2015 (2) TMI 382 - AT - Central Excise

Paper cutting not manufacturing under Central Excise Act. Tribunal upholds decision, emphasizes activity not constituting manufacture.

The Tribunal held that cutting and slitting paper does not amount to manufacture under the Central Excise Act, 1944. The activity of converting paper ... Benefit of exemption under Notification 10/2002 dated 1.3.2002 - Activity of cutting and slitting of various sizes of paper from paper roll purchased from paper manufacturing unit - Held that:- 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 [1997 (12) TMI 110 - SUPREME COURT OF INDIA], [1999 (11) TMI 74 - SUPREME COURT OF INDIA] and [2004 (11) TMI 107 - SUPREME COURT OF INDIA] and the Tribunal in those judgments [2000 (11) TMI 787 - CEGAT, NEW DELHI] and [1998 (11) TMI 650 - CESTAT NEW DELHI], have consistently held that cutting and slitting of paper roll into sheets of various sizes does not amount to manufacture. - No infirmity in the impugned order and the same is upheld - Decided against Revenue. Issues: Classification of goods under Central Excise Tariff Act, 1985; Whether cutting and slitting of paper amounts to manufacture under Central Excise Act, 1944.Classification of Goods Issue:The appeal challenged the Order-in-Appeal allowing the respondent's appeal against a show cause notice proposing excise duty demand for wrongly classifying cut paper under Heading 48.20 instead of sub-heading 4802.90. The respondent argued that cutting paper into sheets does not amount to manufacture, citing judgments like UOI vs. J.G.Glass Industries Ltd. The Commissioner (Appeals) allowed the appeal based on this argument. The Revenue contended that the product was misclassified, making the exemption inapplicable. However, the Tribunal held that the activity of cutting and slitting paper does not change its identity, thus not constituting manufacture under section 2(f) of the Central Excise Act, 1944. The Tribunal upheld the Commissioner's decision, citing settled judgments that cutting paper into sheets does not amount to manufacture.Manufacture Issue:The core issue revolved around whether the respondent's activity of cutting and slitting paper from paper rolls constitutes manufacture under the Central Excise Act, 1944. The respondent argued that even if the goods were misclassified, the activity itself did not amount to manufacture, hence no excise duty should be demanded. The Commissioner (Appeals) agreed, relying on judgments from the Hon'ble Supreme Court and Tribunal. The Tribunal concurred, stating that the mere conversion of paper rolls into sheets through cutting and slitting does not alter the paper's identity, thus not meeting the definition of manufacture. Citing previous judgments, the Tribunal dismissed the Revenue's appeals and upheld the Commissioner's decision, emphasizing that cutting and slitting paper does not amount to manufacture.This detailed analysis of the legal judgment highlights the issues of classification of goods under the Central Excise Tariff Act, 1985 and whether the activity of cutting and slitting paper constitutes manufacture under the Central Excise Act, 1944. The Tribunal's decision was based on the understanding that the identity of the paper remains unchanged through the process of cutting and slitting, leading to the conclusion that such activity does not amount to manufacture.