Custom, Excise & Service Tax Tribunal
M/S. Itc Ltd vs Cce, Patna on 17 December, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.EA-72/05
(Arising out of Order-in-Appeal No.347/PAT/CEX/APPEAL/2004 dated 09.12.2004 passed by the Commissioner(Appeals) of Customs & Central Excise, Patna.)
FOR APPROVAL AND SIGNATURE
HONBLE DR. D.M.MISRA, MEMBER(JUDICIAL)
HONBLE SHRI H.K.THAKUR, MEMBER(TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
M/s. ITC LTd.
Applicant (s)/Appellant (s)
Vs.
CCE, Patna
Respondent (s)
Appearance:
Dr.S.Chakraborty, Advocate for the Appellant(s) Shri K.Chowdhury, Supdt.(AR) for the Revenue CORAM:
Honble Dr. D.M.Misra, Member(Judicial) Honble Shri H.K.Thakur, Member(Technical) Date of Hearing :- 17.12.2015 Date of Pronouncement :- 17.12.2015 ORDER NO.FO/A/75812/2015 Per Dr. D.M.Misra.
1. This is an appeal filed against Order-in-Appeal No.347/PAT/CEX/APPEAL/2004 dated 09.12.2004 passed by the Commissioner(Appeals) of Customs & Central Excise, Patna.
2. Briefly stated the facts of the case are that the appellant are engaged in the manufacture and clearance of articles of paper and paper board which they claimed as printed labels, classifiable under Chapter Sub-Heading 4821.00 of CETA, 1985; whereas, the department proposed its classification under 4823.90 alleging that the processes undertaken by the appellant resulted into manufacture as per Sec.2(f) of CEA,1944 and accordingly dutiable. On adjudication, the demand was confirmed. On Appeal, the Ld. Commissioner (Appeals) upheld the order of the adjudicating authority and rejected their Appeal. Hence, the present Appeal.
3. The ld.Sr.Advocate Dr.Samir Chakraborty for the appellant submits that the the packaging and printing division of the Appellant operate from two factories; one in Munger in the state of Bihar and the other in Tiruvottiyur in the state of Tamil Nadu. The present appeal relates to Munger factory of the appellant. He submits that printed sheets bearing the impressions of labels were received at the Munger factory from Tiruvottiyur factory. This printed sheets were cleared from Tiruvottiyur factory under sub-heading 4821.00 as labels of all kinds attracting nil rate of duty. It is his contention that no further process of printing on these printed sheets was undertaken in the Munger factory; the printed sheets were only guillotined at the said factory i.e. printed sheets which were larger in size in comparison to the required size and labels were merely cut into proper label size prior to its clearance. No other activity has been undertaken at the Munger printing factory with regard to the said printed sheets. The said printed labels cut into sizes at Munger factory were placed in corrugated fiberboards by weight or in number and exported to M/s. Surya Tobacco Co.Ltd., Nepal. Necessary declaration under Rule 173B of the erstwhile Central Excise Rules, 1944 had been filed by the appellant in respect of the said printed paper labels.
3.1 It is his contention that the authorities below taking into consideration the processes carried out on this printed labels at the unit of M/s.Surya Tobacco Co.Ltd., Nepal into consideration, arrived at the conclusion that the appellant in their Munger factory bring out a new product, having different commercial name, which were ultimately used for packing of definite number of cigarettes, hence, could be termed as manufacturing activity of packing materials falling sub-heading 4823.90 of CETA, 1985 and chargeable to duty. It is his contention that activities carried out partly at Nepal and partly at Munger factory cannot be considered in arriving at the conclusion that the appellant were engaged in the manufacture of packing materials which emerges only at the factory of M/s.Surya Tobacco Co.Ltd., Nepal.
3.2 Further, he submits that in his subsequent order, bearing No.92/PAT/CEx/Appeal/2012 dated 04.05.2012, the ld.Commissioner(Appeals) decided the issue in their favour observing that the processes carried out in the factory premises at Munger do not result into manufacture of packing materials. The said order has been accepted by the Revenue and refund was sanctioned subsequently to the Appellant.
4. Per contra, the ld.AR for the Revenue reiterated the findings of the ld.Commissioner(Appeals). However, he fairly accepts that in the subsequent order-in-appeal, the ld.Commissioner(Appeals) has accepted the contention of the Appellant and allowed their appeal by setting aside the order of the adjudicating authority. Also, he does not dispute that the said order has been accepted by the department and consequential refund was also sanctioned to the appellant.
