2005 (3) TMI 302 - AT - Central Excise

Classification of Hinge Lid Cutouts and Cardboard/Foil board with Aluminium foil - Valuation (Central Excise) - Captive consumption - HELD THAT - We hold that the impugned goods are rightly classifiable under Heading 7607.90 as the Aluminium foils are neither perforated nor cut to shape. The Apex Court in the case of Union Carbide India Ltd. v. CCE 2003 (9) TMI 89 - SUPREME COURT while setting aside the order of the Tribunal has specifically observed that since there is specific heading for perforated or cut to shape aluminium foils, they should be classified under that heading alone. In the present case, the facts are different. We hold that the impugned goods are classifiable under sub-heading 7607.90, ruling out 7607.30 which is meant for goods specific description. Appellants argue that the goods are rightly classifiable under Heading 4810.10 whereas the Department holds that the same are classifiable under Heading 4810.90. The appellants argue that the coated board is used for printing and is therefore specifically covered by the description under sub-heading 4810.10 which reads Paper and Paperboard of the kind used for writing, printing or other graphic purposes. They argue that the residuary entry i.e. 4810.90 meant for other is not attracted. We agree that if Heading 4810.10 wants to cover coated board as well, it should have been specifically mentioned therein. The appellants argue that because they are printing something on the paperboard, it is a kind used for printing, but the fact remains that the goods in question are coated paperboard and not merely paperboard. We are of the opinion that coated paper goods are rightly classifiable under sub-heading 4810.90 as residuary item and plain paper boards (without coating) are covered under 4810.10. Thus, the appeal is disposed of in the following terms (a) Value of the goods in question is to be determined in accordance with the principles of costing in CAS-4 and the judicial pronouncements. (b) Profit should be added to the cost of production on notional basis and not on the basis of profit earned by the Group of Companies as a whole. (c) HLCs and CBOs backed with aluminium foils are classifiable under sub-heading 7616.90 of the Schedule to the CETA, 1985. Coated Board is classifiable under sub-heading 4810.90. The appeal is thus allowed by way of remand.

Summary

Issues involved:
Classification of products - HLCs & CBOs, Coated Board; Valuation under Section 4 of the C.E. Act, 1944; Determination of the value under Rule 6(b)(ii) of the Valuation Rules; Addition of profit while computing value under Rule 6(b)(ii).

Analysis:

1. Valuation and Classification of Products:
The dispute in this case revolves around the classification of HLCs & CBOs and Coated Board. The appellants argue for specific sub-headings under the Schedule to CETA 1985, while the Department contests these classifications. The Commissioner (Appeals) emphasized the importance of determining the value under Rule 6(b)(ii) of the Valuation Rules. The appellants challenged the valuation method based on selling price, citing legal precedents and guidelines from the Central Board of Excise & Customs. Ultimately, it was agreed that the principles in CAS-4 should guide the valuation of captively consumed goods. The Tribunal directed the original authority to determine the value in accordance with CAS-4 and legal precedents.

2. Addition of Profit:
The issue of adding profit while computing value under Rule 6(b)(ii) was also contentious. The Commissioner (Appeals) considered the overall profit earned by the Group as a whole, which the appellants objected to, advocating for a notional profit consistent with their activities. The Tribunal ruled in favor of determining a notional profit of 10% of the cost of production, aligning with the Department's show cause notice and legal principles.

3. Classification of HLCs, CBOs, and Coated Board:
Regarding the classification of HLCs, CBOs, and Coated Board, the Department sought to classify them under specific sub-headings, while the appellants argued for alternative classifications. The Tribunal analyzed the descriptions and nature of the goods, ultimately ruling that the HLCs and CBOs backed with aluminum foils are classifiable under a specific sub-heading, and the Coated Board under a residuary item, based on the nature and usage of the goods.

In conclusion, the Tribunal remanded the matter to the original authority for determining the value of the goods, ensuring compliance with CAS-4 principles and legal precedents. The issues of classification were settled, providing clarity on the appropriate sub-headings for the disputed products. The judgment highlighted the importance of following established valuation rules and principles while considering the addition of profit in determining the value of goods.