ORDER
C.N.B. Nair, Member (T)
1. The first appellant, Delhi Paper Products, purchased various varieties of papers in jumbo rolls, repacked them as usable items such as tele-printer rolls, telegraphic rolls, adding machine rolls, fax rolls, typewriting paper, duplicating paper, tissue paper, toilet paper and napkin paper and sold them. In the impugned order, duty has been demanded (and penalty imposed), treating the appellant’s activity as a manufacturing activity. The present appeal challenges the duty demand as well as penalty imposed.
2. The contention of the leaned Counsel for the appellant is that the activity undertaken by the appellant involved no manufacture. It is being pointed out that a process or activity becomes manufacture only if identifiable new goods are brought into existence. It is the contention of the learned Counsel that the various varieties of papers in question remained the same irrespective of packing (jumbo or consumer). That is to say, writing and printing paper remained writing and printing paper even after slitting, cutting and packing into consumer packs for use in particular machines like tele-printer machine or telegraph machine. Similarly, if paper in question in the jumbo rolls was toilet paper, it continued to be the same after slitting, cutting and packing into usable form. Same position is in regard napkin paper also.
3. The learned Counsel has submitted that this issue remained settled in favour of the appellant by the judgment of the Hon’ble Supreme Court in the case of CCE New Delhi v. S.R. Tissues Pvt. Ltd. wherein the court ruled that slitting/cutting of jumbo rolls into smaller size does not amount to manufacture.
4. The learned DR points out that in regard to tele-printer paper, paper in question is interleaved with carbon paper also. According to the Revenue, this certainly involved manufacture of a product for specialized use, is tele-printer paper.
5. The process undertaken by the appellant remains pictorially explained hereunder:
6. It is clear from the above pictures that the basic activity is to convert wholesale (jumbo) paper rolls into usable size and quantity. There is no process carried out by the appellant on the paper which converts a particular variety of paper into another variety of paper, with a different identity, name and use. That is to say, writing paper remains the same, irrespective of the machine on which it is used. Similarly, tissue paper and napkin paper continued to conform to the same standard, whether in jumbo rolls (size) or after preparation into consumer packs by the appellant. Thus, the appellant’s operation is only one of repacking, for particular use, including on particular machines. The same is true in regard to carbon paper also, in as much as interleaving with carbon paper only enables obtaining additional copies, upon writing, printing, etc. Otherwise, the re-packed paper retains its identity as writing and printing paper.
7. The law with regard to manufacture is clear, operations or processes should bring into existence, a new item with a distinct identity, character and use. Unless this occurs, the processes, however, elaborate, they might otherwise be, would not graduate themselves into manufacture. In Union of India v. Park Products Pvt. Ltd. , the Hon’ble Supreme Court confirmed this rule while dealing with the process of providing paper backing to aluminum foils. It was ruled that, aluminum foils, remained the same product, even after converting into paper-backed aluminum foils and no manufacture, was involved. Similarly, in the case of S.R. Tissues Pvt. Ltd. , the Hon’ble Supreme Court ruled that slitting and cutting of jumbo rolls of plain tissue paper/aluminum foil into smaller sizes did not amount to manufacture.
8. Applying the above criteria laid down by the Hon’ble Supreme Court to the present case, it would be noted that the transformation is one of size. But for this, each variety of paper remained the same, in regard to character and use, in the jumbo rolls as well as in the repacked condition. Of course, different names have been assigned (like tele-printer rolls, telegraphic rolls, adding machine rolls, fax rolls, typewriting papers, etc.) only to indicate the machine of use. It is merely to facilitate identification for marketing. Thus, there is no manufacture involved in the present case and in the absence of manufacture, central excise duty is not attracted. Demand has to fail. Once duty demand fails, penalties have no place.
9. In the result, we allow the appeals after setting aside the impugned order.
10. It is made clear that we are not going into other issues like limitation and quantification of duty amount as the appeals are disposed of on the ground of manufacture alone.
(Pronounced in the court)