1993(11)LCX0050

BEFORE THE CEGAT, SPECIAL BENCH `C’, NEW DELHI

Shri S.K. Bhatnagar, Vice President and Ms. Jyoti Balasundaram, Member (J)

SYN PACK (P) LTD.

Versus

COLLECTOR OF CENTRAL EXCISE, BOMBAY-II

Final Order No. 350/93-C, dated 4-11-1993 in Appeal No. E /1828/91-C

Cases Quoted

Gujarat State Fertilizer Co. Ltd. v. UOI — 1988(02)LCX0056 Eq 1988 (034) ELT 0442 (Guj.)                                                         [Para 5]

Partap Rajasthan Copper Foils & Laminates Ltd. v. Collector —1989(08)LCX0073 Eq 1989 (044) ELT 0775 (Tribunal)     [Para 5]

Alcobex Metals (P) Ltd. v. Collector — 1990(01)LCX0026 Eq 1992 (058) ELT 0108 (Tribunal)                                            [Paras 5, 41]

Western India Plywood Ltd. v. Collector — 1984(10)LCX0040 Eq 1985 (019) ELT 0590 (Tribunal)                                         [Para 10]

Advocated By : Shri V. Lakshmi Kumaran, Advocate, for the Appellants.

 Shri L. Narasimha Murthy, JDR, for the Respondents.

[Order per : Jyoti Balasundaram; Member (J)]. - The appellants herein had filed a declaration on 3-5-1988 claiming exemption from licensing control under Notification No. 174/86 dated 1-3-1986 in respect of the products manufactured by them in their factory. It was mentioned in the declaration that they were manufacturing (i) printed self-adhesive paper labels (ii) plastic labels which were classifiable under sub-heading No. 4821.00 and 3926.93 respectively and their products were exempted unconditionally under Notification No. 228/86 dated 3-4-1986. Supdt. of Central Excise informed them that their products were classifiable under Chapter sub-heading No. 3910.00 and that they were not eligible for small scale exemption, as the S.S.I. Unit certificate produced by them was not for the said unit in respect of which exemption was claimed. They were, therefore, informed to take out a Central Excise licence immediately. From the declaration filed by the assessee, it was observed that Mrs. Tara Sarup and Mr. Arun Sarup were common Directors in both the companies, viz. M/s. Syn Pack P. Ltd. and also in M/s Amar Tara Ltd. M/s Amar Tara Ltd. had classified their product, viz. P.V.C. Self-Adhesive Papers under sub-heading 3919.00 of the Central Excise Tariff Act, 1985 whereas in case of M/s. Syn Pack P. Ltd., the same product was classified as falling under sub-heading 3926.90. This showed that the Directors were well aware of the fact that printed P.V.C. Self-Adhesive Tapes were properly classifiable under sub-heading No. 3919.00 attracting duty @ 25% Adv. As regards printed Self- Adhesive paper labels manufactured by them, they had declared the said product as falling under sub-heading No. 4821.00 and claimed an exemption under Notification No. 228/86 dated 3-4-1986 as amended. The said Notification No. 228/86 dated 3-4-1986 grants exemption from duty to paper labels whether or not printed and not to printed self-adhesive paper labels.

Since the value of clearances effected by the assessee from both the units had exceeded the limit of Rs. 7.5 lakhs during the financial year 1987-88 and they had not availed of any of the exemptions contained in the Notifications as specified under para 4(b) of the Notification No. 175/86 dated 1-3-1986, as amended and they had also not availed any exemption under Notification No. 175/86 dated 1-3-1986 during any preceding financial year, it appeared that they were not eligible for exemption under Notification No. 175/86 dated 1-3-1986 as amended, either during the year 1987-88 or any further period.

2. M/s. Syn Pack Pvt. Ltd., Bombay were, therefore, required to show cause as to why :

(a) small scale exemption claimed by the assessee in their declaration filed with the jurisdictional Range Supdt. under Notification No. 175/86 dated 1-3-1986 under their letter F. No. SP/CES/88 dated 3-5-1988 should not be denied;

(b) the products, viz. printed P.V.C. Self-Adhesive tapes, plastic labels and printed self-adhesive paper labels manufactured and cleared by them should not be classified under Chapter sub-heading No. 3919.00 and 4821.00 of Central Excise Tariff Act, 1985, respectively;

(c) Central Excise duty amounting to Rs. 3,54,343.75 (Basic Rs. 3,47,980.34 and Special Rs. 6,363.41) on the goods cleared during the period from 1-10-1987 to 31-8-1988 should not be demanded and recovered Excises from them under Rule 9(2) read with Section 11A of the Central Excises & Salt Act, 1944; and

(d) a penalty should not be imposed on them under Rule 9(2) and/or Rule 52A and/or Rule 173 of the Central Excise Rules, 1944.

