C.C.Ex. Vs. G.T.C. Inds. Ltd. - Court Judgment

Excerpt:
1. assistant commissioner incharge of the respondent factory held that paper backed aluminium foil issued for manufacture inrolls, it consequent embossing and cutting to shape / size taking place in situ during process of packing of cigarettes would not result in new exigible manufacture.2. appeal was filed by revenue, since the aluminium foil were first embossed and then cut to size before being used for packing cigarettes therefore the process resulted in a different distinctly identifiable product to emerge classified separately under a different sub heading of the tariff. the nature and use of the emergent entity being entirely different from the aluminium foil taken up for embossing and cutting to shape/size. therefore if the nature of process being continuous would not change the facts. duty was therefore required to be paid on such embossed cut to shape/size paper backed aluminium foil with effect from 1.3.94 due to withdrawal of exemption notification 180/88 as amended by notification 44/94 dated 1.3.94.3. cce (appeals), rejected the revenue's appeal, by observing, department had not explained how the product in question is chargeable to duty when it is accepted that it is continuous process and was not marketable and by applying the ratio of decision in case of milk plant (1995 (79) elt 315 (tri)) wherein it was held that a poly- pouch emerging in form fill and seal machine was not capable of being sold and was not suitable for sale. the purported product not being an intermediate product, marketability was not established. hence this appeal by revenue. a) captive consumption of entire production does not mean that goods are not marketable was held in the case of punjab national fertilizers and chemicals ltd (1988 (87) elt 155 and in case of hindustan petroleum corporation ltd (1984 (15) elt 339 tri) it was held that intermediate products was liable to excise duty even if produced in continuous process for captive use if resulted goods fall in particular tariff. therefore the finding of in situ production and continuous production as arrived at by lower authority to find the entity not exigible, is not upheld. b) the embossing, a kind of printing, and thereafter cutting to shape and size to fit the packing of cigarettes is not in dispute. the original roll of aluminium foil, in roll form, falling under chapter heading 7607.10, do not remain under that heading but the 'disputed entity' after the processing operations, would merit classification under heading 7607.20 after embossing and 7607.30 after being cut to shape and size. that there would be change in the classification of the emergent entity is also not in dispute before us. c) there is no doubt therefore that embossing and cutting to shape/size is resulting in a new commercial commodity specific to meet the requirement of packing the cigarettes and it classified under a different headings. the emergent entity does not remain plain paper backed aluminium foil in roll for general use it has attained commercially the use and role for a specific use and is so used. the packing of cigarettes is required to be done in a particular form and even the central excise rules provided specific stipulation which were mandatory to be met. without such packing, cigarettes would not be marketable / effectively and are not permitted to be removed from the factory of manufacturer for sale/marketing. the entity emerging after the processing of the roll of foil, is know in the cigarette industries and people dealing with the same, as a new commercial identifiable commodity, different from the roll which was the raw-material. the test prescribed by the apex court in the case of m/s j.g. glass industries ltd (1998 (97) elt 5 sc) and laminated packing pvt ltd (1990 (49) elt 326 sc) are satisfied to cause visit of levy of central excise duty once again. d) boards circular no. 516/12/2000- cx dt. 1.3.2000 prescribing that printing of logo and brand name does not change the nature, character and end use of cigarette paper will not help the assessee's case, since a change in nature of the products does take place as it is not a case of simplicitor embossing/printing only it also entails cutting to shape and size. the instruction in board's circular 42/90 dt. 23.10.99 would mutatis mutandis would be more appropriately cause and call for application of levy of duty once again in the fact herein. e) the test of marketability is an essential test for levy of excise duty, the same in the facts of this case, would be met when the law as laid down by the apex court in the case of sonic electrochem (p) ltd (2002 (145) elt 274 sc) is applied especially para 9 thereof. the cut to shape and size paper backed aluminium foils are internationally and nationally known commercial products in the cigarette trade/ manufacture of market and exigable manufacture would thus take place by the operations conducted. f) we therefore find no reason to uphold the order of the lower authority.5. however, the decision in the case of cce mumbai v. godfrey phillips ltd holding such activity not to be manufacture, merely because of meeting of a changed tarrif entry has been relied by the respondents (see ci/1637/wzb/03 dt. 25.7.03). therefore, in view of the findings arrived herein, which is contrary to the view of a co-ordinate bench, it would be necessary to place this matter before the hon'ble president of cestat to constitute a larger bench to resolve the difference. the following question is being framed for reference the larger bench. "whether in view of the fact, that when operation/process conducted result in changes in sub headings classification, then considering the sc decision in the case of m/s j.g glass industries, m/s laminated packing and m/s sonic electrochem pvt. ltd. whether manufacture under central excise act, 1946 would take, place to cause and call for levy of duty once again on embossed cut to shape and size aluminium foil in cigarette industry".6. registry to produce the papers before the hon. president cestat to consider constitution of larger bench.

