CCE Vs. AP PAPER MILLS LTD.

JUDGEMENT

(1.) THIS is a Revenue appeal against the order in Appeal No. 10/98 dated 25.5.1998 passed by the Collector of Central Excise (Appeals), Hyderabad holding that denial of licence by the Concerned Assistant Commissioner to the respondents under Rule 174 of the Central Excise Rules, 1944 is not sustainable and not according to law. The Revenue is aggrieved against the said order and has filed the present appeal. The respondents are manufacturers of paper and paper boards falling under Chapter 48 of the CET 1985. Due to increased demand for supply of paper in sheets and due to inadequacy of space to install some more in their factory at Rajahmundry, they set up a "Paper cut to size Unit" with proposed installed capacity of 20,000 M.T. at Seri Narasannapalem within the jurisdiction of Hunuman Junction Range of Vijayawada Division. They had obtained approval from the following authorities:

(2.) THE Collector (Appeals) after careful consideration accepted their pleas and directed the Assistant Commissioner to grant registration under the CE Act.

(3.) THE Revenue contend that the process of cutting paper reels into sheets of different sizes does not amount to manufacture in terms of the Judgment of the Andhra Pradesh High Court in the case of Mis. Bhadrachalam Paper Boards as . They contend that the value addition is not the criteria to decide merit whether it amounts to manufacture or not. It is stated by the Revenue that if Registration is issued, the respondents shall become eligible to avail Modvat Credit on capital goods under Rule 57Q and inputs under Rule 57A even though no manufacturing activity is being carried out at this Unit. The Revenue stated that paper is said to be manufactured when it comes out of the machine in the form of a roll as stipulated in para 2.11 of the Departmental manual on paper of sorts. It is stated that with regard to the marketable stage i.e. packed form after cutting etc. it is to be construed only in case if the manufacturer clears the same to his customers with reference to their requirements. It is stated that in the instant case, the basic manufacturing activity i.e. roll stage is being completed in another factory and only ancillary works are proposed to be carried out which does not come within the purview of the meaning of "manufacture" under Section 2(f) of the Central Excise Act, 1944.