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Decorative Liminates (India) Pvt. Ltd. Vs. Collector of Central Excise, Bangalore [1996] INSC 877 (31 July 1996)

Thomas K.T. (J) Thomas K.T. (J) Bharucha S.P. (J) Thomas, J.

CITATION: JT 1996 (7) 627 1996 SCALE (5)582



This 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.

The case of the appellant - company is the following.

Appellant 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 Act, 1985).

Appellant 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.

The 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.

Collector 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.

Learned 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.

CEGAT 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.

According 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.

Learned 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.

Learned 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- proof.

Nor 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 the petitioner.

Shri 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.

Sabyasachi 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 Kraft paper".

There 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.

We find no merit in the appeal, and accordingly we dismiss it. No costs.



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