Customs, Excise and Gold Tribunal - Delhi
Sundstrand Forms Pvt. Ltd. vs Commissioner Of C. Ex., Meerut-Ii on 14 May, 2002
Equivalent citations: 2002ECR470(TRI.-DELHI), 2002(144)ELT305(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. M/s. Sundstrand Forms Pvt. Ltd. have filed this Appeal being aggrieved with the Order-in-Original No. 21-27/2000, dated 26-12-2000 passed by the Commissioner, Central Excise, Meerut-II.
2. Shri A.K. Jain, learned Advocate, submitted that the Appellants, registered by the DGTD as a printing industry, manufacture computer stationery manufactured on two machines, viz. Taiyo Web Printing machine, Japan and Mueller Grapha - Progress 20" 3 colour; that these two machines are colour printing machines; that they also have the facility at the last 4th tower to do spot coating work additionally on the paper already printed at the first three printing towers; that Mueller Martin with coatee was only installed in their factory in November, 1996; that the products manufactured by them are invoices, statements, guest folios, restaurant bills, MICR Bank Cheques, etc. which are purchased only by the actual users such as Five Star Hotels, airlines, multi-national banks and multi-national companies. He explained the manufacturing process by mentioning that duty paid printing paper is purchased in reel form; these reels are put on slitters to obtain different width; slit paper remaining in reel form is put on the said two machines where printing is done in different colours on the first three towers; Paper then moves to fourth tower in the continuous form where, if required, the spot coating of ink is done at the respective selected spots on the printed paper; thereafter paper moves on to the punching part of the machine and then for perforation, to fan-folding portion of the machine; that in this continuous processing of the paper it is impossible to remove the paper in between.
3.1 The learned Advocate, further, submitted that the Adjudicating Order has demanded Central Excise duty and imposed penalty on the ground that self-copying paper classifiable under Heading 48.16 of the Schedule to the Central Excise Tariff Act emerges at the intermediate stage; that as per the opinion of the Institute of Paper Technology, Saharanpur, the computer stationery produced by them is different from carbonless paper and self copy paper:, that their paper does not qualify to be self-copying paper since it is not fully coated throughout the space of the paper; that it also certifies that if a self-copying paper is also printed, it becomes stationery; that the Revenue has not obtained any contrary, opinion from any expert; that thus the Certificate of the Institute is fully binding on the Department; that it was held by the Tribunal in CC v. DCL Polyesters Ltd., 2000 (122) E.L.T. 911 (T) that where an independent opinion of a chemical expert had certified the process, "the warranted thing for the department was to secure another independent opinion or at least invite their own chemical examiners, etc. to verify whether the claim made by the assessee was chemically correct or not"; that they have also submitted trade opinions to the same effect; that for example as per M/s. Mehr Chand Balraj, wholesale Paper Merchants, Delhi, a self copying paper is known as such when it is fully blank and the paper is fully coated throughout with chemicals.
3.2 The learned Advocate also mentioned that unlike in Heading 48.09, the Heading 48.16 does not use expression "whether or not printed"; that this means that if the product of Heading 48.16 has been subjected to the process of printing, it goes out of the purview of the Heading, that after printing, self-copying paper ceases to be a self-copying paper and is called by different names like continuous computer stationery, manifold forms, etc.; that their machines are completely unable to coat any paper throughout its space because of big gaps on the coating rubber fixed on the drums; that the paper is first printed and then coated and not vice versa; that it is not so possible at all; that once a paper has been printed with the logo and other details of the customers concerned, it becomes stationery and ceases to be the paper whether it is coated subsequently or not. He relied upon the Board's Circular No. 11/91-CX. 4, dated 15-10-1991 in which it was clarified that formats (of airline tickets, embarkation cards, etc.) which have ink deposited at appropriate places on the reverse side, instead of being classified under Heading 48.09 or 48.16, would be classifiable under sub-Heading 4901.90 attracting nil rate of duty;, that the Department is bound by its own Circulars issued by the Board as held by the Supreme Court in the case of Paper Products Ltd. v. CCE -1999 (112) E.L.T. 765 (S.C.). He also contended that their coating on paper is 4.5 and 5 GSM whereas the self-copying paper sold in the market has a coating of 7 GSM as per the Technical Report of the Chartered Engineer; that the coating is only incidental whereas the printing is their primary process; that it has been held by the Supreme Court in CCE v. Adhunik Plastic Industries, 1998 (98) E.L.T. 365 (T) where the printing is primary to the use of the goods and contributes something more than incidental printing, classification has to be under Chapter 49; that it has been held by the Supreme Court in U.O.I. v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. - 1985 (21) E.L.T. 633 (S.C.) that classification of the manufactured products for the purpose of Excise duty is dependent upon the nature and character at its final stage of production after all integral, incidental or ancillary processes of manufacture have been completed; the character of goods at the intermediate stage of production cannot be taken into account for determining the classification; that M/s. Mead Opas International Sales, Leads, Great Britain have under their letter dated 21-4-1997 explained that Mead Opas "On-Line" printed carbonless is different from self-contained copy papers and Paper Mills manufactured carbonless paper inasmuch as in Online printed carbonless paper active ingredient required is flexographic printing ink which is applied to the paper through a flexographic printing tower built into and forming a part or the printing press and thus is a printing operation and not a coating operation as in the case of carbonless paper; that they have clearly mentioned that "the paper produced on Sundstrand's machine is not marketable as self-copy paper/carbonless paper but a business form carrying the pre-printed names and descriptions of the purchaser ......... And chemically coated only at certain selected spots."
