Custom, Excise & Service Tax Tribunal
M/S. Lakshmi Packaging Pvt. Ltd vs Cce, Salem on 7 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/737/2004
(Arising out of Order-in-Appeal No. 137/2004-CE (SLM) (Deptl.) dated 27.2.2004 passed by the Commissioner of Central Excise (Appeals), Chennai)
M/s. Lakshmi Packaging Pvt. Ltd. Appellant
Vs.
CCE, Salem Respondent
Appearance Shri S. Raghu, Advocate for the Appellant Ms. Indira Sisupal, AC (AR) for the Respondent CORAM Honble Shri R. Periasami, Technical Member Honble Shri P. K. Choudhary, Judicial Member Date of Hearing / Decision: 07.07.2015 Final Order No. 40773 / 2015 Per R. Periasami The present appeal is second round of litigation before this Tribunal.
2. The brief facts of the case are that the appellants are engaged in printing of PVC films. The duty paid polypropylene films are subjected to process of printing of customers logo, trademark or design etc. and ready for use as wrapper for sewing threads. The appellants classified the printed PVC films under 4901.90 as a product of printing industry whereas Department classified the goods under 3920.39. In the first round of litigation when the issue came up before the Tribunal, the Tribunal by Final Order Nos. 2505 to 2511/1997 dated 8.7.1997 remanded the case to the adjudicating authority to decide the issue in the light of Honble Supreme Courts decision in the case of Metagraphs Pvt. Ltd. Vs. Collector of Central Excise 1996 (88) ELT 630 (SC) and also to consider Section Note 2 of Section VII of Central Excise Tariff Act.
3. The adjudicating authority in his denovo order dated 12.1.2002 accepted the classification under Heading 490190 as products of printing industry and dropped further proceedings. Revenue preferred appeal against the said adjudication order and the Commissioner (Appeals) allowed the Revenues appeal and held that the goods are classifiable under 3920 and set aside the impugned order. Hence the present appeal.
4. Heard both sides.
5. Learned counsel for the appellant submits that the Larger Bench of the Honble Supreme Court in the case of CCE, Bangalore Vs. Srikumar Agencies 2009 (13) STR 3 (SC) in a batch of appeals remanded the matter to the Tribunal with a direction to examine the facts of each case and then decide the case on merits instead of relying on the decisions. Based on the Honble Supreme Courts direction, the Tribunal in the case of Srikumar Agencies Vs. CCE has examined the issue on facts and allowed the batch of appeals vide Tribunals Final Order Nos. 659 to 683/2011 dated 9.8.2011. That Section Note 2 of Section VII clearly excludes products of printing industry from Chapter 39. He relied on the recent Honble Supreme Courts decision in the case of Holostick India Ltd. Vs. CCE, Noida 2015 (318) ELT 529 (SC). He submits that the products are duty paid PVC film already classified under 3920 and what they carried out is only printing of logos etc.
6. On the other hand, learned AR for Revenue submits that it is a product of packaging industry and what is cleared is printed packing material which is distinct and classifiable under Chapter 3920.39. She reiterated the findings recorded by the learned Commissioner (Appeals). She relied on the following case laws:-
(a) Union of India Vs. Rollatainers Ltd. 1991 (55) ELT 317 (Kar.)
(b) Rollatainers Ltd. Vs. Union of India 1994 (72) ELT 793 (SC)
(c) Garden Silk Mills Ltd. Vs. Collector of Customs, Bombay 1997 (91) ELT 263 (SC)
7. We have considered the submissions of both sides and perused the records. The short issue to be decided is whether product PVC films printed with logos is classifiable under Chapter 490190 or 3920.39. It is pertinent to state that due to divergent decisions of Honble Supreme Court and various High Courts and Tribunal decisions, the issue was placed before the Larger Bench of the Honble Supreme Court and the Honble Apex Court in the case of CCE Vs. Srikumar Agencies (supra), remanded the batch of appeals to the Tribunal. The Tribunal in the Final Order No. 659 to 683/2011 dated 9.8.2011 in the case of Srikumar Agencies & Ors. examined the issue in detail taking into account of Honble Supreme Courts decision in the case of Union of India Vs. Rollatainers Ltd. (supra) and ITC Ltd. Vs. CCE. The relevant paragraphs of Tribunals order are reproduced as under:-
20.3. On the other hand, ld. SDR relied on the decisions of the Honble Supreme Court in the case of Rolla Tainers Ltd. Vs. UOI reported in 1994 72 ELT 793 (SC) and in the case of ITC Ltd. Vs. CCE, Madras reported in 1998(97) ELT 401 (SC) to submit that the products in question cannot be treated as products of printing industry. In the case of Rolla Trainers Ltd., the Honble Supreme Court was dealing with the issue as to whether the printed cartons manufactured by the assessee for organizations like Brookbond India Ltd., Lipton India Ltd. and TATA Finlay ltd., could be treated as product of printing industry in the context of applying Notification No.55/1975-CE dt. 1/3/1975 applicable to the erstwhile tariff item 68 of the Central Excise Tariff. The Honble Supreme Court held that the printed cartons are to be treated as products of packaging industry with the following findings:-
