DECORATIVE LAMINATES (INDIA) PVT. LTD. v.

COLLECTOR OF CENTRAL EXCISE, BANGALORE

JULY 31, 1996

[S.P. BHARUCHA AND K.T. THOMAS, JJ.]

Central Excise :

Central Excise Tariff Act, 1985-Cltapter 44 of the Schedule-Commercial Plvwood--{Jndertaking process of applying-Phenol Formaldehyde Resin-Exemption from duty on the ground that process unde1taken was not mam1facture--Duty already paid before processing-Exemption refused- Held, Benefit of exemption cannot be claimed as end product is entirely different after processing.

The appellant company was engaged in processing commercial D plywood. The Assistant Collector of Central Excise issued notice to the appellant company that non-slip plywood is liable to Excise Duty. The Collector of Central Excise (Appeals) confirmed the order of the Asst.

Collector and dismissed the appeal filed by the appellant. Hence this present appeal.

Dismissing the appeal, this Court

HELD : 1 The Tribunal has found that the plywood purchased by the appellant on processing has turned into a new commercial product acquiring a different identity. Hence no scope for contending that the end product is not a different commodity. 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. (211-G-H; 213-A)

Laminated Packings (P) Ltd. v. Collector oj Central Excise, (1990) 49 ELT 326, relied on.

Gujarat Steel Tubes Ltd. and Another v. State of Kera/a and Others, (1989] 3 SCC 127; Collector of Customs & Central Excise and Another v. 01iental Timber Jndusflious, [1985) 3 SCC 85 and Collector of Central Excise, Bombay v. Popular Cotton Cove1ing Works, (1994) 73 ELT 264, referred to.

A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3775 of

1989.

From the Judgment and Order dated 27.6.89 of the Customs Excise and Gold Control Appellate Tribunal, New Delhi in Order No. 170 of

1989-B.

V. Sridharan and V. Balachandran for the Appellant

J. Vellapally, P. Parmeshwaran for the Respondent.

The Judgment of the Court was delivered by

THOMAS, J. 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 Formal" dehyde Resin under 100 per cent heat and pressure and coats the plywood with wire mesh, either on one side or on both sides so as to make it slip E 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 product it is liable to duty as falling under sub-heading 4408-90 (Chapter 44 of the Schedule to the Central Excise Tariff Act, 1985). Appellant in the reply has explained that F 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 nor the processing exercise a manufacture according to the appellant.

Some earlier proceedings, which culminated in refunding the duty collected G on such. products when the department later realised that no duty was chargeable on such commodity, have also been relied on by the appellant to bolster up its stands.

The Assistant Collector took the view that the slip-proof commercial plywood (made after carrying out the processing work) is a different H product and so is liable to duty under the relevant sub-heading of the

DECORATIVELAMINATESv. CGLLECTOROFC.E.[TIIOMASJ.] 211

Schedule to the Act.

Collector of Central Excise (Appeals) confirmed 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 the 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.

CEGA T has considered the factual position whether the process of applying Phenol Formaldehyde Resin on plywood is only a 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 E particular processing would result in the emergence of a new commercial product depends on various factors like to what extent the value is added, whether the product is prepared for a separate 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 F becomes a new product, CEGAT accepted the aforesaid stand of the department and found that application of Phenol Formldehyde Resin results in the emergence of a new commercial product.

Learned counsel for the appellant contended before us that no real change takes place on the plywood despite subjecting the article to heat G 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 product acquiring a differ.en! 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. and Anr .. v. State of Kera/a and Ors., (1989] 3 SCC 127. In the sales tax proceedings taken against the petitioners in that case it was contended that galvanised iron pipes and tubes are a commercially different commodity from steel tubes. This Court pointed out that the purpose of galvanising the steel pipe is merely to make it weather-proof.

Nor does the decision in Collector of Customs & Central Excise and Anr. v. 01iental Timber Indus/lies, [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 v. Popular Cotton Cove1ing W01*s, (1994) 73 ELT 264, the contention raised by the assessee was that the works done by hbn for winding cotton or fibre-yant on the elect1ic wire does not aniount lo D manufactwe of a new product. 171e contention was upheld by this Court on the basis of the finding anived at by CEGAT that no new co1111ne1cially recognised a1ticle distinct froni electlic ivire hus co111e into existence. It was pointed out in the decision that the excise auth01ities did not lead any

evidence to establish that winding cotton or fibre glass yanz upon e/ect1ic 1vire

E would bring about a new conunercially recognised alticle. Those decisions, therefore, do not help the petitioner.

Shri Joseph Yellappally, learned senior counsel who argued for the respondent, cited the decision of this Court in Laminated Packings (P) Ltd.

v. Collector of Central Excise, (1990) 49 ELT 326, and submitted that the F ratio herein has a far greater bearing on the issue involved in the case.

The question considered therein was whether lamination of kraft paper with polyethylene would amount to manufacture. The Collector (Appeals) had taken the view that 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 existt; nce a different commodity distinct from kraft paper. Sabyasachi Mukherji, 0, has observed in that decision that "laminated kraft paper is distinct, separate and different commodity known in the market as such from the kraft paper".

Their 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 H or user of the paper had been brought to the commodity it cannot be

DECORATIVELAMINATESv. COLLECTOR OF CE. [IBOMASJ.] 213

subjected to duty once again. We agree with the learned counsel that the A position in this case is not very different from the above case. That 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.

S.V.K.I.

Appeal dismissed.