Customs, Excise and Gold Tribunal - Delhi
Dipen Textiles (P) Ltd. vs Collector Of Central Excise on 5 June, 1992
Equivalent citations: 1993(41)ECC213, 1992(62)ELT430(TRI-DEL)
ORDER S.V. Maruthi, Member (J)
1. The short point for consideration is whether the conversion by way of slitting and cutting of jumbo rolls of Video Magnetic Tapes into Pancakes amounts to manufacture as defined under Section 2(f) of the Central Excises & Salt Act.
2. The appellants imported Video Magnetic jumbo rolls of about 10,000 ft. in length and 13 inch in width. These jumbo rolls are subjected to the process of slitting for making smaller rolls known as 'Pancakes' having approximately 12.65 mm width and 10,000 ft. in length. The process of slitting according to the appellants, is by machine known as slitting machine. After slitting the product, it is known as 'Pancake'. An application was made to the Assistant Collector for issue of a certificate certifying that the process of slitting of Video Magnetic Tapes into Pancakes from jumbo rolls is exempted from the central excise control. Therefore, no licence is required. The Assistant Collector rejected their request on the ground that the process of slitting of jumbo rolls into pancakes amounts to manufacture and therefore, no certificate as prayed for can be issued. On appeal, the Collector confirmed the order of the Assistant Collector. Hence the appeal before us.
3. The relevant tariff heading reads as follows :--
Tariff Heading 8523.13:
"Video Tapes in the form of jumbo rolls, pancakes, hubs or reels, before amendment the Tariff Heading 85.23 read as "Prepared unrecorded media for sound recording or similar recording of other phenomena, other than products of Chapter 37".
A reading of the tariff entry shows video tapes in any form whether it is in the form of jumbo rolls or pancakes or mini-pancakes, falls under Tariff Entry 8523.13. The Assistant Collector held that from a reading of the tariff entry, "it can be considered that there is specific entry for each of the products such as jumbo rolls, pancakes, mini-pancakes in the new tariff though all the items are falling under the same Chapter sub-heading No. 8523.13. They are distinct from each other and therefore, separately excisable. The Collector held that the further sub-divisions on the basis of forms of video tapes by distinct enumeration of various forms of video tapes, the conversion of one form into another would amount to manufacture. Therefore, according to him, slitting of jumbo rolls into pancake amounts to manufacture and the appellants are not entitled to the certificate claimed for.
4. The main contention of Shri Jain on behalf of the appellants is that slitting of jumbo rolls does not amount to manufacture, though jumbo rolls and pancakes are distinctly mentioned under Tariff Item 8523.13. Since there is no change in the characteristics of the film except a change in the width namely, the width is reduced from 13 inches to 12.65 mm, the process of slitting does not amount to manufacture. The fact that the tariff item differently describes or identifies the jumbo rolls and pancakes does not make them distinct and separate products calling for levy of duty at every stage. In support of the contention that slitting and cutting of jumbo rolls does not amount to manufacture he relied upon the judgment of the Madras High Court in Computer Graphics (P) Ltd. v. U.O.I. -1991 (52) E.L.T. 491 and C.C. v. Hindustan Photo Films -1991 (52) E.L.T. 301 . In support of the contention that specific enumeration in the tariff entry does not make the goods different goods, he relied upon the judgment of the Supreme Court in A. Venkateswarlu v. Govt. of Andhra Pradesh - AIR 1978 SC 945 and Basheer Ahmed v. C.C.E. and Konark Steel Industries and Anr. v. Sales Tax Officer - 1969 STC 187 . He also contended that a change in physical form does not amount to manufacture. He also brought to our notice the trade notices issued by the Office of the Collector of Central Excise, Bombay & Rajkot stating that cassette tapes for sound recorded (Blank Cassette) would not attract duty again if made from duty paid prepared unrecorded media for sound recording when both products fall under the sub-heading 8523.00 of Central Excise Tariff Act, 1985.
5. Shri Sharma appearing for the Department submitted that there is a change in use and name. Jumbo rolls after slitting are known as 'pancakes' in the commercial parlance. Secondly, the use of jumbo rolls is different from the use of pancakes. Though the character does not change since there is change in use and name, pancakes are distinct and separate product and therefore, they are liable to duty and the process of slitting amounts to manufacture. According to him, the rate of duty is not relevant criteria. In other words, merely because there is the same rate of duty in respect of jumbo rolls as well as pancakes it cannot be said that there is no manufacture. Similarly, he submitted that same sub-heading or different sub-headings is not relevant criteria for determining whether the process amounts to manufacture or not. Jumbo rolls and pancakes are differently known in the market. They are distinct and separate products. Further the tariff entry separately identifies the products. Therefore, the process of slitting amounts to manufacture. He further pointed out that the judgment of the Madras High Court does not relate to the present tariff entry but relates to a tariff entry prior to the amendment in 1988. He, therefore, prays that the order of the Collector and the Assistant Collector should be confirmed.
6. Shri Jain appearing for the appellants while reiterating the arguments, submitted, relying on the order of this Tribunal in Basheer Ahmed v. C.C.E. - 33 ECR 507 and also on the order of this Tribunal in Inter Trade Electronics (P) Ltd. v. C.C. -1990 (49) E.L.T. 455 , that merely application of a process does not bring about transformation of an original product into a new product and such a process cannot be equated to manufacture and the slitting of the jumbo rolls into narrower width was for the purpose of fitting in the recording machines and therefore, does not amount to manufacture.