3. The adjudicating authority held as follows :-

“On plain reading of Chapter No. 49 and sub-heading No. 4901 it is seen that it covers ”printed books, newspapers, pictures and other products of the printing industry; manuscripts, type-scripts and plans and as such, it can be seen that the products, viz. printed self-adhesive paper labels, printed self-adhesive tapes and self-adhesive printed paper laminated with plastics cannot be called products of “printing industry” as declared by the assessee company. Further, the claim of the assessee company that the printed self-adhesive paper labels falling under Chapter sub-heading No. 4821.00 and exempted vide Notification No. 226/86 dated 3-4-1986 as “paper labels whether printed or not printed” is also not sustainable as the assessee company manufactured “self-adhesive printed paper labels” which is not covered by above exemption notification.

I find that the products, viz. printed self-adhesive P.V.C. tapes, self adhesive plastic labels and self adhesive printed paper laminated with plastics have been declared by M/s. Amartara Ltd. under Chapter sub-heading No. 3919.00 and paying Central Excise duty at appropriate rate. Mr. Arun Sarup and Mrs. Tara Sarup are common Directors in both the companies. Thus, I find that M/s. Syn Pack Pvt. Ltd., Bombay were aware of the correct classification of their products and they resorted to mis-declaration, wilful mis-statement in respect of their products with an intent to evade payment of Central Excise duty. Thus, the charges of wilful mis-statement, mis-declaration on the part of the assessee company are proved.

Further, as regards the exemption under Notification No. 175/86 dated 1-3-1986, claimed by the assessee, it can be seen that M/s. Syn Pack P. Ltd., was registered as Small Scale Industrial Unit in respect of their factory situated at 19, 20, 21A Building, Ansa Industrial Estate, Saki Vihar Road, Bombay-400072. On going through the conditions on which the said certificate was issued, I find that the registration is valid for the factory location, products and constitution of the unit at the time of allotment of the certificate. M/s. Syn Pack P. Ltd., had shifted their factory to new premises situated at 47B and 73, 74, Saki Vihar Road, Bombay-400072. Thus, the certificate for registration as Small Scale Unit is not valid for the new factory premises of the assessee company. There is no evidence on record nor the assessee company has produced any evidence to show that they had applied afresh for registration as a Small Scale Unit or sought correction in the said certificate.

The assessee company had contended that even though registration as a small scale industrial unit lapsed with the change of address of the premises, they are still eligible for exemption under Notification No. 175/86 dated 1-3-1986 in view of proviso (b) to para 4 of the said notification. However, I do not agree with the assessee company on this count. On perusal of the declarations filed by the assessee company, nowhere had they claimed and availed of exemption under Notification No. 83/83 dated 1-3-1983 and/or 85/85 dated 17-3-1985. They had declared their products as products of “printing industry” and availed wrong exemption. Now, therefore, in view of above discussion, the S.S.I. benefit under Notification No. 175/86 dated 1-3-1986 cannot be extended and they are not eligible for it."

4. The demand raised in the show cause notice was confirmed and a penalty of Rs. 20,000 imposed on the appellants. Hence this appeal.

5. We have heard Shri V. Lakshmi Kumaran, Learned Counsel and Shri L. Narasimha Murthy, Ld. DR and perused the records. We find that the appeal can be disposed of on the preliminary point of jurisdiction. The show cause notice alleging suppression and intent to evade payment of duty has been issued by the Assistant Collector. It has been held by the Gujarat High Court in the case of Gujarat State Fertilizer Co. Ltd. v. Union of India, 1988 (034) ELT 442 that the Collector of Central Excise only can issue a show cause notice if the Department seeks to invoke the proviso to sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944. In case of Partap Rajasthan Copper Foils and Laminates Ltd. v. Collector of Central Excise, 1988-89 (044) ELT 775, the Tribunal has held that with the amendment to Section 11A(1) w.e.f. 27-12-1985, notice alleging suppression and mis-statement has to be issued only by the Collector and this statutory requirement does not get whittled down by the fact that the demand is made only for the normal period of six months and not the extended period. This view has also been expressed by the Tribunal in a later decision reported in 1992 (058) ELT 108 in the case of Alcobex Metals. Following the ratio of the above decisions, we hold that the show cause notice dated 31-10-1988 is without jurisdiction.

The appeal is, therefore, allowed on this count alone without going into the merits of the matter.

