Custom, Excise & Service Tax Tribunal
Appearance vs Shri Ganesh Haavanur, Sdr, For The on 11 October, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE Excise Appeal Nos:1038/1999, 1561/1999, 1252 and 1253/1998, 1703/1999, 337/1999, 44 to 48/1998, 54 to 57/1998,825/2000, 824/2000, 787/1999, 2940 to 2945/1998, 997/1999 (Arising out of Orders: As per the table below) Sl. No. Appeal No. Name of the parties Impugned Order No. Amount involved 1. E/1038/1999 M/s. Sri Kumar Agencies Vs. CCE(A), Bangalore OIA No. 270/99-CE dt: 10.3.99 Duty: Rs. 33,61,893/- 2. E/1561/1999 M/s. Sri Kumar Agencies Vs. CCE, Bangalore-I OIO No. 6/99 dt: 28.5.99 Duty: Rs. 64,94,057/- Penalty: Rs. 64,94,057/- 3. & 4. E/1252 and 1253/1998 M/s. Paxwell Printers Vs. CCE(A), Bangalore OIA No. 67/98-CE dt: 28.1.98 Duty: Rs. 32,97,483/- 5. E/1703/1999 M/s. Paxwell Printers Vs. CCE, Bangalore OIO No.8/99 dt: 23.7.99 Duty: 51,53,454/- Penalty: Rs. 51,53,454/-us 11AC and Rs. 10,00,000/- u/r 173Q 6. E/337/1999 M/s. Paxwell Printers Vs. CCE(A), Bangalore OIA No. 807/98-CE dt: 20.10.98 Duty: Rs. 17,33,925/- 7-11. E/44 to 48/1998 M/s. Regency Printers Vs. CCE(A), Bangalore OIA No. 463/97 dt: 6.11.97 Duty: Rs. 3,23,154/- 12-15 E/54 to 57/1998 M/s. Rajhans Enterprises Vs. CCE(A), Bangalore OIA No. 464/97 dt: 6.11.97 Duty: Rs. 6,93,283/- 16. E/825/2000 CCE, Bangalore-III Vs. M/s. Rajhans Enterprises OIA No. 2/2000 dt: 23.2.2000 Duty: Rs. 1,97,478/- Penalty: Rs. 10,000/- 17. E/824/2000 CCE, Bangalore-III Vs. M/s. Reliance Printers OIA No. 2/2000 dt: 23.2.2000 Duty: Rs. 57,049/- Penalty: Rs. 6,000/- 18. E/787/1999 M/s. Vijai Industries Vs. CCE(A), Bangalore OIA No. 308/99-CE dt: 15.3.99 Duty: Rs. 16,685/- 19-24. E/2940 to 2945/1998 M/s. Vijai Industries (Unit-I) Vs. CCE(A), Bangalore OIA No. 476/98-CE dt: 29.7.98 Duty: 11,60,107/- 25. E/997/1999 M/s. Vijay Industries Vs. CCE(A), Bangalore OIA No. 602/99-CE dt: 8.5.99 Duty: Rs. 1,05,754/- 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 authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? Appearance Shri S. Raghu, Advocate, for the appellants Shri Ganesh Haavanur, SDR, for the respondents
CORAM MR. P.G. CHACKO, HONBLE MEMBER (JUDICIAL) MR. M. VEERAIYAN, HONBLE MEMBER (TECHNICAL) Date of Hearing: 09.08.2011 Date of decision:
FINAL ORDER Nos._______________________2011 Per M. Veeraiyan 1.1 Appeals No. E/1038/1999 and E/1561/1999 are filed by M/s. Sri Kumar Agencies.
1.2 Appeals No. E/1252/1998, E/1253/1998, E/1703/1999, E/337/1999 are by M/s. Paxwell Printers.
1.3 Appeals No. E/44-48/1998 are by M/s. Regency Printers.
1.4 Appeals No. E/54 to 57/1998 are by M/s. Rajhans Enterprises. Appeal No. E/825/2000 is by the Department with M/s. Rajhans Enterprises as respondent.
1.5 Appeal No. E/824/2000 is by the Department with M/s. Reliance Printers as the respondent.
1.6 Appeals No. E/787/1999, E/2940-2945/1998, E/997/1999 are by M/s.
Vijay Industries.