7. We have already extracted the tariff entry in the above paragraphs. It covers all video tapes either in the form of jumbo rolls, pancakes etc. Therefore, whether it is a jumbo roll or pancake, it is a video tape subjected to a levy of 25% plus Rs. 8/- per sq. meter. In the instant case, the appellants imported about 10,000 ft. in length and 13 inches in width jumbo rolls and slit them into 12.65 mm width and 10,000 ft. in length. Before, they are slitted into required size they are known as jumbo rolls and after they are slit, they are known as pancakes. These pancakes are 12.65 mm in width but the length remains the same as jumbo rolls. There is a change in size but there is no change in the character. There is also a change in the use. In other words, jumbo rolls are used in the making of pancakes whereas pancakes are used in the cassettes of video tapes. In other words, there is no change in the character of goods but change in the name and use. The process involved is also slitting by using slitting machine. The basis for holding that the process amounts to manufacture by the lower authorities is the ground that the tariff entry separately mentions jumbo rolls and pancakes. Therefore, the process amounted to manufacture. In this context, we may refer to the judgment of the Madras High Court in Computer Graphics (supra). The Madras High Court while holding that cutting jumbo rolls films into smaller sizes in the form of rolls in the form of flats could not be held amounted to manufacturing process, negatived the contention of the Department that when there is a separate tariff entry for flats as distinct from jumbo rolls, the flats cut from jumbo rolls can be classified as a manufactured product. We may point out that Tariff Entry 37.01 and Tariff Entry 37.02 deal with two different resultant products of manufacture. The Madras High Court held that if a person manufactures photographic film rolls such manufacturing process would attract the levy of duty under Tariff Entry 37.02. If another person manufactures photographic flats and films then that manufacturing process would attract Tariff Entry 37.01. But if photographic flats or films are not manufactured at all but only made out of jumbo rolls by cutting into smaller pieces, then thereafter no manufacturing process involved Tariff Entry 37.01 cannot be made use of to hold that there is a manufacturing process. The above observations squarely apply to the facts on hand. We may also refer to the order of this Tribunal in Hindustan Photo Films (supra) wherein it was held that, "the nature of the subject jumbo rolls namely, cinematograph films is not to be doubted though it is true that they cannot be straightaway put into cinematograph equipment without undergoing the process of slitting and perforation. These latter physical processes actually serve to help the mechanical process of fitment into the equipment and movement of the film in the equipment. But the quality of the goods which makes it cinematograph colour positive film is essentially attributable to the process of emulsion coating etc.... It was also pointed out that, "till not so long ago, cinematograph films, unexposed used to be imported into India in the standard formats namely, width of 70 mm, 35 mm, 16 mm etc. but in recent years imports of cinematograph films unexposed are taking place in jumbo rolls that are of considerable larger widths and these are slit and perforated in the country. This difference in the format should not make any difference to the classification of the goods as cinematograph films, unexposed if one applies the observations of the Supreme Court". Therefore, mere slitting of the jumbo rolls into smaller size does not amount to manufacture as the character of jumbo rolls is not changed though there is a change in the use and name.
8. We may also point out that jumbo rolls as such are subjected to levy. In other words, pancakes were subjected to levy in the form of jumbo rolls. The pancake does not cease to be jumbo rolls even after slitting though they are known in the market as pancakes. We may also point out that mere application of processes of slitting does not bring about transformation to the original product into a new product specifying change in character, use and name laid down by the Supreme Court. Therefore, the pancakes do not lose their identity as jumbo rolls. [ Basheer Ahmed v. C.C.
- supra]. The tariff entry reads as pointed out earlier video tapes in the form of jumbo rolls, tapes etc. In other words, whether it is a jumbo roll or pancake, it is a video tape and classifiable under Heading 8523.13 and therefore, the process does not amount to manufacture. In this context, we may refer to the judgment of the Orissa High Court in Konark Steel Industries - (supra) wherein it was held that, "Iron & steel items was wide and comprehensive enough to include the processed material of the nature sold by the petitioners and in spite of conversion of the material purchased by the petitioners under declaration for resale, the various commodities manufactured by the petitioners in their rolling mills although by name different commercial commodities, being specifically enumerated in mention in the definition of iron and steel remain one of the categories or sub-items of the main item enumerated at Entry 46 in the Schedule. The main contention in the said case was conversion of material purchased by the materials from the selling dealers and manufacture of various commodities in their rolling mills though known as different commercial commodities they being specifically enumerated and mentioned in the definition of iron and steel, they cannot become different goods. The High Court accepted the said contention and held that conversion of the materials purchased by the petitioners from the selling dealers, the various commodities manufactured by them in their rolling mills although became by name different commercial commodities, they being specifically enumerated and mentioned in the definition of iron and steel, the assessing authorities are not correct in holding that they become different goods. Applying the same principle, the fact that the jumbo rolls are slit into pancake does not make pancakes into different goods as they are mentioned under the same sub-heading of the tariff. It therefore, follows from the above that the authorities below are not justified in holding that the appellants are not entitled to the certificate requested for. The appeal is accordingly allowed.
(S.V. MARUTHI) MEMBER (J) P.C. Jain, Member (T)
9. I have carefully gone through the judgment proposed by learned sister, but I regret that I am unable to agree with the conclusions reached by her.
10. I need not re-capitulate the facts which are already set out in the judgment of the learned sister. The question that falls for consideration here is whether the Pancakes brought into existence by the process of slitting of Video Magnetic Jumbo Rolls are liable to duty again inasmuch as Pancakes can be said to have been manufactured or not. If the process of slitting of the Jumbo Rolls and bringing into existence of Pancakes of Video Magnetic Tapes can be considered as manufactured, then the Pancakes would be liable to duty and the appellants herein would be liable to take out a Central Excise licence.
11. In order to determine whether the aforesaid process is to be treated as a process of manufacture, one has to keep in mind not only the fact that a new commodity with different name, character, use has come into existence, but also one has to take into account the description given in the Tariff. The relevant Tariff Heading as reproduced in para 3 of the proposed judgment of the learned sister reads as follows :-
"Video Tapes in the form of Jumbo Rolls, Pancakes, hubs or reels; before amendment the Tariff Heading 85.23 read as "Prepared unrecorded media for sound recording or similar recording of other phenomena, other than products of Chapter 37".
