Customs, Excise and Gold Tribunal - Delhi
Johnson And Johnson Ltd. vs Collector Of C. Ex. on 12 September, 1996
Equivalent citations: 1996(88)ELT465(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The appellants manufacture inter alia, printed labels from numerous base materials such as cloth, aluminium foils, plastic films and paper. The appellants filed their classification lists on 9-3-1987 and 17-3-1987 classifying the said printed labels manufactured from the said base materials under sub-heading 4901.90. The process of manufacture involved is briefly as follows :-
(a) Bonding of large-size sheets of paper and release paper with adhesive, or bonding of release paper and plastic film or aluminium foil or textile fabric as required.
(b) Printing of material required on labels on the bonded sheets in the appellants' printing press and simultaneously cutting the printed labels.
Prior to 1st March, 1987, Chapter 49 of the Central Excise Tariff Act, 1985 inter alia included products of the paper printing industry. By the Finance Act, 1987, with effect from 1-3-1987, the words 'products of the paper printing industry' were substituted by words 'products of the printing industry'. The appellants therefore, filed the said classification lists in respect of the said printed labels manufactured from all the above base materials classifying the said labels under sub-heading 4901.90 as "Other products of the printing industry". By a show cause notice dated 13th October, 1987, issued by the Assistant Collector of Central Excise, Bombay Division III, the appellants were called upon to show cause as to why the said printed labels should not be reclassified under different sub-headings depending upon the base materials used in the manufacture of the said printed labels viz. the following:-
SI. No. Base Material Proposed Classification
1. Plastic 3919.00
2. Paper 4817.10
3. Textile Material 5905.10
(cloth) (or)
5905.20
4. Aluminium 7613.90
By their reply dated 15th December, 1987, the appellants contended that the said printed labels were correctly classifiable under sub-heading 4901.90.
2. By his order dated 27th June, 1986, the Assistant Collector of Central Excise, Bombay rejected the appellants' contentions and confirmed the proposed classifications in respect of the appellants' printed labels depending upon the base materials upon which the process of printing was carried out by the appellants. The main reason for rejecting the appellants' contentions, according to the Assistant Collector, was that though the said articles contain printed materials, the same were merely incidental to their use. The Collector of Central Excise (Appeals) by his order-in-appeal, issued on 8th November, 1989, held that the said printed labels were correctly classifiable under various Chapters depending upon the basis of raw material used in the manufacture of such labels, based on the contention, inter alia, the labels were not products of the printing industry but were products of the packaging industry, inasmuch as, in principle, a label is no different from paper packaging in that it carries information about the contents and does not in any way contribute anything to the quality of the product to which it has been affixed. He confirmed the classification of the disputed items as follows :-
1. Printed labels of paper laminated with another paper under Heading 4818.90 prior to 1-3-1988 and under heading 48.21 subsequently to 1-3-1988;
2. Plastic printed labels laminated with another plastic sheet under Chapter 39 after 1-3-1987;
3. Printed aluminium label laminated with paper under Heading 7607, if the thickness of aluminium (excluding any backing) did not exceed 0.2 mm; in other cases, depending upon the predominance of paper or plastic;
4. Printing labels of textile materials under Heading 59.05. Hence this appeal.
3. We have carefully considered the submissions made by Shri D.B. Shroff, learned Counsel for the appellants and Shri A.K. Agarwal, learned DR for the Revenue. Our findings are as under :-
Printed Paper Labels :- The appellants do not contest the classification of this item under Heading 4818.90 prior to 1-3-1988 and under Heading 48.21 subsequent thereto and hence we confirm the classification determined by the Collector.
