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TMI Blog2002 (5) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s. Rasma Trading Company. These trading companies had individual independent partners. Some of the partners were wives of the partners of the appellant firm. There it no dispute that the trading companies and the appellant firm had common business premises, telephone and some common employees. However, the appellant's claim is that their existence and financial working is totally independent and that they were registered under several authorities independently and that there was no flow back of funds. The trading companies were receiving export orders from exporters for manufacture of printed cartons. The trading firms were supplying raw materials to the appellant firm for mere activity of printing. The printed boards were returned to them. The traders in turn supplied it to individual scorers and laminators who were more than 49 in numbers, having independent partners with individual incorporation and registration under various authorities. They were also carrying on the work of several other similar units and charging small amount as job charges. While the appellant's activity was printing on the board, the major activity after the printing brought into existence separate goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scorers and laminators who were independent in all characteristics and their relationship between the trading firm and the scorers were on principal to principal basis so also the trading company. There was no nexus relationship between them and geographically they were distinct and separated. She submitted that the trading unit cannot be held as a dummy unit of the appellant and hence their clearances cannot be clubbed with the clearance of the scorer and laminators. She submitted that the ld. Commissioner has erred in coming to a conclusion that printed cartons were manufactured by the appellant and they should discharge duty. She submitted that the finding arrived at by the Commissioner was against the Tribunal's remand directions. The Tribunal had clearly given the finding that the case of the appellant and that of M/s. Coronation Litho Works was identical in nature and facts were similar. It was noted in the remand order by the Tribunal that M/s. Coronation Litho Works had been remanded for de novo consideration and therefore the Commissioner should decide the case in the same light. She submitted that in the case of M/s. Coronation Litho Works, the Commissioner held independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent in existence to the scorers. Therefore the finding that the traders and the appellant were dummy is equally a perverse finding as trader were independent and that the appellants did not have any financial flow back and there was no finding to that extent to say that there was financial flow back in all the 3 units to hold that the process of printed cartons were manufactured by all the 3 units. She submitted that appellant were having independent business and were filing independent tax returns. Mere sharing of office premises by the appellant does not imply financial flow back. Financial flow back is a criteria to hold them as dummies. She pointed out that even if they are considered as dummies even then appellants cannot be burdened with duty on printed carton manufactured by various independent 49 scorers and laminators. The scorers and laminators were having relationship on principal to principal basis with the traders and hence their clearance cannot be clubbed. She drew our attention to the Board's Circular No. 56/56/94-CX., dated 14-9-94 issued in this regard to argue that it clearly applied to the facts of the case and in terms of the Apex Court judgment rendered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the printed carton, the Department has considered the traders to be units of the appellant, without bringing out with clarity with facts to show as to how the trading units, who are independent in nature and acting on principal to principal basis, can be considered as dummy units. The appellant were only sharing the premises and some facilities. The department has not shown that the traders and the appellant were having financial flow back and that the appellant had been set up solely with a view to evade payment of excise duty. Such charges has not been brought out to show that the relationship of the traders, the appellants and the scoring units are to be considered as one and the same. A dummy unit has been held to be a unit which exists only on paper and without any existence in reality by virtue of carrying out any business and filing of returns, etc. as held in the case of Alpha Toys Ltd. v. CCE as reported in 1994 (71) E.L.T. 689. We notice that the appellants were manufacturers of only printed boards which was separately classifiable under sub-heading 4811.90 of CET and in terms of the Apex Court judgment rendered in the case of Rollatainers Ltd. v. Union of India (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also submitted a written brief at the time of personal hearing. Main contentions of the Consultant are as follows : (a) The printed cardboard (paperboard) sheets cannot be classified as printed cartons falling under sub-heading No. 4819.12. But the same is to be classified only under sub-heading No. 4811.90 which at the relevant time