Court affirms decision on excise duty refund, no new commodity created. Duty liability arises from manufacture of paper.

The High Court dismissed the appeal and affirmed the Single Judge's decision to set aside the Assistant Collector's order, directing a refund of the excise duty collected. The court held that the process carried out by the respondent did not result in the creation of a new commodity, and therefore, the products were not liable for excise duty under the Central Excises and Salt Act, 1944. The court clarified that the liability to pay duty arises from the manufacture of paper, which was not undertaken by the respondent in this case.

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Issues:
1. Whether the products manufactured by the respondent are liable for payment of excise duty under the Central Excises and Salt Act, 1944.
2. Whether the process carried out by the respondent amounts to the manufacture of a new commodity.
3. Whether the liability to pay excise duty arises under Item 17(2) of the Act for the process of coating and impregnating kraft paper.

Analysis:

Issue 1:
The respondent claimed that the products manufactured in their factory did not fall under the definition of "manufacture" as per Section 2(f) of the Act. The Assistant Collector held that the processed products were different from the original kraft paper and therefore liable for excise duty. However, the High Court held that the process did not result in a new commodity with a different name and use, citing decisions of other High Courts. The Single Judge set aside the Assistant Collector's order, directing a refund of the excise duty.

Issue 2:
The appellants argued that the process undertaken by the respondent amounted to manufacturing a new commodity, relying on a Supreme Court decision. The High Court examined the process described in an affidavit filed by the respondent and concluded that the process did not result in the creation of different products with unique characteristics. The High Court agreed with the Single Judge's decision, citing relevant judgments of other High Courts.

Issue 3:
Regarding the applicability of Item 17(2) of the Act, the appellants contended that the process of coating and impregnating kraft paper attracted excise duty. However, the High Court clarified that the liability to pay duty arises from the manufacture of paper, which the respondent did not undertake. As the process of coating and impregnating was not in relation to the manufacture of paper, Item 17(2) was deemed not applicable. The High Court upheld the Single Judge's decision, finding no grounds for interference.

In conclusion, the appeal was dismissed, and the High Court affirmed the Single Judge's decision to set aside the Assistant Collector's order, directing a refund of the excise duty collected. The High Court clarified that any further refund claims for duty paid prior to the specified date would require a separate application to the Department.

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