Printed Plastic Labels :- The contention of the appellants is that this is a product of printing industry as these labels are bought for the purpose of what is printed upon them and they are not mere adjuncts of items or products on which these labels are affixed. In this connection, they refer to Note 2 to Section VII of the Central Excise Tariff Act, 1985 which states that 'except for the goods of Heading 39.18 or 39.19, plastic, rubber and articles thereof, printed with motifs, characters or pictorial representations which are not merely incidental to the primary use of the goods, fall in Chapter 49'. They also referred to Note 2 to Section VII of the HSN Explanatory Notes which is identical in wording to Note 2 of Section VII of the Central Excise Tariff Act. Ld. Counsel further submitted that Heading 49.01 of the 1987-88 Central Excise Tariff covers : "Printed books, newspapers, pictures and other products of the printing industry" and draws our attention to Heading 4901.10 covering decalcomanias and submitted that since labels are nothing but decalcomanias, they are covered under Chapter 49. Our attention has also been drawn to the judgment of the Hon'ble Supreme Court in the case of Rollatainers reported in Judgments Today 1994 (4) SC 438 in support of their argument that since their product is printed plastic label, it is the product of the printing industry which by itself can bring the label into existence. We regret that the contention of the appellants that these labels are products of the printing industry, cannot be accepted. Every material on which printing work is done is not a product of the printing industry. In the case of Metagraphs Private Ltd. v. Collector of Central Excise, Bombay reported in 1986 (26) E.L.T. 66, the Tribunal has held that printed aluminium labels are not a product of printing industry but akin to a printed packing or wrapping paper and is a product of packaging or packing industry. The Tribunal held that aluminium labels by themselves contribute nothing for the goods on which they are affixed, and a mere paper package contributes nothing to the quality of the product they carry in them. The relevant paragraphs of the Metagraphs Private Ltd. judgment are reproduced below :-
"19. The us of the goods is to be affixed permanently to a product like a bicycle, a radio receiver set, a television set, a motor bicycle, a clock, an airconditioner, a refrigerator and a host of other machines and equipments. According to the learned counsel for M/s. Metagraphy, Mr. Lakshmi Kumaran, the metal plates communicate by means of the message in the printed representation they carry on them. Their primary purpose, according to the learned counsel, therefore, is served by the printing which is a means of communication to the reader of a certain basic and vital information. The plate coveys something in language that the reader is able to understand and, therefore, it forms a printed material. There may be metal plates which carry statistics and vital information about, say, an electrical component like a transformer, which may not be intelligible to the common man, but to an electrical engineer they signify important messages. The messages that the plates carry are sometimes written in language that is no better than a code to say what the component is or what its qualities, its capacities, its load bearing factors, its stresses, tolerances, etc. etc are. This, according to the learned counsel for M/s. Metagraphs, is not merely incidental to the primary use of the goods in the way that printing on a carton or packaging or a wrapper is. The printing on the paper wrapper or a carton is only incidental for its use in the main application for which it is meant, i.e. packaging of goods. The printing bears no relation to the work of the wrapping paper viz. the work of packaging or wrapping. That printing can as well be dispensed with the wrapping paper or the carton would still be good as wrapping paper or carton. It is not so with these printed aluminium labels.
20. It is the printing that gives the aluminium labels their use; without the printing they carry on them, the aluminium sheets or plates would not be labels and their attachment to other products would serve no purpose and, indeed, no one would attach them to their products. Therefore, the printed matter carried by the labels serves as a reading matter that forms the very substance of their utility and use. If the labels are not in position, the product to which they are meant to be attached or affixed would lose, in their customer overture, a vital component as might happen when a potential customer is deprived of information that he may require to have if he is to weigh his preferences about selection of the product. His actual purchase of the product or rejection of it may depend on what he reads in the label. The label does for the product what a salesman might do, that is to say, inform a potential customer or perhaps a passerby what the product is, its quality, price, manufacturer and so on, and by so doing tilt the scales its way. There is, therefore, no difference in content between a printed book or a printed piece of paper meant for reading, and these printed labels. The printed paper that forms the reading material conveys information in the same way that the printed aluminium labels does. The latter communicates information, even if laconic or abbreviated by reason of the limitations of its size, and the space it must not exceed.
21. The learned counsel's arguments are without doubt very attractive and very skilful; but there is a flaw inlthem. The difference between these labels and the printed packaging papers and cartons is more apparent than real. Obviously the packaging paper cannot do the work that these labels do in regard to their permanency. Furthermore, the contents that the packaging and wrapping papers and cartons hold are by their nature meant to be taken out of their confinement in the package or the carton, if they are to be used. A shirt wrapped in a packaging paper or a pair of shoes in the printed carton or a litre of milk in the printed polythene bag, are soon removed from their packing when they are about to be consumed. But as often as not the shoe or the shirt still carry some printing on it in the form of a tab or a die-impressed embossment that give at least the name of the manufacturer or the size of the wear and sometimes the price. The fact that this is not true with the aluminium label is because the label is attached permanently to its surface. But this must obscure the fact that, like the packaging for a shirt or a pair of shoes, it carries propaganda material advocating the virtues of this or that manufacturer and of the goods he makes. To be sure, the aluminium label will carry sometimes added information like the wattage or resistance of the equipment if it is an electrical appliance, but this information is in principle no different from the paper packaging that carries information about the contents. The label by itself contributes nothing to the goods any more than the paper package contribute anything to the quality of the products they carry in them. If the aluminium label on an apparatus like a transformer or an electric motor is required to remain permanently fixed, it is not because of the service that the printed label provides to the equipment or to its owner but because it may carry certain information which is useful to anyone who uses it. That information could as easily have been stamped on the body of the electric motor itself or on the body of the transformer, as they are stamped on shirts or as the size is embossed on shoes. We must not be deceived into reading the printed aluminium labels as products of printing simply because the information they carry may be vital. The information qualifies not the aluminium label but the equipment that it (label) is affixed to. We see the same phenomenon when we look at a paper packet that packs cigarettes indicating the quality, the size and the manufacturers etc. etc., or when we buy a bottle of medicine and read on the carton the year of manufacture, the date of expiry and so on. The information that the carton or the medicine label has is just as vital as the information the aluminium label carries, but that information relates not to the label or the carton but to the contents or machine which a customer buys; in so doing he has to also buy the wrapper, the carton, the aluminium label.
