1985 (1) TMI 65 - HC - Central Excise

Cartons - Classification of goods - Writ Jurisdiction - Plant and Machinery - Worker and apprentice - Job work

Issues Involved:
1. Classification of printed cartons as products of the printing industry.
2. Number of workers employed by the petitioner.
3. Value of machinery in the petitioner's unit.
4. Liability to penalty under Rule 173Q of the Central Excise Rules.
5. Applicability of Notification No. 119/1975 regarding duty calculation.

Issue-wise Detailed Analysis:

1. Classification of Printed Cartons:
The primary issue was whether printed cartons are products of the printing industry and thus exempt from duty under Notification No. 122/1975. The court examined the conflicting decisions by the Government of India and the Karnataka High Court. The court concluded that printed cartons are not products of the printing industry, stating: "Cartons and cans are more properly products of packaging industry...Merely because the printer also prints some matter upon the carton, the printed carton cannot, and does not become a product of printing industry." The court emphasized the importance of the commercial parlance test and the nature of the product rather than the cost-ratio or end-use.

2. Number of Workers Employed:
The court addressed whether the petitioner employed more than 49 workers during the period from 1-3-1976 to 17-6-1977. The Collector included three apprentices in the worker count, which the petitioner contested. The court held that apprentices should not be counted as workers, referencing Section 18 of the Apprentices Act, 1961: "In the absence of any such special provision in the Central Excise Act including apprentices within the meaning and definition of workers, we see no reason to include apprentices within the meaning and definition of workers."

3. Value of Machinery:
The court examined the value of the machinery in the petitioner's unit for the period from 18-6-1977 to 13-12-1977. The Collector's decision that the value exceeded Rs. 10,00,000/- was based on disallowing certain deductions made by the petitioner. The court upheld the Collector's decision, stating: "Accordingly, the total value of the entire machinery in the industrial unit should be taken. There is no room or occasion for allocating the machinery between various goods manufactured therein."

4. Liability to Penalty:
The court considered whether the petitioner was liable for a penalty of Rs. 50,000/- under Rule 173Q. The court found the penalty unwarranted, noting the petitioner's bona fide belief that it was not liable to duty: "In view of the fact that the petitioner's aforesaid explanation has not been rejected, the levy of penalty on the mere ground of not taking out a licence, in our opinion, is not warranted in the facts and circumstances of this case."

5. Applicability of Notification No. 119/1975:
The court addressed whether duty should be calculated based on the total value of the printed cartons or just the job work charges. The court favored the petitioner's argument, stating: "We are of the opinion that the value for the purpose of levy of duty shall only be the charges collected by the petitioner for doing the job work, viz. printing and carton-making; in short, for the manufacture of printed carton."

Conclusion:
The writ petition was allowed in part. The court held:
1. The finding that printed cartons are not products of the printing industry is upheld.
2. The petitioner is exempt from duty for the period 1-3-1976 to 17-6-1977 as the number of workers did not exceed 49.
3. The petitioner's claim for exemption for the period 18-6-1977 to 13-12-1977 was rejected, but duty should be calculated based on job work charges.
4. The penalty of Rs. 50,000/- was set aside.

The court rejected the oral request for leave to appeal to the Supreme Court.

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