2007 (9) TMI 159 - AT - Central Excise

Lay flat tubings emerges as separate finished goods in manufacturing of plastic bags is marketable Note 8 of CH 39 gives sufficient support to classify it under CSH 39.17 Hence Lay flat tubings are excisable which are used in manufacture of plastic bags.

Summary

Issues: Classification of goods under Central Excise Tariff Act, Marketability of layflat tubings, Duty demand on layflat tubings

Classification of goods under Central Excise Tariff Act:
The appeal filed by the revenue sought to vacate the order of the Commissioner (Appeals) and restore the order of the original authority regarding the classification of layflat tubings manufactured by Flexoprints, Chennai. The original authority had demanded duty on the layflat tubings, considering them as marketable finished goods. The Commissioner (Appeals) accepted the contention of the respondents that the impugned goods were not marketable and vacated the demand of duty and penalty imposed on Flexoprints. The Revenue argued that the layflat tubings were marketable and classifiable under CSH 39.17 of the Central Excise Tariff Act. The consultant for the respondents explained the manufacturing process and contended that the tubings were not marketable finished goods. The Tribunal observed that the item is marketable and emerges as separate finished goods at the premises of the respondents. The Tribunal referred to statutory guidelines under Note 8 to Chapter 39 of CETA Schedule, which include layflat tubings in the category of 'tubes, pipes, and hoses.' The thickness of the tubing was deemed irrelevant for classification under CSH 39.17, leading to the partial allowance of the Revenue's appeal.

Marketability of layflat tubings:
The main issue revolved around whether the layflat tubings manufactured by Flexoprints, Chennai were marketable finished goods. The original authority had demanded duty on the layflat tubings, considering them as marketable finished goods. However, the Commissioner (Appeals) accepted the contention of the respondents that the impugned goods were not marketable. The consultant for the respondents argued that the layflat tubings were not marketable finished goods as they emerged in a continuous process where the finished goods were plastic packets. The Tribunal, after careful consideration of the case records and submissions, found that the item is marketable and there is indeed a market for the product. The Tribunal observed that the product emerges as separate finished goods at the premises of the respondents and is not an in-process material without shelf life. This finding supported the classification of the layflat tubings under CSH 39.17 of the Central Excise Tariff Act.

Duty demand on layflat tubings:
The duty demand on the layflat tubings manufactured by Flexoprints, Chennai was another crucial issue in the judgment. The original authority had demanded duty on the layflat tubings, which were considered as marketable finished goods. The value of the layflat tubings cleared during 1997-1998 exceeded the exempted value of clearances, leading to a duty demand of Rs.18,856. The Commissioner (Appeals) vacated the demand of duty and the penalty imposed on Flexoprints after accepting the contention that the impugned goods were not marketable. However, the Tribunal, after reviewing the statutory guidelines and considering the marketability of the product, partially allowed the Revenue's appeal by vacating the impugned order to the extent that it set aside the original authority's order regarding the demand of duty.