Cutting jumbo roll films into smaller flats does not amount to a manufacturing process under the Central Excise Act, 1944.

Petitioner imports from abroad Jumbo rolls of Graphic art films after payment of customs duty and auxiliary duty. Thereafter, the jumbo rolls are slit into various widths such as 20', 30' and 40' and cut into various lengths of 10 feets 200 feet etc. and packed in separate cartons and marketed in India.

2.In Section 11 under the Heading 37 of the Central Excise Tariff, photographic and cinematographic rules are specified.

3.On 28-7-1987, the third respondent called upon the petitioner to take out a Central Excise licence stating that the process of slitting and cutting of jumbo roll films into smaller sizes would amount of to "manufacture". While the petitioner was agitating the validity of this direction by the third respondent, the Central Board of Excise and Customs (second respondent) issued a clarification in their letter F. No. 11/1/88 CX. 3, dated 5-9-1988. The second respondent clarified that the process of cutting into smaller sizes and repacking of jumbo rolls of sensitised photographic paper on which the customs duty including C.V. duty was paid would not amount to "manufacture" for the purpose of levying Central Excise duty. In view of this clarification, the direction given by the third respondent to the petitioner to take out a Central Excise licence was not pursued.

4.However, the third respondent by his communication dated 16-6-1989 insisted that the petitioner should take out a Central Excise licence. This order apparently was because of a subsequent clarification given by the second respondent in their letter F.No. 119/1/89 CX. 3, dated 12-5-1989. The second respondent has stated that in view of the decision of the Supreme Court inEmpire Industries Limitedv. Union of India 1986 AIR(SC) 662, 1985 (S1) SCR 292, 1985 (3) SCC 314, 1985 (1) SCALE 1269, 1985 (20) ELT 179, 1986 (162) ITR 846, 1986 (81) TAXATION 265, 1985 ECR 1169, 1985 SCC(Tax) 416, 1987 (64) STC 42], the petitioner should take out a licence because whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of manufacture. The second Respondent-Board held that though cutting and slitting into smaller rolls may not amount to a process of 'manufacture' because no distinct product emerged as a result of cutting and slitting when the said Graphic Art films in jumbo rolls are converted into plates and film in flat form, then the said product has to be held to be the resultant product of a manufacturing process in view of the changed Entry in the Tariff. In Chapter 37, Tariff Entry 37.01 reads as follows :

"Photographic plates and film in the flat, sensitised, unexposed, of any material other than paper, paper board of textiles; instant print film in the flat, sensitised, unexposed, whether or not in packs."

Tariff Entry 37.02 reads as follows :

" Photographic film in rolls, sensitised, unexposed, of any material other than paper, paperboard or textiles; instant print film in rolls, sensitised, unexposed." *

5.It was the case of the second Respondent-Board that since manufacture of photographic films in rolls (jumbo rolls) fall under Tariff Entry 37.02 and is attracted to Central Excise duty at the rate prescribed for that Entry, yet, for photographic films of the description mentioned in Tariff Entry 37.01, separate rate of duty prescribed and hence, when jumbo roll films are converted into photographic plates and films in flat form, the petitioner who so converts the jumbo films can be held to be engaged in a process of 'manufacture' and in that event, the petitioner has to take out a Central Excise licence.

6.Mr. Habibullah Badsha, learned Senior Counsel appearing for the petitioner would contend that the test for the liability to take out a Central Excise licence is not whether there is any Entry in the Central Excise Tariff Act regarding a commodity, but whether the concerned person carries on an activity wh