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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO.139/2005
The Commissioner of Central Excise,
Mumbai-V,
5th Floor,Utpad Shulk Bhavan,
Plot no.C-24, Sector-E,
Bandra-Kurla Complex, Bandra (E),
Mumbai-400 051 Appellant
Vs.
M/s GTC Industries Ltd.,
Tobacco House,
Vile Parle, Mumbai-400 056 Respondent
Mr.A.S.Rao a/w Mr.S.D.Bhosale for applellant
Mr.V.Sridharan a/w Mr.Prakash Shah i/b P.D.S.Legal for
respondent
CORAM-J.P.DEVADHAR AND
MRS.MRIDULA BHATKAR ,JJ
RESERVED ON - 13TH JANUARY,2011.
PRONOUNCED ON -2nd FEBRUARY,2011.
J U D G M E N T (Per Mrs.Mridula Bhatkar,J.)
. This appeal was admitted on the following
questions of law.
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1 Whether in the facts and circumstances of the
case and in law, the Tribunal is right in holding
that no classification list is necessary as the
embossing and cutting to shape of Aluminium foil
is not a manufacturing process ?
2 Whether in the facts and circumstances of the case
and in law, the Tribunal is right in holding that the
process of embossing on aluminium paper back
foil and cutting it to shape for the purpose of
packing of the cigarettes does not amount to
manufacture ?
2 This appeal is filed by the Commissioner of
Central Excise, Mumbai-V challenging the order dated
19/4/2005 passed by the CESTAT. The respondent (‘assessee’
for short) is the manufacturer of cigarettes and falling under
CH.S.H.2403.11 scheduled to CETA 1985. The assessee used
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duty paid paper back aluminium foil in the roll form for the
purpose of packing cigarettes. In the process the cigarette roll
is cut to size and got embossed with word ‘PULL’ and is
wrapped in the cigarette.
3 As per notification dated 13/5/1988 the duty paid
aluminium foil when cut and embossed,the resultant product
was exempted from payment of excise duty. However, the
government withdrew the said notification by a notification
no.44/94 dated 1/3/1994 . Thereupon, the respondent filed
Classification List 9/94 /Aluminium foil dated 26/4/1994,
under protest classifying the products as aluminium foil cut to
shape under tariff 7607.30 and aluminium foil embossed
under CSH 7607.20. During the pendencyof the approval of
the classification list the assessee paid excise duty on cut to
shape/embossed aluminium foil @ 20%as per tariff heading
7607.30 and 7607.20. The Assistant Commissioner vide order
dated 1/7/1994 held that the aluminium foil cut to
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shape/embossed which is used for packing cigarettes does not
amount of manufacture and accordingly returned the
classification list submitted by the assessee. Being aggrieved
by order dated 1/7/1994 the appellant preferred an appeal
before the Commissioner of Central Excise (Appeals) who
dismissed the said appeal by order dated 9/3/1999. Being
aggrieved by the said order of the Commissioner of Central
Excise the appellant filed appeal before the CESTAT and the
said appeal was also dismissed by order dated 19/5/2005 by
the CESTAT. Hence the appellant has filed this appeal under
section 35(G) of the Act .
4 Learned counsel Mr.Rao appearing for the
appellant made two fold submissions. He argued that the
process of embossing itself is manufacturing and the product
that emerges on embossing is a new product. Secondly
aluminium foil brought in bulk by the assessee on payment of
excise duty is also subjected to the process of cutting it into
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small pieces which changes the form and nature of the foil and
hence the said process amounts to manufacturing.
Accordingly counsel for the revenue submitted that the order
passed by the CESTAT is liable to be set aside.
5 Mr.Sridharan,learned counsel appearing for the
assessee in reply submitted that the assessee purchases a roll
of aluminium foil with backing of white paper and the roll is
cut in pieces and on one side of each piece word ‘PULL’ is
embossed in which the cigarettes are filled in with the help of
machine and Aluminium paper back foil holding cigarettes is
directly placed in cigarette packing machine . The cigarettes
are filled in aluminium foil in such a way that word ‘PULL’
comes on the upper side of the packet. The learned counsel
submitted that the aluminium foil backed with a white paper
purchased by the assessee is itself a excisable commodity.
When the paper foil is cut to the size it does not change its
nature and form and embossing word ‘PULL’ also does not
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add any different character or value to the said aluminium foil
therefore , aluminium foil used in the cigarettes packet is not
dutiable commodity. He further submitted that a foil is a
barrier for moisture and so it is used to protect the cigarettes
from moisture.
