1. This is a revision application before the Central Government (now transferred to the Appellate Tribunal under Section 35 P) against the order-in-appeal No. 600-B of 1979 dated 31-12-1979 passed by the Central Board of Excise and Customs, New Delhi.
2. M/s Ramsay India (Pvt) Ltd., New Delhi (hereinafter called the 'Appellants') were engaged in the manufacture of Teleprinter Rolls, Teleprinter Tapes, Waxed Paper and Kraft Ammunition Paper. On 31-1-1975 Central Excise Officers visited the factory of the appellants and on verification of the records and accounts found that the appellants had manufactured, stored and removed 3,38,608.06 Kgs. of such paper without obtaining Central Excise Licence, without payment of duty and without observance of other Central Excise formalities. The Collector of Central Excise, New Delhi by his order dated 13-10-1976 classified these items under Central Excise Tariff No. 17(2) and 17(4) and demanded duty on the said 3,38,608.06 Kgs. of goods in question under Rule 9(2) of the Central Excise Rules. However, no penalty was imposed upon the appellants under Rule 173Q of the Central Excise Rules, 1944.
3. Not satisfied with the said order of the Collector of Central Excise, New Delhi, the appellants preferred an appeal before the Central Board of Excise & Customs, New Delhi, contending therein that they had purchased duty paid writing and printing paper or wrapping paper from the market and that they were simply cutting the paper in making rolls and tapes and where necessary were also interleafing carbon papers. Regarding Kraft Ammunition Paper, it was contended that the same was nothing but wrapping paper and that no chemical treatment was done by them except that it was made further stronger to pack and wrap ammunition in it. What they were doing was not a process of manufacture and therefore the order of the Collector of Central Excise was not maintainable in the eyes of law.
4. Shri A.K. Bandyopadhyay, Member, Central Board of Excise & Customs, did not agree with the contention raised by the appellants and by his order dated 31-12-1979 dismissed the appeal and held that the Collector of Central Excise had correctly classified these items under Central Excise Tariff Item No. 17(2) and 17(4) and that the demand of duty under Rule" 9(2) of the Central Excise Rules on the said 3,38,608.06 Kgs. goods was found to be justified. The appeal of the appellants was, therefore, rejected.
5. Aggrieved by the said order of the Central Board of Excise & Customs, the appellants preferred a revision application before the Government of India, (now transferred to the Appellate Tribunal under Section 35P) and is being treated as an appeal 6. We have heard Shri M. Chandrasekharan with Shri Madhav Rao, Advocates for the appellants and Sh. A.K. Jain, S.D.R. for the Department.
7. The first submission made by the learned counsel for the appellants is that they simply cut the duty paid base paper for making rolls and tapes and where necessary interleave the carbon papers. This cannot be treated a process of manufacture as defined under Section 2(f) of the Central Excises and Salt Act, 1944. According to him the cutting of duty paid paper and packing into rolls and tapes does not turn the paper into another product nor does it bring any change in the form of paper. He drew our attention towards the decision of the Supreme Court in Union of India v. Delhi Cloth and General Mills Co. Ltd. (AIR 1963 SC 791) and Anr. decision in South Bihar Sugar Mills Ltd. v. Union of India and Anr., (1978 E.L.T. J 336) in support of his contention that the word manufacture implies a change but every change in the rawmaterials is not a manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character and use.
8. According to him, in, both these cases, paper remains the same and there is not any change chemically or otherwise in its variety, character or quality.
9. Regarding Kraft and Ammunition paper, the learned counsel submitted that this is nothing but packing and wrapping paper which is also duty paid and it is only subjected by the appellant to a chemical process to make it fit for packing ammunition. It is after this that it is called Kraft Ammunition Paper. No process of manufacture is involved in this case also. He drew our attention towards the Indian Standard Glossary of terms used in Paper Trade and Industry (UDG 676:001:4) (August 1968 Edition) showing that there is no difference in the chemically processed paper manufactured by them and the so called packing and wrapping paper except that it is further made stronger to pack and wrap ammunition and therefore cannot be charged to duty under Item 17(4) of the Central Excise Tariff.
