1987 (3) TMI 207 - AT - Central Excise

Issues Involved:

1. Validity of the show cause notice under Section 36(2) of the Central Excises and Salt Act, 1944, with respect to the limitation period.
2. Classification of printed cartons as products of the printing industry or packaging industry for the purpose of excise duty exemption.

Issue-wise Detailed Analysis:

1. Validity of the show cause notice under Section 36(2) of the Central Excises and Salt Act, 1944, with respect to the limitation period:

The primary contention was whether the show cause notice issued by the Central Government was barred by the limitation period as specified in Section 36(2) of the Central Excises and Salt Act, 1944. The second proviso to Section 36(2) stipulates a one-year period from the date of the decision or order for initiating proceedings. The third proviso requires that if the Central Government is of the opinion that any duty has not been levied or has been short-levied, the notice must be issued within the time limit specified in Section 11A, which is six months from the relevant date, extendable to five years in cases involving fraud or suppression of facts.

The Assistant Collector's order was dated 5.7.1978, and the Order-in-Appeal was dated 25.9.1978. The show cause notice by the Central Government was issued on 6.9.1979, within the one-year period stipulated by the second proviso but beyond the six-month period specified in the third proviso.

The respondents (R.M.D.C.) argued that the notice was barred by the third proviso since it pertained to the non-levy of duty, which should have been issued within six months. The Department contended that the notice was not a demand for duty but related to the classification of goods, and hence, the third proviso was not applicable.

The Tribunal examined precedents, including the Allahabad High Court's judgment in Triveni Sheet Glass Works Ltd. v. Union of India, which held that an order on a classification list does not result in a demand for duty and hence does not attract the third proviso. Conversely, the Delhi High Court's judgment in Associated Cement Companies Ltd. v. Union of India, which dealt with classification and exemption issues, was considered relevant by the respondents.

Ultimately, the Tribunal majority concluded that the show cause notice was barred by the third proviso to Section 36(2) as it effectively pertained to non-levy of duty, and thus, the notice was discharged, and the appeal was dismissed.

2. Classification of printed cartons as products of the printing industry or packaging industry for the purpose of excise duty exemption:

The second issue was whether printed cartons manufactured by R.M.D.C. were products of the printing industry, eligible for exemption under Notification No. 122/75, or products of the packaging industry, subject to excise duty.

The Assistant Collector initially held that printed cartons were products of the packaging industry, as the printing was merely incidental to their primary function of packaging. The Appellate Collector reversed this decision, relying on the Central Government's Order-in-Revision in the case of M/s. Allibhoy Sharefally & Company, which had granted similar exemptions.

The Tribunal considered various judgments, including the Government's decision in Vijay Flexible Container Ltd., which held that printed cartons were products of the packaging industry. The Tribunal also reviewed high court judgments, including the Andhra Pradesh High Court's decision in M/s. Golden Press, which supported the packaging industry classification, and the Karnataka High Court's decision in Rollatainers Ltd., which supported the printing industry classification.

The Tribunal majority ultimately held that printed cartons were products of the printing industry, considering the substantial cost of printing and the specialized nature of the work undertaken by printers. Consequently, the order of the Appellate Collector granting the exemption was upheld, and the appeal was dismissed.

Separate Judgments:

- Vice President (G. Sankaran): Concluded that the show cause notice was barred by the third proviso to Section 36(2) and dismissed the appeal without addressing the merits of the classification issue.
- Member (V.T. Raghavachari): Dissented, holding that the notice was governed by the second proviso and was issued within time. He further opined that printed cartons were products of the printing industry and upheld the Appellate Collector's order.
- Member (K. Prakash Anand): Agreed with the Vice President that the notice was barred by the third proviso and dismissed the appeal without addressing the classification issue.

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