Custom, Excise & Service Tax Tribunal
Pune I vs Tetra Pak India Pvt. Ltd on 20 June, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/1807/2011
CROSS-OBJECTION NO: E/CO-50/2012
[Arising out of Order-in-Original No: 05 & 06/CEX/2011 dated 08/09/2011 passed by the Commissioner of Central Excise, Pune I.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Commissioner of Central Excise
Pune I
Appellant
Vs
Tetra Pak India Pvt. Ltd.
Respondent
Appearance:
Shri Shobha Ram, Commissioner (AR) for the appellant Shri M.H. Patil, Advocate for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 20/06/2014 Date of decision: 20/06/2014 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
Revenue is in appeal against Order-in-Original No: 05 & 06/CEX/2011 dated 08/09/2011 passed by the Commissioner of Central Excise, Pune I Commissionerate, wherein he classified the asceptic packaging paper manufactured by the respondent, M/s. Tetra Pak India Pvt. Ltd., Pune under CETH 4811 9092 and allowed the exemption under Notification 4/2006-CE dated 01/03/2006 as amended. While coming to the conclusion, the learned adjudicating authority has relied upon the test report of the product given by M/s. ARAI wherein it was confirmed that the paper content was 80.12%, plastic content 15.40% and aluminium content 4.48%.
2. In their appeal, Revenue has urged that the learned adjudicating authority has overlooked Note 2(n) to Chapter 48 which specifically provides that the said Chapter does not cover metal foil backed with paper or paperboard and the correct classification should be under CETH 7607 2090 as aluminium and articles thereof. It is also urged that a Larger Bench of this Tribunal, in the case of Hindustan Packaging Co. Ltd. vs. Commissioner of Central Excise, Vadodara 1995 (75) ELT 313 had held that a product comprising aluminium foil backed with paper and polyethylene is correctly classifiable under CETH 7606 of CETA and the honble apex Court had upheld the said decision as reported in 1998 (97) ELT A139 (SC). It is therefore, the Revenues contention that the product merits classification under CETH 7606 and, therefore, the duty demand of ` 17.65 crores short-paid by the appellant merits to be upheld along with interest thereon and also the respondent needs to be imposed with penalty for mis-delcaration.
3. The learned Commissioner (AR) appearing for the Revenue, reiterates the findings urged in the appeal memorandum.
4. The learned counsel for the respondent-assessee submits that the process of manufacturing of asceptic packaging paper is as follows:
The raw materials required are:
(i) Clay-coated duplex paper in roll form;
(ii) Polyethylene in granule form;
(iii) Aluminium foil in roll form; and
(iv) Printing ink The art-work received form the customer is etched with the help of digital imager on to polymer plates which are mounted on sleeves. The input material, namely, clay-coated duplex paper is fed into a flexo printing press and is printed and/or creased on one side. The printed rolls are then fed into a machine for heating purposes. A thin layer of hot polyethylene at 3300C is extruded and aluminium foil is coated on the inner side. It adheres to the paper when it comes in between the rollers. Further two layers of hot polyethylene and adhesive polymer is extruded and coated on the inner side and a further thin layer of hot polyethylene is extruded and coated on the outer side of the paper. Thereafter the rolls duly printed and coated, goes through the process of slitting. The slitted rolls are packed and ready for dispatch.
4.1. Thus, the aluminium foil is on the inside of the paper. As per HSN Explanatory Notes:
paper and paperboard for the manufacture of packages for beverages and other foodstuffs, printed with texts and illustrations referring to the goods to be packaged therein, covered on both faces with thin transparent sheets of plastics, with or without a lining of metal foil (on the face of which will form the inside of the packaging) are also classified in this heading (4811). These products may be creased and marked to identify individual containers to be cut from the rolls. From the manufacturing process adopted, read with the HSN Explanatory Notes, it can be seen that the product merits classification as asceptic packaging paper falling under CETH 4811.
4.2. The learned counsel has also submitted classification opinions given by HM Revenue and Custom, UK wherein it has been opined that the product merits classification under CETH 4811. A classification ruling given by the US Customs authorities are also submitted wherein identical product manufactured by the US entity of the appellant is classified under CETH 4811.
