2015 (10) TMI 42 - AT - Central Excise

Classification of goods - classification of hologram under Chapter 39 or Chapter 49 of CETA - Held that - As per HSN Note (2) of Chapter 49 the security holograms the product in question where the primary use is of security and self-adhesive is only incidental and therefore rightly falls under chapter 49 as a product of printing industry . By respectfully following both the Hon ble Apex Court decisions (2015 (4) TMI 357 - SUPREME COURT), (later decision is of appellant s own case) we hold that appellant s Polyester Hologram Excise Label produced out of stamping foil (transfer foil) is rightly classifiable under chapter 49 of CETA and find that hologram produced by the appellants are not covered under any of the excluded items i.e. Ch.39.18, 48.14 or 48.21 of HSN of Chapter 49. - excise duty demand confirmed on the Hologram classified under 39199090 is liable to be set aside. Consequently penalties imposed on the main appellant as well as on the other appellants are also liable to be set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of holograms under Chapter 39 or Chapter 49 of CETA.
2. Demand for excise duty and imposition of penalties.

Issue-wise Detailed Analysis:

1. Classification of Holograms:
The primary issue was whether the holograms manufactured by the appellants should be classified under Chapter 39 or Chapter 49 of the Central Excise Tariff Act (CETA). The appellants argued that their holograms, produced from stamping foil, should be classified under Chapter 4901 as products of the printing industry, which would attract a NIL rate of duty. The adjudicating authority had classified the holograms under Chapter 39199090, treating them as self-adhesive plastic products, based on a previous Tribunal decision and a Board's circular.

The Tribunal examined the manufacturing process and the nature of the holograms. It was noted that the holograms contained high-security features and were used primarily for security purposes on products marketed by the Tamil Nadu State Government to prevent counterfeit goods. The Tribunal referred to a previous decision in the case of Holographic Security Marketing Systems Pvt. Ltd. Vs CCE, where holograms produced from stamping foils were classified under Chapter 4901. This decision was upheld by the Supreme Court, which emphasized that the primary use of the holograms was for security, not the adhesive quality, thus classifying them under Chapter 4901.

The Tribunal also considered the Supreme Court's ruling in the appellant's own case, where it was held that the primary use of the holograms was security, and the adhesive nature was incidental. The Supreme Court rejected the Board's circular that classified self-adhesive holograms under Chapter 39, stating that the primary use test should be applied.

2. Demand for Excise Duty and Imposition of Penalties:
The department had issued a show cause notice demanding an excise duty of Rs. 22,01,01,514/- under Section 11A(1) and proposed penalties under Section 11AC and Rule 26. The adjudicating authority confirmed the demand and imposed penalties on the main appellant and other co-noticees.

The Tribunal, after classifying the holograms under Chapter 4901, found that the demand for excise duty under Chapter 39199090 was not sustainable. Consequently, the penalties imposed on the appellants were also set aside.

Conclusion:
The Tribunal concluded that the holograms produced by the appellants were rightly classifiable under Chapter 4901 of CETA as products of the printing industry, following the Supreme Court's decisions. The excise duty demand and the penalties imposed were set aside, and the appeals were allowed with consequential relief.