Excise duty on duty-paid tissue paper used in interleaving was denied where no new commodity emerged and exemption did not apply.

Duty-paid tissue paper used to interleave and cut aluminium foils was treated as retaining its separate identity and not emerging as a new and distinct excisable commodity, so no further excise levy could be imposed. The text also states that levying duty again on the same article would amount to impermissible double taxation. Notification No. 155/72 was confined to aluminium foils merely cut, embossed or perforated after duty payment and did not extend to tissue paper used as interleaving material, so exemption could not be claimed for the tissue paper. On that basis, the demand for further excise duty was described as unsustainable.

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Issues: (i) Whether tissue paper used for interleaving aluminium foils and cutting them to shape underwent manufacture so as to become a separate excisable commodity liable to further excise duty. (ii) Whether Notification No. 155/72 dated 15-6-72 exempted the tissue paper used for interleaving from excise duty.

Issue (i): Whether tissue paper used for interleaving aluminium foils and cutting them to shape underwent manufacture so as to become a separate excisable commodity liable to further excise duty.

Analysis: Excise duty is attracted under the charging provision only when goods are produced or manufactured. The tissue paper had already suffered duty and, in the process of interleaving and cutting, it retained its identity as tissue paper while the aluminium foil also retained its separate character. No adhesive or process of transformation created a new and distinct commodity. Levying duty again on the same duty-paid tissue paper would amount to impermissible double taxation.

Conclusion: The tissue paper did not undergo manufacture into a separate excisable commodity and was not liable to further excise duty.

Issue (ii): Whether Notification No. 155/72 dated 15-6-72 exempted the tissue paper used for interleaving from excise duty.

Analysis: The notification granted exemption to aluminium foils merely cut to shape, embossed, or perforated where the relevant duty had already been paid. Its scope was confined to aluminium foils and did not extend to tissue paper used as interleaving material.

Conclusion: The notification did not apply to the tissue paper, so the petitioners could not claim exemption on that basis.

Final Conclusion: The demand for further excise duty on the duty-paid tissue paper used for interleaving aluminium foils was unsustainable, and the writ petition was allowed.

Ratio Decidendi: A duty-paid article that retains its identity and does not emerge as a new and distinct commodity through processing cannot be subjected to a second excise levy merely because it is used in assembling or finishing another product; an exemption notification must be applied strictly according to its terms.

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