5. Heard both sides and perused the records. We have carefully considered the submissions advanced by both sides. Undisputedly the activities carried out by the Munger factory was limited to cutting of big size labels manufactured in their other unit at Tiruvottiyur. Also, it is not in controversy that further processes were carried out on the said cut/sized labels at the factory of M/s.Surya Tobacco Co.Ltd., Nepal so as to convert into packing material. The authorities below, considering the processes carried out at Munger Unit as well as at the Nepal unit arrived at the conclusion that the resultant product is dutiable under Sub-Heading 4823.00 of CETA, 1985. From the submission of both sides, we find that on similar issue, for the subsequent period, the ld.Commissioner(Appeals) has accepted their stand and decided the issue in their favour after taking into consideration the meaning of labels as per the HSN. The finding of the ld.Commissioner(Appeals) in the said order is as follows:-
On the issue of merit I would like to discuss the following points. The assessee made it explicitly clear in their submissions, that the SCN has not spelt out the departments contention on the question of manufacture and classification of SCPL, based on which the demand in the SCN has been made. Their TVT unit manufacturers printed sheets bearing the impression of labels and clears the same under sub-heading 4821.00 as labels of all kinds at NIL rate of duty. These printed sheets have perforations/markings indicating the place where the same are meant to be cut. AT their Munger factory, the continuous strips of labels so received from Thiruvottiyur are cut into individual pieces as per the marketing on the sheets. No printing on the printed sheets takes place at factory at Munger. The Standard Weight and Measures Act, 1976 under which the Government of India framed the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 which requires all packaged commodities including cigarettes to comply with the requirements thereof, including providing a label on the packages as defined under the term label in section 2 (n) to mean any written, marked, stamp, printed or graphic matters affixed to or appearing upon, any commodity or packages containing any commodity. The printed sheets are merely guillotined at factory into required size. It means the printed sheets, which are much larger in size compared to the required size of the label, are merely cut into specified sizes at the factory. They are thereafter, exported to Surya Tobacco Co.(P) Ltd., Nepal, a company incorporated in Nepal. No other activity is undertaken at their Munger factory with regard to the said printed sheets. Even the Harmonized System of Nomenclature(HSN) Explanatory Notes provide that labels classified under Sub-Heading 4821.00 covered all varieties of paper and paper board labels of a kind used for attachment of any type of article for the purpose of indicating its nature, identity, ownership, destination, prince etc.. The said explanatory Notes of HSN could not be ignored since the Central Excise Tariff is based on HSN.
This factory position was admitted by the Assistant Commissioner in his order No.7/2000 dated 31.03.2000 quoting extract :- The rolls of quality paper are printed giving the print of brand with description of cigarettes to be packed/or put inside, statutory warning and number of cigarettes to be contained and name of Company where the same product will be used in such shape and specification giving demarcation line at which the same will be cut into sizes at one unit of M/s.ITC, Thiruvottiyur and cut into big sheet size. The same printed sheet cleared in the name of printed paper label classifying the same under sub-heading 4821.00 to M/s.ITC(PPD), Munger. At ITC(PPD) Ltd., Munger the printed sheets are cut to sizes at demarcated point/line. The said piece of printed paper then are sorted out and put into CFC (corrugated fibre board) either in specific weight or specific number and cleared to M/s.Surya Tobacco Co. in Nepal which too is one of the units of M/s.ITC Ltd., after submitting declaration under Rule 173B of Central Excise Rules, 1944 Such an activity cannot be treated as manufacture within the meaning of Section 2(f) of the Central Excise Act.
The factual position is that printed labels are received from their Thiruvottiyur factory in a fully finished form, duly classified under Chapter heading 48.21 and assessed to NIL duty by the jurisdictional officers. As stated above these goods are not subjected to any process amounting to manufacture within the meaning of Section 2(f) of the Central Excise Act, but merely cut to the required size at their Munger Unit. There is no dispute that the only job which is carried out at the Munger unit is cutting to size the printed labels of big sheet sizes received from the Thiruvottiyur factory and thereafter putting them into CFCs and exporting the same to Nepal. Hence, the only process undertaken at their Munger unit is the process of cutting to size. It is well settled by decisions of the Supreme Court that mere cutting of larger sheets or lengths of a product into convenient or required sizes cannot and does not amount to manufacture within the meaning of Section 2(f) of the Central Excise Act. It has been held by the Supreme Court that every process carried out on goods does not and would not amount to manufacture, unless it results in the emergence of a new commercial commodity having a distinct name, character or use, the burden to prove which is on the Revenue. This decision of the Honble Supreme Court lend support to the claim of the assessee in the instant case.
Technically, it is also noted that the goods continue to conform to the description of paper board labels of all kinds within the meaning of Sub-Heading 4821.00 of the Central Excise Tariff Act, which were cleared from the Thiruvottiyur factory. The Central Excise authorities therein have allowed the said classification and have approved the same. Since no manufacturing activity takes place, there can be no question of charging any duty. In order to attract Rule 9(2), the goods should have been removed clandestinely and without assessment. In the present case, the goods were assessed and cleared under Chapter subheading 4821.00 and therefore there is no case of clandestine removal to attract the provisions of Rule 9(2).
6. A glance at the above findings of Ld. Commissioner(Appeals), which pertains to subsequent period, we do not see any discrepancy, nor the findings have been rebutted before us with material particulars, by the Revenue. On the contrary, the Revenue has accepted the aforesaid Order-in-Appeal and consequential refund was sanctioned/allowed to the appellant. In the result, we do not find merit in the impugned order-in-Appeal. Accordingly, the same is set aside and the Appeal is allowed with consequential relief, if any, as per law.
(Operative part of the order was pronounced in the open court.) SD/ SD/ (H.K.THAKUR) (D.M.MISRA) MEMBER(TECHNICAL) MEMBER(JUDICIAL) sm 7 Appeal No.EA-72/05