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Commnr. Of Central Excise, Mumbai v. M/S. Rajpurohit Gmp India Ltd. Others
Factual and Procedural Background
The Department of Revenue filed a group of Civil Appeals questioning whether the cutting and slitting of steel sheets or polyester films used for lamination constitute “manufacture” for the purposes of Central Excise duty. The controversy originated from Central Board of Excise and Customs (CBEC) Circular No. 584/21/2001-CX dated 7 September 2001, which stated that slitting would amount to manufacture if the resultant goods fell under a different tariff sub-heading.
The 2001 Circular was challenged before the Delhi High Court, which held on 21 November 2003 (2004 (178) E.L.T. 1099 (Del.)) that the processes did not amount to manufacture. The Department’s appeal to the Supreme Court was dismissed. In response, CBEC issued Circular No. 811/8/2005-CX dated 2 March 2005, expressly withdrawing the 2001 Circular and accepting the Delhi High Court’s decision.
The present appeals arise from Tribunal decisions that followed the Delhi High Court view. The Department now seeks reversal, or alternatively a remand, on the ground that additional processes (die-punching and heat sealing) allegedly constitute manufacture.
Legal Issues Presented
- Whether cutting and slitting of steel sheets or polyester films used for lamination, by themselves, amount to “manufacture” under Central Excise law.
- Whether subsequent die-punching and partial heat sealing of the slit sheets create a new, excisable product warranting remand to the Adjudicating Authority.
Arguments of the Parties
Department’s Arguments
- The show-cause notice alleges that after slitting, the sheets were die-punched and three sides were heat-sealed, resulting in a new product; this sequence, according to the Department, amounts to manufacture.
- The Department requested that the Supreme Court remit the matter to the Adjudicating Authority for fresh consideration of the die-punching and sealing processes.
The opinion does not contain a detailed account of the assessees’ legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Delhi High Court decision dated 21-11-2003, 2004 (178) E.L.T. 1099 (Del.) | Slitting/cutting of HR/CR coils or sheets does not amount to manufacture. | Formed the foundation for CBEC’s 2005 Circular; relied upon by the Supreme Court to affirm that the disputed processes are non-manufacturing. |
| Supreme Court dismissal of Department’s appeal against the above Delhi High Court judgment (date not specified in opinion) | Upheld the Delhi High Court’s view, making it final and binding. | Cited to demonstrate that the Department’s stance has already been rejected at the apex level. |
Court's Reasoning and Analysis
The Court noted that the 7 September 2001 CBEC Circular—under which the show-cause notices were issued—has been withdrawn by the subsequent Circular dated 2 March 2005, which accepted the Delhi High Court’s ruling that cutting or slitting does not amount to manufacture. Because CBEC circulars are binding on departmental officers, the Court found no justification to continue insisting on duty for the disputed processes.
Regarding the Department’s plea to remit the matter for examining die-punching and heat sealing, the Court observed that:
- The assessment period covered only years up to 2001, during which the 2001 Circular, focused solely on tariff interpretation, governed departmental action.
- The show-cause notices themselves did not allege that die-punching constituted manufacture; they proceeded purely on tariff classification grounds.
- Consequently, a remand would serve no purpose, as the foundational allegation was absent.
In view of the binding 2005 Circular and the lack of specific allegations in the notices, the Court declined to interfere with the Tribunal’s decision.
Holding and Implications
Civil Appeals DISMISSED; no order as to costs.
Immediate Effect: The Tribunal’s decision—holding that cutting, slitting, and similar processes do not amount to manufacture—stands affirmed. The Department cannot levy excise duty on such activities for the relevant period.
Broader Implications: The judgment reinforces that CBEC circulars, once issued and not contrary to any statutory provision, bind the Department. No new precedent is set beyond reaffirming the non-manufacturing status of slitting/cutting operations in line with the withdrawn 2001 Circular and the prevailing 2005 Circular.
The main issue which arises for determination in this bunch of Civil Appeals filed by the Department is whether cutting and slitting of steel sheets of polyester films used for lamination purposes amounts to manufacture? In other words, in these Civil Appeals the issue is not on classification, it is about exigibility.
