Full Judgment
The facts briefly are that the respondents are engaged in the manufacture of Bituminised waterproof paper from duty-paid paper falling under Tariff Item 17 of the Central Excise Tariff. They filed a refund application claiming refund of Rs. 1,11,254.04 on the ground that the processing of duty paid paper for conversion into bituminised paper did not amount to manufacture and that they are not liable to pay duty on bituminised waterproof paper again. The Assistant Collector rejected the refund claim against which an appeal was preferred before the Collector (Appeals) who allowed the appeal on the ground that bonding kraft paper with bitumen would not amount to a manufacturing process.
2. Appearing for the Appellant Collector, Shri S. Chakraborty, the learned Departmental Representative submitted that the issue of assessability to duty of bituminised waterproof paper is now well settled by the Larger Bench decision of this Tribunal in the case of Guardian Plasticote Ltd. v. Collector of Central Excise, Calcutta -1986 (24) ELT 542 (Tribunal) wherein the Tribunal, after detailed consideration of the Tariff Item 17 and going into the pronouncement on the subject by the Supreme Court in the case of Empire Industries v.Union of India -1985 (20) ELT 179 and also considering the technical and commercial literature on the subject had come to the conclusion that bituminised paper is a distinct commercial marketable commodity and the manufacture thereof would attract duty liability under Tariff Item 17-CET.3. The learned counsel Shri Willingdon Christian appearing for the respondents, however, placed reliance on the decision of the Bombay High Court reported in 1988 (33) ELT 292 in the case of Union of India v. Babubhai Nylchand Mehta, which is directly on the product now in question wherein the High Court held that bituminised waterproof paper obtained by application of bitumen liquid to kraft paper does not cease to kraft paper and that the process of bituminisation of kraft paper would not amount to a process of manufacture. The learned counsel pointed out that this decision of the Bombay High Court was subsequent to the Larger Bench decision in which the High Court had also taken note of the Empire Industries case decided by the Supreme Court.
4. We have carefully considered the submissions made by the learned Departmental Representative and the learned counsel. We find that the Larger Bench decision in Guardian Plasticote Ltd. case squarely covers the issue. In that decision, the Larger Bench had considered in detail the judgment of the Supreme Court in the case of Empire Industries and in particular, had referred inter alia, para 30 of the Supreme Court decision which reads as follows: "the moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, "manufacture" takes place and liability to duty is attracted".
The Tribunal had observed that the proper question would be whether by reason of the said process, another distinctive product having a distinctive name, character and use had emerged and that if this question is answered in the affirmative, the process would have to be classified as manufacture within the meaning of the Central Excises & Salt Act. The Larger Bench also noted that in the Paper Trade Manual (Paper and allied trade Hand Book) by Raghunath Dutt & Sons (P) Ltd. that paper is generally classified according to uses to which the particular variety is to be put and also noted that there are different definitions in the glossary of the book relating to coated, kraft union, waterproof paper and tarred paper and that kraft union was defined as waterproof packing paper made of two kraft papers conjoined by a layer of tar to make it impervious to water. It was further noticed by the Larger Bench that the Indian Standard Institution had issued different specifications for each type of paper including a different specification for bituminised waterproof paper. The Tribunal had thereafter concluded that judged by the ratio of the decision laid down by the Supreme Court in the Empire Industries case, the process of bituminisation of kraft paper would also amount to manufacture of a new excisable commodity i.e. bituminised paper, the process of bituminisation being carried out in order to impart additional qualities such as strength and impermeability to water. It is further seen that the decision of the Larger Bench had not come up for consideration by the Bombay High Court in its decision in the case reported in 1988 (33) ELT 292 relied upon by the respondents.
Therefore, the issue having been decided by the Larger Bench, which decision we are bound to follow, and in the circumstances, we hold that the impugned order of the Collector (Appeals) is not maintainable which is, accordingly, set aside and the department's appeal is allowed.