in the section note nor in the chapter note, refining as a process was indicated as amounting to manufacture. In the circumstances, it was held that refining of edible vegetable oil did not amount to "manufacture". In our view, the .....

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f this case. 17. In the case of Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad reported in 1995 (76)ELT 241, this Court held that Section 3 of the Act levies duty on all excisable goods mentioned in the schedule provided they are produced and manufactured. Therefore, where the goods are specified in the schedule, they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the assessee on whom duty is p .....

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s succinctly drawn a distinction between manufacture vis-a-vis process and in the course of the judgment, it has been observed as follows: "16. On an analysis of the aforesaid rulings, a 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 existenc .....

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rposes or are of no commercial use." 19. Applying the above tests to the facts of the present case, we hold that mere mention of a product in a tariff heading does not necessarily imply that the said product was obtained by the process of manufacturing. That, just because the raw material and the finished product came under two different headings, it cannot be presumed that the process of obtaining the finished product from such raw material automatically constituted manufacture. In the pre .....

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rein). 21. Lastly, in the instant case, the Commissioner as an adjudicating authority has held that there was a value addition of 180%. He found that jumbo rolls of tissue papers were purchased by the assessee @ ₹ 30/- to ₹ 70/- per kg. and the final product i.e. the toilet tissue paper was sold by the assessee @ ₹ 85/- to ₹ 100/- per kg. and, therefore, there was a value addition of around 180% i.e. between the range of ₹ 30/- to ₹ 85/- per kg. This finding o .....

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tc. Therefore, without such change in the nature or characteristics of the tissue paper, value addition on account of transport charges, sales tax, distribution and selling expenses and trading margin cannot be an indicia to decide what is manufacture. Thus, value addition without any change in the name, character or end-use by mere cutting or slitting of jumbo rolls cannot constitute criteria to decide what is "manufacture". 22. In the case of Decorative Laminates (India) Pvt. Ltd. v. .....

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rous 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. 13. In view of the above position, we have no hesitation in holding that the activity undertaken by the appellant will not amount to manufacture. 14. The learned Sr. Counsel has also submitted that the judgment o .....

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be said that the judgment of the hon'ble Supreme Court in the case of S.R. Tissues Pvt. Ltd. case is per incuriam. 15. The learned Sr. Counsel has also submitted a number of case laws suggesting that since CENVAT credit has been utilised in the clearance of the final products which are now held to be non-dutiable, Revenue cannot seek to demand the credit so utilised. We are in agreement with the learned counsel that since the credit taken has been utilised for the clearance of their final pr .....

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