Sujata V. Manohar, J.
1. The petitioner, inter alia, carries on business of making of waterproof kraft paper under the name and style of 'Neptune Waterproof Manufacturing Company'. This concern is the sole proprietary concern of the petitioner. The petitioner purchased kraft paper and other requisite ingredients from the open market and manufactures certain types of kraft paper by the process of bonding, lining, impregnating and sandwiching certain other ingredients with kraft paper. The items under dispute are: (1) Bituminised water proof packing paper, (2) Polythenelined kraft packing paper, (3) Waxed kraft packing paper, (4) Jute-Lined bituminised waterproof packing paper, (5) Waxed kraft packing paper and (6) Hessian lined kraft paper. The only difference between Items 3 and 5 is that item 3 refers to waxed kraft packing paper of 40 gms., 50 gms. and 60 gms., while Item 5 refers to waxed kraft packing paper above 65 gms.
2. The respondent have levied excise duty under the Central Excises and Salt Act, 1944 on these items on the ground that the petitioner 'manufactures' these items.
3. These goods fall under Item 17(2) of the First Schedule to the Central Excises and Salt Act, 1944. The relevant provisions of the said item at the material time were as follow :---
17. PAPER AND PAPER BOARD, All SORTS (including pasteboard, miliboard, strawboard, cardboard and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.---
(1) ......................(2) Paperboard and all other kinds of paper Forty percent.(including paper of paper boards whichhave been subjected to various treat-ments such as coating, impregnating,corrugation, creeping and design prin-ting) not elsewhere specified.The process of making these varieties of kraft paper is being carried on by the petitioner with the aid of power. There is also no dispute that these various commodities made by the petitioner are 'goods ' sold in the market. The only question that requires consideration is whether the process carried out on by the petitioner can be considered as a 'manufacture' of a new commodity with a different name and a different use.
4. Under section 2(f) of the Central Excise and Salt Act, 1944 'manufacture' is defined to include 'any process incidental or ancillary to the completion of a manufactured product'. In the well-known case of Union of India v. Delhi Cloth and General Mills Co. Ltd., : 1973ECR56(SC) the Supreme Court has held that the word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance'. Manufacturing implies a change but every change is not a manufacture. Something more is necessary. There must be transformation; a new and different article must emerge having a distinctive name, character or use. In the present case, the petitioner is producing different varieties of kraft paper. The petitioner purchasing kraft paper from the market and applies bitumen or other coating, as a case may be, to this paper in order to strengthen it. It is the case of the petitioner that such kraft paper -whether it is bitumenised or wax-coated or jute-lined or polythene lined or hessian-lined retains the character of kraft paper and it is known in the market as kraft paper. Kraft paper is used for packing. The use of this paper also remains the same. Hence, according to the petitioner, the process applied by him to kraft appear cannot be considered as manufacturing process. This contention appears to be sound.
5. The respondent contends that as a result the process applied by the petitioner, a new product is manufactured which is known in the market as a new product. There is, however, no material produce by the respondent in support of this contention. The respondent merely relies upon order dated 16th February, 1981 passed by the Assistant Collector of Central Excise, which is annexed as Exhibit 'B' to the petition. In this order the Assistant Collector of Central Excise has observed that the product are different items from the original raw material viz. kraft paper. I do not fined from the order any material on the basis of which this conclusion was arrived at. In the affidavit in a reply also, no material is disclosed to show that the products made by the petitioner are known in the market as something different from kraft paper or that the use of these product is different from the use of kraft paper.
6. In the case of Kwality Coated Products v. Government of India, reported in 1980 Excise Law Times 579, a learned Single Judge of the Madras High Court was required to consider whether by bonding the craft paper with bitumen, the craft paper losses it essential character as kraft paper. The Madras High Court was required to consider bitumenised waterproof paper manufactured by the petitioners before that Court. The Madras High Court held that, by treating the layers of kraft paper with bitumen, it cannot be said that a new kind of paper is brought into existence. It held that the petitioners could not be said to have manufactured any new product.
7. Similarly, a Division Bench of the Andhra Pradesh High Court in the case of Standard Packing v. Union of India, reported in 1984 Excise and Customs Reporter p. 2635 held that the production of bitumenised waterproof paper was not liable to excise duty as final kraft paper and bitumen used in the process has already suffered duty. In so deciding, the Andhra Pradesh High Court set aside the judgment of a Single Judge of the Andhra Pradesh reported earlier in 1981 Excise and Customs Reporter p. 133.
8. In the present case bitumenised waterproof kraft paper, which is prepared by the petitioners is prepared in a similar manner by bonding craft paper with bitumen. There is no material before me to show that bitumenised waterproof kraft paper is considered as a different commodity from kraft paper in the market or that its use is in any manner different from the use of kraft paper since both are used for packing, though one may possess an additional quality of waterproofing the goods which are wrapped in it.