2.1 Tribunal, vide a common Order Nos. 3008 to 3028/1999 dated 25.11.1999, disposed of 21 appeals by accepting the claim on behalf of the assessees on the issue of classification. On appeal by the department, the Honble Supreme Court, vide their judgment dated 27.11.2008 in Civil Appeal Numbers 4872-4892/2000 reported in 2008 (232) ELT 577(SC) set aside the orders of the Tribunal and remanded the matter for fresh consideration with the following observations/directions.
4. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclids theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed :
The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge. In Home Office v. Dorset Yacht Co. [1970 (2) All ER 294] Lord Reid said, Lord Atkins speech ...... is not to be treated as if it was a statute definition. It will require qualification in new circumstances. Megarry, J. in (1971) 1 WLR 1062 observed : One must not, of course, construe even a reserved judgment of Russell L.J. as if it were an Act of Parliament. And, in Herrington v. British Railways Board [1972 (2) WLR 537] Lord Morris said :
There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case.
5. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
The following words of Lord Denning in the matter of applying precedents have become locus classicus :
Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. *** *** *** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.
6. Since the factual position has not been analysed in detail, disposal of appeals by mere reference to decisions, was not the proper way to deal with the appeals. The CEGAT also does not appear to have dealt with the relevance and applicability of ITCs case (supra) on which strong reliance has been placed by learned Solicitor General. The CEGAT ought to have examined the cases individually and the articles involved. By clubbing all the cases together and without analyzing the special features of each case disposing of the appeals in the manner done was not proper. In the circumstances, we set aside the impugned judgment in each case and remit the matter to CEGAT presently known as Customs, Excise & Service Tax Appellate Tribunal (in short CESTAT) to be dealt with by the appropriate Bench. In view of the aforesaid order there is no need to answer the reference made."
2.2 Similarly, Tribunal vide Final Order Nos 1056-1057 dated 8.8.2000 disposed of two appeals of Reliance Printers as reported in 2000 (122) ELT 728 and the said order was set aside by the Honble Supreme Court vide order dated 27.11.2008 and the matter remanded to the Tribunal for fresh decision.
2.3 Similarly, Tribunal vide Final Order dated 10.2.2000 disposed of two appeals relating to M/s Pax Well Printers which was also set aside by the Honble Supreme Court vide order dated 27.11.2008 and the matter remanded to the Tribunal for fresh decision.
3. These appeals are taken up for fresh consideration in the light of the directions/observations of the Honble Supreme Court.
4. Heard both sides extensively.
Relevant facts of the case assessee-wise:
Sri Kumar Agencies:
5.1 The appellant received polyethylene coated paper in jumbo rolls from M/s. Laminated Packings (P) Ltd. The said supplies have been effected by M/s. Laminated Packings (P) Ltd. after discharging duty liability under Chapter Heading 481130. The appellants undertook printing on the rolls so supplied and cut them to required sizes by process of cutting and slitting. The end products were directly supplied to ITC on the directions of M/s. Laminated Packings(P) Ltd.. The appellants received job charges. The printed material included details like the brand name like Bristol Filter, logo, words A BRAND OWNED BY ITC LTD, words MADE IN INDIA, words WHOLESALE PACKAGE NOT FOR CONSUMER USE CONTAINS 10 CONSUMER PACKAGES OF 20 CIGARETTES EACH and words MFD. BY THE HYDERABAD DECCAN CIGARETTE FACTORY PVT. LTD., 1-7/140 MUSHEERABAD, HYDERABAD-500048.
5.2. A show-cause notice dated 01.08.1996 was issued proposing demand of Rs. 33,61,893/- by alleging that the products cleared by the appellants fall under Chapter sub-heading 4823.19. The original authority confirmed the demand and denied the MODVAT credit. The original authority did not accept the claim of the appellants that the final products cleared by them should be treated as product of printing industry and should be classified under Chapter sub-heading 4901.90. Commissioner (Appeals) confirmed the classification and confirmed the demand of duty but allowed MODVAT credit.
5.3. In pursuance of a subsequent show-cause notice dated 09.01.1998, duty demand of Rs. 64,94,057/- relating to the period 03/1994 to 12/1995 stands confirmed and penalty of equal amount stands imposed under Section 11AC.
Paxwel Printers:
6.1. In these four appeals also, Polyethylene coated paper was supplied by M/s. Laminated Packings (P) Ltd. in jumbo rolls and identical printing work, as in the case of M/s. Sri Kumar Agencies, was undertaken and the printed paper was hey were subsequently cut to required sizes and sent to ITC.
