In case of CCE v M/s Fitrite Packers, Hon’ble Supreme Court held that the product could be termed as ‘Manufactured’ only when there is a transformation in the original article and this transformation should bring out a distinctive or different use in the article.
Facts of the Case
The assessee herein purchased GI paper from the market which is already duty paid base paper. On this paper, the process of printing is carried out by the assessee according to the design and specifications of the customers depending on their requirements. On the paper, logo and name of the product is printed in colorful form. After carrying out the printing as per the requirement of the customers, the same is delivered to the customers in jumbo rolls without slitting.
Question of Law
The issue is as to whether this printing process amounts to manufacture or not?
Order of The Ld. Commissioner
The ld. Commissioner held that the process is manufacture and the Assessee is liable to pay duty.
Judgment of the Tribunal
The Tribunal while upsetting the aforesaid decision of the Commissioner and relying on Union of India v. J.G. Glass Industries Ltd. 1998 (97) ELT 5 (SC) has arrived at a conclusion that printing is only incidental and primary use of GI printing paper roll is for wrapping which is not changed by the process of printing.
Contention of the Revenue
The Learned counsel appearing for the Revenue argued that, no doubt, paper in-question was meant for wrapping/packing of the goods of the customer but that was not the determinative factor and a vital feature/aspect which was missed by the Tribunal was that after printing the said GI paper rolls, it was used for specific purpose which was not possible with the plain paper.
Contention of the Assessee
The Learned counsel for the Assessee, argued that the approach of the Tribunal was perfectly justified which was in consonance with the principle laid down by this Court in J.G. Glass Industries (supra). According to him, the Tribunal had rightly held that the primary purpose for which GI paper is used is the wrapping/packaging and even after GI paper was printed, the essential functioning of this paper remained the same, namely, wrapping and had not changed by the process of printing. He, thus, submitted that no interference in the decision of the Tribunal was called for.
Judgment of Hon’ble Supreme Court
The Hon’ble Supreme Court discussed the judgment in the case of J.G. Glass Industries (supra) where there were discussions on various points :
(i) Manufacture takes place on the application of one or more processes and each process may lead to a change in the goods but every change does not amount to manufacture. There must be an emergence of new article which has a distinctive name, character or use.
(ii) The transformation does not take place.
(iii) It was noted that when essential character of the product does not undergo change there would be no manufacture. The Court explained ‘retaining of essential character test’ to mean that the product in its primary and essential character remains the same even after the process in-question and the product is sold in the market with its earlier character.
(iv) Another circumstance was taken note of and discussed which involves integrated process, culling out ‘the test of integrated process without which manufacture would be impossible or commercially inexpedient’.
After the above discussion the Hon’ble Supreme Court applied above mentioned principles in the present case and held that a cursory look into the same may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end use was still the same, namely, wrapping/packaging. However, a little deeper scrutiny into the facts would bring out a significant distinguishing feature; a slender one but which makes all the difference to the outcome of the present case. No doubt, the paper in-question was meant for wrapping and this end use remained the same even after printing. However, whereas blank paper could be used as wrapper for any kind of product, after the printing of logo and name of the specific product thereupon, the end use was now confined to only that particular and specific product of the said particular company/customer. The printing, therefore, is not merely a value addition but has now been transformed from general wrapping paper to special wrapping paper. In that sense, end use has positively been changed as a result of printing process undertaken by the assessee.
Therefore, the process of aforesaid particular kind of printing has resulted into a product, i.e., paper with distinct character and use of its own which it did not bear earlier. Thus, the ‘test of no commercial user without further process’ would be applied.
Finally. It was held that there has first to be a transformation in the original article and this transformation should bring out a distinctive or different use in the article, in order to cover the process under the definition of ‘manufacture’. Accordingly, the appeals were allowed.