2013 (5) TMI 33 - AT - Central Excise

Manufacture - Department raised the questions Whether the printing and plastic/varnish coating of plain paperboard amounts to manufacture; and - If so, whether the printed and plastic/varnish coated paperboard sheets are classifiable under Heading 4811 or under Heading 4911 in which case, the rate of duty would be nil. Held that - We are of the view that the judgment of the Apex Court in Union of India v. J.G. Glass Industries Ltd. reported 1997 (12) TMI 110 S.C is squarely applicable to the facts of this case as in this case, admittedly, plain paperboard and printed paperboard, both can be used for making cartons for packaging. Hon ble Supreme Court in case of Rollatainers Ltd. v. Union of India reported in 1994 (7) TMI 86 S.C. which has also been relied upon in its above-mentioned judgment in case of Union of India v. J.G. Glass Industries Ltd. (supra) has held that the plain carton even after printing remains a carton i.e. the product of packaging industry and they do not become the product of printing industry after printing. In view of the above discussion, we hold that the process of printing and varnish/plastic coating of plain cartons received by the appellant does not amount to manufacture and as such no duty is chargeable on the same. The impugned order, therefore, is not sustainable. The same is set aside. The appeal is allowed.

Summary

Issues:
Classification of printed and coated paperboard, liability to duty, applicability of duty exemption under Notification No. 214/86-C.E., invocation of extended period under proviso to Section 11A(1).

Detailed Analysis:

1. Classification and Liability to Duty:
The dispute revolves around the classification and duty liability of the printed and plastic/varnish coated paperboards/sheets cleared by the appellant to their Baddi unit. The appellant engaged in printing and coating activities on paperboard received from Baddi unit, claiming duty exemptions under Notification No. 214/86-C.E. The Department contended that the printed and coated paperboard was chargeable to duty under Heading 4811, not exempt due to Baddi unit's duty exemption. During a later period, plain paperboards were purchased and subjected to printing and coating, cleared at nil duty under Heading 4911. The key issues to decide are whether the printing and coating amount to manufacture and the correct classification of the products for duty assessment.

2. Manufacture and Classification Analysis:
The Commissioner's finding indicated that the printing and coating processes did not alter the basic character and use of the paperboard, which continued to be used for making cartons. This aligns with the legal precedent established in the case of Union of India v. J.G. Glass Industries Ltd., where the Supreme Court emphasized that for a process to constitute "manufacture," a new commercial commodity must emerge or the original commodity's identity must cease to exist. In this case, both plain and printed paperboards serve the same purpose of carton production, indicating that the printing process does not alter the fundamental nature of the product. The Supreme Court's rulings emphasize that the product remains within the packaging industry category even after printing.

3. Judgment and Conclusion:
Based on the analysis, the Tribunal concluded that the printing and coating activities on the paperboard do not amount to manufacture, and therefore, no duty is chargeable on the processed paperboards. Consequently, the impugned order was deemed unsustainable and set aside, with the appeal being allowed in favor of the appellant. The judgment highlights the importance of assessing whether a process results in a commercially new product with distinct characteristics to determine the applicability of duty liability.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, New Delhi provides a comprehensive overview of the issues, legal interpretations, and the final decision rendered in the case.