6.2. Different amounts of demands have been raised for different periods and upheld by Commissioner (Appeals). In the case in Appeal No. E/1252/1998, a sum of Rs. 12,12,704/- stands confirmed relating to the period 01.03.1996 to 31.07.1996 in pursuance of show-cause notice dated 09.09.1996 and in the case in Appeal No.E/1253/1998, for the period from 01.08.96 to 31.12.96, an amount of Rs. 20,84,779/- stands confirmed in pursuance of show-cause notice dated 30.01.1997. In the case in appeal No. E/1703/1999, vide the impugned order, duty of Rs. 51,53,454/-, interest @ 20% per annum, equal penalty under Section 11AC, penalty of Rs. 10,00,000/- under Rule 173Q(1) were confirmed in pursuance of show-cause notice dated 02/98. In the case in Appeal No. E/337/1999, an amount of Rs. 17,33,925/- stands confirmed vide show-cause notice dated 02.07.1997.
Vijay Industries:
7.1. The appellants have undertaken printing of Agarbathi labels on PVC films and on paper. The printing undertaken indicating brand of Agarbathis, name of the manufacturer and the MRP and the printing was in four different languages namely Tamil, Kannada, Hindi and English. The department has held that such printing of Agarbathi labels on PVC films as falling under Chapter sub-heading 3920.19 whereas the appellants claimed the same under Chapter sub-heading 4901.90 as products of printing industry. In respect of paper based agarbathi labels, the department proposed the classification under Chapter sub-heading 4823.19 whereas the appellant claimed the same under Chapter sub-heading 4901.90 as products of printing industry.
7.2. In the case in Appeal No. E/787/1999, for the period from 6/95 to 12/96, an amount of Rs. 16,685/- has been confirmed in pursuance of various show-cause notices. In the case in Appeal No. E/2940 to 2945/1998, an amount of Rs.11,60,107/- has been confirmed on both the Units I and II in pursuance of different show-cause notices for different periods. In the case in appeal No.E/997/1999, an amount of Rs.1,05,754/- stands confirmed for the period 01.04.96 to 18.07.96 in pursuance of show-cause notice dated 28.10.96.
Rajhans Enterprises:
8.1. The products involved are printed labels mainly used for packing/wrapping of agarbathis. The department confirmed the classification under SH 4823.19 whereas the party claimed it under SH 4821.00 or alternatively, under SH 4901.90 as products of printing industry.
8.2. In the case in Appeal Nos. E/54 to 57/98, an amount of Rs. 6,93,283/- stands confirmed for the period 11/95 to 12/96 in pursuance of various show-cause notices.
8.3. In the case in Appeal No. E/825/2000, an amount of duty of Rs. 1,97,478/- and a penalty of Rs. 10,000/- for the period 3/94 to 2/95 was confirmed by the original authority against the respondents in pursuance of show-cause notice dated 26.7.96. However, the Commissioner (Appeals) has accepted the contention of the party and dropped the demand. Therefore, the Department is on appeal.
Regency Printers:
9. The products involved in the cases of the present appellant is identical to those in the case of M/s. Rajhans Enterprises. In this case, a demand of Rs. 3,23,154/- was confirmed for the period 4/95 to 12/96 as proposed under various show-cause notices.
Reliance Printers:
10. The product involved in the case is identical to the products involved in the case of M/s. Rajhans Enterprises. In this case, the original authority confirmed duty of Rs. 57,049/- and penalty of Rs.6,000/- for the period 10/94 to 6/95 against the respondents vide show-cause notice dated 5.8.96. However, the Commissioner (Appeals) has accepted the contention of the party and dropped the demand. Therefore, the Department is on appeal.
Submissions on behalf of Assessees :
11.1 The learned Advocate Shri S. Raghu, appearing for all the assessees submit that there are 3 different products whose classifications are in dispute. In the case of M/s. Shri Kumar Agencies and M/s. Paxwell Printers, the products involved are referred to as Printed Gay Wrappers used by ITC to pack 10 packets of 20 cigarettes in consumer pack with the material printed as aforesaid. The ITC company has given orders to Laminated Packaging Ltd., who in turn, gave the raw materials in the form of Jumbo rolls and the appellants namely Sri Kumar Agencies and Paxwell Printers have undertaken the printing work as per the specifications of M/s. ITC. They have undertaken the work as job workers and supplied the final products directly to ITC. The activities of printing and cutting to size will not amount to manufacture as the raw materials and the final product are substantially the same and the end use remained the same. The final product was used for wrapping 10 consumer packets of cigarettes which go to the retail dealers through the network of wholesale dealers.
