By TIOL News Service

MUMBAI, FEB 18, 2015: THE appellants are receiving duty paid PVC sleeves in the form of flattened PVC tubes, either whole or cut into pieces of specific sizes. The sleeves are cut into horizontal pieces of required width which are then mounted on moulds of specific shape and dimensions (as per the packing container of the user of such sleeves) and such cut sleeves are heated upto a specified temperature to get particular shape and so form sleeves which are thereafter used to seal the caps of plastic containers.

Revenue's case is that the above process amounts to manufacture and, therefore, appellant is liable to pay excise duty.

The appellant did not agree and, therefore, a SCN came to be issued. The department also carried out testing of the goods in the CE laboratory and also recorded statements of persons concerned.

The CE demand was confirmed by the original authority and which was upheld by the Commissioner(A) but he extended the benefit of cum-duty, thereby reducing the duty liability, interest and the mandatory penalty.

Not satisfied with this order the appellant is before the CESTAT.

The appellant inter alia submitted that the process of ‘forming' is a simple process wherein the shape of the PVC sleeves received by them is changed or “formed” and these sleeves are thereafter sold by them to their customers who use the said sleeves for sealing the plastic containers; that the goods continued to be PVC sleeves only and it is only the shape that has changed; that the goods before ‘forming' and as also after the ‘forming' continues to be classified under the same heading and, therefore, the process will not amount to manufacture. It is also pleaded that since the department knew about their activity in the year 2000 itself the SCN issued in the year 2003 invoking extended period is hit by limitation; that inputs received are duty paid and they are entitled for CENVAT credit which contention was ignored by lower authorities. The decisions in CCE vs. Dhariyal Chemicals - 2014-TIOL-2193-CESTAT-AHM, CCE v. GTC Industries Ltd.- 2011-TIOL-82-HC-MUM-CX, Rukmani Pakkwell Traders v. CCE - 2008-TIOL-564-CESTAT-MAD, Pan Pipes Resplendents Ltd. - 2005-TIOL-158-SC-CX were also cited in support.

The AR submitted that the processes carried out by the appellant is not a simple process as is being made out by the appellant; what is being received is flattened PVC rolls and sometimes horizontally cut PVC sleeves; goods so received are horizontally cut in the required width and thereafter put on the moulds; moulds are heated to a required temperature and the sleeves are kept on the moulds for specific time wherein the shape of the PVC sleeves gets formed and gets converted into shape required for sealing; thus the tube is a sealant sleeves while the input is normal PVC sleeves; inputs are bi-axially oriented plain sleeves and on formation these gets to fully oriented blown/formed sleeve for the purpose of shrink wrap as is evident from the report of the Chemical Examiner. Inasmuch as even the characteristics of the goods changes so also the use changes and once the sleeves are so formed these cannot be converted into original shape by any process and has to be used only as sealing sleeve on the plastic container. Suffice to say that a new product with different name, characteristic and use has emerged and the process therefore amounts to manufacture, submitted the AR. In the matter of limitation, it is mentioned that although the investigation started in 2000 it continued due to various representations etc. by the appellant and could be finally concluded in 2003. The decisions in the following cases are cited for assistance viz. CCE Surat v. Neminath Fabrics Pvt. Ltd. - 2011-TIOL-10-HC-AHM-CX, ELG India Pvt. Ltd. - 2013-TIOL-02-ARA-CX, Flex Engineering Ltd. vs. CCE - 2012-TIOL-01-SC-CX.

The Bench considered the rival submissions and also took a look at the samples of inputs (PVC sleeves) as also final product (formed sleeves).

The CESTAT thereafter observed -

"5. This is not in dispute the appellants are getting PVC tubes in the flatten form sometime in running length and sometime cut into pieces of specific length. We have also seen the sample of the same. The flatten PVC tube can be used for packing and other purposes. However, after cutting and forming, the said sleeves cannot be used for packing purpose but can be used only for a sealing a plastic container of specific dimensions. We have also gone through the report of the Chemical Examiner wherein it has been clarified that the inputs are bi-axially oriented plain sleeves while the tube/final is fully oriented blown/formed sleeve for the purpose of shrink wrap. It is clear from the sample once the sleeves is formed as above, these cannot be used for any purpose other than sealing plastic container. Hon'ble Supreme Court in the famous case of DCM Ltd. vs. Union of India has held that for any process to be considered as amounting to manufacture, a new commodity with different name, character and use should emerge. In the present case the name, use and character of input and final product are different. The inputs are plain sleeves which can be used for wide variety of purpose and can be used as shrink wrap containers. Inputs are biaxially oriented whole output is fully oriented blown/formed. Thus in our view all the three conditions are satisfied and the process would therefore amount to manufacture."

The case laws cited by the appellant in the context of ‘manufacture' were distinguished; it was held that the ingredients for invoking the proviso to s.11A were not satisfied as there is no evidence to indicate that there was wilful intention to evade duty. The benefit of CENVAT credit on inputs was directed to be extended and the matter was remanded to the original adjudicating authority for recomputation of duty demand and interest.

The appeal was disposed of.

(See 2015-TIOL-356-CESTAT-MUM)