COMMISSIONER OF CENTRAL EXCISE-I, NEW DELHI versus M/S. S.R. TISSUES PVT. LTD. AND ANR.

Citation: [2005] SUPP. 2 S.C.R. 355 · Decided: 05-08-2005 · Supreme Court of India · Bench: B.P. SINGH · Disposal: Dismissed

Judgment (excerpt)

COMMISSIONER OF CENTRAL EXCISE-I, NEW DELHI 
A 
v. 
MIS. S.R. TISSUES PVT. LTD. AND ANR. 
AUGUST 5, 2005 
[B.P. SINGH AND S.H. KAPADIA, JJ.] 
B 
Central Excise Act, 1944. 
Sections 2(f), 35-l (b)-Assessee involved in the process of cutting/ 
slitting duty paid jumbo rolls of tissue paper into paper rolls, napkins and C 
facial tissues-Department alleging such process to be manufacture and 
demanding duty on product-Whether such process amounts to manufacture-
Held; process of cutting/slitting of plain tissue paper I aluminium foil into 
smaller size does not amount to manufacture and, therefore, no duty payable 
on finished product-Central Excise Tariff Act, 1985-Heading no. 48.03 
and 48.18. 
D 
Words & Phrases-"Manufacture"-Meaning of in the context of 
Central Excise Act, 1944. 
Assessee was engaged in the activity of cutting]slitting of jumbo rolls 
of tissue paper of width measuring 36 ems. normally used for household 
or sanitary purposes. The jumbo rolls were purchased from manufacturers 
I suppliers on payment of excise duty under taritf heading 48.03, Central 
Excise Tariff Act, 1985. Department issued show-cause notice and initiated 
proceedings against assessee on the ground that cutting]slitting of jumbo 
E 
rolls of tissue paper falling under heading 48.03 amounted to manufacture 
F 
and alleged that the assessee was engaged in the manufacture and storage 
of tissue paper rolls, napkins and facial tissues and sought to assess and 
demand duty under tariff sub-heading 4818.90 of the 1985 Ac:. Assessee 
replied to show-cause notice submitting that cutting/slitting of jumbo 
rolls of tissue paper into specific width and different shapes did not 
amount to manufacture and denied that they were manufacturing wet 
and fragmented tissues. Commissioner held that assessee was manufacturer 
of table napkins, toilet rolls, and ordinary wet and fragmented facial 
tissues with distinct brands/trademark and confirmed the demand and 
G 
also imposed penalty. Assessee challenged order of Commissioner by 
filing an appeal before the Customs, Excise & Gold (Control) Appellate 
H 
355 
356 
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R. 
A 
Tribunal which was allowed. Tribunal held that cutting/slitting the ~issue 
paper to various sizes for use as toilet papers, table napkins or facial 
features did not alter the name, character or end-use of the material, 
therefor~, the s~id ac~ivity/process did not amount to manufacture, both 
on first principles as well as in terms of Section 2 (t) of the 1944 Act. Hence 
B 
these appeals by the Department. 
Depal'.tment contended that the activity of cutting/slitting of jumbo 
rolls of tissue paper into smaller sizes amounted to 'manufacture' under 
Section 2 (t) of the 1944 Act; that on applying the test of character or end-
use, a new product with a distinct character and end-use known to the 
C 
market and to the buyers emerged and, therefore, even on first principles 
the process of cutting/slitting amounted to manufacture; that the tribunal 
ought to have referred the matter to a larger bench particularly when the 
co-ordinate bench of the tribunal had taken a contrary view; that there 
was a value addition of 180% in the final product on account of price 
D 
difference between price of jumbo roll and price of final product; and 
that when the jumbo roll of tissue paper was subjected to the process of 
cutting/slitting/rewinding and packaging, the resµltant product namely 
table napkins, facial issues, toilet paper rolls emerged as products of 
different varieties and for specific purposes and in the circumstances, 
E 
F 
G 
H 
cutting/slitting amounted to "manufacture". 
Dismissing the appeal, the Court 
HELD : 1. The assessee is one of the downstream producers. The 
assessee buys duty-paid jumbo rolls. 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 
boi}ght by the assessee, which undergoes the process of unwinding, cutting/ 
slitting and packing. It is important to note that th.e 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 textur~, moisture absorption capacity, feel etc. are the same as the 
tissue paper in the jumbo rolls. The said jumbo r

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