1983 (5) TMI 234 - AT - Central Excise

Bituminising kraft paper not manufacturing under Central Excises and Salt Act

The Tribunal held that the process of bituminising duty paid kraft paper does not amount to 'manufacture' under the Central Excises and Salt Act, 1944. It ... Manufacture - process incidental to or ancillary to manufacture - inclusive definition - residuary entry - levy twice over - assessable as Paper or Paper Board under Item 17(2)Manufacture - process incidental to or ancillary to manufacture - Whether bituminising duty-paid kraft paper by bonding with duty-paid bitumen amounts to manufacture or involves any process incidental to or ancillary to the completion of manufacture. - HELD THAT: - The Tribunal held that bituminisation by bonding duty-paid kraft paper with duty-paid bitumen does not constitute a manufacture nor a process incidental or ancillary to the manufacture of paper. The inclusive description of 'Paper Board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing)' shows that the listed processes are illustrative and the entry is residuary. A process performed after the manufacture (such as bituminisation) leaves the resultant product still to be regarded as paper or paper board within the inclusive definition; it does not create a new manufacture simply because characteristics, strength or use may be altered. Consequently, bituminisation cannot properly be characterised as a manufacture or as ancillary to the original manufacture of the kraft paper. [Paras 9]Bituminisation of duty-paid kraft paper is not a 'manufacture' nor a process incidental or ancillary to the manufacture of paper.Inclusive definition - residuary entry - levy twice over - assessable as Paper or Paper Board under Item 17(2) - Whether, if bituminisation is not a manufacture, the bituminised kraft paper is nevertheless assessable to duty again under Item 17(2) of the First Schedule or under residuary Item 68. - HELD THAT: - The Tribunal found no legislative intent to levy duty twice on paper: Item 17(2) was a residuary inclusive entry covering paper and paper board subjected to various treatments and did not separately prescribe a second levy when such processes (including bonding) are applied. By contrast, where the legislature intended double levies it did so expressly in other items (for example, Item 19). Because Item 17(2) defines the taxable object inclusively and contains no separate sub-item imposing an additional duty on treated paper, neither an implication of a second levy nor attraction of the residuary Item 68 is justified. The existence of an exemption notification relating to bituminised paper cannot be read to imply a levy where none exists. [Paras 9, 10]Bituminised kraft paper is not exigible to a second duty under Item 17(2) nor to the residuary Item 68 for the period in question; no double levy is permissible on the facts and construction adopted.Final Conclusion: Appeal allowed; orders below set aside and refund of duty directed for the period 1-9-1977 to 31-1-1978, if otherwise in order. Issues Involved:1. Whether the process of bituminising duty paid kraft paper amounts to 'manufacture' or involves 'any process incidental to or ancillary to the completion of manufacture' u/s the Central Excises and Salt Act, 1944.2. If it does, whether duty paid kraft paper on bonding with duty paid bitumen is assessable to duty again u/s Item 17(2) of the First Schedule to the Act or the residuary item 68.Summary:Issue 1: Whether the process of bituminising duty paid kraft paper amounts to 'manufacture' or involves 'any process incidental to or ancillary to the completion of manufacture' u/s the Central Excises and Salt Act, 1944.The Tribunal examined whether the process of bituminising kraft paper constitutes 'manufacture' or any process incidental or ancillary to manufacture. The Appellant argued that no 'manufacture' was involved and thus no duty was payable. The Tribunal referred to various judicial precedents, including the Supreme Court's interpretation of 'manufacture' and High Court rulings, which indicated that mere application of substances like bitumen does not transform the original product into a new commodity. The Tribunal concluded that bituminisation of kraft paper does not amount to 'manufacture' u/s the Act.Issue 2: If it does, whether duty paid kraft paper on bonding with duty paid bitumen is assessable to duty again u/s Item 17(2) of the First Schedule to the Act or the residuary item 68.The Tribunal analyzed Item 17(2) of the Schedule, which includes 'Paper board and all other kinds of paper' subjected to various treatments. It was noted that the inclusive definition in Item 17(2) does not imply a second levy on the same product after it has undergone processes like bituminisation. The Tribunal emphasized that the legislative intent did not support a double levy on the same product. Additionally, the Tribunal found that the residuary Item 68 was not applicable as the bituminised kraft paper still fell u/s Item 17(2). Consequently, the Tribunal ruled that the duty paid kraft paper bonded with duty paid bitumen is not assessable to duty again.Conclusion:The Tribunal answered both questions in the negative, allowing the Appeal, setting aside the orders below, and directing the refund applied for to be made, if otherwise in order.