12. The learned Advocate for the appellants relying on a number of citations and on the description of the Tariff Entry, as set out above, has urged that what is liable to duty under the said Tariff Heading is Video Tapes in various forms as enumerated therein. According to him, if duty has been paid on one of the forms, i.e. in the form Jumbo Rolls here, there is no liability of duty if the Video Tapes are converted into other forms mentioned in the Tariff Heading. According to him, change in form does not bring into existence a new commodity, only its name and use is changed and not the character of the goods. Video Tapes remain Video Tapes and, therefore, it has been submitted by the learned Advocate that no new commodity has come into existence. Hence the submission is that slitting of the Jumbo Rolls of Magnetic Video into Pancakes does not create any further liability of duty. In support of his plea, the learned Advocate has relied on a number of judgments mentioned in the judgment proposed by the learned sister, which are as follows :-
(i) Computer Graphic (P) Ltd. v. U.O.I. -1991 (52) E.L.T. 491 .
(ii) Collector of Customs v. Hindustan Photo Films -1991 (52) E.L.T. 301 .
(iii) A. Venkateswarlu v. Govt. of Andhra Pradesh - AIR 1978 SC 945 .
(iv) Konark Steel Industries and Anr. v. Sales Tax Officer -1969 STC 187 .
(v) Basheer Ahmed v. CCE -33 ECR 507 .
(vi) Inter Trade Electronics (P) Ltd. v. Collector of Customs -1990 (49) E.L.T. 455 .
13. The Department on the other hand has contended that the judgment of Madras High Court in Computer Graphics mentioned supra and all other judgments relied upon by the learned Advocate for the appellants are either on the old Tariff or on Import Trade Control (ITC) aspect or on sales tax matters, which are peculiar to the description of goods mentioned in the relevant Tariffs, Notifications, ITC Policy or Sales Tax Laws. None of these judgments, submits the learned Departmental Representative is on the new Tariff Heading 8523.13 which is the subject matter of consideration in this case and which has been set out above. He has submitted that Jumbo Rolls after slitting are converted into a commodity Pancakes, which are known as such in commercial parlance. It is admitted that the name and use of the goods is different from that of the Jumbo Rolls. He has, further, submitted that since Pancakes are specifically mentioned in the Tariff as liable to duty, the question of considering whether the process of slitting, which brings Pancakes into existence should be treated as a process of manufacture or not, is irrelevant. Legislative intent, according to him and according to the lower authorities is clear that Pancakes are liable to duty, if somebody brings into existence Pancakes of Video Magnetic Tapes. The lower appellate authority in coming to its conclusion has also relied upon a decision of the Supreme Court in the case of Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai, Rewari and Anr. -1978 (2) E.L.T. (J 389) . He has also relied upon Supreme Court's judgment in the case of Collector of Central Excise, Bombay v. Kiran Spinning Mills -1988 (34) E.L.T. 5 (SC) .
14. After giving my careful consideration of the pleas from both sides and studying the judgments relied upon by both sides, as mentioned supra, I am of the considered view that the process of slitting Jumbo Rolls into Pancakes of Video Magnetic Tapes is a process of manufacture and the Pancakes so produced or manufactured would be liable to duty again. Since it is not disputed that MODVAT credit of duty paid on Jumbo Rolls is available, the appellants would be entitled to the benefit of the said MODVAT credit, if they are able to satisfy the lower authorities about the other conditions that the Jumbo Rolls on which duty has been paid, have been utilised in the manufacture of Pancakes. Apart from the citations, which have been relied upon by the lower appellate authority in the case of Ramlal Mansukhrai, mentioned supra, there is a very clear judgment of Delhi High Court in the case of Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. -1980 (6) E.L.T. 735 (Del.) , which holds that if the Legislature has treated a process of an article to be a manufacture, it is not open to contend that the process is not manufacture. It is appropriate to reproduce the relevant para of the judgment of the High Court of Delhi :-
"22. Reference was made to 30 Lawyers Edition page 1012. In that case the Collector has levied a duty upon the shells on the ground that they were manufacturing shells. What was found was that the outer layer of the shells was cleaned by acid and then grinding off the second layer by an emery wheel, so as to expose the brilliant inner layer. The court on that held that the shells were still shells and thus they had not been manufactured into a new and different article having a distinctive name, character or use from that of a shell and the application of labour to an article does not necessarily make it into a distinct article. It will be seen that what was originally a shell, still remained shell though cleaned for ornamental purposes. This case is like that in (supra). It is significant to note that in this very case a duty of 30% ad valorem was imposed on "coral, cut or manufactured" was made exempt from duty. The court observed that this provision clearly implies that but for the special provision imposing a duty on cut coral, it would not be regarded as a manufactured article, although labour was employed in cutting it. What is important is that the Court accepted that if the legislature has treated an article to be a manufacture the argument is not open that the process is not manufacture. It is of significance to note that in American case it was observed that "cleaning and ginning cotton does not make the resulting cotton a manufacture of cotton" runs contrary to (supra) where it was held that "ginning process is a manufacturing process". Similarly, it has been held that rice and paddy are two different things and when paddy is dehusked and rice produced, there has been a change in the identity of goods (See AIR 1974 SC 1362; AIR 1979 SC 1475). Similarly the next case of 75 Lawyers edition page 801 is of no assistance to the petitioners. In that case the orange had been impregnated with borax, through immersion in a solution and it was held that this did not amount to a manufacture. Evidently as was said by the court there was no change in the name, appearance or general character of the fruit. It remained a fresh orange fit only for the same beneficial uses as theretofore. Obviously by applying even borax the orange remained a fresh orange."
