2015 (9) TMI 467 - SC - Central Excise

Classification of shrink sleeves - classifiable under Sub-heading 3020.19 or Sub-heading 4901.90 - case of the assessee is that this product is to be treated as one falling under plastic industry - whether the product in question can be treated as that of printing industry or it is covered by plastic industry. - Held that - we are clear in our mind that the printing was only incidental and the main purpose of the product is to provide tamper protection to the product to make shatter resistance, enhance puncture resistance and tamper proof packing. - Decision in the case of Metagraphs Pvt. Ltd.(1996 (11) TMI 68 - SUPREME COURT OF INDIA) followed. Revenue relied upon the decision of Holostick India Ltd. Vs. Commissioner of Central Excise, NOIDA 2015 (4) TMI 357 - SUPREME COURT , but this case is also helps the assessee and not the Revenue - Decided against the revenue.

Summary

Issues: Classification of product under Chapter 39 or 49

In this judgment, the Supreme Court addressed the issue of classifying a product known as 'shrink sleeves' under Chapter 39 or Chapter 49 of the Customs Tariff Act. The respondent-assessee classified the product under Sub-heading 3920.19 of Chapter 39, pertaining to "Plastics and articles thereof." On the other hand, the Revenue contended that the product should be classified under Sub-heading 4901.90 of Chapter 49, which deals with printing products. The main question was whether the product should be considered part of the plastic industry or the printing industry.

The Court examined the nature and purpose of the product to determine its classification. The assessee procured duty-paid plastic film, slit it to size, and processed it through a machine to create 'shrink sleeves' primarily used for tamper protection, shatter resistance, and puncture resistance. The Revenue argued that since printing was done on the product, it should be classified under the printing industry. However, the assessee maintained that printing was only incidental, and the main purpose of the product was tamper protection, making it a plastic industry product.

The Court referred to previous judgments to establish the principle that the primary function of the product determines its classification. It cited a case where printed cartons were considered products of the printing industry, emphasizing that each case must be analyzed based on its unique facts. Applying this principle, the Court concluded that in this case, the primary purpose of the 'shrink sleeves' was tamper protection, not printing, supporting the classification under the plastic industry.

Additionally, the Court discussed a judgment involving security holograms manufactured using metallised film, classified under Sub-heading 4901.90. The judgment highlighted that the primary use of the product, such as security features, determines its classification, even if printing is incidental. The Court emphasized the importance of internationally accepted nomenclature, such as the Harmonized System of Nomenclature (HSN), in resolving classification disputes.

Ultimately, the Court dismissed the appeals, affirming the classification of the 'shrink sleeves' under Chapter 39 as products of the plastic industry based on their primary purpose of providing tamper protection, shatter resistance, and puncture resistance, despite incidental printing.