Manufacture and exemption limits: coating, lamination and branding processes created distinct goods, while coated-paper bags fell outside the notification.

Coating and lamination of duty-paid paper, together with dilution and branding of purchased chemicals, were treated as manufacture because the processes produced commercially distinct goods with a different character and use. Bags made out of coated paper were held outside the scope of Notification No. 18/95-CE, as the exemption covered cartons, boxes, containers and cases made out of corrugated paper and paperboard, and could not be extended beyond its express terms. The departmental classification was therefore sustained and the claimed exemption denied.

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Issues: (i) whether coating and lamination of duty-paid paper, and dilution and branding of purchased chemicals, amounted to manufacture; (ii) whether bags made out of coated paper were eligible for exemption under Notification No. 18/95-CE dated 16-3-1995.

Issue (i): whether coating and lamination of duty-paid paper, and dilution and branding of purchased chemicals, amounted to manufacture

Analysis: The appellant did not merely further process an already coated paper. Duty-paid paper was coated in some cases and laminated with HDPE/LDPE in others, resulting in a product different in character and use. Likewise, the chemicals purchased by the appellant were subjected to processes before sale under its brand name, and those processes were found to bring about commercially distinct goods. The earlier decision relied on was distinguished on the basis that it dealt with a different tariff context and with further coating of coated paper.

Conclusion: The processes undertaken amounted to manufacture.

Issue (ii): whether bags made out of coated paper were eligible for exemption under Notification No. 18/95-CE dated 16-3-1995

Analysis: The exemption entry covered cartons, boxes, containers and cases made out of corrugated paper and paperboard. Bags made out of coated paper did not fall within that description. The notification could not be extended to cover goods outside its express terms.

Conclusion: The exemption was not available.

Final Conclusion: The classification adopted by the departmental authorities was sustained, the processes in question were treated as manufacture, and the assessee was denied the claimed exemption.

Ratio Decidendi: A process results in manufacture when it brings into existence a new and distinct product with a different character or use, and an exemption notification must be construed strictly according to its terms.

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