(Emphasis supplied) 14.1 It is also worthwhile to quote from para-7 on the aspect of the process being a manufacture or not from the judgment of Ramlal Mansukhrai (supra) :-
"7. Dr. Barlingay, relying on these two decisions of this Court, urged a further point that, when the billets were rolled into circles, no process of manufacture was carried out and, consequently, excise duty could not be charged under Item 26A which imposes the liability only when goods like circles are manufactured. Reliance was placed on the interpretation of the word "manufacture" given in both the cases where it was indicated that manufacture implies the bringing into existence of a new substance known to the market. According to the respondents, the conversion of billets into circles did not bring any new substance into existence, nor did it bring into existence any complete product, so that there was no process of manufacture which alone could render the circles liable to excise duty. This argument again appears to be based on a misunderstanding of the law. There is, first, the circumstance that in Item 26A itself, the legislature has laid down that excise duty shall be leviable on billets at a lower rate and on manufactures of circles at a higher rate. This provision itself makes it clear that the legislature was aware that billets are converted into circles, and it was decided that excise duty should be leviable at both stages. When the legislature used the word "manufacture" in connection with circles, after having taken account of the fact that billets were already subjected to excise duty, it is obvious that the process, by which the billets were converted into circles, was held by the legislature to amount to manufacture. The word "manufacture" is defined in Section 2(f) of the Act as including any process incidental or ancillary to the completion of a manufactured product. The rolling of a billet into a circle is certainly a process in the course of completion of the manufactured product, viz. circles. In the present case, as we have already indicated earlier, the product, that is ought to be subjected to duty, is a circle within the meaning of that word used in Item 26A(2). In the other two cases which came before this Court, the articles mentioned in the relevant items of the First Schedule were never held to have come into existence, so that the completed product, which was liable to excise duty under the First Schedule, was never produced by any process. In the case before us, circles in any form are envisaged as the completed product produced by manufacture which are subjected to excise duty. The process of conversion of billets into circles was described by the legislature itself as manufacture of circles."
(Emphasis supplied) From the aforesaid two citations, it is apparent that since Pancakes have been specifically spelt out as exciseable goods in the Tariff, the question whether any process employed in bringing into existence Pancakes would amount to manufacture or not would be an irrelevant question. Such a question cannot be allowed to be raised in view of the clear legislative intent.
15. Further the judgment of Supreme Court in the case of Laminated Packings Private Ltd. v. Collector of Central Excise, reported in 1990 (49) E.L.T. 326 (SC) will also have a very strong bearing on this case. Paras - 4 & 6, which directly have a bearing on the issues involved in this case are also reproduced :--
"4. Lamination, indisputably by the well settled principles of excise law, amounts to 'manufacture'. This question, in our opinion, is settled by the decisions of this Court. Reference may be made to the decision of this Court in Empire Industries Ltd. and Ors. v. Union of India and Ors. - 1985 (3) SCC 314 . Reference may also be made to the decision of this Court in Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. - 1988 (37) E.L.T. 480 . We are, therefore, of the opinion that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper,"
"6. The further contention urged on behalf of the appellant that the goods belong to the same entry is also not relevant because even if the goods belong to the same entry, the goods are different identifiable goods, known as such in the market. If that is so, the manufacture occurs and if manufacture takes place, it is dutiable. 'Manufacture' is bringing into being goods as known in the excise laws, that is to say, known in the market having distinct, separate and identifiable function. On this score, in our opinion, there is sufficient evidence. If that is the position, then the appellant was liable to pay duty. We are, therefore, clearly of the opinion that the order of the CEGAT impugned in this appeal does not contain any error. The appeal, therefore, fails and is accordingly dismissed."
(Emphasis supplied) The view taken by the Supreme Court in para 4 reproduced above relying on its earlier decision in the Empire Industries Ltd. -1985 (20) E.L.T. 179 (SC) confirms the view taken by the larger Bench of the Tribunal in the case of Guardian Plasticote Ltd., Calcutta v. Collector of Central Excise, Calcutta and Ors. - 1986 (24) E.L.T. 542 . It must be remembered that in the case of Guardian Plasticote, the Tariff Entry had not specifically spelt out the goods in question. Merely by the test of commercial parlance, it was held that the process of bringing into existence bituminized kraft paper or polythene laminated kraft paper from duty paid kraft paper were liable to duty again because the two products were commercially known differently.
16. It is immaterial that the Pancakes and Jumbo Rolls fall under the same Tariff sub-heading, so long as they are known differently in the market. As admitted by the appellants that it is so, it cannot be said that the process of slitting is not a process of manufacture in the instant case, apart from the fact that the legislative intent is clear because of specific entry for 'Pancakes'.
17. I agree with the learned D.R. that the judgments relied upon by the appellant's learned Advocate are based on their peculiar facts and circumstances. I shall now deal with some of those judgments. Strong reliance was placed by the learned Advocate on Orissa High Court's judgment in the case of Konark Steel Industries & Another mentioned supra. In my view, this judgment is of no help to the appellants. It is because of the peculiar definition of the expression 'iron and steel' that it was held that no further tax liability is imposed inasmuch as no new product came into existence after conversion of this scrap of iron and steel into different commercial commodity of iron and steel. This is apparent from para 12 of the judgment of the said Court, which is reproduced below :-
"12. As in my opinion, in spite of the conversion of the materials purchased by the petitioners from the selling dealers, the various commodities manufactured by them in their rolling mills although became by name different commercial commodities they being specifically enumerated and mentioned in the definition of "iron and steel", the assessing authority has completely misdirected himself in holding that they became different goods and therefore the petitioners violated the provisions of law."
(Emphasis supplied) 17.1 Learned Advocate has strongly relied upon Madras High Court's judgment in the case of Computer Graphics mentioned supra. It is worth noting here that the judgment of the High Court appears to have been influenced by the second Clarification, dated 12-5-1989 of the Central Board of Excise & Customs, which admitted that cutting of the rolls of photographic films into flats would not amount to manufacturing process. This is clear from para 11 of the said judgment, which is reproduced below :-
"11. Deciding in the light of the law so laid down, it would be inconceivable to conclusion that mere cutting of jumbo roll films into small lengths called flats would amount to a manufacturing process. In fact, the second respondent - Central Board itself has in unequivocal terms held that cutting and slitting into smaller rolls would not amount to a process of manufacture. If that were so, cutting jumbo roll films into smaller sizes not in the form of rolls, but in the form of flats could ever not be held as amounting to manufacturing process."
(Emphasis supplied) 17.2 Again reliance placed by the learned Advocate on Tribunal's decision in the case of Hindustan Photo Films mentioned supra is also misplaced. The questions under consideration before the Tribunal in that case were the two entries (1) specific entry Tariff Item No. 37(1) reading as "Cinematographic films unexposed" as against Tariff Entry 68, the erstwhile residuary tariff entry. Relying on the well settled position of law, the Tribunal came to the conclusion that Tariff Entry 37(1) is more specific to the goods than Tariff Entry 68. It would, thus, be seen that the question before the Tribunal in the Hindustan Photo Films was in a different perspective than what is present in this case.
