2024 (7) TMI 62 - AT - Central Excise

Classification of goods - printed paper labels - to be classified under Heading 48.21 attracting 16% ad valorem or under sub-heading 4901.90 attracting NIL rate of duty? - period 08.03.2002 to 31.03.2002 - HELD THAT - The primary use of the goods is known to be as printed labels and the product would then be correctly classifiable as a product of printing industry falling under 4901.90 as argued by the appellant. The Tribunal in the case of M/S. LOVELY OFFSET PRINTERS VERSUS COMMISSIONER OF CENTRAL EXCISE, TIRUNELVELI 2017 (1) TMI 1314 - CESTAT CHENNAI had occasion to consider the very same issue of classification of printed paper labels. The Tribunal followed the decision in the case of JOHNSON JOHNSON LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY-II 1997 (7) TMI 138 - SUPREME COURT and held that the goods would fall under chapter sub heading 4901.90. The Hon ble Apex Court in the case of JOHNSON JOHNSON LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY-II 1997 (7) TMI 138 - SUPREME COURT had considered whether paper printed labels would be eligible for exemption as a product of printing industry and held the issue in favour of the assessee. The Ld. A.R produced the decision in the case of ITC. LIMITED VERSUS COLLECTOR OF CENTRAL EXCISE, MADRAS 1997 (12) TMI 115 - SC ORDER . In the said case, the issue that was under consideration was with regard to the paper / paperboard articles used for packaging of cigarettes which also contained printed matter. After considering both the competing classifications under Chapter Heading 48 as well as 4901.90, it was held that since the primary use of the articles being in connection with the packaging of cigarettes and the printing there being merely incidental to the primary use, the goods are correctly classifiable under Chapter 48 of the Tariff Act, 1985 - This decision would clearly bring out the distinction between the printing which is merely incidental as well as that of primary use and therefore would substantiate our view that the printing being of primary use in printed label, the impugned products in the present case are classifiable under Chapter heading 4901.90 of CET Act, 1985. Thus, the impugned products fall under Chapter Heading 4901.90 as products of printing industry and attract NIL rate of duty. The demand of duty therefore cannot sustain. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Classification of printed paper labels.
2. Eligibility for NIL rate of duty.
3. Applicability of Section Note 11 of Chapter 48.
4. Relevance of prior judgments and circulars on classification.

Detailed Analysis:

1. Classification of Printed Paper Labels:
The primary issue revolves around whether the printed paper labels manufactured by the appellant should be classified under Chapter Heading 48.21, attracting 16% ad valorem duty, or under Chapter Heading 4901.90, attracting NIL rate of duty. The appellant contends that their products fall under Chapter Heading 4901.90 as products of the printing industry, which should attract NIL duty. The department argues that these labels should be classified under Heading 48.21, which specifically mentions "paper or paperboard labels of all kinds, whether or not printed," thus attracting 16% duty.

2. Eligibility for NIL Rate of Duty:
The appellant argues that their printed paper labels are products of the printing industry and should be classified under Chapter Heading 4901.90, which attracts NIL rate of duty. This argument is supported by several judicial precedents, including the Hon’ble Supreme Court's decision in Johnson & Johnson Ltd. Vs. CCE, Mumbai, which held that printed paper labels are eligible for exemption as products of the printing industry. The Tribunal also referred to other decisions, such as Lovely Offset Printers Vs. CCE, which classified similar products under sub-heading 4901.90, attracting NIL duty.

3. Applicability of Section Note 11 of Chapter 48:
The department relies on Section Note 11 of Chapter 48, which states that except for goods of Heading 48.14 or 48.21, paper or paperboard printed with motifs, characters, or pictorial representations, which are not merely incidental to the primary use of the goods, fall under Chapter 49. The department argues that the printing on the labels is merely incidental and not the primary use, thus classifying them under Heading 48.21. However, the Tribunal found that the primary use of the goods is as printed labels, and the printing is not merely incidental but essential, thus classifying them under Chapter 49.

4. Relevance of Prior Judgments and Circulars:
The Tribunal referred to multiple judicial decisions to support its conclusion. The Hon’ble Supreme Court in Johnson & Johnson Ltd. Vs. CCE, Mumbai, and other related cases consistently held that printed paper labels are products of the printing industry and attract NIL duty. Additionally, the CBEC Circular No. 21/90 clarified that products deriving their essential character from printing should be classified under sub-heading 4901.90. The Tribunal also distinguished the present case from the I.T.C. Limited Vs. CCE case, where the primary use was packaging, and printing was incidental.

Conclusion:
The Tribunal concluded that the printed paper labels manufactured by the appellant are classifiable under Chapter Heading 4901.90 as products of the printing industry, attracting NIL rate of duty. The demand for duty by the department was set aside, and the appeal was allowed with consequential relief. The decision was pronounced in the open court on 01.07.2024.