1990 (11) TMI 161 - HC - Central Excise

Summary

Issues Involved:

1. Whether printed cartons manufactured by the respondent-Company are products of the printing industry and thus exempt from excise duty under Notification No. 55/75.
2. Whether the end use of the printed cartons is relevant in determining their classification.
3. Whether the cost factor associated with printing affects the classification of printed cartons.
4. Whether the issuance of show cause notices to the respondent-Company was justified.

Issue-wise Detailed Analysis:

1. Classification of Printed Cartons:

The main issue was whether printed cartons are products of the printing industry, exempt from excise duty under Notification No. 55/75. The respondent-Company argued that printed cartons are understood in the trade as products of the printing industry, supported by various references and text books. The process of manufacturing printed cartons involves several stages, including designing, printing, cutting, creasing, and sometimes gluing. The dominant activity in this process is printing, making the final product a product of the printing industry.

The appellants contended that printed cartons are products of the packaging industry and not entitled to the exemption. They argued that the mere fact that something is printed on a carton does not change its essential nature or use as a packaging product.

The learned single Judge allowed the writ petition, holding that printed cartons must be understood in common parlance and not in any technical sense. He referred to literature establishing that printed cartons should be treated as products of the printing industry. However, the appellate court disagreed, stating that a carton remains a carton regardless of printing, and its primary function is packaging. The court concluded that printed cartons are products of the packaging industry.

2. Relevance of End Use:

The learned single Judge observed that the end use of the article was irrelevant in the context of the exemption notification or the tariff item. However, the appellate court held that for cartons, the question of end use does not arise as they have only one use-packaging. The court emphasized that the essential function of a carton is its capacity to contain, which is not altered by printing.

3. Cost Factor:

The respondent-Company argued that the cost involved in printing a carton could be more than the price of the paper or other material used. The learned single Judge considered this factor significant. However, the appellate court held that the cost factor is not determinative. The classification should be based on the primary function and common parlance understanding of the product, not the relative cost of printing.

4. Issuance of Show Cause Notices:

The respondent-Company challenged the show cause notices issued by the appellants, arguing that printed cartons are products of the printing industry and entitled to exemption. The learned single Judge quashed the show cause notices and directed a refund of the excise duty collected.

The appellate court, however, held that the issuance of show cause notices was justified. The court reasoned that the existence of an alternative remedy does not affect the jurisdiction of the court to grant relief in appropriate cases. Since the court found that printed cartons are not products of the printing industry, the issuance of show cause notices was warranted.

Conclusion:

The appellate court allowed the appeal, setting aside the judgment and order of the learned single Judge. The court dismissed the writ petition, holding that printed cartons are products of the packaging industry and not entitled to exemption from excise duty under Notification No. 55/75. The court also upheld the issuance of show cause notices to the respondent-Company.