11.2. Alternatively, it was claimed that, if the printed wrappers are held to be excisable, then, they should be treated as products of printing industry and classified under CSH 4901.90.
11.3 The second category of products are printed agarbathi labels printed on paper. These products are manufactured by M/s. Rajhans Enterprises, M/s. Vijai Industries, M/s. Regency Printers and M/s. Reliance Industries. (M/s. Vijay Industries also manufacture printed agarpathi labels on PVC films.) He submits that the printing of details like brand of agarbathis, name of the manufacturer, MRP in various colours and in different languages do not amount to manufacture as the starting material and the end product are substantially the same and used for the purpose of wrapping and packing of agarbathis. He also alternatively submits that if the said activities are held to be amounting to manufacture, and the printed agarbathi labels are held to be excisable, then they should be treated as products of printing industry chargeable to nil rate of duty.
11.4. The next category of product is the printed agarbathi labels on PVC films. These products are manufactured by Vijai Industries, Rajhans Enterprises, Regency Printers and Reliance Industries. He submits that the activities undertaken do not amount to manufacture and if the same is held to be amounting to manufacture, then the resultant products should be classified either under CH 392690 or under CH 490190 as products of printing industry.
11.5. In support of his contention that the processes of printing undertaken on Polyethylene coated paper, paper and PVC films do not amount to manufacture, he relies on the following decisions:-
(i) JG Glass -1998 (97) ELT (SC)
(ii) Yellora Mechanical -1998 (98) ELT 109
(iii) Swastik Package Bombay -1986 (23) ELT 270
(iv) Fitscite package -2006 (203) ELT 452 11.6. In respect of his claim that the impugned products should be treated as products of printing industry, he relies on the following decisions:-
(i) Aganta Print Arts -1998 (98) ELT 406
(ii) Mela Groups Ltd. 1998 (88) ELT 8
(iii) Jhonson & Jhonson Ltd. 1997 (94) ELT 286(SC)
(iv) Adhunik Plastic Industries 1998 (98) ELT 365
(v) New Jade Printing Works (P) Ltd. 1999 (105) ELT 440
(vi) Fitsite Package -1999 (108) ELT 680
(vii) VST Industries Ltd. 2005 (180) ELT 350(Tribunal) Submissions on behalf of the Department
12.1. Ld. SDR reiterated the findings and reasoning contained in the impugned orders in favour of the department. He added that the printing activities undertaken on paper, polyetheline cotted paper and PVC films are sophisticated processes. The materials printed serve statutory requirements and also contain logo, trade marks and other important details for the purpose of identifying and promoting the products. The products which emerge after printing and the unprinted products do not serve the same purpose.
12.2 He submits that the decisions relied upon on behalf of the assessee are mostly relating to earlier tariff and they may not be applicable to the present tariff.
12.3 It is also claimed that the products emerging after printing may not deserve to be treated as products of printing industry. In this regard, reliance is being placed on the judgments of the Honble Supreme Court in the case of Rolla Trainers Ltd. Vs. UOI reported in 1994(72) ELT 793 (SC) and in the case ITC Ltd. Vs. CCE, Madras reported in 1998(97) ELT 401 (SC).
Discussions and Findings :
13.1 We have carefully considered the submissions made by both sides and perused the records.
13.2 The core issue involved is whether the products which emerge after printing on paper, polyethylene coated paper and on PVC films could be treated as arising out of manufacture or not. If the processes are treated as amounting to manufacture then the other issue to be considered is the classification of the said products which emerge after such printing.
14.1 According to the assessees, no manufacture is involved in printing on the paper. In case it is treated as amounting to manufacture then, according to the assessees, the resultant products should fall under 4901.90 and held to be products of printing industry and exempted. On the other hand, according to the Department, the printing activities undertaken amount to manufacture and the resultant products fall under 4823.19 and that the same cannot be treated as products of printing industry and consequently exemption is not available.
14.2 According to the assessees, printing on PVC films does not amount to manufacture and if the same is held to be manufacture, then, according to the assessees, the resultant products should be treated as falling under 3923.90. The Department has held that printing on PVC films amounted to manufacture and that the resultant products should be treated as falling under 3920.19.
15. Several decisions have been relied upon on behalf of the assessees to submit that printing on duty paid materials does not amount to manufacture. It may be appropriate to analyse the said decision before considering the facts of the present cases. They are as follows:-
a. Decision of the Tribunal dated 30.9.85 in the case of Swastik Packaging Industries, Bombay 1986 23 ELT 217 was to the effect that printing on duty paid aluminium foils has been not resulted in a new product and hence not amounting to manufacture. The said decision has been rendered in the context of the erstwhile Tariff 27(c) which read as under :
(c ) Foils (whether or not embossed, cut to shape, perforated, coated, printed, or backed with paper or other reinforcing material) of a thickness (excluding any backing) not exceeding 0.15 mm.