was exempted from duty under Notification No. 49/87. The CEGAT Special Bench 'C' in New Delhi in the matter of Collector of Central Excise v. G. Agarwala and Company - 1990 (47) E.L.T. 605 (Tribunal) have held that the printed sheets of craft paper and duplex paperboard are classifiable under Heading No. 48.11 and not under Heading 48.18 (sub-heading 4818.12 then covered printed cartons). If the headings read in the light of section or chapter notes are clearly determinative of the classification, the rules for interpreta tion cannot be invoked. The CEGAT in the case of Rajasthan Synthetic Industries Ltd. v. Collector of Central Excise - 1989 (42) E.L.T. 24 (Tribunal) had also held as above. (b) The exemption contained in Notification No. 175/86, dated 1-3-86 as amended was not available to a D.G.T.D. unit at the relevant time and there is no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on principal to principal basis. It has already been settled by the decisions of Courts and Tribu nal that the job workers are the manufacturers of excisable goods and not the customers who supply raw materials to the job workers. In the instant case NPC were suppliers of raw materials to the job workers on behalf of their customers. (f) Scoring of printed cardboard has been treated as manufacturing activity and the scorers have been treated as manufacturers of printed cartons vide summary based on M.F. (D.R.) Circular No. 6/89/Ex.4, dated 14-2-89 available in R.K. Jain's Central Excise Tariff of India 1990-91. (g) For the activities of NPC in representing as local agent of their customers STC and JE in getting printed cartons by engaging independent job workers viz. scorers, CLW are not re sponsible in any way. NPC also cannot be treated as manufacturer of printed cartons. Samples of following items when produced at the time of personal hearing. (i) Plain Sheet of paperboard. (ii) Printed sheet of paperboard. (iii) Printed sheet after lamination. (iv) Printed sheet after scoring. (v) Printed sheet after scoring and slitting. (vi) Printed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not otherwise require, according to the provisions of the other Interpretative Rules. As already painted out, since Chapter Heading 4811 covers 'printed boards' specifically, there is no necessity to invoke Rule 2(a) of Interpreta tive Rules to the Schedule to CETA, 1985 for the classification of the product in question. This is also the ratio of the decision of CEGAT in the case of Rajasthan Synthetic Industries Ltd. v. CCE - 1989 (42) E.L.T. 24 (T). 18. The Supreme Court, while defining the process of manufacture in the case of M/s. Ujagar Prints etc. have observed that "the prevalent and generally accepted test to ascertain that there is 'manufacture' is whether the change of the series of changes brought about by the application of processes take the commodity to the point, where, commercially, it can no longer be registered as the original commodity but is, instead, recognised as a distinct and new article that has emerged because of the result of the processes." In line with the above judgment, I view that the process of scaring or creasing the printed paperboard as discussed earlier, brings into existence a new product, commercially known as 'printed cartons' in flattene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pumps manufactured with brand name 'Atul Shakti' from the different manufacturing units who in fact were manufacturing these pumps on behalf of the appellant. In reply it was stated that the appellant had given raw materials to independent units who were not under control or direction of the appellant. According to the appellant, on the raw material supplied by it the independent units had manufactured according to specification given by the appellant. Therefore, the work carried on by the independent units could not be deemed to be on behalf of the appellant and the appellant could not be denied the benefit of exemption under Notification No. 85/72. The Tribunal did not agree even though it held that the appellant had no control over manufacturing process and the manufacturing parties but what persuaded the Tribunal to take the view against the appellant was that it found that the appellant sent components in the shape of casting which by a little machining and grinding became pumps. Therefore, even though the manufacturing units were independent, yet it did not make any difference in law as the pumps having been manufactured on behalf of the appellant, it was not entitled to exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l either over the manufacturing process or manufacturing parties. Once the Tribunal recorded this finding it misdirected itself in entering into the question whether the pumps manufactured by third parties was mere assembling on raw material or component supplied by the appellant or it was manufacture. Even assuming that what was supplied was component, but that by itself was not sufficient to fasten liability on the appellant. The component unless processed did not result in production of pump. And that having been done by independent units for payment the finding that it was manufactured on behalf of the appellants without any material cannot be upheld. In fact, no such finding has been recorded by the Tribunal nor any material could be pointed out which could establish that it was the appellant who manufactured the pumps or the independent units from whom it got the pumps manufactured were doing so on behalf of the appellant. The Tribunal in extending the meaning of the expression 'manufacturing' on behalf of the appellant by introducing the concept of supply of components went beyond the ambit of the notification. 