Coating an uncoated paper & writing paper not amounts to manufacture, as no distinct article with different character or use emerges

CA Bimal Jain

Pitamber Coated Paper Ltd. (the Respondent) is engaged in the manufacture of coated and uncoated paper falling under Chapter 48 of the Schedule to the Excise Tariff Act. The Respondent clear coated paper (Final Product) at nil rate of duty in terms of Notification No.3/2001-CE dated March 1, 2001 as amended. Further, uncoated paper and paper board manufactured by the Respondent are captively consumed for the manufacture of Final Product. The Revenue contended that, since the Final Product is nil rated, the Respondent is not eligible for exemption under Notification No.67/95-CE dated March 16, 1995 (Exemption Notification). Accordingly, Show Cause Notices were issued and the Hon’ble Commissioner confirmed the Excise duty demand along with penalty. Being aggrieved, the Respondent preferred an appeal before the Hon’ble Tribunal.

The Hon’ble Tribunal relying upon the judgment in case of CCE Vs. Shree Vindhya Paper Mills set aside the order passed by the Hon’ble Commissioner and found that on coating uncoated paper, an article with different name commercially may have emerged but it is not a distinct article with different character or use and therefore no manufacturing process was involved when uncoated printing and writing paper is coated. Reason being, the uncoated paper emerges at one stage of the manufacturing process of coated paper.

Further, the Exemption Notification grants exemption from payment of duty on paper and paper board articles made therefrom upto clearance of 3500 Mts. When the same is manufactured from the stage of pulp and using non-conventional raw material. The objective is apparently to promote use of non-conventional raw material in making paper, paperboard and articles of paper and paperboard.

Being, aggrieved, the Revenue preferred an appeal before the Hon’ble Supreme Court.

The Hon’ble Supreme Court upheld the order of the Hon’ble Tribunal and observed that the conclusion of the Hon’ble Tribunal is legally sustainable and there is no error in the view taken by the Hon’ble Tribunal.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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