22. The difference between the .printed aluminium label and the printed packing paper or wrapper is only of form and shape. The printed matter on the wrapper paper informs the buyer about the quality, nature, quantity, amount of the contents, in the same way that the printed aluminium label tells the window shopper what he is looking at. A buyer of the medicine frequently has to know the concentration of the preparation he is buying, just as the buyer of the motor must know the ratings and capacities of the motor he needs for his workshop. There is no difference in quality but only in their shape, contours and body. The paper carton is thrown away partly because it is detachable and partly because the contents are soon used up and, therefore, there is nothing more for the carton or the wrapper to contain. The aluminium label, on the other hand, is in association with a product that lasts for years and is discarded only when the product itself is no longer serviceable and is thrown away. The presence of the aluminium label serves the machine as long as the machine lasts and is in service, in its limited life, the paper carton serves the same purpose until it is finally thrown away by the contents having been extracted and having been used. The difference in the longevity of the two points nothing more than to the nature and use of the contents or the products they are created to serve. It is not an indication that one is a product of the printing industry and the other is not. Neither is a product of the printing industry; it is more a case of their being products of the so-called packaging or packing industry of which one hears every now and then. It is significant that in both cases, the principal i.e. the medicine or the machine, determines the useful life of the wrapper or the label, the servitors."
4. The Tribunal held in Para 25 of its order that a printed matter is its whole substance and printed matter is bought for itself and is itself good value for its printed contents, while printed labels and printed packing papers do not form goods of commerce and trade except to the person who is going to use them on his goods. They are used only as adjuncts of the products they contain or the equipment to which they are affixed. Hence printing on the label is merely incidental to its use and, therefore, the labels are the products of the printing industry. The facts in the above case are more akin to the facts of the present appeal then the facts before the Hon'ble Supreme Court in case of Rollatainers Ltd. and Anr. where the issue decided was only whether printed cartons were the products of printing industry as such exempt from duty under Notification No. 55/75, in which the Supreme Court has held that cartons remain products of the packing industry even after printing is undertaken on them. Further the order of the Tribunal in the appellants own case -Final Order No. E/70/95-B1, dated 13-3-1995 reported in 1995 (78) E.L.T. 193 (Tribunal) also holds that printed labels are not products of printing industry although the issue of classification of printed labels was not decided, as there was no dispute before the Bench in regard to classification. Following the ratio of the above orders, we hold that printed plastic labels are not the products of the printing industry and not classifiable under sub-heading 49.01 as self adhesive strips but under sub-heading 39.19 which covers "self-adhesive, plates, sheets, film foil, tape, strip and other flat shapes of plastics whether or not in rolls". The decision of the Tribunal in the case of Synpack (Pvt.) Ltd. v. Collector of Central Excise, Bombay-II reported in 1994 (71) E.L.T. 98 (Tribunal) does not help the appellants as the Judicial Member's order was confined to the issue of jurisdiction of the Assistant Collector to issue show cause notice alleging suppression, while the Hon'ble Vice President's order in para 37 states that printed self-adhesive plastic tapes would either fall under Heading 39.36 or Chapter 49 depending upon the primary or principal use as printed material or otherwise and the Hon'ble Vice President has considered it more appropriate to leave the appellants' declaration undisturbed as even otherwise out of the two headings, the classification under Chapter 49 would be more appropriate going by the principle of classification under latter heading, in the case of two headings found equally appropriate; the observation on classification of the item cannot be regarded as the ratio of the Bench order.
