Embossin & cutting of Aluminium foil for packing cigarettes-whether manufacture

PJ/Case Laws/2010-11/1083

Case: Commissioner of Central Excise, Mumbai-V v/s M/s GTC Industries Ltd

Citation: 2011-TIOL-82-HC-MUM-CX

Issue:- Whether embossing and cutting to shape of Aluminium foil for the purpose of packing of the cigarettes does not amount to manufacture?

Brief Facts:- Respondent-assessee is the manufacturer of cigarettes and falling under heading 2403.11. They used duty paid paper back aluminium foil in the roll form for the purpose of packing cigarettes. In the process the cigarette roll is cut to size and got embossed with word ‘PULL’ and is wrapped in the cigarette.

As per Notification dated 13/5/1988 the duty paid aluminium foil when cut and embossed, the resultant product was exempted from payment of excise duty. However, the Government had withdrawn the said Notification by a Notification No.44/94 dated 1/3/1994.

Thereupon, the respondent filed Classification List 9/94 /Aluminium foil dated 26/4/1994, under protest classifying the products as aluminium foil cut to shape under Tariff heading 7607.30 and aluminium foil embossed under heading 7607.20. During the pendency of the approval of the classification list the respondent paid excise duty on cut to shape/embossed aluminium foil @ 20%as per tariff heading 7607.30 and 7607.20.

The Assistant Commissioner held that the aluminium foil cut to shape/embossed which is used for packing cigarettes does not amount of manufacture and accordingly returned the classification list submitted by the respondent.

Being aggrieved by this order, Revenue preferred an appeal before the Commissioner (Appeals) who dismissed the said appeal. Being aggrieved by the said order of the Commissioner the Revenue filed appeal before the Tribunal and the said appeal was also dismissed by the Tribunal. Hence the Revenue has filed this appeal under Section 35(G) of the Act before the High Court.

Appellant’s Contentions:- Revenue argued that the process of embossing itself is manufacturing and the product that emerges on embossing is a new product. Secondly, aluminium foil brought in bulk by the respondent on payment of excise duty is also subjected to the process of cutting it into small pieces which changes the form and nature of the foil and hence the said process amounts to manufacturing.

Revenue contended that the judgment in S. R. Tissues Pvt Ltd was not applicable to the present set of facts. In that case the tissue paper was cut and slit into various shapes and sizes from a jumbo roll of tissue paper. In the present case the aluminium foil and paper backing is not only cut to pieces but the word ‘PULL’ is also embossed on it and further the said piece of aluminium foil is used as a shell for cigarettes. Thus, its nature, form and purpose is changed and therefore, the said ruling is distinguishable.

Respondent’s Contentions:- Respondent submitted that they purchases a roll of aluminium foil with backing of white paper and the roll is cut in pieces and on one side of each piece word ‘PULL’ is embossed in which the cigarettes are filled in with the help of machine and Aluminium paper back foil holding cigarettes is directly placed in cigarette packing machine. The cigarettes are filled in aluminium foil in such a way that word ‘PULL’ comes on the upper side of the packet. It was submitted that the aluminium foil backed with a white paper purchased by the respondent is itself an excisable commodity. When the paper foil is cut to the size it does not change its nature and form and embossing word ‘PULL’ also does not add any different character or value to the said aluminium foil therefore, aluminium foil used in the cigarettes packet is not dutiable commodity. Respondent further submitted that a foil is a barrier for moisture and so it is used to protect the cigarettes from moisture.

Respondent relied on the judgment of the Apex Court in Commissioner of Central Excise New Delhi v/s S. R. Tissues Pvt. Ltd [2005 (186) E.L.T.385 (S.C.)].

Reasoning of Judgment:- The High Court observed that the use of aluminium foil which is cut to the size and embossed is in a continuous process of packing the cigarettes in the packets. Manufacturing as defined in Section 2(f) of the Central Excise and Salt Act, 1944 includes any process enumerated therein. However, all the processes would not amount to manufacturing under the Act. Process is not defined under the Act. So it is understood in a common parlance. The process may be a flow, progress, movement, transformation, change continuation, a link, an action, happening, etc. Any process which produces distinct and identifiable commodity and renders marketable value the can be called manufacture. A commodity whether manufactured or not necessarily depends on the context and the factors of the production/process of that commodity.

In the present case, it was noted that a roll of aluminium foil backed with white thin paper is purchased by the respondent for the purpose of packing their product i.e. cigarettes. In the roll there is a continuous foil, therefore, it is cut to the size as per requirement of the capacity of the packet in which the cigarettes are to be packed. Thus, the cuts are given horizontally and separate pieces of the foil are made. As soon as the separate piece of the foil is made, a word ‘PULL’ is embossed on it. Thereafter fixed number of 10 or 20 cigarettes are wrapped in the foil and the said wrapped cigarettes are inserted in the cigarettes packet. An aluminium foil being a resistant to moisture is used as a protector for the cigarettes and to keep them dry. The word ‘PULL’ is embossed with a view to make it convenient for the user and to know from which side a cigarette can be taken out. Thus, it shows that cutting and embossing do not transform aluminium foil into a distinct and identifiable commodity. That does not change the nature and substance of the aluminium foil. It does not render any marketable value to that piece of paper. Cutting to the size and embossing is only for making it usable for the purpose of packing.

It was noted that in Mafatlal Industries Limited Vs. Nadiad Nagar Palika [2000 (117) ELT 290], the Apex Court had observed that cutting of 100 mtrs. cloth into small pieces does not bring any different commercial commodity.

In Collector of Central Excise Vs. Technoweld Industries [2003 (155) ELT 2009 (S.C.)], the Supreme Court has dealt with the issue that drawing wires from wire rods is manufacture or not and it is held that both the products being wires are not considered excisable merely because they are covered by two separate entries in the tariff.

Reliance was also placed on judgment given in Parle Products Pvt. Ltd. vs. Union of India [1991 (56) E.L.T.52(Bom.)] the Division Bench of this Court had on facts of the case held that the Department was clearly in error in recovering the duty from the company. Backing of aluminium foil with printed paper only to make it more attractive for packing and not resulting in any distinct and different articles does not amount to manufacture.

It was held that the present case was covered by the ratio given in Commissioner of Central Excise New Delhi I Vs. S. R. Tissues Pvt. Ltd [2005 (186) E.L.T.(S.C.)] in which the Apex Court has observed that slitting/cutting of jumbo rolls of plain tissue paper/aluminium foil is not treated as a manufacture. Hence section 2(f) of the Act is not applicable. In the said case jumbo rolls of toilet tissue papers or a aluminium foils were cut in various shapes and sizes. However, it was held that mere mention of the product in tariff heading does not necessarily implies that the said product was obtained by process of manufacture.

It was held that the view taken by the Asstt. Collector as also the Tribunal that embossing on foil and cutting to shape and size during the process of packing of cigarettes cannot be faulted. Aluminium foil is cut to size in a continuous process and it does emerge as a new commodity and hence it is not excisable.

In these circumstances, the questions answered in favour of Assessee and against the Revenue.

Decision:- Appeal disposed of.

***********

Comments

PJ/Case Laws/2010-11/1083

Post a Comment

Query