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18% 48.18 Toilet paper and similar paper, cellulose wadding or webs of cellulose fibres, of a kind used for household or sanitary purposes, in rolls of a width not exceeding 36 centimeters, or cut to size or shape;

handkerchiefs, cleansing tissues, towels, table cloths, serviettes, napkins for babies, tampons, bed sheets and similar household, sanitary or hospital articles, articles of apparel and clothing accessories of paper pulp, paper, cellulose wadding or webs of cellulose fibres.

By judgment and order dated 10.11.2000, the appeal preferred by the assessee was allowed. It was held that the assessee was purchasing duty-paid jumbo rolls of tissue paper; that, thereafter they used to cut/slit the tissue paper to various sizes suitable for use as toilet papers, table napkins or facial tissues and that this activity did not alter the name, character or end-use of the material and, therefore, the said activity / process did not amount to manufacture, both on first principles as well as in terms of section 2(f) of the said Act. In this connection, the tribunal placed reliance on the judgment of the Madras High Court in the case of Computer Graphics Pvt. Ltd. v. Union of India reported in 1991 (52) ELT 491. It was further held by the tribunal that the mere existence of a separate tariff entry (48.18) for the tissue paper product of a smaller size obtained by cutting/slitting of jumbo rolls of tissue paper (48.03) would not necessarily lead to inference that such activity/process on the duty-paid jumbo rolls of tissue paper amounted to manufacture. Moreover, there was no section or chapter note in the tariff defining the activity of cutting/slitting of tissue paper as a process amounting to manufacture and, therefore, section 2(f) of the said Act was not applicable. On facts, the tribunal found that the assessee used to purchase jumbo rolls from the market and they used to cut and slit the same to smaller sizes of required dimensions suitably in use as table napkins, facial tissues etc. It was not disputed before the tribunal that the duty paid jumbo rolls of tissue paper were bought by the assessee from M/s Ellora Paper Mills and M/s Padamjee Paper Mills etc. It was also not in dispute before the tribunal that the jumbo rolls of tissue paper were classifiable under tariff heading 48.03. It was also not disputed before the tribunal that the table napkins and facial tissues obtained by cutting and slitting of jumbo rolls fell in tariff heading 48.18. The only dispute before the tribunal was  whether conversion of duty-paid jumbo rolls of tissue paper into table napkins and facial tissues by the process of unwinding, cutting & slitting and packing constituted "manufacture". The tribunal held that the above process of cutting/slitting of jumbo rolls of tissue paper into facial tissues and table napkins did not constitute "manufacture"; that there was no section note/chapter note in chapter 48 to bring in the activity of slitting and cutting of jumbo rolls of tissue paper into smaller sizes within the ambit of section 2(f) of the said Act; that a mere existence of a separate tariff entry 48.18 would not, by itself, make facial tissues and table napkins excisable. The tribunal further held that by the said activity of slitting and cutting, no new commodity with different name, character, end- use or commercial identity emerged and, therefore, there was no "manufacture" both in terms of first principles as well as in terms of section 2(f) of the said Act. Accordingly, the appeals filed by the assessee stood allowed. Hence, these civil appeals.

Mr. Dutta, learned senior counsel appearing on behalf of the department submitted that the activity of cutting/slitting of jumbo rolls of tissue paper into smaller sizes amounted to "manufacture" under section 2(f) of the said Act. It was further submitted that the definition of the word "manufacture" in section 2(f) was inclusive and, therefore, the normal meaning of the term could be ascertained for judicial interpretation. He submitted that on cutting/slitting of jumbo rolls, several different products emerged, namely, table napkins, toilet rolls, facial tissues etc. and, therefore, cutting/slitting constituted "manufacture" and, therefore, the department was right in raising the demand under sub-heading 4818.90. It was urged that in the present case, the test of character or end-use have to be applied and on applying the said test one finds that on cutting/slitting of the tissue paper from the jumbo rolls, a new product with a distinct character and with the distinct end-use known to the market and to the buyers had emerged and, therefore, even on first principles the process of cutting/slitting amounted to manufacture. It was submitted that in the present case, the tribunal ought to have referred the matter to the larger bench particularly when the co-ordinate bench of the tribunal in the case of Foils India Laminates Pvt. Ltd. v. Commissioner of Central Excise, Jaipur reported in 1999 (111) ELT 728 had taken a contra view. Lastly, it was urged on behalf of the department that the tribunal had ignored the findings of the commissioner that there was a value addition of 180% in the final product on account of the price difference between price of the jumbo roll and the price of the final product; that when the jumbo roll of tissue paper was subjected to the process of cutting/slitting, rewinding and packing, the resultant products namely, table napkins, facial tissues, toilet paper rolls emerged as products of different varieties and for specific purposes and in the circumstances, cutting/slitting amounted to "manufacture".

At the outset, we may point out that the assessee is one of the downstream producers. The assessee buys duty-paid jumbo rolls from M/s Ellora Paper Mills and M/s Padamjee Paper Mills. There are different types of papers namely, tissue paper, craft paper, thermal paper, writing paper, newsprints, filter paper etc. The tissue paper is the base paper which is not subjected to any treatment. The jumbo rolls of such tissue papers are bought by the assessee, which undergoes the process of unwinding, cutting/slitting and packing. It is important to note that the characteristics of the tissue paper are its texture, moisture absorption, feel etc. In other words, the characteristics of table napkins, facial tissues and toilet rolls in terms of texture, moisture absorption capacity, feel etc. are the same as the tissue paper in the jumbo rolls. The said jumbo rolls cannot be conveniently used for household or for sanitary purposes. Therefore, for the sake of convenience, the said jumbo rolls are required to be cut into various shapes and sizes so that it can be conveniently used as table napkins, facial tissues, toilet rolls etc. However, the end-use of the tissue paper in the jumbo rolls and the end-use of the toilet rolls, the table napkins and the facial tissues remains the same, namely, for household or sanitary use. The predominant test in such a case is whether the characteristics of the tissue paper in the jumbo roll enumerated above is different from the characteristics of the tissue paper in the form of table napkin, toilet roll and facial tissue. In the present case, the tribunal was right in holding that the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper, after slitting and cutting, in the table napkins, in the toilet rolls and in the facial tissues.