18. Hence I reject the appeal.
(P.C. JAIN) TECHNICAL MEMBER POINT OF DIFFERENCE OF OPINION
19. "Whether in the facts and circumstances of this case, slitting of duty paid Jumbo Rolls into Pancakes would amount to manufacture and consequent liability of the Pancakes to duty".
(S.V. Maruthi) (P.C. JAIN) JUDICIAL MEMBER TECHNICAL MEMBER N.K. Bajpai, Member (T)
20. In view of a difference of opinion having arisen between learned Member (Technical) and learned Member (Judicial), the following point was referred to the Hon'ble President (under Section 129C(5) Customs Act, 1962 as made applicable to the proceedings under the Central Excises and Salt Act, 1944 by Section 35D ibid) who referred it to me for hearing :-
"Whether in the facts and circumstances of this case, slitting of duty paid Jumbo Rolls into Pancakes would amount to manufacture and consequent liability of the Pancakes to duty".
21. Accordingly, I heard Shri A.K. Jain, learned Counsel for the appellants and Shri S.K. Sharma, learned Departmental Representative. The latter raised a preliminary objection against proceeding with the hearing on the ground that according to a letter received by him from the Collector of Central Excise, Madras, an appeal against the judgment of the Hon'ble Single Judge of Madras High Court in the case of Computer Graphics (Pvt.) Ltd. v. Union of India -1991 (52) E.L.T. 491 , had been admitted by the Division Bench on 4-10-1991. It was the claim of the learned Departmental Representative that substantial reliance had been placed on the judgment of Hon'ble Single Judge in the order of learned Member (Judicial) and the matter should not be heard by me till the judgment of the Division Bench becomes available. Shri A.K. Jain strongly contested the argument on the ground that the Division Bench had not stayed the operation of the judgment of the Single Judge. He relied on the decision of the Tribunal in the case of Lamps, Caps, Filaments Ltd. v. Collector of Central Excise, Bombay - 1987 (27) E.L.T. 93 , in support of his arguments. Shri Jain also submitted that all the decisions on the point of reference were in favour of the appellants and, in the absence of any stay from the Division Bench, there was no ground for not hearing the point. After considering the submissions of both sides on the preliminary objection, I overruled it and directed the learned Counsel to proceed with the matter.
22. Shri Jain submitted that learned Member (Technical) had relied upon the following judgments in support of his conclusion that slitting of jumbo rolls of video tapes into pancakes amounted to "manufacture" under Section 2(f) and the latter were therefore dutiable :-
(a) Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. -1980 (6) E.L.T. 735 (Del.)
(b) Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai, Rewari and Anr. -1978 (2) E.L.T. J389
c) Laminated Packagings Private Ltd. v. Collector of Central Excise - 1990 (49) E.L.T. 326 (SC)
(d) Guardian Plasticote Ltd., Calcutta v. Collector of Central Excise, Calcutta and Ors. -1986 (24) E.L.T. 542
23. Shri Jain invited attention to the Tariff Heading 8523.13 and submitted that it covered video tapes in certain specified forms only - five of them were clubbed in one sub-heading and one was separated. He submitted that the expression "in the form of ...." was restrictive in nature and not illustrative. Thereafter, the learned Counsel handed over a copy of Tribunal's Order No. 612/86-B1, dated 26th September 1986 in the case of Light Metal Works v. Collector of Customs , Bombay in which it was decided that no duty was leviable on a circle cut out of a duty paid aluminium sheet under Item 27(b) of the erstwhile Central Excise Tariff on the ground that both sheet and circle were listed in the same item and were subject to the same duty. The Tribunal observed that there was no law that the same duty would be paid again simply because the sheet was sheared into a circle. Shri Jain contended that jumbo rolls and pancakes both being mentioned in sub-heading 8523.13, the ratio of the decision was fully applicable to the present case. He cited two other decisions of the Tribunal on the same point - liability to duty of metal conductors of copper or aluminium which had once suffered duty under Item 33B on being covered with paper or cotton or glass fibre ( Order No. 164/87-B1, dated 18th March 1987 in the case of Collector of Central Excise v. Popular Cotton Covering Works, Bombay ) and of all aluminium conductors (AAC) or aluminium conductors steel re-in-forced (ACSR) on being stranded even though they have been subjected to duty under Item 33B at the earlier stage (Order No. 156-160/86-B1, dated 11th March 1986 in the case of Assistant Collector, Central Excise, Anantpur v. Ranka Cables (Pvt.) Ltd., Cuddapah ). In both these cases the Tribunal had held that the goods could not be subjected to duty a second time because the two products were covered by the same heading.
24. Continuing his arguments, Shri Jain cited the following other decisions in support of his contention :
(a) A.P. Venkateswarlu and Ors. v. Govt. of Andhra Pradesh - AIR 1978 (SC) 945
(b) Deputy Commissioner, Sales Tax (Law), Board Revenue (Taxes) Emakulam v. Pio Food Packers -1980 (6) E.L.T. 343 (S.C.)
(c) Sandoz India Ltd. v. Union of India and Ors. -1980 (6) E.L.T. 696 (Bom.)
(d) State of Madhya Bharat and Ors. v. Hiralal -1966 (17) STC 313 (S.C.)
