Case Note & Summary
The dispute concerned excise duty exemption for printed cartons manufactured by the appellant company. The appellant had claimed exemption under Notification No. 55/75 dated March 1, 1975, which exempted 'All products of Printing Industry including newspapers and printed periodicals' from excise duty payable under Item 68 of the First Schedule to the Central Excise and Salt Act, 1944. Initially, the Assistant Collector approved the appellant's classification list dated October 26, 1979, and the appellant cleared printed cartons without paying duty. Subsequently, the Superintendent of Central Excise by letter dated September 15, 1980 informed the appellant that printed cartons were not eligible for exemption as they were products of the packaging industry. The appellant filed a fresh classification list dated November 1, 1980 and began paying duty. Show cause notices dated September 24, 1980 were issued to recover duty for the period when cartons were cleared without payment. The appellant challenged these notices before the Karnataka High Court under Articles 226/227 of the Constitution. A learned single Judge allowed the writ petition, holding that printed cartons were products of the printing industry. In appeal, the Division Bench reversed that decision on November 16, 1990, holding that printed cartons were not products of the printing industry and dismissed the writ petition. The appellant then approached the Supreme Court by special leave. The appellant argued that printed cartons were known in trade as products of the printing industry, that printing was the dominant activity in their manufacture, and that they served as advertising media enhancing sale value. The revenue contended that a carton is essentially a packaging product and that printing on it does not change its nature. The Supreme Court agreed with the Division Bench. It held that the product in question is the carton, and the printing industry by itself cannot bring the carton into existence. A carton has only one use, namely packing a product. The mere fact that something is printed on it does not change its essential nature or use. Classification of manufactured goods cannot depend merely on the place of production or the cost of printing. The guiding factor is what is produced and how it is understood in common parlance. Therefore, printed cartons remain products of the packaging industry and are not exempt under Notification No. 55/75. The main appeal was dismissed. Civil Appeal No. 3206 of 1984 was dismissed upholding the CEGAT order dated March 27, 1984. Civil Appeal No. 3437 of 1987 was allowed, setting aside the CEGAT order dated September 29, 1987 and the Appellate Collector's order dated December 5, 1978, and restoring the Assistant Collector's order. No costs were awarded.
Headnote
A) Excise Law - Exemption Notification - Interpretation of 'All products of Printing Industry' - Central Excise and Salt Act, 1944, Item 68, First Schedule; Notification No. 55/75 dated 1 March 1975 - The question was whether printed cartons manufactured by the appellant company qualified as products of the printing industry and were exempt from excise duty. The court held that printed cartons are not products of the printing industry but products of the packaging industry because the essential character and function of a carton is to serve as a container, while printing on it is merely incidental and does not change its classification. The exemption notification was interpreted strictly and applied based on common parlance and product purpose, not on the activity of printing alone. Held that the Division Bench of the High Court correctly rejected the appellant's claim and dismissed the appeal (Paras 1-4). B) Excise Law - Classification of Goods - Common Parlance and Essential Function Test - Central Excise and Salt Act, 1944, Item 68, First Schedule - The court affirmed that classification of manufactured goods for excise purposes must be based on what the product is understood to be in common parlance and its essential function, irrespective of where it is produced or the cost of printing relative to other inputs. A printed carton remains a carton used for packaging goods; printing does not convert it into a product of the printing industry. The court endorsed the High Court's reasoning that printed cloth remains textile, printed metal cans remain packaging, and similarly printed cartons remain packaging products. Held that mere printing on a product does not make it a product of the printing industry; the guiding factor is the product's essential nature and use, not the production process or cost of printing (Paras 3-4).
Issue of Consideration
Whether printed cartons manufactured by the appellant company are 'products of the Printing Industry' and thus exempt from payment of excise duty under Exemption Notification No. 55/75 dated March 1, 1975 as amended.
Final Decision
Civil Appeal No. 4770 of 1994 dismissed; printed cartons held not products of Printing Industry but of Packaging Industry, not exempt under Notification No. 55/75. Civil Appeal No. 3206 of 1984 dismissed, upholding CEGAT order dated March 27, 1984. Civil Appeal No. 3437 of 1987 allowed, setting aside CEGAT order dated September 29, 1987 and Appellate Collector order dated December 5, 1978, restoring Assistant Collector's order. No costs in all appeals.
Law Points
- Exemption notification interpretation
- Common parlance test
- Classification of excisable goods
- Essential character and function
- Packaging industry versus printing industry
- Excise duty exemption
- Product of printing industry
- Central excise tariff item 68
