Appellate Tribunal: Converting Paper Rolls /= 'Manufacture' under Central Excise Act

The Appellate Tribunal ruled that the conversion of Jumbo Paper Rolls into Writing and Printing Paper Sheets by the Appellant did not constitute 'manufacture' under the Central Excise Act, 1944. Citing the Supreme Court decision in S.R. Tissues, the Tribunal held that such conversion activities did not amount to 'manufacture.' As a result, the Tribunal overturned the challenged orders and granted relief to the Appellant, determining that the demands for central excise duty were unsustainable, allowing the benefit of the exemption notification without including the value of the cleared goods in the assessable value.

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Issues involved:
The judgment involves determining whether the process adopted by the Appellant, converting Jumbo Paper Rolls into Writing and Printing Paper Sheets, amounts to 'manufacture' for the purpose of central excise duty exemption under Notification 8/2003 dated 01.03.2003.

Issue 1 - Process of Conversion:
The Appellant converted Jumbo Paper Rolls into Writing and Printing Paper Sheets, treating it as a trading activity, resulting in non-levy of central excise duty. The department alleged that this conversion process amounts to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944.

Issue 2 - Legal Interpretation:
The primary issue to be decided was whether the cutting of Jumbo Paper Rolls into sheets by the Appellant constitutes 'manufacture' as per the relevant legal provisions. The Appellant argued that this process did not lead to the creation of a new product, relying on judgments such as S.R. Tissues and decisions by various Tribunals.

Issue 3 - Extended Period of Limitation:
The Appellant contended that the extended period of limitation cannot be invoked as there was no willful suppression or misdeclaration on their part. They maintained that they genuinely believed their activities did not amount to 'manufacture' and that there was no evidence of concealment by them.

Judgment Summary:
The Appellate Tribunal held that the conversion of Jumbo Paper Rolls into Writing and Printing Paper Sheets by the Appellant did not amount to 'manufacture' as defined in the Central Excise Act, 1944. The Tribunal relied on the decision of the Hon'ble Supreme Court in S.R. Tissues, where it was held that cutting/slitting of paper rolls into smaller sizes does not constitute 'manufacture'. Consequently, the Tribunal set aside the impugned orders and allowed all three appeals filed by the Appellant. The demands for central excise duty confirmed in the impugned orders were deemed unsustainable, as the value of the cleared goods did not need to be included in the assessable value for availing the benefit of the exemption notification.

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