Case Note & Summary
The Commissioner of Central Excise, Mumbai-V, filed an appeal under Section 35(G) of the Central Excise Act, 1944, against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dated 19/4/2005. The respondent, M/s GTC Industries Ltd., is a manufacturer of cigarettes falling under Chapter Sub-Heading 2403.11 of the Central Excise Tariff Act, 1985. The respondent used duty-paid paper back aluminium foil in roll form for packing cigarettes. In the process, the foil was cut to size and embossed with the word 'PULL' before being wrapped around the cigarette. Initially, under a notification dated 13/5/1988, such cut and embossed aluminium foil was exempt from excise duty. However, the government withdrew this exemption by notification No.44/94 dated 1/3/1994. Consequently, the respondent filed a classification list (No.9/94) on 26/4/1994 under protest, classifying the products under tariff headings 7607.30 (cut to shape) and 7607.20 (embossed). During the pendency of approval, the respondent paid excise duty at 20% under those headings. The Assistant Commissioner, by order dated 1/7/1994, held that the process of cutting and embossing did not amount to manufacture and returned the classification list. The respondent's appeal to the Commissioner of Central Excise (Appeals) was dismissed on 9/3/1999, and a further appeal to CESTAT was dismissed on 19/5/2005. The revenue then appealed to the High Court. The court framed two questions of law: (1) whether the Tribunal was right in holding that no classification list is necessary as the process is not manufacture, and (2) whether the Tribunal was right in holding that the process does not amount to manufacture. The appellant argued that embossing itself is manufacturing and results in a new product. The respondent contended that the process is ancillary and incidental to packing and does not change the character of the foil. The court, relying on the definition of 'manufacture' under Section 2(f) of the Central Excise Act, held that manufacture requires the emergence of a new and distinct product. Since the embossed and cut foil remains aluminium foil and is used only for packing, no new product comes into existence. Therefore, the process does not amount to manufacture, and no classification list is required. The appeal was dismissed, and the questions of law were answered in favor of the assessee.
Headnote
A) Central Excise - Manufacture - Embossing and Cutting - Section 2(f) Central Excise Act, 1944 - The issue was whether embossing the word 'PULL' on aluminium foil and cutting it to shape for packing cigarettes constitutes manufacture. The court held that the process does not bring into existence a new product having a distinct name, character, or use; the foil remains aluminium foil. Therefore, it is not manufacture and no classification list is required (Paras 1-4).
Issue of Consideration
Whether the process of embossing on aluminium paper back foil and cutting it to shape for packing cigarettes amounts to 'manufacture' under the Central Excise Act, 1944, and whether a classification list is necessary for such process.
Final Decision
Appeal dismissed. The questions of law are answered in favor of the assessee. The process of embossing and cutting of aluminium foil does not amount to manufacture, and no classification list is necessary.
Law Points
- Manufacture requires emergence of a new and distinct product
- Embossing and cutting of aluminium foil for packing does not amount to manufacture
- Classification list not required when process is not manufacture
- Burden on revenue to show manufacture
- Section 35G of Central Excise Act
- 1944
