2019 (8) TMI 716 - AT - Central Excise

Classification of labels used in packing of cigarettes - Whether the labels would fall within heading no. 4819 90 of the First Schedule to Central Excise Tariff Act, 1985? - appellant contends that the classification decided by the Tribunal had adjudged the classification to be under heading no. 4818 90 of the First Schedule to Central Excise Tariff Act, 1985 which, after the amendment, was intended only for articles of paper and not printed cartons. HELD THAT - In classification disputes, it is well settled that if the alternative proposed in the show-cause notice is not defensible, the claimed classification will prevail even if other headings be more apt. In view of this, we do not have to classify the product based on submissions made by either side. The consequence of the failure of the product to be covered by the heading proposed in the show cause notice suffices for acceptance of the one claimed by assessee. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Classification of 'labels' used in packing of cigarettes under Central Excise Tariff Act, 1985.

Analysis:
1. The dispute arose from the classification of 'labels' used in packing of cigarettes under the Central Excise Tariff Act, 1985. The central excise authorities sought to classify the 'labels' under heading no. 4819 90, attracting a duty of 16% ad valorem, while the assessee classified them under heading no. 4821 00, eligible for a 'nil' rate of duty on clearance. Two show cause notices were issued demanding differential duty, which were upheld by the first appellate authority based on the restructuring brought about by the Finance Act, 1988. The Tribunal also upheld this classification under heading 4818 90, considering the changes in the tariff headings post the restructuring.

2. The appellant contended that the classification under heading no. 4818 90 was incorrect as it was intended only for 'articles of paper' and 'not printed cartons.' The appellant argued that the adjudicating authority erred in relying on the Tribunal's order instead of the classification by the Hon'ble Supreme Court.

3. The Authorized Representative relied on a previous Tribunal decision and the subsequent reclassification by the Hon'ble Supreme Court. Referring to the tariff headings, it was argued that the 'labels' in question could only fall under heading 4819 90 of the Central Excise Tariff Act, 1985.

4. Upon reviewing the Tribunal and Supreme Court decisions, it was found that the product in dispute was a 'flat piece of printed paper' used as a sleeve on the aluminium foil pouch for packing cigarettes. The issue was whether this paper constituted a carton. The Supreme Court had previously determined that it did not qualify as a 'printed carton.' With the amended tariff structure, the product could not be reclassified under a residuary heading intended for different products.

5. It was established that if the alternative proposed in the show-cause notice was indefensible, the claimed classification by the assessee would prevail. As the product did not fit the heading proposed in the notice, the classification claimed by the assessee was accepted.

6. Consequently, the lower authorities' classification was set aside, and the appeal was allowed, emphasizing the importance of the correct classification of goods under the Central Excise Tariff Act, 1985.