Conversion of Video Magnetic Tapes into Pancakes not 'manufacture' under tax law

DIPEN TEXTILES (P) LTD. Versus COLLECTOR OF CENTRAL EXCISE

DIPEN TEXTILES (P) LTD. Versus COLLECTOR OF CENTRAL EXCISE - 1992 (62) E.L.T. 430 (Tribunal) Issues Involved:
1. Whether the conversion by way of slitting and cutting of jumbo rolls of Video Magnetic Tapes into Pancakes amounts to manufacture u/s 2(f) of the Central Excises & Salt Act.
2. Whether the resultant Pancakes are liable to duty again.

Summary:

Issue 1: Whether the conversion by way of slitting and cutting of jumbo rolls of Video Magnetic Tapes into Pancakes amounts to manufacture u/s 2(f) of the Central Excises & Salt Act.
The appellants contended that the process of slitting jumbo rolls into Pancakes does not amount to manufacture under Section 2(f) of the Central Excises & Salt Act, as there is no change in the characteristics of the film except a change in width. They relied on various judgments, including Computer Graphics (P) Ltd. v. U.O.I. and C.C. v. Hindustan Photo Films, which held that mere change in physical form does not constitute manufacture. The Department argued that there is a change in use and name in commercial parlance, and thus, Pancakes are distinct and separate products, making the process of slitting equivalent to manufacture.

The majority opinion held that slitting jumbo rolls into Pancakes does not amount to manufacture as the character of the goods remains unchanged despite the change in name and use. It was emphasized that mere application of processes like slitting does not transform the original product into a new product, referencing the judgments of the Madras High Court and the Tribunal in similar cases.

Issue 2: Whether the resultant Pancakes are liable to duty again.
The appellants argued that since both jumbo rolls and Pancakes fall under the same tariff sub-heading 8523.13, no additional duty should be levied on Pancakes. They cited trade notices and previous judgments supporting that duty paid on one form should not be levied again on another form if both fall under the same tariff heading. The Department countered that the specific mention of Pancakes in the tariff entry indicates a legislative intent to levy duty on Pancakes as a distinct product.

The dissenting opinion by Member (Technical) held that the process of slitting jumbo rolls into Pancakes amounts to manufacture, making Pancakes liable to duty. This view was supported by the legislative intent reflected in the specific tariff entry for Pancakes and the Supreme Court's judgments, which emphasized that the creation of a new commodity with a different name, character, and use constitutes manufacture.

Final Order:
In view of the majority opinion, the appeal was dismissed, confirming that slitting jumbo rolls into Pancakes does not constitute manufacture, and thus, Pancakes are not liable to additional duty.