6 The learned counsel in support of his submissions
relied on the judgment of the Apex Court in Commissioner of
Central Excise New Delhi Vs.S.R.Tissues Pvt.Ltd.2005(186)
E.L.T.385 (S.C.). However, the learned counsel for the
appellant Department controverted and submitted that the ratio
of the Apex Court in respect of aluminium foil is not
applicable to the present set of facts. In that case the tissue
paper was cut and slit into various shapes and sizes
from a jumbo roll of tissue paper. In the present case the
aluminium foil and paper backing is not only cut to pieces but
the word ‘PULL’ is also embossed on it and further the said
piece of aluminium foil is used as a shell for cigarettes . Thus,
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its nature , form and purpose is changed and therefore, the said
ruling is distinguishable .
7 Use of aluminium foil which is cut to the size and
embossed is in a continuous process of packing the cigarettes
in the packets. Manufacturing as defined in section 2(f) of the
Central Excise and Salt Act, 1944 includes any process
enumerated therein. However, all the processes would not
amount to manufacturing under the Act. Process is not defined
under the Act . So it is understood in a common parlance. The
process may be a flow , progress , movement,
transformation,change continuation,a link , an action ,
happening,etc.. Any process which produces distinct and
identifiable commodity and renders marketable value the can
be called manufacture.A commodity whether manufactured or
not necessarily depends on the context and the factors of the
production/process of that commodity.
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8 In the present case a roll of aluminium foil backed
with white thin paper is purchased by the respondent for the
purpose of packing their product i.e.cigarettes . In the roll
there is a continuous foil, therefore, it is cut to the size as per
requirement of the capacity of the packet in which the
cigarettes are to be packed. Thus, the cuts are given
horizontally and separate pieces of the foil are made. As soon
as the separate piece of the foil is made , a word ‘PULL’ is
embossed on it. Thereafter fixed number of 10 or 20 cigarettes
are wrapped in the foil and the said wrapped cigarettes are
inserted in the cigarettes packet. An aluminium foil being a
resistant to moisture is used as a protector for the cigarettes
and to keep them dry. The word ‘PULL’ is embossed with a
view to make it convenient for the user and to know from
which side a cigarette can be taken out. Thus, it shows that
cutting and embossing do not transform aluminium foil into a
distinct and identifiable commodity. That does not change the
nature and substance of the aluminium foil. It does not render
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any marketable value to that piece of paper. Cutting to the size
and embossing is only for making it usable for the purpose of
packing.
9 In Mafatlal Industries Limited Vs.Nadiad Nagar
Palika,2000(117) ELT 290 the Apex Court has observed that
cutting of 100 mtrs.cloth into small pieces does not bring any
different commercial commodity.
In Collector of Central Excise Vs.Technoweld
Industries,2003 (155) ELT 2009 (S.C.)the Supreme Court has
dealt with the issue that drawing wires from wire rods is
manufacture or not and it is held that both the products being
wires are not considered excisable merely because they are
covered by two separate entries in the tariff.
In Parle Products Pvt.Ltd. Vs.Union of India , 1991
(56) E.L.T.52(Bom.) the Division Bench of this Court has
delt with a issue of use of aluminium foil with printed paper
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for packing whether amounts to manufacturing. In the said
case the Division Bench of this Court held that the
Department was clearly in error in recovering the duty from
the company. Backing of aluminium foil with printed paper
only to make it more attractive for packing and not resulting in
any distinct and different articles does not amount to
manufacture .
10 The present case in fact is covered by the ratio
Court in Commissioner of Central Excise New Delhi I
Vs.S.R.Tissues Pvt.Ltd.2005(186) E.L.T.(S.C.)in which the
Apex Court has observed that slitting/cutting of jumbo rolls of
plain tissue paper/aluminium foil is not treated as a
manufacture. Hence section 2(f) of the Act is not applicable.
In the said case jumbo rolls of toilet tissue papers or a
aluminium foils were cut in various shapes and sizes.
However, it was held that mere mention of the product in tariff
heading does not necessarily implies that the said product was
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obtained by process of manufacture. The submissions of
Mr.Rao that the present case is distinguishable from this case
(S.R.Tissues) is not correct and cannot be accepted. There is
nothing on record to suggest that the cut to shape/embossed
aluminium foils used for packing cigarettes is a distinct
marketable commodity . Neither the appellant nor any one
else is said to have been marketing cut to shape/embossed
aluminium foils.
11 Hence the view taken by the Asstt.Collector of Central
Excise as also the CESTAT that embossing on foil and cutting
to shape and size during the process of packing of cigarettes
cannot be faulted. Aluminium foil is cut to size in a
continuous process and it does emerge as a new commodity
and hence it is not excisable.
12 In these circumstances, the questions raised by the
revenue are answered in the affirmative, that is, in favour of
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the assessee and against the revenue.
The appeal is disposed of with no order as to costs.
(MRS.MRIDULA BHATKAR,J.) (J.P.DEVADHAR,J.)
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