2022 (11) TMI 450 - AT - Central Excise

Classification of goods - Folders for inserting certificates - Letters head/pads - Waste paper - Invitation card - Envelope - classifiable under Chapter heading 48 or under Chapter 49? - extended period of limitation - HELD THAT - The two items, namely, Folders for inserting certificates and waste paper are being contested on merit by the appellant. In respect of other items, namely, letter head/ pages, invitation cards and envelopes, the appellants are contesting solely on limitation. A perusal of Circular No. 1052/1/2017 dated 23.02.2017 shows that it specifically holds that inland letter cards which are printed would be classifiable under Chapter 49 whereas plain letter cards are classifiable under Chapter 48. Moreover, it is seen that note 12 and 14 of Chapter 48 clearly lay down that unless there is further printing or writing needed, the products where the printing is not merely incidental the said products would be classifiable under Chapter 49. The criteria being that all the printing or writing that is required to be done on the said cards is already done at the time of clearance and therefore, the same would be classifiable under Chapter 49. The same argument equally applies to folders for inserting certificates which contain already pre-printed details of the arguments and nothing remains to be written on the same. Relying on the aforesaid Circular and Chapter Note 12, it is apparent that the said product needs to be classifiable under Chapter 49 and not under Chapter 48. Classification of the waste paper - appellants have sought to classify the same under Chapter 49, however Revenue sought to classify the same under Chapter 48 - HELD THAT - The impugned order does not give any finding whatsoever on this issue. In para 21 of the said order which discusses various items but there is no discussion whatsoever of item namely Waste Paper. It is also found that even in Order-in-Original, there are no specific findings. Notification of extended period of limitation - HELD THAT - It is seen that CBIC has issued a Circular to Clarify the classification of the goods and the interpretation of Chapter Note 12 14 of the Chapter 48. The CBEC has issued a clarification relied on decision of Hon ble Apex Court in case of M/S. HOLOSTICK INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA 2015 (4) TMI 357 - SUPREME COURT . From the nature of dispute, it is apparent that it was possible that appellants to hold a bonafide belief, in such circumstances, extended period of limitation in respect of these items cannot be invoked. Appeal allowed in part and part matter remanded.

Summary

Issues Involved:
1. Classification of products under Chapter 48 vs. Chapter 49.
2. Classification of waste paper.
3. Applicability of extended period of limitation.

Issue-wise Detailed Analysis:

1. Classification of Products under Chapter 48 vs. Chapter 49:
The primary issue is whether the products manufactured by the appellants are classifiable under Chapter 48 or Chapter 49. The appellants argue that their products fall under Chapter 49, while the Revenue contends they belong under Chapter 48. The specific items in question include folders for inserting certificates and waste paper. The appellants cite Chapter notes 12 and 14 of Chapter 48, which state that printed paper, paperboard, cellulose wadding, and articles thereof, if printed with motifs, characters, or pictorial representations that are not merely incidental to the primary use of the goods, fall in Chapter 49. The impugned order, however, reclassified these goods under specific headings of Chapter 48 without providing detailed reasoning.

The appellants argue that the folders used for inserting certificates are printed with specific text and logos, making them unsuitable for general public use as stationery articles. They rely on the Tribunal's decision in the case of Sri Kumar Agencies, which held that sophisticated printing that serves a definite purpose should classify the products under Chapter 49. The Tribunal agreed with the appellants, stating that the folders for inserting certificates should be classified under Chapter 49, as the printing is not merely incidental but essential.

2. Classification of Waste Paper:
The appellants argue that waste paper generated during the manufacturing process should be classified under Chapter 49, as it is produced from products classified under Chapter 49. They also seek the benefit of exemption Notification No. 89/95-CE, which exempts waste, pairing, or scrap arising during the manufacture of exempted goods from excise duty. The impugned order does not provide any findings on the classification of waste paper. The Tribunal found that there were no specific findings on this issue in the Order-in-Original either and remanded the matter back to the original adjudicating authority for a fresh decision.

3. Applicability of Extended Period of Limitation:
The appellants contest the demand for items 2, 4, and 5 solely on the grounds of limitation. They argue that the issue involves interpretation, and there was no malafide intention to evade or suppress facts. The Tribunal noted that the CBIC had issued a Circular clarifying the classification of goods and the interpretation of Chapter Notes 12 and 14. Given the nature of the dispute, the Tribunal held that the appellants could have held a bona fide belief regarding the classification, and thus, the extended period of limitation could not be invoked for items 2, 4, and 5.

Conclusion:
The Tribunal allowed the appeal in respect of items 1, 2, 4, and 5, setting aside the impugned order for these items. For item 3, the Tribunal remanded the matter back to the original adjudicating authority for a fresh decision. The judgment emphasizes the importance of detailed reasoning in classification disputes and acknowledges the possibility of bona fide belief in complex interpretative issues.