CX - Mere cutting and slitting of paper roll and conversion into foolscap sheets does not change identity of paper - activity is not manufacture u/s 2(f) - much water has flown on subject matter: CESTAT
By TIOL News Service
MUMBAI, FEB 09, 2015: THESE are Revenue appeals and the issue is as old as the Act itself -you guessed it right, manufacture .
The respondent is engaged in the activity of cutting and slitting of various sizes of paper from paper roll purchased from paper manufacturing unit. The paper roll purchased by the respondent falls under CH 48.02. However, the cut paper was classified by the respondent under Heading 48.20 and they claimed the benefit of exemption under Notification 10/2002-CE dated 1.3.2002.
A SCN came to be issued alleging that the "cut paper" is correctly classifiable under SH4802.90 and consequently the same is not eligible for exemption under Notification 10/2002-CE dated 1.3.2002.
The CE demand of Rs.4,58,883/- was confirmed by the original authority along with interest and penalty.
The Commissioner (Appeals) allowed the appeal of the respondent on the ground that the cutting of paper from bulk roll into sheets does not amount to manufacture. And so, there is no question of any classification or applicability of exemption notification. While arriving at the said conclusion, the lower appellate authority relied upon the following case laws -
UOI vs. J.G.Glass Industries Ltd. - 2002-TIOL-112-SC-CX
CCE vs. Paper Products Ltd. - 2002-TIOL-860-SC-CX-LB
Kores India Ltd. vs. CCE, Chennai - 2004-TIOL-92-SC-CX
S.R.Tissues Pvt. Ltd. vs. CCE - 2002-TIOL-76-CESTAT-DEL & 2005-TIOL-194-SC-CX
Interestingly, the CE, Thane-II Commissionerate does not subscribe to this view and, therefore, they filed an appeal before the CESTAT in the year 2005.
The matter was decided recently. What happened in the interregnum is anybody's guess!
The AR parroted the allegations contained in the SCN and did not find it prudent to make any submission on the findings of the lower appellate authority.
The respondent assessee submitted that although they had classified the goods under CH 4820.00, the same is not correct as their activity was confined to slitting and cutting of paper from paper roll to sheet form in foolscap size &the fact of the matter is that the activity does not amount to manufacture in terms of section 2(f) of the CEA, 1944. Inasmuch as irrespective of any wrong declaration of classification, when the activity itself does not amount to manufacture, there is no question of demand of any excise duty. It is also submitted that the Commissioner(A) had by careful application of mind relied on various judgements of the apex court and allowed the appeal and which is absolutely legal and correct and does not require any interference.
The Bench observed -
"5. …As regards the fact that the respondent is engaged in the activity of conversion of paper sheet from paper roll by the process of cutting and slitting, mere cutting and slitting of paper roll and conversion into sheets does not change the identity of the paper. Therefore, this activity does not fall under the purview of manufacture as defined under section 2(f) of the Central Excise Act, 1944. On this particular issue, much water has flown and by the judgments relied upon by the learned Commissioner (Appeals), the issue has been settled and the Hon'ble Supreme Court and the Tribunal in those judgments have consistently held that cutting and slitting of paper roll into sheets of various sizes does not amount to manufacture."
Holding that there is no infirmity in the order of the Commissioner(A), the same was upheld and the Revenue appeals were dismissed.
In passing: Hopefully, the Revenue will look no further!
(See 2015-TIOL-284-CESTAT-MUM)