9. My attention was drawn to a decision of a Division Bench of this Court in the case of Kores (India) Ltd. v. Union of India, reported in 1982 E.L.T. 253. In that case the petitioners manufactured teleprinter rolls from printing or writing paper by the process of cutting large rolls of paper into specific size and dimension and rolling them into teleprinter rolls. The Court in that case held that the printing or writing paper did not detained its identity as such but became entirely a different product having a distinctive name, characteristics and use. The Court, therefore, held that this process was a process of manufacture.
10. The present case, however, is very different from the above case. The process of strengthening the kraft paper by applying bitumen, polythene-lining, hessian-lining etc. is more akin to the process of applying gum to paper or with colouring the paper or printing a design on it, rather than akin to cutting and rolling the paper to manufacture a new product like a teleprinter roll.
11. In the case of Swastic Products. Baroda v. Superintendent of Central Excise, reported in 1980 E.L.T. 164 the Gujarat High Court held that colouring paper which is already manufactured is not process in the manufacture of paper. Nor can it be said to be incidental process is involved in printing on white paper or by colouring manufacture product, namely, the paper.
12. In these circumstances, the activity carried on by the petitioner cannot be considered as manufacturing of goods within the meaning of the Central Excises and Salt Act, 1944.
13. The petitioner has prayed for refund of excise duty levied and collected from the petitioner as a result of the impugned order dated 16th February, 1981 classifying the said goods as excisable under tariff entry 172). It is submitted by learned Counsel for the respondent that the petitioner has passed on the incidence of this excises duty to his customers. Granting any refund of excise duty would result in an unjust enrichment of the petitioner. This submission was orally made by Counsel for the respondent while submitting his argument. Nos such submission has been made by the respondent in their affidavit in reply nor it is stated by the respondent on affidavit that the incidence of excise duty has been passed on by the petitioner to his customers. There is no material on record at all on the basis of which it can be said that the petitioner passed on the entire burden of excise duty on to his customers. It was submitted by the respondent that it should be presumed that this is the case. It is difficult to rise any presumption. It is possible in a given case that the manufacture may pass on the entire burden of excise duty to his customers. It is also possible that if the market conditions does not so permit, a manufacture may chose not to be pass on the entire burden of the additional tax on his customers but may have to bear a part of the burden or even the entire burden himself if the manufacture feels that in trying to pass on the burden to his customers by increasing price, he may lose his customers. There is nothing in the Central Excise and Salt Act which enable a manufacture to recover from his customers the entire burden of excise duty. Normally no doubt, the manufacture would try to pass on the burden of taxation to his customers. But there cannot be any presumption that this have been done because the manufacture's ability to pass on the duty to his customers depends upon the market conditions. In this circumstance, in the absence of any material record, it is possible for me in the first instance to come to a conclusion that there would be any unjust enrichment the petitioner is granted refund of excise duty in question.
14. In these circumstance, it is not necessary for me to examine the question whether the respondent can retain the excise duty levied by it without authority of law on the ground that there would be any unjust enrichment of the petitioner, if the duty recover without the authority of law is return to the petitioner. Mr. Lokur, learned Counsel for the respondent, drew my attention to a decision of the Supreme Court in the case of M/s. Amar Nath Om Parkash v. State of Punjab, reported in : 2SCR72 and submitted that this is in fact the law as laid down by the Supreme Court. In that cast, however, the Supreme Court was required to consider the provision of section 23-A of Punjab Agriculture Product Act, 1961. Under section 23-A notwithstanding anything contained in any judgement, decree or order of any court, it shall be lawful for a committee to retain the fee levied and collected by it from a license in excess of that leviable under section 23 if the burden of such fee was passed on by the licensee to the next purchaser of the agriculture produce in respect whereof such fee was levied and collected. This section was upheld by the Supreme Court. There is no such section in the Central Excises and Salt Act, 1944. Hence the ratio of that judgement cannot be applied to the present case.
15. In the premises the order dated 16th February, 1981, Ex. B to the petition on is set aside. Six items mention above made by the petitioner are not goods manufacture by the petitioner within the meaning of section 2(f) of the Central Excise and Salt Act, 1944, and as such cannot be classified as excisable goods under tariff entry 17(2).
16. The respondent are directed to refund to the petitioner forthwith the excise duty levied and collect from the petitioner as a result of the order dated 16th February, 1981.
17. At this stage Mr. Lokur applies that I should direct the petitioner to file a statement of how much excise duty has been passed on by the petitioner to his customers. In view of my earlier findings, there is no basis on which an application can be granted. It is, therefore, rejected.
18. The respondent will pay to the petitioner the costs of the petition.