Case: Union Of India Vs. Babubhai Nylchand Mehta

characteristics and uses. After quoting Item 17(2) of the schedule to the Act the High Court observed as under. "The mere perusal of this item makes it clear that the liability arises in relation to manufacture of paper and for which any process is ordinarily carried on with the aid of power. It is not in dispute that the respondents carry out the process of coating and impregnating with the aid of power, but Shri Sathe, learned counsel appearing on behalf of the respondents, very rightly submitted that these processes are carried out not in relation to the manufacture and that being the principle requirement of import of levy under Item 17(2), the mere fact that process of coating and impregnating is carried out cannot attract levy of duty. The liability to pay duty arises because of manufacture of paper and it is not in dispute that the respondents do not manufacture any paper but purchase kraft paper from the open market. The process carried out by the respondents as such kraft paper does not amount to manufacture, and, therefore, Item 17(2) is not attracted to the work undertaken by the respondents." * Learned Division Bench thus affirmed the judgment of learned Single Judge and dismissed the appeal. 4. We have heard Mr Krishnamurthy Iyer on behalf of the Union of India and Mr U.R. Lalit on behalf of the respondent. Mr Krishnamurthy Iyer submitted that the case is fully covered by a recent decision of this Court in Laminated Packings (P) Ltd. v. CCE [ 1990 (4) SCC 51 in which in similar circumstances it was held that by process of lamination of kraft paper with polyethylene different goods came into being. It was held that laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper. The court did not approve the decision of Division Bench of Andhra Pradesh High Court in the case of Standard Packaging Nellore v. Union of India 1984 ECR 2635 : 1985 TaxLR 2538] which was relied on by the Collector of Central Excise, Guntur for reaching to the conclusion that the appellant would be eligible to claim refund of duty paid by them in this regard.5. Mr Lalit on the other hand tried to distinguish the above case and further submitted as an alternative argument that even if the case is covered by the above decision, no evidence was placed on record by the appellant to show that the goods in question were known in the market as having distinct, separate and identifiable function. 6. We have given our careful consideration to the arguments advanced by learned counsel for both the parties. In our view the above decision in Laminated Packings (P) Ltd. v. CCE [ 1990 (4) SCC 51 is an authority directly clinching the issue involved before us. In the above case the short question for consideration was whether the lamination of duty paid kraft paper with polyethylene resulting in polyethylene laminated kraft paper would amount to manufacture and excisable under law or not. Dealing with the above question it was observed as under : (SCC p. 52, paras 4 and 5) "Lamination, indisputable by the well settled principles of excise law, amounts to manufacture. This question, in our opinion, is settled by the decisions of this Court. Reference may be made to the decision this Court in Empire Industries Ltd. v. Union of India [ 1985 (3) SCC 314 We are, therefore, of the opinion that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper Counsel for the appellant sought to contend that the kraft paper was duty paid goods and there was no change in the essential characteristic or the user of the paper after lamination. The fact that the duty has been paid on the kraft paper is irrelevant for consideration of the issue before. If duty has been paid, then benefit or credit for the duty paid would be available to the appellant under Rule 56-A of the Central Excise Rules, 1944." * 7. It is no doubt correct that in the above case it was also observed that manufacture is bringing into being goods as known in the excise laws, that is to say known in the market as having distinct, separate and identifiable function. On this score in our opinion, there is sufficient evidence. On the basis of the above observations it was strenuously contended by Mr Lalit that in the above case there was sufficient evidence on record to hold that after manufacture the goods were known in the market as having distinct, separate and identifiable function but there is no such evidence on record in the case in hand before us. 8. We find no force in the above contention. Once we hold that the coating and lamination and other process applied by the company in its factory amounts to manufacture, new products come into being. It does not remain an ordinary kraft paper and as such it is liable to excise duty of 40 per cent ad valorem as provided, under Central Excise Tariff Item 17(2). In the above Laminated Packings case [ 1990 (4) SCC 51it was clearly held that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper. 9. We are in agreement with the view. The entire case before the Assistant Collector was understood and argued on the basis of controversy regarding manufacture. Once it is held that the products which come into being are manufactured from kraft paper, then in the facts and circumstances of this case there can be no controversy that new goods come into being and they are sold in the market as distinct, separate and different goods.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. We find no force in the above contention. Once we hold that the coating and lamination and other process applied by the company in its factory amounts to manufacture, new products come into being. It does not remain an ordinary kraft paper and as such it is liable to excise duty of 40 per cent ad valorem as provided, under Central Excise Tariff Item 17(2). In the above Laminated Packings case [ 1990 (4) SCC 51it was clearly held that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraftWe are in agreement with the view. The entire case before the Assistant Collector was understood and argued on the basis of controversy regarding manufacture. Once it is held that the products which come into being are manufactured from kraft paper, then in the facts and circumstances of this case there can be no controversy that new goods come into being and they are sold in the market as distinct, separate and different goods