[Order per : S.K. Bhatnagar, Vice President]. - With due respect to Hon’ble Member (Judicial) my views and orders are as follows :-

6. I observe that this case relates to three items (and not two) namely :-

1. Gummed Printed Paper Labels

2. Gummed Printed Paper Labels laminated on one side with plastic

3. Printed Self-adhesive P.V.C. tapes

7. This is evident from appeal memo as well as the Show Cause Notice.

8. According to Ld. Advocate a lot of correspondence was exchanged with Department as evident from the date-sheet filed by him. The Ld. Counsel summarised his pleadings with reference to 5 propositions mentioned in the document filed on 25th July, 1992 in the Court.

9. The first proposition relates to printed self-adhesive paper (labels); And the issue is whether they qualify for exemption under Notification No. 228/86. The Ld. Counsel has stated that Asstt. Collector has not disputed the Classification of the printed paper labels and such labels cannot but come under Heading 4818.90 prior to 1-3-1988. Hence they cannot be denied the benefit of the aforesaid notification which covers paper labels.

10. Further a product is covered in all its types and forms once it is described in the statute as held in the case of Western India Plywood [1985 (019) ELT 590].

11. Hence second proposition that Printed Self-adhesive labels qualify for exemption under Notification No. 49/87 as converted types of paper.

12. The third proposition relates to Printing of duty-paid self-adhesive tape. According to them merely printing of such bought-out tapes, which had already suffered duty, would not amount to manufacture since there is no change of name, character or use. He has cited a number of decisions and orders in support of this contention. The Ld. Counsel also argued that printed self-adhesive tapes have not been specifically mentioned in 39.19 and therefore, they could, at best, be classified under 39.26 and in that case they would be exempted under Notification 132/86.

13. In the fourth proposition the Ld. Counsel has referred to Notification No. 175/86 and stated that as S.S.I. Unit, it would be covered for (1) the period 1986-87 and (2) the period 1987-88 upto 30-9-1987 in any case. He has argued that merely because the factory has shifted to a different location, the benefit of this notification could not be denied.

14. The fifth proposition relates to the question of time bar and the Ld. Counsel has argued that since the products were exempted under erstwhile Tariff Item No. 68 as products of Printing Industry, no suppression of facts or information or misstatement with intention to evade duty was involved.

15. He has argued that Chapter Note 8 of Chapter 48 and Section Note 2 and Section VII are so confusing that even well-experienced persons in the field of Customs, and Excise find it difficult to interpret the said notes and it will not be fair to accuse the appellants.

16. The Ld. DR has reiterated the Departmental point of view.

17. I observe that the Supdt. of Central Excise vide his letter dated 9-10-1986 had informed the appellants that “with reference to your declaration, you are hereby permitted to avail the exemption under Notification No. 174/86 dated 1-3-1986 for the year 1986-87.” Again Asstt. Collector, Bombay vide his letter dated 23rd March, 1987 had intimated that “It is reported by the Asstt. Collector of Central Excise having jurisdiction over your unit that your unit is exempted from payment of Central Excise duty by virtue of relevant exemption notification issued by the Govt. of India” and allotted the Code Number.

18. In this connection, the appellants had drawn attention to their letter dated 15-4-1987 claiming exemption from Licensing Control for the year 1987-88. In this application printing of Self-adhesive paper labels and P.V.C. Tapes have been mentioned and subject Heading 4901.90 has been indicated.

19. I also observe that the appellants had filed a declaration under Notification No. 174/86 claiming exemption from Licensing Control vide their letter dated 3-5-1988. This letter encloses one proforma showing their products falling under 4821.00 and 4901.90 and refers to the printing of Self-adhesive paper labels, P.V.C. paper tapes. It further clarifies that Gum-coated paper/P.V.C. tapes are purchased from the open market and printed on Off Set printing machine. In it it is also claimed the benefit of Notification No. 228/86.

20. In view of the above correspondence and orders, it is apparent that the appellants had sought and were granted exemption from the Licensing Control.

21. Further I consider that although strictly speaking the S.S.I. Unit Certificate is valid for a firm at a particular address or location, in the present case, since the firm has remained the same and merely location of the factory has been changed within the same city and all that was required was to get the new address endorsed for new location. Since it is not denied that the appellants otherwise continued to be a small scale unit, the officers could have allowed them time to get the address of new location endorsed by registration authority and thereafter considered whether they were eligible for the benefit of Notification No. 174/86. In any eventuality it is only procedural infraction and on this ground alone a substantial benefit could not be denied.

