CX - End use has positively been changed - printing has resulted into a product, i.e., paper with distinct character and use of its own which it did not bear earlier - activity amounts to manufacture and CX duty payable under 4811.90 - Revenue appeal allowed: Supreme Court
By TIOL News Service
NEW DELHI, OCT 08, 2015: THE assessee purchased GI paper from the market which is already duty paid base paper. On this paper, the process of printing is carried out by the assessee according to the design and specifications of the customers depending on their requirements. This printing is done in jumbo rolls of GIP twist wrappers. Bulk orders are received from Parle , which needs the said paper as a wrapping/packing paper for packing of their goods. On the paper, logo and name of the product is printed in colorful form. After carrying out the printing as per the requirement of the customers, the same is delivered to the customers in jumbo rolls without slitting.
The following two issues were before the Tribunal for a decision -
(i) Whether the impugned goods mainly GIP wrappers in rolls printed by the appellants out of GI base paper in rolls on which duty has been paid under sub-heading 4805.90 is chargeable to duty under sub-heading 4811.90? It is the contention of the appellants that merely printing such paper in the rolls with the motive/logo of M/s Parle Biscuits, which is subsequently waxed and cut into wrappers of required size, does not amount to manufacture and the same is not excisable.
(ii) It is the alternate contention of the appellants that the impugned printed rolls are classifiable as product of the printing industry under sub-heading 4901.90 and hence fully exempted from duty as the tariff rate itself is nil.
The CESTAT, WZB while allowing the appeals of the assessee had held thus -
++ It is well settled that mere change of tariff classification from one heading to another, in this case, from 48.05 to 48.11 would not make the product excisable unless the process meets the test of manufacture.
++ Printing is incidental and primary use of GI printed paper roll is for wrapping, which is not changed by the process of printing. Hence following the ratio of the decision of the Hon'ble Supreme Court in the case of J.G. Glass (2002-TIOL-112-SC-CX), we are of the view that if the impugned printed products are produced in the same factory, where paper is produced, it would be chargeable to duty under Heading 48.11, whereas in this case, the appellants have bought duty paid GI paper and merely carried out the process of printing, they are not required to pay duty on such printed GI papers produced from duty paid GI paper as the process of printing in this case does not amount to manufacture .
We had reported this decision as 2006-TIOL-676-CESTAT-MUM.
The matter did not end there as the CCE, Mumbai-IV had filed a Civil Appeal before the Supreme Court in the year 2007.
And the Apex Court has decided the issue in favour of the Revenue .
The Supreme Court referred to its recent decision in Servo-Med Industries Pvt. Ltd. v. Commissioner of Central Excise, Mumbai 2015-TIOL-103-SC-CX which culled out the following four categories of cases to ascertain whether a particular process would amount to manufacture or not -
(1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category.
(2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process.
(3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place.
(4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place.
After extracting as above, the Supreme Court inter alia further observed -
++ A cursory look into the printing process may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end use was still the same, namely, wrapping/packaging.
++ However, a little deeper scrutiny into the facts would bring out a significant distinguishing feature; a slender one but which makes all the difference to the outcome of the present case. No doubt, the paper in-question was meant for wrapping and this end use remained the same even after printing.
++ However, whereas blank paper could be used as wrapper for any kind of product, after the printing of logo and name of the specific product of Parle thereupon, the end use was now confined to only that particular and specific product of the said particular company/customer.
++ The printing, therefore, is not merely a value addition but has now been transformed from general wrapping paper to special wrapping paper. In that sense, end use has positively been changed as a result of printing process undertaken by the assessee.
++ We are, therefore, of the opinion that the process of aforesaid particular kind of printing has resulted into a product, i.e., paper with distinct character and use of its own which it did not bear earlier. Thus, the 'test of no commercial user without further process' would be applied as explained in paragraph 20 of Servo-Med Industries (supra).
As mentioned, the Revenue appeal was allowed by setting aside the order of the Tribunal and restoring the Order-in-Original passed by the Adjudicating Authority.
(See 2015-TIOL-235-SC-CX)
