2026 (3) TMI 907 - AT - Central Excise

Manufacture test: printing on customer supplied materials is not manufacture under central excise law, so excise demand unsustainable.

The article examines whether printing on customer supplied materials constitutes 'manufacture' for central excise by applying the transformation test ... Demand of excise duty, interest and penalties - Manufacture test - Printing of cheque books, cartons/boxes/cases, calendars, sheets, match tickets, letterhead pads, Adhiwakta welfare stamps and other products - Manufacture Or Not - job works basis. Printing as not amounting to manufacture - Whether the activity of printing carried out by the appellant amounts to 'manufacture' for levy of Central Excise duty. - HELD THAT:- The Tribunal held that mere printing on pre-existing paperboard/paper or similar substrates does not transform the identity, character or use of the underlying commodity so as to constitute manufacture. The adjudication relied on co-ordinate decisions which examined the two-fold test of manufacture - whether a different commercial commodity comes into existence and whether the original commodity would be of no commercial use but for the process - and concluded that plain and printed substrates remain the same commercial commodity. The department's reliance solely on tariff classification to treat the activity as manufacture was rejected, and the Tribunal found no material that the appellants had machinery, raw-material procurement or processes that would satisfy the chapter-note test for manufacture. [Paras 12, 13] Printing carried out by the appellants does not amount to manufacture; the appellants are not liable to excise duty on that ground. Classification of printed paper under Chapter 49 - HELD THAT: - It is not the case of the Department that the Appellants have the machinery wherewithal to manufacture excisable products classifiable under Section 48 or Section 49. The only allegation by the Department on the basis of the classification of the goods cannot be sustained. There is no allegation in the Show Cause Notice or in the impugned order that the Appellant had installed machineries, procured raw material, employed persons to produce the products classifiable under Chapter 48/49. It is not denied that the Appellants are engaged in printing of cheque books, cartons/boxes/cases, calendars, sheets, match tickets, letterhead pads, adhiwakta welfare stamps and other products; it is not proved that mere printing on the material amounts to manufacture. We, further find that as submitted by the learned Counsel for the Appellant that there is no specific section or chapter notes in the Central Excise Tariff Act, 1985 deeming printing to be an act of manufacture. It is also not proved that the products manufactured by the Appellants are marketable in themselves as they are printed for a particular consumer. We find that the issue is no longer res integra having been decided by the co-ordinate Bench of the Tribunal in the case of M/s Chromaprint (India) Pvt. Ltd. [2024 (3) TMI 493 - CESTAT CHENNAI] after going through the various cases decided in this regard and held that activity of printing does not amount to manufacture. Accordingly, the impugned order cannot be sustained on merits. We find that the issue is squarely covered in favour of the Appellants on merits. We need not go into the issue of limitation and other issues. Final Conclusion: The Tribunal allowed the appeals, holding that the appellants' printing activity does not amount to manufacture and, alternatively, that the printed products fall under Chapter 49 attracting nil duty; consequently the excise demand, interest and penalties imposed in the impugned order were set aside. Issues: (i) Whether the activity of printing carried out on materials supplied by customers amounts to 'manufacture' for the purposes of central excise and whether the impugned demand of excise duty, interest and penalties is sustainable.Analysis: The issue was examined by applying the legal test of manufacture requiring a transformation that yields a new and different article having a distinctive name, character or use. The analysis considered chapter notes and tariff headings of the Central Excise Tariff Act, 1985 (notably Chapter 48 and Chapter 49), the definition of 'manufacture' under Section 2(f) of the Central Excise Act, 1944, and precedent holding that mere printing or surface treatment does not alter the basic character of the underlying material. It was further examined whether change in classification alone or change of tariff heading establishes manufacture, and whether printed items produced for a particular customer are marketable in themselves. Relevant principles applied include the manufacture test (distinctive name, character or use), marketability of the end product, applicability of job-work and modvat/cenvat credit where relevant, and the inability of classification alone to convert a non-manufacturing process into manufacture.Conclusion: (i) In favour of the assessee. The activity of printing on materials supplied by customers does not amount to 'manufacture' under Section 2(f) and related chapter notes; the demand of excise duty, interest and penalties is not sustainable and is set aside.