5. The judgment of the Tribunal in the case of M. Vadilal & Co. Pvt. Ltd., Ahmedabad v. Collector of Central Excise reported in 1987 (10) ETR 325, cited by the learned Counsel for the appellants, holding printed sample folders to be the products of printing industry is distinguishable from the present appeal - in that case, the printed sample folder is printed by a printer and is complete in itself, while labels are not self-contained items and are used only as adjuncts to the products on which they are affixed and the information contained on the labels relates to the products on which they are affixed, and not to the labels themselves. Lastly, the submission of the appellants that labels are decal-comanias and, therefore, are to be classified under Chapter 49 is not tenable -Decalcomanias have been defined in the New Encyclopaedia Britannica Volume 30 as 'designs that are printed on specially prepared paper to form films that can be transferred to any surface. These films which usually are called decals (transfers) are widely used for decorating any objects that can be run through a press'. The definition further reads as :-
"Decals are made in a variety of ways, depending upon the need to be served. The regular decal, applied to such items as typewriters and .trucks, for example, begins with a sheet of porous paper coated with a solution of starch, albumin, and glycerin. The design that will be seen is printed on this paper backing. The printed paper is then covered with several coats of opaque white ink that will not be seen after application. The decal is finished with a coat of water-soluble glue called stickative. When the decal is moistened and applied to the object to which it adheres, the moistened backing paper is removed; and the design becomes permanently affixed. The stickative becomes water resistant soon after application.
Decals intended to be applied to windows are printed in reverse order. The layers of opaque white ink are printed first and the design is printed last in order to be seen when in contact with the glass. Decals for chine and kitchen ranges are printed with mineral colours and are fired to resist heat.
The term decalcomania has a specific application in mid 20th Century art, Paper is covered with gouache, an opaque watercolour paint. It is then pressed against canvass or another piece of paper and then removed, yielding exotic designs reminiscent of fungi or colonies of sponge. The German-born Surrealist artist Max Ernst (1891) used at his technique in his paintings."
From the above it would be seen that decals are transfers and cannot be equated with labels. In the light of the above discussion and analysis of the various judgments, we hold that printed plastic labels fall for classification under sub-heading 39.19, confirm the order of the lower Appellate authority on this item and reject the appeal on classification of this item.
6. Printed Cloth Labels : The appellants claim that this item falls for classification under sub-heading 49.01 cannot be accepted - We have already held in the previous paragraphs while discussing the classification of Printed plastic labels that labels are not products of the printing industry. Both the lower authorities have confirmed classification under heading 59.05 relying upon Chapter Notes 3 and 6 of Chapter 59 of the Central Excise Tariff Act, 1985; however, we agree with the learned Counsel for the appellants that Heading 59.05 is not appropriate as it covers rubberised fabrics and Note 3 of Chapter 59 states that such fabrics are impregnated, coated or covered with rubber. Since the Printed Cloth labels in dispute are not rubberised fabrics, Heading 59.05 will not cover them. Printed Cloth labels are classifiable under Heading 59.06 which covers 'Textile fabrics otherwise impregnated, coated or covered ...
7. Printed Aluminium labels : For the period 1987-88, the Assistant Collector has classified this item under sub-heading 7613.90 relying upon Note 1(1) of Chapter 48 while the Collector (Appeals) has classified it under Heading 76.07. The appellants' claim is that this item falls for classification under Heading 49.01 as product of the Printing industry. The claim of the appellants is ruled out in view of the fact that labels have already been held not to be products of printing industry. They are classifiable under Heading 76.06 as Aluminium foil for the period 1987-88 in accordance with Note 1(viii) of Chapter 76 which defines Aluminium foil as "a flat product of rectangular section of thickness excluding any packing not exceeding 0.15 mm whether or not embossed, cut to shape, coated, printed or packed with paper, paper board, plastics or other reinforcing materials". For the period 1988-89, they would fall for classification under sub-heading 7607.50 as Heading 76.07 covers "Aluminium foil (whether or not printed or packed with paper, paper board, plastics or similar packing materials) of a thickness (excluding any packing materials) not exceeding 0.2 mm" and sub-heading 7607.50 covers printed aluminium foil.
8. In the result, we hold as follows :-
(1) Printed paper labels are classifiable under sub-heading 4818.90 of the Central Excises Tariff Act, 1985 prior to 1-3-1988 and under heading 48.21 after 1-3-1988;
(2) Printed plastic labels are classifiable under heading 39.19;
(3) Printed cloth labels are classifiable under heading 59.06;
(4) Printed aluminium labels are classifiable under heading 76.06 prior to 1-3-1988 and under sub-heading 7607.50 subsequently.
9. The appeals are disposed of in the above terms.