In the said case, the original product before printing and the resultant product were not found to be different and the resultant product was held to be not a commercially known distinct product and that the product served the same purpose before and after printing. Further, the said decision related to period prior to 1980 and rendered in the context of avoiding double taxation.
b. The decision dated 9.12.1997 of the Honble Supreme Court in the UOI Vs. JJ Glass 1998 97 ELT 5 (SC) dealt with a case of printing on bottles falling under erstwhile chapter 23A(4) of the Central Excise Tariff. It has been held that printing on bottles did not bring into existence a new commodity which was distinct and separate in its character, use and name from the original commodity. It has been held that by the process of printing of names or logos on the bottle, the basic character of the commodity did not change and it has been further held that even without the printing the bottles would serve the purpose.
c. The decision dated 5.12.1997 of the Tribunal in the case of Ellora mechanical 1998 90 ELT 109 dealt with printing on polyester films and held that it would not amount to manufacture following the decision in the case of Swastik packaging inds.
d. In the decision dated 7.1.2010 in the case of CCE Vs. Supreme Inds. Ltd., it has been held by the Tribunal that the process of printing on duty paid plain plastic film did not amount to manufacture. This decision has been rendered following the decision of the Tribunal in the case of Ellora Mechanical Vs. CCE. Meerut.
e. Decision of the Tribunal in the case of Fitright Truckers 2006 203 ELT 452 dealt with G.I. wrappers printed out of GI paper rolls. In the facts and circumstances of the case, it has been held that the printing was incidental and the primary use of GI Printed paper rolls continued to be wrapping as in the case of unprinted GI paper rolls.
16.1. In the case of Sri Kumar Agencies and Faxwell Printers, polythene coated paper in jumbo rolls falling under Chapter 4811.30 were given by M/s. Laminated Packings Pvt. Ltd. The assessees have undertaken printing on the rolls supplied by the said party and thereafter, they were cut to sizes and delivered to ITC. The matter printed on the paper consisted of trade name and marks for identification and to promote the product as well as to impart requisite information. The printing involved is of a sophisticated nature using advanced printing Machines and it served the dual purpose of marketing and promoting the product as well as to impart the requisite information to meet the statutory requirements. Further, the products arising after the printing were clearly known by a different name i.e. gay wrappers. The paper without printing is, no doubt, usable for wrapping purposes. The use of such unprinted paper is of a general nature. After printing also the wrappers are used for packing. The assessees have claimed that the paper before printing and after printing served only the purpose of wrapping. The printed gray wrappers, in addition to serving as wrapper, serve an additional and, in fact, a more important purpose of identifying and promoting the specific products. Therefore, it is incorrect to say that the use of unprinted paper and that of gray wrappers are one and the same. The nature and extent of printing have unparted new characteristics to the paper and has brought about a change of name, and the resultant product serve an additional and new purpose and, thus, the activities leading to emergence of such products satisfy the test of manufacture.
16.2. The facts of the cases in decisions relied on behalf of the assessees are distinguishable. The primary use of Aluminium foil before and after printing, the primary use of bottles before and after printing remained the same and therefore, it was held that no manufacture was involved in those cases.
17.1. The printing was claimed by the assessees to be incidental to the primary use of wrapping the product. Printed paper could fall either under chapter 48 or chapter 49. When the printing is incidental to the primary use, the end product continues to fall under chapter 48. When the printing is essential and serve a definite purpose then the printed product falls under chapter 49. Therefore, it becomes necessary to determine the nature and effect of printing undertaken in these cases.
17.2. In this regard, the relevant portions of the chapter sub heading 4823.19, chapter sub heading 4901.90 and the corresponding chapter notes are reproduced below:-
Note 11 of Chapter 48 :
11. Except for the goods of heading No.48.14 or 48.21, paper, paperboard, cellulose wadding 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.