(e) Bharat Forge & Press Industries (Pvt.) Ltd. v. Collector of Central Excise - 1990 (45) E.L.T. 525
(f) Collector of Central Excise, Aurangabad v. Shree Vindhya Paper Mills -1988 (35) E.L.T. 361 (Tribunal)
(g) Extrusion Processes Pvt. Ltd. v. Assistant Collector of Central Excise -1988 (36) E.L.T. 531 (Bombay)
(h) Hindustan Photo Films Manufacturing Co. Ltd. v. Collector of Customs, Madras -1990 (29) ECC 116
(i) Union of India and Ors. v. Delhi Cloth and General Mills Co. Ltd. and Ors. -1977 (1) E.L.T. (J 199)
25. Referring to the decision of the Tribunal in the case of Collector of Customs v. Hindustan Photo Films -1991 (52) E.L.T. 301 , Shri Jain submitted that in the case of cinematographic films (unexposed) it was held that the process of slitting and perforation did not amount to manufacture because these physical processes actually served to help the mechanical process of fitment into the equipment and movement of the film in the equipment. He submitted that the same principle should apply to jumbo rolls of video tapes which were slit into pancakes for being used in video cassettes.
26. Shri Jain referred to the wordings of the sub-heading and submitted that the different forms mentioned in 8523.13 were forms of video tapes and it had been held in decisions cited by him that mere change of form did not amount to manufacture. He also cited the Madras High Court judgment in the case of Computer Graphic Ltd. v. Union of India -1991 (52) E.L.T. 491 . As for the judgment of the Supreme Court in the case of Laminated Packaging (supra) cited by learned Member (Technical) in his order, Shri Jain submitted that by the process of lamination the character of kraft paper had undergone total change which is not the position in the case of slitting of jumbo rolls of video tapes. It cannot be said that pancakes which were obtained by slitting of jumbo rolls were an altogether a new and different article which was the result of any process of manufacture in terms of Section 2(f) of the Central Excises & Salt Act, 1944 as interpreted by the catena of decisions cited by him during the previous hearing or in the hearing before me. The principle of Laminated Packaging judgment (supra) was, therefore, not applicable to the present case. He also cited the decision of the Tribunal in the case of Golden Paper Udyog v. Collector of Central Excise, Delhi -1983 (13) E.L.T. 1123 , in which it was decided that bituminising duty paid kraft paper did not amount to "manufacture" under Section 2(f) and Tariff Item 17(2); and Tariff Item 17(2), in contrast with Items 3, 19, 20, 21, 22, 28, 37A etc. neither expressly nor by necessary intendment contemplates or prescribes a levy twice over. Shri Jain submitted that if the intention is to levy duty again, the article needs to be put under a different heading or sub-heading.
27. Arguing for the Department, Shri S.K. Sharma, the learned JDR submitted that whether the article remains under the same heading or different heading has no bearing on the concept of "manufacture". The definition of "manufacture" in Section 2(f) is a broad definition inasmuch as even the processes mentioned in the Section or Chapter Notes of the Central Excise Tariff Act, 1975 were included in the term. The fundamental question to be considered was whether any change in the character, name and use of the goods had taken place as a result of the slitting of jumbo rolls and since the answer was in the affirmative, it cannot be denied that this was the result of the process of manufacture. After slitting of jumbo rolls, the new article that came into being was known by the name of pancakes. There was no doubt that the two articles had different uses. Their character had also undergone change inasmuch as it was linked to their use. He contested the argument about the criteria of change in chemical composition and emphasised that what was important was the capability of use. He also contested Shri Jain's claim about the decisions in Sales Tax cases cited by him and said that the concept of levy under the Central Excise law being different, these decisions were not applicable to the present case. Referring to the decision in the case of Bharat Forge & Press Industries case (supra) cited by the learned Counsel, Shri Sharma submitted that since the pipes and tubes as well as pipe fittings performed the same function viz. that of carrying fluids, the Supreme Court had held that they were both classifiable under the same item.
28. Shri Sharma cited the decision of the Supreme Court in the case of Empire Industries Ltd. and Ors. v. Union of India - 1985 (20) E.L.T. 179 and referred to paragraphs 31 to 33. He submitted that the Supreme Court had held that certain processes in the case of fabrics, amounted to manufacture although the fabrics had continued to remain as fabrics. Similarly, the form of video tapes had undergone a change and this change had to be taken note of as a process of "manufacture". He also cited the following other decisions :-
(a) Associated Soap Stone Distributing Co. Pvt. Ltd. v. Collector of Central Excise - 1985 (22) E.L.T. 109 (Tribunal)
- Grinding/Crushing of soap stone lumps into soap stone powder has been held by the Tribunal to be a process of manufacture.
(b) Dy. Commissioner of Sales Tax (Law) v. Coco Fibres -1991 (53) E.L.T. 515 (SC)
- It has been held by the Supreme Court that conversion of coconut husks into coconut fibre amounts to 'manufacture' since fibre is a distinct commodity known in the commercial parlance - Section 5 of the Kerala General Sales Tax Act.
(c) Indian Organic Chemicals Ltd. v. Collector of Central Excise - 1991 (55) E.L.T. 285 (Tribunal)
- The process of producing soil inoculants as formulated crop - specific branded products from starting point of separating out useful microbes from soil amounts to manufacture and soil inoculants are liable to duty.
(d) Ajanta Marble & Chemical Industries v. Collector of Central Excise, Meentt - 1991 (37) ECR 335
- The Tribunal held that grinding and sieving limestone to convert it into chips is a process of manufacture.
29. The learned DR referred to para 17.2 of the order written by learned Member (Technical) in which he had distinguished the decision of the Tribunal in the case of Hindustan Photo Films (supra) and how it was not applicable to the present case. Shri Sharma relied on the order of Member (Technical) in support of his arguments and submitted that if character, name and use are the criteria for deciding the question, it may be seen that each of the forms of video tapes mentioned in sub-heading 8523.13 had a different use and, to that extent, it could not be denied that the process of manufacture had taken place when the forms under went a change.