3.3 The learned Advocate, further, submitted that applying Rule 2(a) of the Interpretative Rules, even when continuous computer stationery is not perforated and fan-folded, it is still classifiable as computer stationery (incomplete, unfinished); that the essential character of computer stationery stands imparted on the paper after printing of the Customer's name; that the computer stationery has been classified by the Tribunal under Heading 48.20 of the Tariff in the case of Clover Finance & Comml. Enterprises P. Ltd. - 1999 (108) E.L.T. 92 (T).
4. The learned Counsel also mentioned that printed coated paper is not removable from the machine and if one tries to remove it from the machine, it shall have to be torn haphazardly from its running length on the machine; that as such the printed coated paper is neither capable of being marketed nor is ever meant for the same purpose; that nobody would ever purchase it except as waste paper, being of no use to him; that as held by the Supreme Court in Union of India v. Delhi Cloth and General Mills Co. Ltd. - 1977 (1) E.L.T. (J 199) to become "goods" an article must be something which can ordinarily come to the market to be bought and sold." He, further, submitted that carbonless paper having spot coating is not capable of being sold in the market, even when not printed that Taj Palace Hotel and Le Meridian have opined that paper without holes or perforation is of no use; that the opinions obtained by the Department are not acceptable because these were not recorded under Section 14 of the Central Excise Act as there does not appear any signature of any Central Excise Officer; secondly their cross-examination was not allowed; that as per Dinesh Gupta, the printing only specifies the customer and such printed carbonless paper is marketable; that he does not say whether the same would be marketable as a self-copying paper or as computer stationery; that other person Shri Chandraveer Jain has mentioned that his firm does not deal in printed carbonless paper; however, he clarifies that after the printing of logo and name of the customer, the same is not saleable as carbonless paper. He also stated that the Adjudicating Authority could not substitute his own personal opinion as evidence for the opinion of technical experts/trade as has been done by him at internal page 7 of impugned Order when he gives his findings that the argument that the impugned carbonless paper as emerging in their factory is different from the carbonless paper available in the market hardly has any effect so far as classifiability and dutiability is concerned. He relies upon the decision in the case of Industrial Electronics and Allied Products v. CCE, Pune, 1998 (100) E.L.T. 232 (T). He also mentioned that it is necessary for the Revenue to show that a facility existed for separating the printed coated paper from the machine and further that in the form paper arose in the continuous process, it was capable of being marketed. Reliance has been placed on the decision in the case of CCE, Baroda v. United Phosphorus Ltd. - 2000 (117) E.L.T. 529 (S.C.), He also relied upon the decision in Shital Fibres Ltd. v. CCE, Chandigarh, 2001 (129) E.L.T. 489 (T) wherein it was held that Knitted Unfinished fabric emerging as an intermediate product in a continuous and uninterruptible process of manufacture of Acrylic blanket is not capable of being cut into pieces for marketing and not shown by the Revenue to be marketable, are not exigible to duty.
5. The learned Counsel also contended that as they were under a bona fide belief, particularly in view of the Board's Circular dated 15-10-1991, that no duty was attracted on the printed coated paper arising at the inter mediate stage during the continuous process of manufacture of carbonless computer stationery; that further there could be no intent to evade since every input was duty paid as well as modvatable; that wilful suppression with an intent to evade is a must to invoke extended period as held by the Supreme Court in the case of Cosmic Dye Chemical v. CCE - 1995 (75) E.L.T. 721 (S.C.) . He further, mentioned that value of the printed coated paper could not be more than the value of the duly coated self-copying paper available in the market whereas the Department had priced their intermediate products in multiples thereof; that the show cause treats all the sales made by them as that of computer stationery with online spot coating; that they have not been allowed to cross-examine the Department's cost accountant; that their total clearances are less than Rs. 30 lakhs and as such they are exempted from payment of duty; that they had claimed classification under Chapter 49 but there is no finding on this aspect in the Impugned Order.