11. We agree with the reasoning and the conclusions reached by the Division Bench of the High Court. What is exempt under the Notification is the Product of the Printing Industry. The product in this case is the carton. The Printing Industry by itself cannot bring the carton into existence. Any amount of fancy printing on a card-board would not make it a carton. In the process of manufacturing the printed cartons, the card-board has to be cut, printed, creased and given the shape of a carton by using paste or gum. Simply because there are expensive prints on the carton such a printed carton would not become the product of the Printing Industry. It shall remain the product of the Packaging Industry. In the present cases, we are dealing with classification of printed products where printing has been done on paper / polyethylene coated paper. Such printed papers could fall either under chapter 48 or 49. The chapter note under chapter 48 clearly holds that only when printing is incidental and not essential for the primary use, such printed products would fall under chapter 48 and when the printing is considered essential, it would fall under chapter 49. The Honble Supreme Court was not considering such a situation while determining whether the printed cartons would fall under the category of products of printing industry. In the said case, the issue was whether the printed cartons should be treated as products of printing industry or products of packaging industry. Honble Supreme Court after noting that the printing industry by itself could not bring cartons into existence, held that such printed cartons could not be considered as products of printing industry. The ratio of the said decision cannot be applied to the facts of the present case which involve determination of classification of the printed products which could fall either under chapter 48 or 49 depending upon the nature and scope of printing on the products. Honble Supreme Court, in the ITC Ltd. cited supra considered appeal against the CEGATs Final Order No.251 to 256/95-C dt. 31/8/1995 (copy placed on record by ld. SDR). On perusal of the said order of the Tribunal, it is noticed that the same dealt with classification of items like printed racks unfolded, printed top lid flats unfolded, printed hanged lid, printed shells/hulls, and slider which are parts / components of packets meant for packing of cigarettes. The Tribunal held that they could not be treated as products of printing industry on the ground the capacity to contain is essential characteristic of a carton and not the printing work on it which is merely incidental. Tribunal heavily relied on the ratio of the decision in the case of Rolla Tainers Ltd. cited supra. The said decision of the Tribunal stands upheld by the Honble Supreme Court. As the decision clearly related to cartons and its parts whose primary function was to contain, the same cannot be applied to the facts of the present case.
21. Similarly, in the present cases, the printed PVC films require to be considered for classification either under chapter 39 or under 49 depending upon the nature and scope of printing. Therefore, the decisions of the Honble Supreme Court cited supra cannot be applied to the facts of the present case.
22. In view of the above, while upholding the contention of the Department that the activities undertaken in the present cases would amount to manufacture, we accept the alternative submissions on behalf of the assessees that the products should be treated as products of printing industry. Therefore, on merits, we hold that the demands are not sustainable and accordingly set aside the demands of duty, interest and penalties. The above decision is squarely applicable to the present case as the issues are identical and the appellants are using duty paid PVC films for printing with logos, designs etc. which are cleared for use as wrapper for sewing threads. The product is already classifiable under Chapter 3920.30 of CETA, 1985. It is pertinent to state that the Section Note 2 of Section VII clearly excludes the products of the printing industry from Chapter 39.
8. Further, we find that the Honble Supreme Court in the recent judgment in the case of Holostick India Ltd. Vs. Union of India (supra) settled the issue of what construes the products of printing industry classifiable under Chapter 4901 of CETA, 1985 and allowed the Civil Appeals filed by the assessee. Relevant paragraphs of Apex Court order are reproduced as under:-
8. We have heard learned counsel for the parties. The first important thing to notice is that the original coated metallised film that has been used by the appellant has already been classified under sub-Heading 3920.36 as a flexible metallised film of plastic. The fact that it got laminated later would not take it out of this particular sub-Heading. The only question which arises is, after such classification, which is not disputed by the appellant, whether the relevant tariff entry would be 39.19 or 49.01.
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16. The real question, therefore, in this appeal is the application of Note No. 2 to entry 49, which reads as follows: -
"Except for the goods of Heading No. 39.18 or 39.19, plastics, rubber and articles thereof, printed with motifs, characters of pictorial representations, which are not merely incidental to the primary use of the goods, fall in Chapter 49."