10. The second submission made by the learned counsel for the appellants is that the demand of the duty made by the department is barred by limitation of one year as laid down under Rule 10 read with Rule 173J of the Central Excise Rules, 1944. The paper which they had cut into rolls and tapes was already duty paid and the differential duty demanded by the department should have been made within a period of one year as laiddown under Rule 10 read with Rule 173 J of the Central Excise Rules, 1944. According to him, the provisions of Rule 9(2) of the Central Excise Rules cannot be made applicable in such cases. He drew our attention towards the Supreme Court decision given in KB. Sanjana v. E.S. & W Mills AIR 1971 SC 2039] and Murugan & Co.
Pudukottai v. Dy. Collector of Central Excise, Tiruchirapalli and Ors.
[1977 E.L.T. (J 193)] in support of his contention that in cases where a particular manufacturer goes on producing certain articles under the bona fide impression that the goods are not excisable goods steps for bringing the goods under excise levy as per Rule 9(1), the authorities cannot invoke Rule 9(2) on the ground that the goods have been cleared without payment of excise duty merely because they have taken a view that the goods are excisable long after the goods had been cleared from the factory.
11. According to him, no duty could be ordered to be charged from the appellants on the clearance effected before 14-2-1974 as no intimation of levy of duty was given to them through any media prior to that and it was barred on account of the limitation of one year as laid-down under Rule 10 read with Rule 173J of the Central Excise Rules, 1944. In this case duty was short levied on misconstruction of the particular provision of the Act and so the demand should have been raised within the limitation period as provided under Rule 10 read with Rule 173J of the Central Excise Rules, 1944.
12. There is no dispute about the legal proposition as laid down by the Hon'ble Supreme Court in various decisions that the word 'manufacture' implies a change, but every change is not manufacture. Though change in an article is a result of treatment labour and manipulation but something more is necessary. There must be transformation; a new and different article must emerge, having a distinctive name, character and use.
13. The teleprinter paper or roll as described by the appellants is definitely a different commodity or article from the one used as the base material which is large size or jumboo rolls writing or printing paper. Teleprinter paper or teleprinter rolls is well known in the market and is known as distinct commodity and as such meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in usual course.
14. In Kores (India) Ltd. v. Union of India and Ors. [1982 E.L.T. 253 (Bombay)] similar question arose before the Hon'ble Judges of the Bombay High Court and it was held by their Lordships of the Bombay High Court that if printing or writing paper on which duty has been paid is used in the manufacture of teleprinter rolls or tapes, it does not remain the same as classifiable under Item 17(3) of the Central Excise Tariff but becomes entirely a different product having a distinctive name, characteristic and use under Item 17(2).
15. Teleprinter rolls and teleprinter tapes are definitely separate items than the printing and writing paper and are also known in the common trade parlance as teleprinter rolls or teleprinter tapes and are sold as such. This item is specifically included in the Central Excise Tariff Item 17(2). The authority below has correctly appreciated the point while holding that the base paper once converted into teleprinter rolls or tapes changes its identity and nomenclature and is rendered for use only on the teleprinter machines and therefore the process of converting the writing and printing paper into teleprinter rolls and teleprinter tapes is a process of manufacture under Section 2(f) of the Central Excises and Salt Act, 1944, and would attract duty under Central Excise Tariff Item No. 17(2). We do not find any justification in interfering with the findings of the authority below on this point.