30. Replying, Shri Jain cited the decision of the Supreme Court in the case of Collector of Central Excise, Madras v. Kutty Flush Doors & Furniture Co. (Pvt.) Ltd. -1988 (35) E.L.T. 6 , in which the Court had upheld the decision of the Tribunal that no new product emerges by sawing of timber into several sizes. He read out from paras 4 and 5 of this judgment which are as under :-
"4. It is well-settled that excise duty becomes chargeable only when a new and different article emerges having a distinct name, character and use. See in this connection the observations of this Court in Union of India v. Delhi Cloth & General Mills - 1963 (1) Suppl. SCR 586 and South Bihar Sugar Mills Ltd. etc. v. Union of India and Ors. - 1968 (3) SCR 21 . This principle is well-settled. This is a question of fact depending upon the relevant material whether as a result of activity, a new and different article emerges having a distinct name, character and use. The use of expression 'manufacture' was explained in the case of Allenburry Engineers Pvt. Ltd. v. Ramakrishna Dalmia and Ors. -1973 2 SCR 257 . In State of Orissa and Ors. v. The Titaghur Paper Mills Co. Ltd. and Anr. -1985 3 SCR 26 which was a decision on the Orissa Sales Tax Act, this question was considered in the background of the fact whether planks, cut into sizes, etc., sawed out of logs, are different from logs in its nascent state.
5. It may be worthwhile to note that 'manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation; a new and different article must emerge having a distinct name, character or use. See Union of India v. Delhi Cloth Mills (supra) at page 596 of the report. Having regard to the facts found in this case by the Tribunal, which ultimately is the final fact finding authority, we are of the opinion that regard being had to the principles for determining the questions which were correctly applied in the decision of the Tribunal, in the facts of this case, the conclusion of the Tribunal is unassailable."
31. He referred to another decision of the Supreme Court in the case of Collector of Central Excise v. Fine Marble & Minerals (Pvt.) Ltd.
in which it was decided by the Court that marble slabs sawn from marble blocks are not a commercially distinct commodity. On the question of interpretation of the Tariff Schedule, Shri Jain cited the decision of the Supreme Court in the case of Indo National Industries v. Commissioner of Sales Tax, U.P. -1981 (8) E.L.T. 325 .
32. I have carefully considered the submissions of the two sides and have also had the benefit of perusing the orders written by the two learned Members.
33. Although numerous decisions of the Supreme Court, High Courts and the Tribunal have been cited during the hearings, the question that has to be decided is whether the slitting of jumbo rolls of video tapes of about 10,000 feet in length and 13" in width into shorter width of 12.65 mm, the length remaining the same, amounts to "manufacture" as stipulated under Section 2(f) of the Central Excises & Salt Act, 1944. If the answer to this question is in the affirmative, the second question is that the "pancakes" that arise as a result of such slitting would be liable to duty.
34. The liability to duty of excise is created by Section 3 of the Act which provides for the levy on all excisable goods which are produced or manufactured in India as, and at the rates set forth in the Schedule to the Central Excise Tariff Act, 1985. It has been held by the Supreme Court in Bhor Industries v. C.C.E. -1989 (40) E.L.T. 280 , that in order to be "goods", they should be capable of being bought and sold. In other words, they should be marketable. In Laminated Packaging case (supra), the Supreme Court has held that the fact that 'laminated kraft paper' and 'kraft paper' belonged to the same entry in the tariff was not relevant because the two were different identifiable "goods" known as such in the market. This being so, "manufacture" had occurred and, if "manufacture" had taken place, the laminated kraft paper was dutiable. The Court further observed as under :-
"Manufacture" is bringing into being goods as known in the excise laws, that is to say, known in the market having distinct, separate and identifiable function."
35. The appellants claim in their letter dated 10th April 1989 to the Assistant Collector explaining the process of manufacture is as under :-
"Process of manufacture:
Video Magnetic Tape in Jumbo rolls of more or less 10,000 ft. in length and 300 mm in width is being sitted into 22 reels of approx. half inch width on semi-automatic machine. These reels are known as "Pancakes".
These pancakes are being taken to the loader and the required length of the tape is being wound on the hub of V-O and V-O is assembled, resulting in manufacture of complete 'Video Blank Cassette'. We do not manufacture any plastic part of V-O but buy the same from the open market."
36. In the note enclosed with the letter claiming exemption from licensing control the appellants have further stated that :-
"(a) cutting, slitting or sizing is not manufacture and since they are only converting bigger size jumbo rolls to smaller size pancakes by only slitting process, it does not amount to manufacture.
(b) "manufacture" cannot be said to have taken place unless the goods cease to be of one taxable description and become those of a different taxable description. Therefore, so long as goods continue to fall under the same sub-item, it cannot be said that manufacture has taken place because there cannot be two manufactures attracting two levies at two different stages under the same item or sub-item.
(c) Mere change in physical form or shape of a substance or of a commodity would not, by itself, lead to the conclusion that a new article has been manufactured. It is claimed that in their case only physical form has changed i.e. from bigger width of roll of about 13" width the same is slitted to small width roll of 1/2" and no different commodity has been manufactured; both raw material and end-product is the same commodity viz. video magnetic tape.
(d) Processing of duty paid goods will not amount to manufacture so long as the duty paid goods and the processed goods continue to fall under the same tariff item or sub-item as the case may be.
Reliance for this purpose has been placed on the judgment of the Bombay High Court in the case of Empire Dyeing & Mfg. Co. v. P.P. Bhide -1977 (1) E.L.T. (J 34) and of Gujarat High Court in Vijaya Textiles v. Union of India -1979 (4) E.L.T. (J 181) .
(e) Reliance has also been placed on Trade Notice No. 59/MP dated 25th August 1986 issued by the Bombay-I C.E. Collectorate clarifying that cassette tapes made from duty-paid prepared unrecorded media for sound recording are not chargeable to duty again when both products fall under sub-heading 8523.00. Similarly, reference has also been made to Rajkot C.E. Collectorate Trade Notice 78/86, dated 6th June 1986 clarifying that unrecorded tape whether in spool or in cassette form being covered by a single sub-heading 8523.00 only, duty would be attracted at one stage only. Since the appellants have paid countervailing duty at the time of importation of jumbo rolls, no further duty is leviable when they convert the same into pancakes since both of them fall under the same sub-heading."