17. It is clear therefore, that the question resolves itself into whether printing is only incidental to the primary use of the goods or is something more than something merely incidental. We have already referred to the process hereinabove and the final product which emerges is a product which is used for security purposes. It is important to remember therefore, that the primary use of the product is security and not the quality of being adhesive. Here again, a simple example will suffice. Take an adhesive tape with a monogram printed upon it. The primary use of such tape is by virtue of its adhesiveness to bind and package containers in which goods are to be stored and transported. Obviously, in such an example, the printed monogram of such adhesive tape would be incidental to the primary use of the said goods - the adhesive tape. By way of contrast, in the present case, the factor of adhesiveness is incidental to the primary use to which the goods are put, namely, that they are to be used for security purposes. Also, the HSN Explanatory Notes are relevant, which according to the judgment of this Court reported in 'Collector of Central Excise, Shillong v. Wood Craft Products Ltd.' [1995 (77) E.L.T. 23 (S.C.)] = 2002-TIOL-278-SC-CX-LB in para 12 are a safe guide in case of doubt: -
"12. It is significant, as expressly stated, in the Statement of Objects and Reasons, that the Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to "reduce disputes on account of tariff classification". Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central Excise Tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning of the expression given in the HSN and the meaning of that term given in the Glossary of Terms of the ISI."
18. When one goes to the HSN Explanatory Notes to 'other printed matter', Item No. 10 which has already been referred to hereinabove states that 'self adhesive printed stickers designed to be used, for example, for publicity, advertising or mere decoration, e.g. "comic stickers" and "window stickers"' would be included.
19. It also goes on to say that goods of entry 39.19 (inter alia) because they are merely incidental to the primary use of the products, would not be so included. This test again provides a useful application of what is includable and what is left out by applying the "primary" and "incidental" test outlined in Note 2 above. Obviously, a comic sticker would have as its primary use the "comic part", the adhesive or sticker part being only incidental to its primary use. Similarly, in the facts of the present case, a security hologram sticker would have as its primary part, the security hologram, the sticker part or adhesive part only being incidental to the primary use of the said goods.
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21. It will be seen that under Para 3 of the second circular self adhesive embossed holograms will now fall under Heading 39.19, whereas embossed plastic holograms which are not self adhesive alone will fall under entry 49. This is said to be in view of Note 2 to Chapter 49. We are afraid that the second circular which has been quoted hereinabove does not set out the law correctly. It is clear that merely because a particular embossed hologram is self adhesive, therefore in all cases, it will attract entry 39 is not correct. What is to be seen, as has been pointed out above, is whether the self adhesive part of the product is of primary use or the printed matter is of primary use. It cannot be that invariably in all cases, the moment a hologram is self adhesive it will fall within entry 39 without more. To this extent, it is clear that the circular as has been noted above, does not lay down the correct law.
22. We will now come to the impugned judgment. The CESTAT in the impugned judgment states as under: -
"It is thus apparent that even if printing is of essential nature, the product of 39.19 would remain classifiable under Heading 39.19 and will not be regarded as "a product of printing industry". This view is further strengthened by the Explanatory Notes of HSN below Heading 39.19 which reads as under:
"It should be noted that this heading includes articles printed with motifs, character or pictorial representations which are not merely incidental to the primary use of the goods (See Note 2 to Section VII)".
General Explanatory Notes of HSN below Chapter 49 clearly mentions that "Goods of Heading 39.18, 39.19, 48.14 or 48.21 are also excluded from this Chapter, even if they are printed with motifs, characters or pictorial representations, which are merely incidental to the primary use of the goods." For this reason "self-adhesive printed stickers designed to be used, for example, for publicity, advertising or mere decoration, eg. "comic stickers" and "window stickers" mention in HSN Notes below Heading 49.11 would not cover the products of Heading 39.19. In view of this, the decisions relied upon by the learned Advocate are not applicable to the facts of the present matters. In Holographic Security Marking Systems case the product involved was "stamping foils" falling under Heading 32.12 of the Tariff which was classified under Heading 49.01 after the hologram was printed thereon. The Tribunal observed that "until the product became transformed because of the printing of the material on it, it continued to be stamping foil..". In the present case even after printing, because of Note 2 to Section VII, the product continues to remain classified under Heading 39.19 of the Tariff. We thus hold the classification of the impugned product under Heading 39.19 of the Tariff."
23. It is clear that the aforesaid reasoning is flawed in more than one respect. After setting out the Explanatory Notes to HSN and the conclusion of such Note that products such as "comic stickers" would not fall within entry 39, the CESTAT arrives at the exactly opposite result without telling us why. Secondly, we are again left guessing as to how the self adhesive aspect of the product is more important than the security aspect of the said product. Equally, there is no reasoning so far as this aspect is concerned. We therefore find that the CESTAT is not correct in the finding reached above and the judgment dated 19.12.2003 of the CESTAT is, therefore, set aside.
9. The issue in the above decision relates to product hologram and the Honble Supreme Court held that it is a product of printing industry classifiable under Chapter 49. The only difference in the present case is the goods are PVC film printed with logos.
10. By respectfully following the above decision of the Honble Supreme Court and the Tribunals decision in Srikumar Agencies (supra), we hold that the product printed PVC film is classifiable under Chapter 490190 chargeable to nil rate of duty. Accordingly, the impugned order is set aside and the appeal is allowed.
(Dictated and pronounced in open court)
(P.K. CHOUDHARY) (R. PERIASAMI)
Judicial Member Tehnical Member
Rex
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