Whether the activity of laminating of BOPP films used as laminated wrapper for packing biscuits amounts to manufacture?

PJ/Case Law /2016-17/3309

Name :- PARLE BISCUITS PVT. LTD. VersusCOMMISSIONER OF C. EX., ROHTAK

Citation :- 2016 (339) E.L.T. 132 (Tri. - Chan.)

Brief Facts:-The facts of the case are that the appellant is in the business of manufacture of biscuits. These biscuits are packed in a printed laminated wrapper. The appellant in their own factory produce the printed wrappers by printing a plain BOPP film and then laminating it with plain polyester film. Some of these printed laminated wrappers are consumed by the appellant captively and some produce is cleared to the contract manufacturing units of the appellant on payment of excise duty. The appellants were availing Cenvat credit on the Excise duty paid in respect of the inputs for printed laminated sheets. The Revenue was of the view that since the printing and laminating of a plain polyester film does not amount to manufacture, no Excise duty was payable on the printed wrappers cleared by the appellant to their contract manufacturing units. Therefore, in the light of the decision of Apex Court in the case of Metlex (I) Pvt. Ltd. v. CCE, New Delhi - 2004 (165) E.L.T. 129 (S.C.). The appellant is not entitled to take credit. On this basis, the Cenvat credit availed in respect of BOPP film, polyester film and other inputs used in making printed laminated sheets was sought to be recovered along with the interest by way of issue of a show cause notice. The matter was ultimately adjudicated and impugned order has been passed demanding duty on account of reversal of credit on the said with interest and equal amount of penalty was also imposed. Aggrieved with the said order, the appellant is before us.

Appellant’s contention:-Learned counsel for the appellant submitted that the issue involved in the matter is whether the activity of printing and laminating of a plain polyester film amounts to manufacture or not? The said issue came up before the Apex Court in the case of CCE, Mumbai-IV v. Fitrite Packers - 2015 (324) E.L.T. 625 (S.C.), wherein it has been held that the activity of printing and laminating of BOPP film shall not amount to manufacture. Therefore, they are not required to reverse the credit. In alternate, it is submitted by the learned counsel that if their activity does not amount to manufacture, in that case, printing and laminating wrappers have been cleared by the appellant. On payment of duty the same is to be treated reversal of credit on the inputs used in printing and laminating wrappers. Similar view has been taken by this Tribunal in the case of Ajinkya Enterprises - 2013 (288) E.L.T. 247 (Tri.), which has been affirmed by the Hon’ble High Court reported in 2013 (294) E.L.T. 203 (Bom.).

Respondent’s contention:-On the other hand, learned AR reiterated the findings in the impugned order.

Reasoning of judgement:-The Tribunal heard both sides and considered the submissions. Short issue before the Tribunal was that whether the activity of printing/laminating of BOPP films which were used as laminated wrapper for packing of biscuits by the appellant amounted to manufacture or not? Similar issue came up before the Apex Court in the case of Fitrite Packers (supra), wherein this Tribunal has held as under :-
(i)Whether the goods in question, i.e., printed GI paper are classifiable under Chapter Heading 4811.90, as claimed by the Revenue or they were to be classified under Chapter Heading 4901.90 as the product of printing industry, as per the stand taken by the respondent/assessee?
(ii)Whether printing on duty paid GI paper would amount to manufacture?
The facts of the case set out in that case are as under:
The respondent/assessee herein purchased GI paper from the market which is already duty paid base paper. On this paper, the process of printing is carried out by the assessee according to the design and specifications of the customers depending on their requirements. This printing is done in jumbo rolls of GIP twist wrappers. Bulk orders are received from Parle, which needs the said paper as a wrapping/packing paper for packing of their goods. On the paper, logo and name of the product is printed in colourful form. After carrying out the printing as per the requirement of the customers, the same is delivered to the customers in jumbo rolls without slitting. The issue is as to whether this printing process amounts to manufacture or not?
On this set facts, the Apex Court observed as under :-
On the basis of aforesaid discussion and formulation of certain tests to ascertain whether a particular process would amount to manufacture or not, the Court culled out four categories of cases in its conclusion in Para 27 of the judgment. We reproduce these categories hereunder:
The case law discussed above falls into four neat “27. categories.- (1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category.
(2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process.
(3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place.
(4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place.”
On the facts of the present case, it is to be determined as to whether the case would fall under category (2) or category (4). We have already taken note of printing process. A cursory look into the same may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end-use was still the same, namely, wrapping/packaging. However, a little deeper scrutiny into the facts would bring out a significant distinguishing feature; a slender one but which makes all the difference to the outcome of the present case. No doubt, the paper in question was meant for wrapping and this end-use remained the same even after printing. However, whereas blank paper could be used as wrapper for any kind of product, after the printing of logo and name of the specific product of Parle thereupon, the end-use was now confined to only that particular and specific product of the said particular company/customer. The printing, therefore, is not merely a value addition but has now been transformed from general wrapping paper to special wrapping paper. In that sense, end-use has positively been changed as a result of printing process undertaken by the assessee. We are, therefore, of the opinion that the process of aforesaid particular kind of printing has resulted into a product, i.e., paper with distinct character and use of its own which it did not bear earlier. Thus, the ‘test of no commercial user without further process’ would be applied as explained in paragraph 20 of Servo-Med Industries (supra). The aforesaid paragraph is extracted hereunder.
In“20. Brakes India Ltd. v. Superintendent of Central Excise - (1997) 10 SCC 717, the commodity in question was brake lining blanks. It was held on facts that such blanks could not be used as brake linings by themselves without the processes of drilling, trimming and chamfering. It was in this situation that the test laid down was that if by adopting a particular process a transformation takes place which makes the product have a character and use of its own which it did not bear earlier, then such process would amount to manufacture irrespective of whether there was a single process or several processes.”
Admittedly, in this case, the appellant after printing and laminating the wrappers use them in packing the biscuits manufactured by the appellant only. We find that the activity of printing/laminating of BOPP films which were used as laminated wrapper for packing of biscuits by the appellant shall amount to manufacture. Therefore, the appellant has rightly availed the credit on BOPP films and other inputs used in making printed laminated sheets. In these circumstances, the appellant has correctly taken the credit. Consequently, the impugned proceedings are not warranted against the appellant. Therefore, the impugned order is set aside and the appeal is allowed with consequential relief, if any.

Decision:-Appeal allowed

Comment:- The gist of the case is that sincelaminating of BOPP films used as laminated wrapper for packing of biscuits manufactured by assessee amounts to manufacture assessee is entitled to avail credit of duty paid on inputs used in making of laminated sheets.

Prepared By:-Praniti Lalwani

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PJ/Case Law /2016-17/3309

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