4.3. The learned counsel further relies on the decision of honble apex Court in the case of Collector of Customs vs. Business Forms Ltd. 2002 (142) ELT 18 (SC) and in the case of Collector of Central Excise vs. Wood Craft Products Ltd. 1995 (77) ELT 23 (SC) wherein it has been held that Explanatory Notes to HSN not only has a persuasive value but is entitled to the greater consideration in classifying the goods under Central Excise and Customs Tariff. Reliance is also placed on the decision of the honble apex Court in the case of Sharp Industries Ltd. vs. Commissioner of Central Excise, Mumbai 2005 (188) ELT 146 wherein the classification of the aluminium foil covered on one side with a polyester film and on the other side with a polyethylene was the issue for consideration. In the said case, it was held that since plastic predominates in the product as 70-80% of the product consists of plastic and aluminium foil being covered on both sides by different materials cannot be said to be backed so as to merit classification under Chapter 76 and, therefore, the product was held to be falling under articles of plastic under CETH 3920/3923. Similarly, in the case of Commissioner of Central Excise vs. Indus Coating Pvt. Ltd. 2010 (259) ELT 321, a question arose whether plastic laminated aluminium foil would fall under CETH 7606.60 or under CETH 3920 and the honble apex Court confirmed the classification under CETH 3920. A similar issue also came up for consideration in the case of Flex Industries Ltd. vs. Commissioner of Central Excise 2010-TIOL-1878-CESTAT-DEL wherein a question of aluminium foil laminated on both sides with plastic came up for consideration and this Tribunal held that the product would merit classification under Chapter 39 and not under Chapter 76. Accordingly, he submits that the impugned order is sustainable in law and needs to be upheld and the appeal of the Revenue dismissed.
5. We have carefully considered the submissions made by both the sides.
5.1. From the manufacturing process given, it can be seen that the aluminium foil is not backed with any material. On the other hand, it is covered on both sides by plastic material and is laminated on one side of the paperboard. Thus, it is the aluminium foil which forms the backing and not the other way. Further, as per the test report, paper accounts for 80% of the material and aluminium, barely 5%. After the introduction of a specific entry for asceptic packaging paper, the scope of CETH 4811 has undergone a change and paper or paperboard backed by a metallic foil merits classification under Chapter 48 which was not the position earlier. The HSN explanatory notes also underwent a change to incorporate within the scope of CETH 4811 such paper. A reading of the revised HSN Explanatory Notes clearly shows that paper and paperboards covered on both faces with thin transparent sheets of plastics with or without a lining of metal foil (on the face which will form the inside of packaging) are also classified under CETH 4811. Thus the change in the scope of tariff entry needs to be given effect to. The honble apex Court in the case of Business Forms Ltd. and Wood Craft Products Ltd. (supra) has highlighted the relevance of HSN Explanatory Notes in classification under the Customs and Central Excise Tariff as they are fully aligned to the Harmonized System of Nomenclature for commodity classification. In Sharp Industries Ltd it was held by the honble Apex Court that an aluminium foil which is covered on both sides, by different materials cannot be said to be backed. The aluminium foil in such cases is sandwiched between other materials. It is clear that there can never any backing on both sides. Chapter note (d) of Chapter 76 also makes it clear that Tariff Heading 76.07 will not apply to products which assume the character of articles or products of other headings. In this case, since plastic predominates, the product assumes the character of plastic and for this reason, it could not be classified under Chapter 76. The said ratio was re-iterated in the Indus Coating Pvt. Ltd.(supra). The ratio of these decisions applies squarely to the facts of the case before us. Therefore, we are of the considered view that the product manufactured by the appellant is more appropriately classifiable under CETH 4811 as asceptic packaging paper. The rulings given by the UK and US authorities classifying identical products under CETH 4811, though not binding on us, also support this view. The reliance placed by the Revenue on the Hindustan Packaging case does not help as it pertained to the period prior to the changes made in the tariff creating a specific entry for asceptic packaging paper. Therefore, we do not find any infirmity in the impugned order passed by the adjudicating authority.
6. Accordingly, we do not find any merit in the appeal filed by the Revenue and the same is dismissed. The Cross-Objection filed by the respondent is also disposed of.
(Operative Part pronounced in Court) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 8