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2015 (6) TMI 617 - CESTAT MUMBAI

2015 (6) TMI 617 - CESTAT MUMBAI - 2015 (329) E.L.T. 161 (Tri. - 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 .....

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ing of jumbo rolls of toilet tissue paper into various shapes and sizes amounted 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 ta .....

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oods under Rule 15(1) or imposition of penalty under Rule 15(2) of the CENVAT 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 s .....

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. E/85556/2013 - Final Order No. A/1314/2015-WZB/EB - Dated:- 11-5-2015 - P 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 im .....

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paper are affixed on bottles/containers of various items such as shampoo, etc. 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 cre .....

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the CENVAT Credit Rules. Interest was also proposed to be recovered under 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 .....

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e film and self-adhesive paper as a process amounting to manufacture. The goods 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 .....

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tted that at the time of registration, the assessee did not submit detailed 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 p .....

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to enable printing on the rolls. The learned Additional Commissioner (AR) 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 .....

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missioner's reliance on the hon'ble Supreme Court's decision in 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 requi .....

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manufacture as without such process brake lining cannot be used by automobile 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 require .....

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tographic film paper whether amounts to manufacture has considered the issue 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 .....

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Excise reported in 2012 (282) ELT A46 (SC) and similar case of Commissioner 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. .....

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sel submitted that the process is a very elaborate process and involves large 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 sai .....

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me Court has taken the view that the judgment in N. Radhakrishan vs. Maestro 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'b .....

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r. Counsel was that CENVAT credit availed by them has been utilised for the 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 (2 .....

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ELT 315. In addition to the above mentioned judgments, certain other judgments 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 .....

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es etc. It is undisputed fact that the input for the appellant is self-adhesive 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 a .....

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r function and use were also completely different and both products are not 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 .....

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he width of jumbo rolls is cut and slitted in such a way that it is suitable 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. Applyi .....

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apter 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 th .....

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tariff item exists in respect of that commodity. In that matter, the question 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 edibl .....

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, therefore, Section 2(f) of the Act was also not applicable to the facts of 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 w .....

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dia v. J.G. Glass Industries Ltd. reported in 1998 (97)ELT 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: "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 cea .....

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be said that but for the process of printing, the bottles will serve no purposes 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 produ .....

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ium foils (which item is the subject matter of some of the civil appeals herein). 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. .....

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d 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 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 "manu .....

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erence 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. 13. In view of the above position, we have no hesitation in holding that the activity undertaken by the appellant will not amount to manu .....

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) and S.R. Tissues Pvt. Ltd. (supra) are different and therefore it cannot 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 s .....

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the appellant's representative, the learned Sr. Counsel has informed us that so far they have not paid any amount from PLA. In view of the said position, we are of the view that the appellant should furnish the details of the credit taken and credit utilised for clearance of the corresponding final products and in case input credit taken is more than the duty paid on the final products, then the differential CENVAT credit needs to be reversed or paid back. Similarly, credit availed on capit .....

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