ORDER
V.K. Agrawal, Member (T)
1. These are two applications for waiving the pre-deposit of the following amounts of duties and penalties imposed by the Commissioner, Central Excise, New Delhi under the Impugned Order.
(i) M/s. S.R. Tissues P. Ltd. - Rs. 18,18,551 - Duty
- Rs. 18,18,551 - Penalty
(ii) Shri Rakesh Gupta - Rs. 1,00,000 - Penalty
2. Shri V. Lakshmikumaran, learned Advocate, submitted that M/s. S.R. Tissues Pvt. Ltd. purchase duty paid jumbo rolls of tissues and after cutting and slitting and repacking them, they sell them as facial tissues, tissues roll form, tissues paper, table napkins, etc.; that the activity undertaken by them does not amount to manufacture as tissue papers remain tissue papers and no new product with a distinct name or character emerges as a result of the processess undertaken by them. He relied upon the decisions in the case of CCE v. Reelco Paper Products Private Ltd. -1989 (40) E.L.T. 435, wherein it was held that mere slitting and rewinding of jumbo reels of paper into reels of smaller sites does not amount to manufacture as there is no change in the name, character and use of the paper and no transformation into a distinct and separate commodity takes place. Reliance was also placed on the decision in the case of Purolator India Ltd. v. CCE – 1990 (45) E.L.T. 91(T) and CCE v. True Graph Charts Pvt. Ltd. 1999 (31) RLT 157 (CEGAT). The Id. Advocate also submitted that there is neither any Section nor chapter note providing artifical definition by which the process undertaken by them will amount to manufacture. He also referred to the Dictionary of Paper according to which “Facial tissue stock in sheets usually packed for re-sale” and “toilet peper is marketed in rolls of varying sizes, or in inter-leaved packages.”
3. The learned Counsel also submitted that they are selling their products under their brand name “Mystique”; that they also put house mark “S.R.” along with a bird in a club; that they had applied for registration of brand name as well as the house mark with Trade Mark Authorities; that M/s. S.R. Foils Ltd. have never used the logo of a bird in club shape with words S.R. written underneath for tissue products, and as such M/s. S.R. Foils cannot be the owner of logo on the basis of prior use; that as such it cannot be alleged that the appellants were selling their products under the brand name of another person. He also mentioned that mentioning of house mark on the product does not make it ineligible for concessional rate of duty under SSI exemption notification. He relied upon the decision in the case of Chemguard Coatings Pvt. Ltd. v. CCE, Chennai – 2000 (116) E.L.T. 43 wherein it was held that mentioning name of foreign company, that is house mark, cannot be said as using brand name of another person. Finally, he submitted that the show cause notice was issued on 12.07.1999 for demanding duty for the period from 01.08.1997 to 14-10-1998 which is beyond the period of six months; that extended period of limitation is not invocable as the appellants entertained a bona fide belief that the process of slitting and cutting does not amount to manufacture in view of the decision of the Madras High Court in the case of Computer Graphic Pvt. Ltd. v. U.O.I. 1991 (52) E.L.T. 491 (Mad). The Id. Advocate also pleaded financial hardship to the applicants. He mentioned that during the period 1998-99 they had earned net profit of Rs. 18,526/- only and as such payment of any amount of duty and penalty will cause undue hardship.
4. Countering the request for waiver of pre-deposit, Shri K. Srivastava, Id. SDR, submitted that the logo of bird in a club shape with words S.R. underneath was used by M/s. S.R. Foils. Ltd. since 1993; that they were using this logo while trading in tissue papers; that there is association of the said logo with M/s. S.R. Foils in the ordinary course of trade; that M/s. S.R. Foils Limited had applied for registration of logo with the Trade Mark Registration Authority in 1994. He further submitted that these facts are duly supported by the affidavit dated 06.03.2000 of Shri Rakesh Gupta, Director of M/s. S.R. Foils Ltd., in which it has been clearly mentioned that S.R. Foils Ltd. was affixing the logo on the. tissue products and paper products traded by the company, and that they had applied for registration of the logo for aluminium foils. The Id. SDR submitted that it is apparent from this affidavit that the logo belongs to M/s. S.R. Foils Ltd. and use for different products is immaterial for the purpose of SSI Notification. In support of his contention, he relied upon the decision of Madras High Court in the case of Bell Products Company v. U.O.I. -1995 (78) E.L.T. 404 (Madras). He also submitted that taking into consideration all these facts as well as market pattern of the products of both the companies and the fact that when the tempo was intercepted, it was carrying the products of both the companies, go to show the association of logo with M/s. S.R. Foils Ltd. The Id. SDR also contended that the process of slitting/cutting, and packing the tissue papers brings into existence a product with a distinct name, quality or use; that when a customer asks for tissues or napkins, the product as manufactured by the Appellants will be given and not the tissues paper in jumbo rolls. He also relied upon the decision in the case of Foils India Laminates Pvt. Ltd. v. CCE, Jaipur – 1999 (33) RLT 474, wherein it was held that the process of slitting/cutting of jumbo rolls of aluminium foils into small sizes amounts to manufacture as new and distinct product as ‘house foils’ comes into existence. Finally, he mentioned that there are two separate headings provided in Chapter 48 for Jumbo Rolls (48.03) and for smaller packs (28.18) which shows that these are two different products.
5. We have considered the submissions of both the sides. The issues whether the process undertaken by the applicant company amounts to manufacture and whether they were marketing their products under the brand name/trade name of another person are highly arguable matters and these can be considered only at the time of hearing the appeal. However, we are of the view that the applicants have made out a prima facie strong case about non-invokability of extended period of limitation. Considering this aspect clubbed with financial hardship we waive the requirement of pre-deposit of the entire amount of duty and penalty imposed on both the applicants and stay the recovery of the same during the pendency of the appeal. The appeals will come up for regular hearing in due course.