22. Moreover if the appellants had classified their products differently than another concern with which their Directors were common, it was still necessary on the part of the officers to decide in the first instance as to the classification of which unit was correct.

23. In the instant case, there was scope for bona fide difference of opinion based on different interpretations. Hence one need not jump to any conclusion and presume mala fides.

24. As regards Classification, the relevant period is October, 1987 to August, 1988. Therefore, we are concerned with Tariffs of 1987-88 and 1988-89.

25. In 1987-88, Chapter 48 has an entry at 48.18 for “Other articles of paper pulp, paper, paperboard, cellulose wadding or webs of cellulose fibres”. This includes inter alia `printed cartons, boxes’ etc.

26. And Chapter Notes 7 and 8 of this Chapter read as follows :

“7. Paper, paperboard, cellulose wadding and webs of cellulose fibres answering to a description in two or more of the heading Nos. 48.01 to 48.11 are to be classified under that one of such headings which occurs last in the numerical order in the Schedule.

8. Except for the articles of heading No. 48.14 or paper labels of heading No. 48.18 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 articles fall in Chapter 49."

Further Notification No. 228/86 describes :-

27. In view of the above position, it is evident that paper labels whether gummed, printed or otherwise would fall under Heading 43.18 unless it could be shown that printing was not merely incidental to the primary use of the article.

28. In other words, the act of printing design by itself does not take out “other paper or articles of paper” out of the purview of Chapter 48 unless it could be shown that primary use of the article was as printed product of the type falling under Chapter 49.

29. This view is also supported by the fact that other entries in the Chapter which were concerned with printed labels paper or paper board or printed articles of paper, paper board etc. came under Chapter 48 (as for example 48.10, 48.11, 4818.12 4818.13).

30. Further it is noticed that this Chapter also covers gummed or adhesive paper and paper board as well as Paper and paper board coated, impregnated or covered with plastic excluding adhesives.

31. And Chapter Note 1(f) excludes only certain types of sheets or layers coated or covered with plastic.

32. In other words, this Chapter also covers impregnated or coated or laminated labels/articles.

33. Hence in my opinion, Heading 48.18 would cover gummed paper labels with or without lamination during1987-88.

34. In 1988-89, there was a specific entry 48.21 which reads as follows :

“Paper or paperboard labels of all kinds, whether or not printed.”

35. Therefore, gummed printed paper labels whether laminated or not, were covered by this Heading in 1988-89.

Consequently, Chapter 49 was out of question.

36. In so far as the printed self-adhesive P.V.C. tapes were concerned, I observe that self-adhesive tapes are specially covered by Heading 39.19 (during both the periods) but the words `printed of all kinds’ are conspicuous by their absence. This gains importance in view of the specific words like lacquered or metallised or laminated mentioned in sub-headings such as 39.20 (as also in contradistinction to language of Heading 48.21 (in 1988-89 tariff).

37. Therefore, printed self-adhesive plastic tapes could either fall under 39.26 or 49 depending upon the primary or principal use as printed material or otherwise.

38. In this respect, from the affidavit filed before us, it appears that the main process to which they were subjected in appellants’ factory was printing of duty-paid tapes.

39. Therfore, 39.19 gets excluded on two counts (1) that the words such as printed or of all kinds did not occur there (2) if duty had already been paid on these very articles under Heading 39.19 (as claimed) they could not be subjected to a further duty once again under the same sub-heading otherwise it will amount to double taxation.

40. Furthermore in the absence of any specific finding by the adjudication authority regarding the nature and type of their principle views and lack of any inquiry report or even a plea on this point, I am constrained to take note of uncontradicted submission of the Ld. Counsel in this regard that printed plastic labels were products of printing industry and had been rightly so declared. Consequently in the facts and circumstances of this case out of the two alternatives proposed by the Ld. Counsel, I consider that it would be more appropriate to leave their declaration undisturbed is even otherwise out of the two headings the classification under Chapter 49 would be more appropriate going by the principle of classification under later heading, in the case of two headings found equally appropriate.

41. In view of the above position, it was not necessary to go into the time bar aspect, save to say that the charge of deliberate mis-declaration having failed and the Department’s knowledge in evidence from exchange of correspondence, the demand was in any eventuality time barred beyond the normal period of time and much water has flown since the Tribunal’s order in case of Alcobex Metals.

42. In view of the above discussions, I hold that in the facts and circumstances of this matter, Department’s case remains unsubstantiated on all counts and the impugned order is liable to be set aside.

43. The appeal is, therefore, accepted as already announced in the open Court.

Equivalent 1994 (71) ELT 98 (Tribunal)