16. As regards Ammunition Kraft paper, we find that no evidence has been adduced by the Department to show the nature of the chemical treatment of Kraft paper, the difference in characteristics and properties between the untreated Kraft Paper and the treated Kraft paper with a view to establish that there has indeed been "manufacture" for the purpose of Central Excise levy as interpreted by the Supreme Court in its judgments in the Delhi Cloth & General Mills' case and the South Bihar Sugar Mill's case. We also notice that Ammunition Kraft paper has not been specifically enumerated in the Glossary of terms used in Paper Trade and Industry published by the Indian Standards Institution as IS : 4661-1968, In the circumstances, we hold that the Department has not established their case for levy of excise duty on Ammunition Kraft Paper as a product distinct and different from Kraft Paper. We therefore, set aside the impugned order insofar as Ammunition Kraft Paper is concerned and direct that the consequential relief be granted by the concerned Central Excise authorities within three months from the date of communication of this order.
17. On the point of the applicability of Rule 9(2) of the Central Excise Rules, 1944, admittedly the case of the appellants is that they did not obtain any Excise licence and cleared the goods without payment of any excise duty under the bona fide belief that the product manufactured by them was not subject to levy of the Excise duty. It has been laid down in N.S. Metal Industries v. Union of India [1977 TLR (NOC) 31] that when no licence is obtained for the manufacture of excisable goods and removal is affected without payment of duty, Rule 9(2) is attracted. It is only when the demand is made under Rule 9(2) that the liability to pay arises and not otherwise. The decision of the Madras High Court cited by the learned Counsel for the appellants, Murugan & Co. Pudukottai v. Dy. Collector of Central Excise, Tiruchirapalli and Ors. and N.B. Sanjana v. E.S. & W. Mills (Supra) are not helpful to the appellants in the circumstances of the present case.
It was held by the Hon'ble High Court that the provisions of Rule 9(2) would not be invoked where the excise authorities entertained a doubt as to whether the goods were excisable or not and did not object to the clearance of the goods without payment of duty. In this case the appellants never informed the excise authorities nor obtained any licence. The excise authorities were not informed when the goods were cleared and therefore the question of entertaining any doubt as to whether the goods were excisable or not could not have arisen.
18. In N.B. Sanjana's case there was a demand made under Rule 10(A).
When those demands were challenged as being untenable under Rule 10(A), demands were sought to be sustained under Rule 9 (2). While dealing with the question as to whether the demands could be justified under Rule 9(2) Supreme Court expressed :- "Sub-rule (I) of Rule 9 provides for the time and the manner of payment of duty. In this case there is no controversy that whatever goods were cleared by the respondents, necessary applications had been made to the officer concerned and the latter had passed orders of assessment to nil duty. To attract sub-rule (2) of Rule 9, the goods should have been removed in contravention of Sub-rule (1)." 19. In the present case before us, the appellants had not even disclosed the fact of manufacture of those goods to the Excise authorities and therefore the question of their removal within the knowledge of the Excise authorities could not have arisen. The facts of the cases N.B. Sanjana and Murugan & Co. (Supra) were quite different from the facts of the present case. In those cases goods were cleared within the knowledge of the Excise authorities and therefore it was held that the provisions of Rule 9 (2) were not applicable.
20. Hon'ble Justice S.C. Pratap of Bombay High Court had the occasion to deal with the applicability of Rules 9 and 10 in Devidayal Rolling & Refineries (Pvt.) Ltd. v. Superintendent of Central Excise (1983 E.L.T.338). After discussing the case law as laid down by the Hon'ble Supreme Court in N.B. Sanjana's case (Supra), held that Rule 10 of the Central Excise will apply if demand notice was issued after assessment and if there is no assessment, Rule 9(2) will apply.
21. In the present case before us, admittedly there was no assessment as the appellants had removed the goods under the belief that those were not subject to levy of excise duty. The Department had no knowledge as to when those goods were removed. In these circumstances, the Department has rightly invoked the provisions of Rule 9(2) of the Central Excise Rules, and the demand is within time.
22. In view of our findings above, we partly allow the appeal to the extent that differential duty of excise on the Kraft Ammunition Paper is not to be charged from the appellants and if the same stands recovered, it shall be refunded within three months from the date of the communication of this order.
23. Regarding the Excise Duty sought to be charged on teleprinter papers and tapes, the order of the Appellate Collector is upheld and the appeal is dismissed on that point.