On 7th September, 2001, a Circular was issued by the Central Board of Excise and Customs, New Delhi, on the question as to whether slitting of HR/CR coils of iron and steel sheets into strips would amount to manufacture. The matter was examined and the Board came to the conclusion which is reproduced hereinbelow:
"3. As far as slitting of HR/CR coils of iron and steel into strips of smaller width is concerned, two view points have been expressed by the field formations and the trade. One view is that if as a result of slitting the classification of the product changes from Heading 72.08/72.09 to 72.11/72.12 in respect of iron or non-alloy steel strips and from Heading 72.19 to 72.20 in respect of stainless steel strips, a new product with commercially distinct name, character and use has come into existence and hence the process would amount to manufacture.
4. Another view is that mere slitting is not a process of manufacture. The products before and after slitting remain flat-rolled products and do not have new and distinct identities. Thus, the activity should not amount to manufacture.
7. In the circumstances, it is hereby clarified that cutting of HR/CR coils of iron or non-alloy steel into sheets or slitting into strips of lesser width; or slitting of sheets into strips will amount to manufacture if the resultant product is classifiable under different sub-heading of the Central Excise Tariff."
The said Circular dated 7th September, 2001 was challenged before the Delhi High Court which took the view that the processes in question did not amount to manufacture. The Department's appeal to this Court was also dismissed. Consequently, the Central Board of Excise and Customs issued another Circular which is the latter Circular dated 2nd March, 2005 which reads as under:
"CIRCULAR: 811/8/2005-CX. DATED 02-MARCH-2005 Manufacture - Slitting of HR/CR coils of Iron & Steel sheets not amounts to manufacture Circular No.811/8/2005-CX.,dated2-3-2005 F.No.139/4/2002-CX-4 Government of India Ministry of inance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject : Whether slitting of HR/CR coils of Iron & Steel sheets into strips would amount to manufacture - Reading.
I am directed to invite your attention to Board's Circular No. 584/21/2001-CX., dated 7-9-2001 (2001 (133) E.L.T. T3) wherein it was clarified that cutting of HR/CR coils of iron or non-alloy steel into sheets or slitting into strips of lesser width; of slitting of sheets into strips will amount to manufacture if the resultant product is classifiable under different sub- heading of the Central Excise Tariff.
2. The said Circular was quashed by the Hon'ble High Court of Delhi vide its order dated 21-11-2003, [2004 (178) E.L.T. 1099 (Del.)] holding that these processes would not amount to manufacture. Department's appeal filed against Delhi High Court Order has been dismissed by Hon'ble Supreme Court.
3. In the light of the judgment of the Apex Court the Circular No. 584/21/2001- CX., dated 7-9-2001 is withdrawn herewith.
4. Field formations may be informed suitably.
5. Hindi version will follow."
The later Circular dated 2nd March, 2005 accepts the judgment of the Delhi High Court and withdraws the earlier Circular dated 7th September, 2001. Thus, the position is now made clear that cutting and slitting of steel sheets and polyester films used for lamination purposes do not amount to manufacture according to Board which is binding on the Department.
Shri Vikas Shrama learned counsel appearing on behalf of the Department, however, contended before us that in the present case the show cause notice alleges that sheets of various sizes which emerged after the slitting process were again die-punched on the press machine and the die-punched pieces were sealed by heat leaving three sides open which, according to the learned counsel, amounted to manufacture. It was urged that this aspect needs to be remitted by this Court to the Adjudicating Authority for fresh consideration. We find no merit in this argument for the simple reason that in these cases we are concerned with the period up to 2001. At that time the previous Circular dated 7th September, 2001 held the field. That Circular was applied for the past period. That Circular essentially proceeded on the basis of interpretation of the tariff items and not on examination of the entire process undertaken by the assessees. In these cases also show cause notice clearly indicates that the matter has proceeded before the Adjudicating Authority not on examination of the process undertaken by the assessee but on the basis of interpretation of the tariff items. In the show cause notice there is no allegation that the above process of die-punching amounts to manufacture, hence we are not inclined to remit the matter to the Adjudicating Authority.
As stated above, the Circular dated 7th September, 2001 stands withdrawn by the subsequent Circular dated 2nd March, 2005. Hence, we find not reason to interfere with the impugned judgment of the Tribunal in these Civil Appeals. Accordingly, this bunch of Civil Appeals stands dismissed with no order as to costs.
....................J.
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