Slitting and cutting of paper rolls is not manufacture absent a specific deeming provision, and the demand was time-barred.

Slitting and cutting of jumbo paper rolls into smaller sheets was held not to amount to manufacture under section 2(f) of the Central Excise Act because no new and distinct product emerged and the paper remained paper, with only its size changing. In the absence of a specific deeming provision for the product concerned, the process could not be treated as manufacture, so duty liability on that basis failed. The demand was also time-barred because invoices and returns disclosed the activity and negated suppression or intent to evade duty. As the demand itself was unsustainable, the personal penalty on the director could not survive.

---

---

Issues: (i) Whether slitting and cutting of jumbo paper rolls into smaller sheets amounts to manufacture under section 2(f) of the Central Excise Act, 1944. (ii) Whether the demand was barred by limitation and the personal penalty could survive.

Issue (i): Whether slitting and cutting of jumbo paper rolls into smaller sheets amounts to manufacture under section 2(f) of the Central Excise Act, 1944.

Analysis: The activity did not bring about a new and distinct product. The paper remained paper and only its size changed. A specific deeming provision existed for thermal paper under Chapter Note 13 of Chapter 48 of the Central Excise Tariff Act, 1985, but no similar note covered the paper in question. In the absence of such a provision, slitting and cutting of already manufactured paper could not be treated as manufacture.

Conclusion: The activity did not amount to manufacture and the finding of duty liability on that basis was unsustainable.

Issue (ii): Whether the demand was barred by limitation and the personal penalty could survive.

Analysis: The invoices and returns disclosed the activity and expressly stated that it did not amount to manufacture. On that basis, there was no suppression of facts or intent to evade duty. The demand beyond the normal period was therefore time-barred. Since the demand itself could not be sustained, the penalty imposed on the director also could not stand.

Conclusion: The demand was barred by limitation and the personal penalty was not sustainable.

Final Conclusion: The impugned order was set aside and the appeals were allowed in full.

Ratio Decidendi: Slitting and cutting of already manufactured goods does not amount to manufacture unless the statute expressly deems that process to be manufacture for the specific product concerned.

---