Decided on May 30,1991

Chemicoat Ltd. Appellant
COLLECTOR OF C. EX. Respondents


N.K. Bajpai, Member (T) - (1.) THIS is an appeal against the order of the Collector of Central Excise, Baroda : - (a) demanding Central Excise duty Of Rs. 49,87,319.90 on metallised/lacquered PVC films manufactured and removed by the appellants during the period from 15 -4 -1983 to 2 -1 -1986 without possessing/obtaining Central Excise licence, without complying with the prescribed procedure and without payment of duty; (b) imposing a penalty of Rs. 30 lakhs on the appellants under Rule 173Q(1) for contravention of Rule 174 read with Section 6 of the Central Excises and Salt Act, 1944 and Rules 173C, 173F, read with Rule 9(1), 173G(2) read with Rule 52A and Rule 173 6(4) read with Rule 53 and 226 of the Central Excise Rules 1944; and (c) ordering confiscation of plant and machinery etc., belonging to the appellants and used in the manufacture, production storage and removal of the offending goods under Clause (a) to Sub -rule (2) of Rule 173Q and permitting redemption of the aforesaid plant and machinery on payment of a fine of Rs. 10 lakhs in lieu of confiscation within one month.
(2.) BRIEFLY stated, the facts are that the Central Excise authorities initiated action against the appellants for not paying duty on PVC films which were metallised and lacquered in the appellant's factory culminating in the passing of the impugned order demanding duty etc. In the appeal before us, the appellants have assailed the order on the ground, inter alia, that metallising and lacquering of films did not amount to manufacture. It is further stated that before metallising/lacquering, the very same films had borne duty under Tariff Item 15A(2) of the erstwhile Central Excise Tariff. The matter was heard at length on various grounds taken in the appeal and judgment was reserved on conclusion of hearing. It is not necessary to go into all the grounds because the appeal can be decided on the short point viz., whether metallising/lacquering of PVC films amounts to manufacture and if, the answer is in the negative, whether metallised/lacquered films should be subjected to duty once again under Tariff Item 15A(2) which covers both bare films as well as metallised/lacquered films.
(3.) AFTER the hearing was completed, but before the judgment could be given, the appellants moved a Miscellaneous Application enclosing a copy of the judgment of the Division Bench of Bombay High Court in the case of Garware Plastics and Polyester v. Union of India [1991 (52) ELT 506 (Bom.)] in which it was held that lacquering and metallising of polyester films does not amount to manufacture. It was stated in the application that the judgment is fully applicable to the facts of the appellants' case; that there is no other judgment except this one involving the facts regarding lacquering and metallising of polyester films. In view of the request in the application, the matter was re -opened and the Miscellaneous Application was heard. Arguing for the appellants, Shri Willingdon Christian, their learned counsel submitted that the Collector has held in the impugned order that with effect from 1st March, 1982 when the tariff description of Item 15(A) was substantially amended, lacquered/metallised films as also those which were not lacquered or metallised were included in the tariff item and, in view of this change, lacquered/metallised films did not have to suffer the incidence of duty because it was not open to argue that this involved any manufacturing process. The learned counsel submitted that this point stands settled in view of the judgment of the aforesaid Bombay High Court and placed reliance on para 18 of the judgment which is as under : - "18. In the present case, we have no material before us which would show that as a result of the process of lacquering/metallising of polyester film any new distinct commercial commodity comes into existence having a different identity or name. The only difference which results from the process of lacquering/metallising is a change in the colour of polyester film. There is no material before us which would show that such lacquered/metallised film has any special properties or is known differently in the market or has uses different from the uses of polyester film. In these circumstances, looking to the test laid down by the Supreme Court in Delhi Cloth and General Mills Co. Ltd. [1977 (1) ELT (J 199) (SC) we are unable to hold that the processing carried on at the petitioners' factory at Nasik amounts to 'manufacture'. In fact, right upto 1982 no excise duty was levied on the processed polyester film produced in the petitioners' factory at Nasik. From July 1982, however, the respondents have sought to levy excise duty only on the ground that under the new Tariff Item 15A(2) lacquered/metallised polyester films are expressly referred to. This, in our view, can make no difference if in lacquering/metallising polyester film no process of manufacture is involved because a new commercial commodity does not come into existence. This is not to say that the process of lacquering or metallising can never amount to manufacture. Whether it will amount to manufacture or not will depend upon the end -product which emerges and on whether this end -product is a distinct commercial commodity having its own separate identity and use." ;

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