Liminates (India) Pvt. Ltd. Vs. Collector of Central
Excise, Bangalore  INSC 877 (31 July 1996)
K.T. (J) Thomas K.T. (J) Bharucha S.P. (J) Thomas, J.
JT 1996 (7) 627 1996 SCALE (5)582
appeal is in challenge of an order passed by the Customs, Excise and Gold
(Control) Appellate tribunal (CEGAT) repelling the contention of the appellant
that the commodity commercial plywood processed by the appellant is not liable
to excise duty as the duty was paid for the plywood before its processing.
case of the appellant - company is the following.
is engaged in processing commercial plywood by applying Phenol Formaldehyde
Resin under 100 per cent heat and pressure and costs the plywood with wire
mesh, either on one side or on both sides so as to make it slip proof
commercial plywood. The product is mostly used in body building of vehicles or
for flooring etc. On 3.9.1986, the assistant Collector of Central Excise issued
show cause notice to the appellant company, in which it was stated that since
non-slip plywood is a different products it is liable to duty as falling under
sub-heading 44008-90 (Chapter 44 of the Schedule to the Central Excise Tariff
in the reply he explained that commercial plywood was once subjected to duty
and hence cannot again be made dutiable merely on the strength of the
processing done by the appellant. The processed commodity does not become a
different product not the processing exercise a manufacture according to the
appellant. Some earlier proceedings, which culminated in refunding the duty
collected on such products when the department latter realised that no duty was
chargeable on such commodity, have also been relied on by the appellant to
bolster up its stand.
Assistant Collector took the view that the slip- proof commercial plywood (made
after carrying out the processing work) is a different products and so is
liable to duty under the relevant subheading of the Schedule to the Act.
of Central Excise (Appeals) confirmed the said order of the said order of the
Assistant Collector - CEGAT by the impugned order has concurred with the said
finding and dismissed the appeal filed by the appellant.
counsel for the appellant first contended that since the department took a view
in the earlier proceeding (which culminated in the order passed in 1985) that
no new product was emerging from the processing done by the appellant the same
benefit has to be afforded to the appellant now also. We are not disposed to
decide the question merely on the strength of the stand which Assistant
Collector had adopted prior to 1985. Then counsel invited our attention to the
advice tendered by the Board of Central Excise in 1975 that "Duty should
be charged at the plywood stage as commercial plywood and subsequent
alterations etc. should be ignored" (vide CBE & C Bulletin for January
- March, 1975). Such an advice is irrelevant in dealing with the tariff
prescribed in 1985.
has considered the factual position whether the process of applying Phenol
Formaldehyde Resin on plywood is only nominal process which does not affect the
identity of the commodity or whether it is a substantial process resulting in
the emergence of a new commercial product.
to the CEGAT, answer to the question whether any particular processing would
result in the emergence of a new commercial products depends on various factors
like- to what extent the value is added, whether the product is prepared for a
separated use. In the case of non-slip plywood, after coating it with Phenol
Formaldehyde Resin and pressing it with enroller, the department took the view
before the CEGAT that it becomes a new product. CEGAT accepted the aforesaid
stand of the department and found that application of Phenol Formaldehyde Resin
results in the emergence of a new commercial products.
counsel for the appellant contended before use that no real change taken place
on the plywood despite subjecting the article to heat and pressure to apply the
Resin and coating it with wire mesh. But in the light of the finding of the
Tribunal that the plywood which appellant purchased has turned into a new
commercial products acquiring a different identity there is no scope for
contending that the end product is not a different commodity.
counsel for the appellant tried to seek support from the decision of this Court
in Gujarat Steel Tubes Ltd. the sales tax proceedings taken against the
petitioners in the case it was contended that galvanized iron pipes and types
are a commercially different commodity from steel tubes. This Court pointed out
that the purpose of Galvanizing the steel pipe is merely to make it weather-
does the decision in Collector of Customs & Central Excise and Anr. vs.
Oriental Timber Industries, 1985 (3) SCC 85, cited before us by the learned
counsel afford any useful support to the appellant's contention. The question
considered therein was the stage at which the plywood used for manufacturing
plywood "circles" became liable to excise duty. In Collector of
Central Excise Bombay vs. Popular Cotton Covering Works, 1994 (73) ELT 264, the
contention raised by the assessee was that the works done by him for winding
cotton or fibre-yarn on the electric wire does not amount to manufacture of a
new product. the contention was upheld by this Court on the basis of the
finding arrived at by CEGAT that no new commercially recognised article
district from electric wire was come into existence. It was pointed out in the
decision that the excise authorities did not lead any evidence to establish
that winding cotton or fibre class yarn upon electric wire would bring about a
new commercially recognised article. Those decisions, therefore, do not help
Joseph Vallappally, learned senior counsel who argued for the respondent, cited
the decision of this Court in Laminated Packings (P) Ltd. vs. Collector of
Central Excise, 1990 (49) ELT 326, and submitted that the ratio therein has a
fare greater bearing on the issue involved in the case. The question with
polyethylene would amount to manufacture. The Collector (Appeals) had taken the
view the lamination process on duty paid kraft paper would not invite duty
again. But this Court held that lamination amounts to manufacture as it
involves a process for bringing into existence a different commodity distinct
from kraft paper.
Mukherji, CJ, has observed in that decision that "laminated Kraft paper is
distinct, separate and different commodity know in the market as such from the
Lordships did not agree with the contention of the counsel that since duty was
paid on kraft paper and since no change in the essential character or use of
the paper had been brought to the commodity it cannot be subjected to duty once
again. We agree with the learned counsel that the position in this case is not
very different from the above case . The fact finding authority has correctly
concluded that the end product is distinctly different from what it was before
the processing was done on it.
find no merit in the appeal, and accordingly we dismiss it. No costs.