2019 (8) TMI 421 - AT - Central Excise

Tribunal: Cutting & repacking jumbo rolls is 'manufacture' under Central Excise Act

Commissioner of CGST Versus M/s. Ashok Paper Products

Commissioner of CGST Versus M/s. Ashok Paper Products - TMI Issues Involved:1. Whether the activity of cutting, slitting, and repacking jumbo rolls into smaller sizes amounts to 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944.2. Whether the extended time limit for demand under Section 11A(4) of the Central Excise Act, 1944 is applicable.3. Applicability of the provisions of the Legal Metrology Act, 2009 and Section 4A of the Central Excise Act, 1944 to the goods supplied to institutional consumers.Detailed Analysis:Issue 1: Definition of ManufactureThe respondent-assessee is engaged in the manufacture of cleansing or facial tissues, handkerchiefs, and towels by cutting jumbo rolls into smaller sizes and packing them. The respondent claimed exemption from Central Excise duty based on the Supreme Court judgment in CCE, Delhi vs. S R Tissues Pvt. Ltd., which held that slitting/cutting jumbo rolls does not amount to manufacture.However, the Department argued that a specific amendment was made in Section 2(f)(iii) of the Central Excise Act with effect from 01 March 2003, which included the process of packing or repacking of napkins after cutting and slitting of jumbo rolls under the definition of 'manufacture.' The Tribunal agreed with the Department, stating that the amendment in the definition of manufacture under Section 2(f)(iii) post-01 March 2003 made the earlier Supreme Court judgment inapplicable. The Tribunal cited the Supreme Court judgment in CCE, Mumbai vs. Fitrite Packers, which laid down tests to determine whether a process amounts to manufacture. The Tribunal concluded that the activity undertaken by the respondent-assessee amounts to manufacture as the final products are perceived differently in the market from the jumbo rolls.Issue 2: Extended Time Limit for DemandThe Department issued a show cause notice invoking the extended time limit under Section 11A(4) of the Central Excise Act, 1944, for the period 2011-2012 to November 2015. The respondent-assessee argued that a similar issue was previously adjudicated by the Commissioner in 2007, and thus, the Department was aware of the activity. The Tribunal agreed with the respondent-assessee, citing the Supreme Court judgment in M/s. Nizam Sugar Factory vs. CCE, which stated that the extended time period could not be invoked if the Department was aware of the facts. The Tribunal held that the extended time limit under Section 11A(4) could not be invoked, but the demand for the normal period could be confirmed on a denovo basis.Issue 3: Applicability of Legal Metrology Act and Section 4A of Central Excise ActThe respondent-assessee claimed that the goods were sold to institutional customers like government, airlines, and railways, and thus, the provisions of the Legal Metrology Act, 2009, and Section 4A of the Central Excise Act, 1944, would not apply. The Department contended that no duty exemption notification exists for goods sold to institutional customers and that the assessment should be based on retail sale price with 30% abatement as per Notification No. 49/2008-CE (NT).The Tribunal noted that the issue of whether the goods were supplied to institutional consumers in bulk or retail packs needs verification by field formations. The Tribunal directed the lower adjudicating authority to decide on a denovo basis by verifying the nature of the clearances and the type of packing used.Conclusion:1. The activity of cutting, slitting, and repacking jumbo rolls into smaller sizes amounts to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944.2. The extended time limit under Section 11A(4) of the Central Excise Act, 1944, could not be invoked as the Department was aware of the activity. However, the demand for the normal period can be confirmed on a denovo basis.3. The issue of whether the goods were supplied to institutional consumers and the applicability of Section 4A of the Central Excise Act, 1944, needs to be verified by the lower adjudicating authority on a denovo basis.The appeal was allowed to the extent indicated, and the respondent-assessee was directed to cooperate with the adjudicating authority for a decision within three months.