2005 (9) TMI 175 - AT - Central Excise

Classification of goods - printed PVC sheets - classifiable under sub-heading 3920.39 of Central Excise Tariff Act, 1985 or under Chapter 49, as product of printing industry? - HELD THAT - Only those printed goods which are not incidental to the primary use, would be excluded from Chapter 39. The respondents have produced before us plain as also printed PVC sheets. It is seen that the printing on the plain sheets is only to enhance the beauty of the plain sheet and both the types are being used for the same purpose, i.e. either as table coverings or shower curtain, etc. As such it is clear that the printing on the plain sheet is only incidental and does not convert the plain plastic sheets into something different so as to take it away from the Chapter 39 and make it fall under Chapter 49, as a result of printing industry. It is well settled that Chapter 49 covers product of printing industry like labels, etc. which imparts the character to the goods. The Hon'ble Supreme Court in the case of METAGRAPHS PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY 1996 (11) TMI 68 - SUPREME COURT has, while deciding upon the classification of aluminum labels, has held that printing of the label is not incidental to its use but primary in the sense that it communicate to the customers about the products and thus serve a definite purpose. It is the printing industry which brought label into existence. They have further observed that the products on which some printing is done are not the products of printing industry and the classification is to be contested with reference to the fact of the each case. Inasmuch as printing in the present case is not of prime importance so as to convey the main use of PVC sheet, it cannot be said that the final product has come into existence on account of the printing having been done on the same. It is also seen that the appellants are clearing printed plastic sheets to the market, in which case the duty is required to be paid on the assessable value of the printed sheets. However, at this stage, ld. Advocate submits that they had already paid duty on the plain PVC sheets and they may be allowed the benefit of Modvat credit of the same, while discharging duty on the printed sheets. Inasmuch as the duty is being demanded on the printed sheets, it is held that the duty already paid on the plain sheets would be adjustable towards the final duty required to be paid by the respondents, for which purposes, matter remanded to the Assistant Commissioner for doing quantification. Appeal allowed by way of remand.

Summary

Issues:
Classification of printed PVC sheets under Central Excise Tariff Act, 1985 - Whether printing amounts to manufacture - Correct classification under Chapter 39 or Chapter 49 - Benefit of Modvat credit on plain PVC sheets.

Analysis:
The dispute in the appeal revolves around the classification of printed PVC sheets under the Central Excise Tariff Act, 1985. The Assistant Commissioner classified the sheets under sub-heading 3920.39, resulting in a duty demand of Rs. 50,44,584.50. However, the Commissioner (Appeals) accepted the assessee's argument that the sheets should be classified under Chapter 49 as a product of the printing industry, leading to the current appeal.

The assessee contended that printing on plain PVC sheets does not amount to manufacture. They argued that if it does, the classification should fall under Chapter 49 with a nil rate of duty. The Tribunal referenced a previous order where it was held that printing on sheets constitutes manufacture, creating a new product with its own commercial identity. The Tribunal rejected the assessee's claim that plain and printed sheets are the same goods, emphasizing the emergence of a new identifiable product through printing.

Regarding classification, the appellate authority considered Section Note (2) of Section VII, which excludes printed goods not incidental to their primary use from Chapter 39. The Tribunal observed that the printing on plain PVC sheets was merely to enhance their appearance, making it clear that the printing did not transform the sheets into a different product. Chapter 49 covers products of the printing industry that impart character to goods, as established by a Supreme Court ruling on the classification of labels.

Chapter Note (10) of Chapter 39 was also noted, specifying that printed sheets fall under Heading 39.20 even with pictorial representation. Consequently, the Tribunal upheld the Original Adjudicating Authority's classification under Heading 39.20 for the printed PVC sheets. Additionally, the Tribunal addressed the issue of duty payment on printed sheets, allowing the benefit of Modvat credit on duty already paid for plain PVC sheets, which can be adjusted towards the final duty on printed sheets.

In conclusion, the Tribunal allowed the Revenue's appeal, directing quantification of duty payable on printed PVC sheets after adjusting the duty already paid on plain sheets. The classification under Heading 39.20 was upheld, emphasizing that printing on plain sheets did not alter their essential nature.