48.23 Other paper, paperboard, cellulose wadding and webs of cellulose fibres, cut to size or shape; other articles of paper pulp, paper, paperboard, cellulose wadding of webs of cellulose fibres
-Other paper, paperboard, cellulose wadding and webs of cellulose fibres, cut to size or shape:
4823.11 -- Gummed or adhesive paper in strips or rolls 20% 4823.12 - Cards, not punched, for punchcard machines, Whether or not in strips 20% 4823.13 Braille paper Nil 4823.14 Blotting paper 20% 4823.19 Other 20% 4823.90 Other 25% Chapter Note 2 of Chapter 49
2. For the purpose of Chapter 49, printed also means reproduced by means of a duplicating machine, produced under the control of a computer, embossed, photographed, photo-copied, thermocopied or typewritten.
49.01 Printed books, newspapers, pictures and Other products of the printing industry;
Manuscripts, typescripts and plans 4901.10 Transfers (decalcomanias) 20% 4901.20 Maps and hydrographic or similar charts Nil Of all kinds including atlases, wall maps, Topographical plans and globes, printed 491.90 -- Other Nil 17.3 From a careful reading of the above, it is clear that if the printing is considered essential for the purpose then the printed paper cannot be retained under chapter 48. In the facts of the present case, as claimed by the assessees, the printing is of a sophisticated nature and the printed materials contain details which are required statutorily as well as certain specific informations relating to the manufacturer, brand name, logo etc. which are sought to be conveyed to the consumers. The material printed is of such a nature and they serve a definite purpose of identifying and promoting the product. In such a scenario, the printed paper acquires different characteristics and a new name (referred to as gray wrappers by the assessees) and serve definite purpose different from the unprinted paper. The wrappers are not used primarily for packing. They are used for wrapping cigarette packets and they serve definite purpose different from mere wrapping.
18. Thus in these cases, the printing undertaken on paper/paper board, cannot be considered as incidental to the purpose of packing and the printing is essential and serve a definite purpose. The distinct identity and the end use is definitely imparted by the sophisticated printing of materials in different colours and material indicating information sought to be conveyed to the customers for the purpose of promoting the product and also to meet the statutory requirement. Therefore, the resultant products are to be treated as products of printing industry.
19.1 Coming to the printing activities undertaken on paper for the purpose of packing of agarbathis, it is noticed that the details printed indicated brand of agarbathis, name of the manufacturer and the MRP. The printing was in four different languages viz. Tamil, Kannada, Hindi and English. Similar printing activites were undertaken on PVC films. The resultant products are labels much different from paper / PVC films and serve a purpose different from the paper/PVC films.
19.2. In other words, the activities of printing undertaken are essential and not incidental and serve definite purpose as claimed by the Department and, therefore, results in emergence of products with new characteristics, new names and end uses and, therefore, amount to manufacture.
19.3. The printed PVC films, as already noted, have definite end use different from mere use as packing material. In this regard, Note 2 to Section VII of the Central Excise Tariff Act, which is relevant, reads as follows:-
2. 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. Therefore, they fall outside the chapter of 39. However, as these activities which gave the essential characteristics and new end use are sophisticated printing activities undertaken in the printing industry, the resultant products deserve to be classified as products of printing industry under sub heading 4901.90.
20.1. In the present cases, the printing activities undertaken are sophisticated in nature. Considering the contents of the printed material and the nature of printing, the printing activities do not qualify to be called as incidental to the main purpose of wrapping / packing, as the printed products in the form of gay wrappers meant for packing cigaretss, printed agarbathi labels meant for agarbathi packings served significant purposes in addition to the purpose for which the printed paper / paper board, polyethylene coated paper / pvc films were meant to be used. Decisions cited on behalf of the Department in support of the claim that the printed products are not products of printing industry cannot be applied to the facts of these cases, for reasons detailed below.
20.3. On behalf of the assessees, several decisions, for example in the cases of Aganta Print Arts, Mela Groups Ltd., Jhonson & Jhonson Ltd., Adhunik Plastic Industries, New Jade Printing Works (P) Ltd., Fitsite Package and VST Industries ltd. have been relied upon to claim that the impugned products should be treated as products of printing industry.
20.3. On the other hand, ld. SDR relied on the decisions of the Honble Supreme Court in the case of Rolla Trainers 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 Divison 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 Trainers 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.
23. In some of the cases, demands have been confirmed invoking extended period of limitation on the allegations of suppression of relevant information. We have already set aside the demands on merits. However, we also observe that considering the nature of dispute which involve in depth interpretation of competing entries of the Tariff, invocation of extended period of limitation is not justified.
24. Appeals of the assessees are allowed with consequential relief as per law. Appeals by the Department are rejected.
(Pronounced in open Court on )
(M. VEERAIYAN)
Member (T) (P.G. CHACKO)
Member (J)
/pr/