TaxTMI 
TaxTMI 
1986 (10) TMI 144
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....paid tissue paper and convert the same into carbon paper through a process. They purchase duty paid printing and writing paper and use the same as backing paper for this stencil paper. The said stencil paper is made by collecting together the stencil skin, carbon paper and backing paper. The scale printing is also done simultaneously with collating. The said operation of collating is carried out by a machine known as collating machine. The stencil head of the said stencil paper is punched by the appellants on punching press by punching required holes to make it useable on a particular duplicating machine. 2. Upto 24th April, 1980 the appellants cleared the stencil paper after paying duty on it under Item 68 of the Central Excise Tariff. Thereafter the appellants were asked to file classification lists for the stencil paper classifying it under Tariff Item 17(2) with effect from 16th March, 1976 and to pay the duty. The appellants thereafter cleared the goods under Item 17(2) C.E.T. under protest. They contended that duty was payable only under Item 68 C.E.T. They, however, availed of proforma credit on the duty paid on the said paper. 3.On 15th November, 1980 the Central....
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....86 (24) E.L.T. 542. (ii) The "stencil skin" is not known as paper in the market. In common parlance paper means paper which is used for writing, printing or packaging and as "stencil skin" is not used for any of these purposes, it is not known as paper and cannot be considered as such. (iii) The "stencil skin" is obtained at an intermediate stage in the process of manufacture of 'duplicating paper' and is neither bought nor sold as such. It is, therefore, not 'goods'. (The appellants sought support for this argument by some affidavits filed). They also submitted that a small number of instances of export of "stencil skin" to some foreign buyers did not amount to buying and selling the same. (iv) Even if "stencil skin" is paper no duty can be levied as there is no removal of the goods from the factory, all the skins being used in the manufacture of "stencil paper" also known as "duplicating stencils". (v) Even if "stencil skin" is charged to duty it could be liable to duty under Tariff Item 68 C.E.T. and not 17(2) as it is not paper. The Learned Counsel cited case law to which reference will be made at appropriate places. 8. Replying to the a....
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....Court overlooks some arguments or facts or these are not cited before the Court. The Learned Counsel was recalling a suggestion made by the Revenue that the Supreme Court judgment in Union Carbide India Ltd. 1986 (24) E.L.T. 169 S.C. was not correct as Rules 9 and 49 were not considered there. Shri Sorabjee also argued that captive consumption is different from being able to bring goods to the market and that mere removal for captive consumption does not render something into goods when they are otherwise not goods. He pointed out that the affidavits filed have not been answered by the lower authorities. 11.We have considered the arguments of both sides carefully. The points for decision before us can be reduced to whether - (1) 'Stencil Skin' are goods and (2) if they are so whether they are classifiable under Item 17(2) C.E.T. or Item 68 thereof. 12. Shri Sorabjee's argument that "stencil skin" were not goods was based on the averment that these are not normally and in the ordinary course bought and sold. The consumption is entirely captive and they are useless for anybody except the makers of stencil paper like the appellants. In this con....
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.... have mentioned above. 15. In the present case, it was stated by the Learned J.D.R. that the manufacture of stencil skin is independent and is complete when the skin is made and becomes a component part of stencil. In the Union Carbide case the position was different. As observed by the Supreme Court it appeared from the records (of the case) that the aluminium cans at the point of levy of excise duty exist in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The Hon'ble Court also observed that the cans have sharp uneven edges and in order to use them as a component in making flashlight cases, the cans have to undergo various processes such as trimming, threading and redrawing. After the cans are trimmed, threaded and redrawn, they are reeded, beaded and anodized or painted. It is at that point only that they (the cans) become a distinct and complete component capable of being used as flashlight case..... 16. In the present case, we note the submission of the Learned J.D.R. to the effect that the stencil skin is a ready component of the stencil. The observations made by the Supreme Court about the cans do not appl....
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....recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity". It may be noted that the taxable event in the context of Sales Tax Law is 'sale'. The taxable event under the Excise Law is 'manufacture'. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted. Though in the facts of that case perhaps it was not necessary and as such the attention of the Court was not drawn to the definition of the term "manufacture" under Section 2(f) of the Central Excise Act nor was the Tariff Item IB placed before .the Court." 18. It cannot be denied that the stencil skin is manufactured by the appellants. The argument that the stencil skin....
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....mplete product after processing is done on it. In view of this and in view of the foregoing discussion, we hold that it is "goods" and is liable to excise duty. 21. This brings us to the next question as to the correct classification. The Revenue's argument is that it is 'paper' falling under Item 17(2) C.E.T. Appellants resist this argument and submit that it is not 'paper' and it is not liable to duty under that item. We would like to straightway reject the argument of the Learned J.D.R. that the Bombay High Court's order, dated July 13, 1981 classified these goods under Tariff Item 17(2). These orders do not have any indication to that effect. 22. tem No. 17 of C.E.T. at the relevant time was as follows: "17. Paper and Paper board, all sorts (including paste-board, mill board, strawboard, cardboard and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power - (1) Uncoated and coated printing and writing paper (other than poster papery (2) Paper board and all other kinds of papers (including paper or paper boards which have been subjected to various treatments such as c....
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....reme Court in M/s. Kores (India) Ltd. relates to a dispute under the U.P. Sales Tax Act but in our opinion the views expressed by the Supreme Court have to be followed with respect as these are relevant to a judgment on the present matter. Holding that carbon paper is not paper, the Hon'ble Supreme Court observed as follows: "16. Bearing in mind the ratio of the above-mentioned decisions, it is quite clear that the mere fact that the word 'paper' forms part of the denomination of a specialised article is not decisive of the question whether the article is paper is generally understood. The word 'paper' in the common parlance or in the commercial sense means paper which is used for printing, writing or packing purposes. We are, therefore, clearly of opinion that carbon paper is not paper as envisaged by entry 2 of the aforesaid Notification." Shri Sorabjee submitted that the Tribunal's rejection of this judgment in 1985 (6) E.T.R. 570 [Kores (India) Ltd. Thane v. Collector of Central Excise, Thane] on the ground that it was delivered in a sales-tax case was wrong. We note this argument but do not find it necessary to make any observations on the correctness or otherwise of the....