37. The facts which emerge are that out of a jumbo roll of Video tape, as many as 22 reels of approx. 1/2" width are slitted in a semi-automatic machine. These reels which are known as "Pancakes" are taken to the loader and the required length of the tape is wound on the hub of V-O and V-O is assembled resulting in manufacture of complete Video Blank Cassette. The appellants' claim is that countervailing duty having been paid on Jumbo rolls at the time of their import into India, there is no further liability to excise duty under sub-heading 8523.13 as "Pancakes" because no manufacturing process is involved in slitting of Jumbo rolls. There is no change in the goods from one taxable description to another taxable description and mere change of physical form does not result in creation of a new article because both - the jumbo roll as well as the pancake -are different forms of video tape which is what is specified as an excisable commodity under sub-heading 8523.13. The two Trade Notices have been cited in support of their claim. The department's contention, on the other hand is that "pancakes" are different from "jumbo rolls" not only in name but also in their use, even if they are two forms of video tapes. As long as these are specified in the sub-heading of the tariff schedule, they become liable to duty because 'manufacture' takes place from one form to another. The Trade Notices were issued before the Tariff Heading 8523 was split up into sub-headings in 1988 by which specific form of video tapes have been incorporated. The clarification given in the Trade Notices are, therefore, no longer applicable. The orders of Collector of Central Excise (Appeals), Bombay, dated 19th January 1989 in the case of Inter Trade Electronics (Pvt.) Ltd., Bombay holding that slitting of jumbo rolls of audio/video magnetic tapes into "pancakes" did not amount to manufacture related to the tariff sub-heading 8523.00 before it was split up, and is no longer applicable since the headings have been divided into several sub-headings and one such sub-heading viz. 8523.13 specifically mentions different forms of video tapes.
38. The question that will finally have to be answered is whether by slitting the jumbo rolls and calling them "pancakes", a new marketable commodity has come into existence. I observe that the appellants have annexed two documents as Exhibits-B at pages 35 and 36 of their appeal paper book which are highly significant and which will enable us to decide the matter conclusively. The document at page 35 is a letter dated 20th April 1989 addressed to the Assistant Collector from the appellant which is reproduced below :-
DIPEN TEXTILES (P) LTD.
Regd. Office 204, Parekh Market, 39 Kennedy Bridge, Opera House, Bombay-400 004.
Office : 369401 (3 lines), 369402, 369403, 387662, Resi: 476423, 477159 Cable: DIPENENT Bombay-400 004 Telex: 11759 76 DPEN IN April 20,1989.
Asstt. Collector of Central Excise, Dn.-IX (Supdt. C. Ex. P&I Section), Bombay-II, Takshasheela, 4th Floor, Samant Estate, Plot No. 1, Goregaon (E), Bombay-63.
Dear Sir, You are requested to kindly issue a certificate/declaration certifying that the manufacturing process of slitting Video Magnetic Tapes in Pancakes from Jumbo rolls is exempted from the Central Excise and that under the present Central Excise Rules, we are not required to obtain Central Excise Licence, as per the draft certificate enclosed.
In support of above request, we submit that we have already submitted you the form under Notification No. 11/88-C.E. (N.T.), dated 15-4-1988 on 14-4-1989 in the hands of Mr. Nayak, Inspector C. Ex. Prev. & Supdt. Br. Dn-IX, a copy of which is enclosed herewith for your immediate reference. The above is required to be submitted to JCCI, Bombay, as required in their letter No. ADV/U-SES/611/50582/AM. 89/L/ALS. IV/56, dated 11-4-1989 (copy enclosed) for issuance of Advance Licence for importing 1500 Jumbo rolls and exporting 37,500 pancakes. Thanking you, Yours faithfully, Dipen Textiles (P) Ltd.
Sd/-
Antubhai Sheth Mg. Director."
Encl.: As above.
39. The document at page 36 is a certificate which appears to have been signed by some representative of the appellants and is as under :-
"CERTIFICATE This is to certify that M/s. Dipen Textiles (P) Ltd. 204, Parekh Market, 39 Kennedy Bridge, Opera House, Bombay 400 004, has filed the declaration in the month of April 1989 required under Notification No. 11/88-C.E.(N.T.) dated 15-4-1988 for having out of licensing control for the year 1989-90.
In the declaration they have shown the value of goods declared in 1988-89 for the goods cleared for home consumption as under :-
(1) Pancakes - Rs. 9,50,118.10 (2) Cassettes - Rs. Nil
This is to state that under the present Central Excise Rules, they are not required to obtain Central Excise Licence."
Sd/-
Illegible."
40. It has been stated in the appellants' letter, dated 20th April 1989 that a certificate is required to be submitted to the Joint Chief Controller, Imports & Exports, Bombay for issuance of Advance Licence for importing 1,500 jumbo rolls and exporting 30,500 pancakes. This statement itself would show that pancakes which are required to be exported are marketable commodity and, if these were not so, they could not be exported. Similarly, the second document - namely, the certificate - makes it clear that during 1988-89 the appellants had cleared pancakes valued at Rs. 9,50,118.10 for home consumption and the clearance of cassettes was nil. It is evident that unless pancakes were a marketable commodity, where was the question of clearing them for home consumption and that too, of such high value? That the appellants have not cleared any cassettes during that period is also significant and speaks for itself. In the circumstances, the appellants' claim that the slitting of jumbo rolls does not result in manufacture of a new commodity is belied by these two documents. Supreme Court's judgment in Bhor Industries case (supra) about marketability being an essential condition for liability to duty, is fully applicable to the facts of this case. In these circumstances, it is not necessary for me to go into all the other contentions which were raised by the learned Counsel for the appellants and the point of difference can be answered straightaway. Thus, answer to the point is as under :-
"In the facts and circumstances of this case, slitting of duty-paid jumbo rolls into pancakes would amount to manufacture inasmuch as a new and marketable article comes into existence, and the evidence on record shows that pancakes were cleared for home consumption and were also proposed to be cleared for export against Advance Licences. Pancakes are, therefore, liable to duty even though they fall under the same sub-heading in view of Supreme Court's judgment in Laminated Packaging case (supra)."
41. The point of difference having been answered, the matter may be placed before the Bench which originally heard the appeal.
(N.K. BAJPAI) TECHNICAL MEMBER FINAL ORDER
42. In view of the majority opinion the appeal is dismissed.