4. In the result, this appeal succeeds and is allowed. The ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms such as raw material supplier/job worker and their relationship and should have been legally vetted. The Committee has desired that the said circular should be modified taking into consideration the deficiencies noticed, in consultation with Law Ministry, with a view to eliminating any ambiguity and scope for misinterpretation which may not only involve the department in legal wrangles, but also effect revenue collection. The matter has accordingly been examined by the Board in consultation with Law Ministry. 3. It may be mentioned that the issue as to whether the raw material supplier or the job worker will be treated as manufacturer came for consideration before the CEGAT, Special Bench, New Delhi in the case of Kerala State Electricity Board v. Collector of Central Excise [1990 (47) E.L.T. 62 (Tribunal)]. In that case the Kerala State Electricity Board used to get PSC/PCC and RCC poles produced according to their specification and satisfaction with the help of material supplied by them, through contractors. On detailed examination of the terms and conditions of the contract between the two, the CEGAT came to the conclusion that the contractors were not merely working as hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lationship between the raw material supplier and the job workers should be on principal to principal basis. The fact that the job workers have not received any financial assistance from the raw material suppliers would make the job workers as independent units and they are required to be treated as an independent one. 10. In the present case the raw material suppliers are the traders. They are different units and have independent existence with separate business transaction. The appellant completed the job work of printing and returned the printed board to the traders. The traders independently distributed the same to 49 units of scorer and laminator who brought out into existence the printed carton, which were different product classifiable under chapter sub-heading 4819.12 of CET. There is no charge that the traders were giving any financial assistance to the scorer and laminator unit. Hence there is no relationship of hired labourer between them and the scorers and laminators. The records and evidence clearly show that the traders and appellant are independent in existence. The scorers and laminators are equally independent and their relationship is on principal to principal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCN and all the case law cited has not been examined. To this extent, we agree with ld. Counsel's argument that the order is not a speaking order. Further more, we notice that there were independent charges made against the appellants as well as the traders and traders were put to notice for penalty under Rule 209A. However, in the order the Commissioner has proceeded to hold that all the three units are one and the same. To that extent, the Commissioner has proceeded beyond the terms of the SCN. Further, we notice that the aspect of classification and the manufacture should have been addressed initially by the Commissioner and the Commissioner should have given a categorical finding whether mere printing would bring into existence a fully finished 'goods namely printed cartons for the classification purpose under chapter sub-heading 4811.12 as held by him. Much water has flown after the order of the Commissioner has been passed. By different several judgments passed by the Tribunal and matter having reached Apex Court, the matter has culminated in the judgment of Rollatainers Ltd (supra) and other similar judgment of Apex Court and also the Larger Bench judgment of the Tribunal. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the judgment rendered in the case of Basant Industries (supra), Board's Circular referred to and the finding arrived by the Commissioner of Central Excise in Order-in-Original No. 22/96, dated 30-12-96 in the case of Coronation Litho Works and on re-examination of the entire evidence, we hold that the appellants were only performing the activity of printing on paperboard, which are classifiable as printed board under chapter sub-heading 4811.90 of CET. The "cartons" are used for packaging goods and that product is considered as for packaging goods to be classified under chapter sub-heading 4819.12 of CET in the light of the Apex Court judgment rendered in the case of Rollatainers Ltd. v. Union of India (supra). The cartons come into existence in the hands of independent scorers and laminators and not in the hands of the appellant. Their relationship with the appellant is also on principal to principal basis and hence the show cause notice demanding duty on the appellant on the ground that the manufacture of printed carton by getting the work completed from hired labourers that is scorer and laminator is against the evidence on record. Hence the impugned order is set a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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