Judgment:
1. Assistant Commissioner incharge of the Respondent factory held that paper backed aluminium foil issued for manufacture inrolls, it consequent embossing and cutting to shape / size taking place in situ during process of packing of cigarettes would not result in new exigible manufacture.

2. Appeal was filed by Revenue, since the aluminium foil were first embossed and then cut to size before being used for packing cigarettes Therefore the process resulted in a different distinctly identifiable product to emerge classified separately under a different sub heading of the tariff. The nature and use of the emergent entity being entirely different from the Aluminium foil taken up for embossing and cutting to shape/size. Therefore if the nature of process being continuous would not change the facts. Duty was therefore required to be paid on such Embossed cut to shape/size paper backed Aluminium foil with effect from 1.3.94 due to withdrawal of exemption notification 180/88 as amended by notification 44/94 dated 1.3.94.

3. CCE (Appeals), rejected the Revenue's appeal, by observing, department had not explained how the product in question is chargeable to duty when it is accepted that it is continuous process and was not marketable and by applying the ratio of decision in case of Milk Plant (1995 (79) ELT 315 (Tri)) wherein it was held that a poly- pouch emerging in Form Fill and Seal Machine was not capable of being Sold and was not suitable for sale. The purported product not being an intermediate product, marketability was not established. Hence this appeal by Revenue.

a) Captive consumption of entire production does not mean that goods are not marketable was held in the case of Punjab National fertilizers and Chemicals Ltd (1988 (87) ELT 155 and in case of Hindustan Petroleum Corporation Ltd (1984 (15) ELT 339 Tri) it was held that intermediate products was liable to excise duty even if produced in continuous process for captive use if resulted goods fall in particular Tariff. Therefore the finding of in situ production and continuous production as arrived at by lower authority to find the entity not exigible, is not upheld. b) The embossing, a kind of printing, and thereafter cutting to shape and size to fit the packing of cigarettes is not in dispute.

The original roll of Aluminium foil, in Roll form, falling under Chapter heading 7607.10, do not remain under that heading but the 'disputed entity' after the processing operations, would merit classification under heading 7607.20 after embossing and 7607.30 after being cut to shape and size. That there would be change in the classification of the emergent entity is also not in dispute before us.

c) There is no doubt therefore that Embossing and Cutting to shape/size is resulting in a new commercial commodity specific to meet the requirement of packing the Cigarettes and it classified under a different headings. The emergent entity does not remain Plain Paper Backed Aluminium foil in Roll for general use it has attained commercially the use and role for a specific use and is so used. The packing of Cigarettes is required to be done in a particular form and even the Central Excise Rules provided specific stipulation which were mandatory to be met. Without such packing, Cigarettes would not be marketable / effectively and are not permitted to be removed from the factory of manufacturer for sale/marketing. The entity emerging after the processing of the roll of foil, is know in the Cigarette industries and people dealing with the same, as a new commercial identifiable commodity, different from the roll which was the raw-material. The test prescribed by the Apex Court in the case of M/s J.G. Glass Industries Ltd (1998 (97) ELT 5 SC) and Laminated Packing Pvt Ltd (1990 (49) ELT 326 SC) are satisfied to cause visit of levy of Central Excise Duty once again.

d) Boards circular No. 516/12/2000- CX dt. 1.3.2000 prescribing that printing of logo and brand name does not change the nature, character and end use of Cigarette paper will not help the assessee's case, since a change in nature of the products does take place as it is not a case of simplicitor Embossing/printing only it also entails cutting to shape and size. The instruction in Board's circular 42/90 dt. 23.10.99 would mutatis mutandis would be more appropriately cause and call for application of levy of duty once again in the fact herein.

e) The test of marketability is an essential test for levy of excise duty, the same in the facts of this case, would be met when the law as laid down by the Apex court in the case of Sonic Electrochem (P) Ltd (2002 (145) ELT 274 SC) is applied especially para 9 thereof.

The cut to shape and size Paper Backed Aluminium foils are internationally and nationally known Commercial products in the Cigarette Trade/ manufacture of market and Exigable Manufacture would thus take place by the operations conducted.

f) We therefore find no reason to uphold the order of the lower authority.

5. However, the decision in the case of CCE Mumbai v. Godfrey Phillips Ltd holding such activity not to be manufacture, merely because of meeting of a changed tarrif entry has been relied by the respondents (See CI/1637/WZB/03 dt. 25.7.03). Therefore, in view of the findings arrived herein, which is contrary to the view of a co-ordinate bench, it would be necessary to place this matter before the Hon'ble President of CESTAT to constitute a larger Bench to resolve the difference. The following question is being framed for reference the larger Bench.

"Whether in view of the fact, that when operation/process conducted result in changes in sub headings classification, then considering the SC decision in the case of M/s J.G Glass Industries, M/s Laminated Packing and M/s Sonic Electrochem Pvt. Ltd. whether manufacture under Central Excise Act, 1946 would take, place to cause and call for levy of duty once again on embossed cut to shape and size Aluminium foil in Cigarette industry".

6. Registry to produce the papers before the Hon. President CESTAT to consider constitution of Larger Bench.