6. Countering the arguments, Shri R.C. Sankhla, learned Departmental Representative, submitted that the carbonless paper emerges at the intermediate stage during the course of manufacture of carbonless stationery; that from the various stages of the manufacturing of carbonless stationery from plain paper, the emergence of the carbonless paper is conspicuous which is a separate commodity, different from the plain paper and its usage is different from the ordinary paper; that essential characteristics of carbon less paper is imparted by the process of coating. He emphasized that the argument of their process being a continuous process is of no avail to the appellants as the function of individual sub-unit can be made non-operative as per need of the job; that the manufacturing process adopted by the Appellants is the same as mentioned in letter dated 21-4-1997 of M/s. Mead Opas International Sales which goes to show that the impugned paper is a known commodity; that it is apparent from the statement of Shri Chandraveer Jain, partner of M/s. Vaishali Papers, Delhi that the carbonless paper in printed form can be sold or purchased but the number of the customer is restricted. He, further, submitted that the appellants also manufacture blank computer stationery which shows that only perforation, punching and fan-folding processes are done in the said case, that it can thus be concluded that if the printed carbonless paper is supplied to the appellants, it can be converted into carbonless stationery and, therefore, the printed carbonless paper emergency at the intermediate stage is capable of being marketed; that it is not necessary that the goods should have been actually marketed; that what is important is that the goods should be capable of being marketed; that carbonless paper in the form in which it emerges can be sold to the concerned buyer whose name or logo is printed thereon. The learned Departmental Representative also mentioned that the scrutiny of the invoices issued by the appellants revealed that they had also cleared the carbonless paper in roll form i.e. without perforation, punching and fan-folding; that they have not controverted this fact either in their reply to the show cause notice or in Memorandum of Appeal. He continued his arguments by submitting that when the appellants purchased the carbonless paper from the market, the coating unit remains inoperative; that when the buyers desire plain stationery, the printing and coating sub-units may be kept inoperative and only perforation, punching and fan-folding units remain in operation; that this shows that they have the facility to manufacture the self-copying paper in their factory; that it is not material that they have facility to coat only specified portions of the paper and not throughout the paper as Heading 48.09 and 48.16 of the Tariff only covers self-copy paper irrespective of the fact whether the full or portion of the paper has the characteristics of self-copying; that as the intermediate product emerging at the intermediate stage is carbonless paper, Central Excise duty is chargeable. He relied upon the decision in J.K. Cotton Spinning and Weaving Mills v. Union of India, 1983 (12) E.L.T. 239 (Del.) wherein it was held that the utilization of excisable goods even in a continuous process so long as the goods are identifiable and capable of physical removal would attract duty whether in fact they are physically removed or not.
7. The learned Departmental Representative also submitted that as per Note 11 to Chapter 48 of the Tariff, where printing is mere incidental to the primary use of the paper, the paper will fall in Chapter 48; that in the present matter the printing of name, logo or other words specifying the buyers prior to coating, does not make the product computer stationery; that Shri Amit Dey, Dy, Managing Director and Shri B, Dey, Managing Director, have deposed in their statements dated 14-3-97 and 10-12-97 respectively that process of perforation, punching and fan-folding is essential to convert the carbonless paper into stationery; that they never retracted their statements. He, further, contended that non-mentioning of words "whether or not printed" in Heading 48.16 is immaterial as the expression "other than those of Heading No. 48.09" used in Heading 48.16 is a relative expression which means that the scope of Heading 48.16 is to be construed in relation to Heading 48.09; that if the carbon less paper does not satisfy the conditions set out in Heading 48.09 (roll form width exceeding 36 cm or if in rectangular or square sheet form, its one side should exceed 36 cm in unfolded state), it will fall under Heading 48.16 irrespective of the fact whether each carbonless paper is printed or not; that Board's Circular No. 11/91-CX. 4, dated 15-10-91 is in respect to computer stationery under Heading 48.20; that the Circular neither deals with continuous carbonless computer stationery paper nor with the carbonless stationery as it actually deals with either plain continuous computer stationery or that which is interleaved with carbon paper. He relied upon the decision in the case of Kores (India) Ltd. v. CCE - 1999 (114) E.L.T. 926 (T) wherein it was held that self-copy papers is classifiable under Heading 48.16 of the Tariff and that Board's Circular No. 10/89 dated 13-3-89 pertains to the tele-printer rolls which are quite different from the self copy papers. The learned Departmental Representative also mentioned that even the letter of Mead Opas says clearly that the product is marketable as a business form. On the question of time limit, the learned Departmental Representative contended that the extended period of limitation is invocable as they had neither registered themselves with the Department nor filed any documents; that other manufacturer's are paying Central Excise duty on carbonless paper. He reiterated the Commissioner's finding on the aspect of valuation.
