Classification of printing biri wrappers cut to size.

PJ/CASE LAW/2015-16/2884

Case:- HEADWAY LITHOGRAPHIC COMPANY VS COMMISSIONER OF C. EX., KOLKATA

Citation:- 2015 (321) E.L.T. 394 (S.C.)

Brief Facts:-The appellants herein are printing biri wrappers cut to size and they have been clearing these goods under the Central Excise Act under Chapter sub-heading 4821.00, and the duty under this is Nil. The Department took the view that the case would be classified under Chapter Heading 4823.19 and excise duty at the rate of 20% was payable.
Show cause notice was issued proposing to levy excise duty of Rs. 27 lakhs for the period August, 1994 to March, 1999. After eliciting reply from the appellant, Order-in-Original was passed by the adjudicating authority confirming the demand contained in the show cause notice and also directing the appellant to pay interest thereupon. The contentions of appellant were rejected by the adjudicating authority while passing the Order-in-Original. The appellant then preferred appeal against the aforesaid order.
The two Members differed with each other on the issue as to whether it amounted to ‘manufacture’ or not and the matter was referred to the third Member. The third Member took the view that the process undertaken by the appellant amounted to ‘manufacture’. Against that judgment of the Tribunal appeal was preferred.

Appellant’s Contention:-The appellant, had taken the defence that the printing of the biri wrappers and thereafter cutting them to size does not amount to ‘manufacture’ and therefore no duty was payable. In addition, the contention of the appellant was that the printing biri wrappers cut to size were to be classified under Chapter Heading 4821.00 which attracts Nil rate of duty.

Respondent’s Contention:-Mr. Radhakrishnan referred the notice contained under Chapter 48 and particularly Note 11 thereof, which reads as under :
Except for the goods of heading No. 48.14 or 48.21, paper, paperboard, cellulose wadding and articles thereof, printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods, fall in Chapter 49.

Heading No.	Sub-heading No.	Description of Goods	Rate of duty
(1)	(2)	(3)	(4)
48.01		Newsprint, in rolls or sheets
	4801.10	- Odd sized and rejects	10%
	4801.90	- Other	10%

It was pointed out that except for the goods under Heading 48.14 or 48.21, paper, paper board, cellulose, Wadding and articles thereof printed with motifs, character or pictorial representations would fall under Chapter 49 when they are not merely incidental to the primary user of the goods. He was candid in accepting that in view thereof as far as printing of the biri wrappers is concerned, it would not fall under Chapter Heading 48.23, which was the case set up by the Revenue. According to him it would fall under Chapter 49. This position is accepted by Mr. Lakshmikumaran, learned counsel appearing for the appellant.
Entry 49.01, under which the goods fall, reads as under :
For the purposes of Chapter 49, ‘printed’ also means reproduced by means of a duplicating machine, produced under the control of a computer, embossed, photographed, photo-copied, thermocopied or typewritten.

Heading No.	Subheading No.	Description of Goods	Rate of duty
(1)	(2)	(3)	(4)
49.01		Printed books, newspapers, pictures and other products of the printing industry, manuscripts, typescripts and plans
	4901.10	Transfers (decalcomanias)	20%
	4901.20	Maps and hydrographic or similar charts of all kinds including atlases, wall maps, topographical plans and globes, printed	Nil
	4901.90	Other	Nil

The only dispute is as to whether the goods in question will fall within the Entry 4901.10 or 4901.90. Whereas Mr. Radhakrishnan maintains that the goods would fall under Chapter Heading 4901.10, Mr. Lakshmikumaran argues otherwise.

Reasoning Of Judgement:-
Submissions of both were considered and Entry 4901.10 was referred which deals with ‘transfers (decalcomanias)’. The description of this entry is contained in HSN explanatory note which reads as under :
“Transfer (decalcomanias) consist of pictures, designs or lettering in single or multiple colours, lithographed or otherwise printed on absorbent, lightweight paper (or sometimes thin transparent sheeting of plastics), coated with a preparation, such as of starch and gum, to receive the imprint which is itself coated with an adhesive. This paper is often backed with a supporting paper of heavier quality. The designs are sometimes printed against a background of metal leaf.
When the printed paper is moistened and applied with slight pressure to a permanent surface (e.g. glass, pottery, wood, metal, stone or paper), the coating printed with the picture, etc. is transferred to the permanent surface.
This heading also covers vitrifiable transfers, i.e. transfers printed with vitrifiable preparations of Heading 32.07.
Transfers may be used for decoration or utility purposes, e.g. for decorating pottery or glass, or for marking various articles such as vehicles, machines, and instruments.
Transfers produced and supplied mainly for the amusement of children are also covered by this heading, as are also articles such as embroidery or hosier transfers which consist of papers on which designs are outlined in pigment which is transferred, usually to a textile surface, by pressure with a heated smoothing iron.”
On the face of it, it is apparent that the printing of biri wrappers would not and can never fit under the description ‘transfer decalcomanias’ inasmuch as in the present case on plain paper simple printing is done on the wrappers which are cut to size for the purpose of wrapping the biris and there is no use of sheet of plastics. In fact it is not printed on any absorbent, lightweight papers and there is no coating of starch and gum. The conclusion would be that the goods in question would fall under Item No. 4901.90 which attracts nil duty.
In view of the aforesaid classification, it is not even necessary to go into the question whether the process amounts to manufacture or not.

Decision:- The appeal is allowed.

Comment:- The crux of the case is that printing biri wrappers cut to size would fall under Item No.4901.90 which attracts Nil rate of duty. Therefore, no duty is payable on printing biri wrappers cut to size. As the classification of the product itself leads to nil rate of duty, the question whether process amounts to manufacture or not was not taken up for consideration.

Submitted By:- Somya Jain

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PJ/CASE LAW/2015-16/2884

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