8. In reply the learned Advocate mentioned that they have mentioned in the Memorandum of Appeal that the invoices referred to by Departmental Representative (Para 24 of the show cause notice) were for small rolls of 200 gram each like adding machine rolls used by Citibank in their ATM Machines; that they make these rolls on a small roll making machine which has nothing to do with coating system. He again emphasized that only fully coated paper is carbonless paper and referred to the opinion tendered by the Institute of Paper Technology, Saharnpur in support. He also mentioned that Explanatory Notes of H.S.N. also supports this view as it mentions that "This Heading covers paper coated, or sometimes impregnated, in such a way that one or more copies of an original document can be made by applying pressure (e.g. by the impact of a typewriter key), moisture, ink, etc." that Board's Circular dated 15-10-91 was referring to their product only; that the Circulars are binding on the Revenue even if they place a different interpretation as held by the Supreme Court in C.C.E., Vadodara v. Dhiren Chemical Industries, 2002 (139) E.L.T. 3 (S.C.).
9. We have considered the submissions of both the sides. The facts, which are not in dispute, are that the plain paper procured by the Appellants is slit into specific size or and then put on the manufacturing line. Firstly printing is done at pre fixed places of the paper with the purpose of printing names of the buyers, logo or some other words' as desired by them. The printing paper is then passed through coating unit for applying chemical to develop the character of self-copying paper. The backside of the paper is coated to obtain top copy and front coating is done on the sheet which is to be used as bottom copy. The chemically coated copy is finally passed through the unit for perforation, punching and fan-folding. It is also not in dispute that all these operations are carried out in continuous process. The Department is demanding Central Excise duty at the intermediate stage when the paper is coated to make it carbon less self-copying paper. The Appellants on the other hand, claims that what they are manufacturing is computer stationery in a continuous process and the paper after coating is not a marketable commodity as without perforation, punching, and fan-folding, the product cannot be sold in the market. The Department wants to classify the product as "the coated paper at the intermediate stage under Heading 48.16 of the Tariff which applies to carbon paper, self-copying paper and other copying or transfer papers. The learned Advocate for the Appellants had also shown at the time of hearing the samples of the impugned products and emphasized that it bears the name of the customers and hence has no use for anybody else whatsoever. After going through the process of manufacture, we find force in the submissions of the Appellants that what they are making is the printed computer stationery and not the self-copying paper, What comes first into existence is the printed stationery, which is coated at specified places as per the requirement of the customers. This cannot be classified under Heading 48.16 which covers inter alia self-copying paper. The Central Board of Excise and Customs itself, in Circular No. 11/91-CX. 4, dated 15-10-91, considered the correct classification of paper printed with a format of air line tickets or embarkation/disembarkation cards which have ink/carbon deposed at appropriate places on reverse side. The Central Board of Excise and Customs after referring to the Explanatory Notes of HSN, observed that the tickets, printed circulars, letters, forms etc. which are essentially printed matter requiring filling up of only minor details, would be covered by sub-heading 4901.90. The Board, therefore, held that airline tickets (including blanks) and embarkation/disembarkation cards (ED cards), which may have ink/carbon deposited at appropriate place on reverse side will also be covered under Heading 4901.90 of the Tariff. Institute of Paper Technology, Saharanpur has also opined in its Report dated 15-4-97 that the Computer stationery produced by the Appellants is different from carbonless paper/self-copy because this is produced online, firstly by printing, secondly by coating partially to make it carbonless only at those places where it is desired by the Customer. No opinion contrary to this has been brought on record by the Revenue. Accordingly, we hold that the impugned product is not classifiable under Heading 48.16 as carbon less paper. The ratio of the decision in Kores India Ltd. relied upon by the learned Departmental Representative is not applicable to the facts of the present matter as in the present matter, the assessee therein was engaged in the manufacture of self-copying paper and not the products which are in question in the present matter before us. As the Appeal is being allowed on merit, the other issues of time limit and valuation are not being considered, The impugned Order is set aside and