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M/s I.T.C. LTD. Versus Commissioner of Central Excise, Bangalore And Others

2017 (10) TMI 552 - CESTAT ALLAHABAD

Parts of cigarette packets - excisability/marketability - Whether parts of cigarette packets namely slides/slits (inner frame) are excisable goods within the meaning of CETA 1985? - Natural Justice. - Held that: - The ruling in the case of M/s Zupiter Printing versus Union of India [1991 (3) TMI 394 - DELHI HIGH COURT] supports the case of the appellant herein, as the issue therein was taxability of cigarette shells only manufactured by M/s Zupiter Printing by way of job work for the cigaret .....

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etable. - In the facts of the present case slide/slits are not goods or product known in the market and hence not marketable. - The slide/slits in the facts of the present case are specific to the appellant as manufactured by them for their own brand separately and cannot be inter-used by other cigarettes manufacturers for their brands. In the facts of the case that the slides/slits are also not interchangeably usable by the appellant itself for its various cigarettes being manufactured .....

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ding that slides/slits are not capable of being marketable and accordingly are not excisable/dutiable. - Appeal allowed - decided in favor of appellant. - Cross Application No. E/Cross/153/2007, Appeal Nos. E/1207, 1205 & 1206/2007-EX [DB] - Final Order Nos. 71184 71186/2017 - Dated:- 27-9-2017 - Mr. Anil Choudhary, Member ( Judicial ) And Mr. Anil G. Shakkarwar, Member ( Technical ) Shri Ravinder Narain (Adv.), Shri Ajay Aggarwal (Adv.) & Ms. Mallika Joshi (Adv.) for Appellant Shri Paw .....

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bai units of the appellant, the Apex Court observed that the question of marketability of slides and slits was not taken in reply to the Show Cause Notice, yet, having regard to the fact that the question was raised in the synopsis of submissions before the Appellate Authority, but was not dealt with specifically by it, further it was urged before the Tribunal and no objection was taken as to maintainability of the contention on the ground that it was not raised before the Original Authority, we .....

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he Commissioner (Appeals), Meerut I Uttar Pradesh. Similarly, on the same facts and circumstances the appeal of the appellant before the Apex Court regarding its Bangalore unit being Civil Appeal No. 7515 7517 of 2004 was also disposed of in same terms, vide order dated 08/02/2006 remanding the matter to the Learned Commissioner (Appeals), Meerut-I 3. Accordingly as directed the appellants herein appeared before the Learned Commissioner (Appeals), Meerut-I and made their various submissions with .....

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td., posted at the Cigarette factory of the said company at Saharanpur since May, 2002. Earlier also I have worked in several factories manufacturing cigarettes of M/s ITC Ltd. at different locations and I have experience in the field of the production of cigarettes and packing thereof for the last over 20 years. I am fully conversant with the entire process involved in packing of cigarettes including the process of preparing shell type and hinge lid type of cigarettes packets as well as the pro .....

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he two open ends of the shell. For this purpose, a flat cut out of paper board is required. Cigarettes, which are prepared on a separate cigarette making machine, are brought on a trolley to the packing machine. These cigarettes are put and folded in an aluminium foil. This folded aluminium foil containing the cigarettes, is placed on the aforesaid flat cut out of paper board. This cut out of paper board with the folded aluminium pack placed on it, is then slided into the shell, and the two ends .....

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or cut outs for each brand of cigarettes, in the first instance, a suitable paper board is procured which is duty paid. The paper board required for packing different cigarettes is of different specifications. The difference in specification may be on account of (a) thickness, which varies from 205 to 250 gsm (grams per sq. mtr). (b) Nature of the Board i.e. foil, metalized, coated, folding box Board, etc. (c) colour, which may be white, yellow, gold etc. After identifying the suitable paper boa .....

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to obtain the cut out of the requisite width, length and shape. In this manner, printing is done first and the cutting and creasing is done subsequently on the same machine. The cut outs for each brand of cigarettes are design specific. The printed cut out for each brand of Cigarettes has a distinct and different marking thereon which contains particulars and details applicable only to a particular brand of cigarettes. The markings and printing material is specified to also comply with the legal .....

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ion, the following details were required to be printed for each brand of Cigarettes during the period relevant for the above appeals, for each brand of Cigarettes:- (i) Brand name like Capstan Standard (ii) MRP like ₹ 4.00 incl. of all taxes (iii) Name and address of the manufacturer like Mfd. By I.T.C. LTD., 37, Chowrenghee Calcutta 71 . (iv) Name of the factory like I.T.C. LTD. Saharanpur. (v) Licence No. like R-1/7/92 (vi) Date of packing like pkd. 05/02 (vii) Slogan relating to each br .....

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manufacturer of Cigarettes himself within his factory and he has to necessarily use it himself and that too for the purpose of packing only a particular brand of cigarettes. It is not possible for the appellant to use such cut out for packing any other cigarette of a different brand. This pre printed cut out cannot be sold to any other competitor producing cigarettes which are of a different brand. The cut out required for packing cigarettes of different brands are not interchangeable. Such cut .....

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of Cigarettes. Such printed cut outs are nothing but duty paid paper board having the requisite material printed thereon and cut to specific size and shape. Such cut outs are not available in the market and are not a product which is ordinarily brought to the market for sale and purchase and are not generally dealt with in the market. It is not a product having any commercial name. The cut out is also not capable of being sold to the consumer in the market. These printed cut outs or slides canno .....

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an be firmly closed again, a paper board cut out is pasted on the inner front side of the packet, so that when the lid of the packet is closed, the lid gets stuck by the said Cut Out and the packet gets firmly closed. In the absence of paper board Cut Out , the lid when closed, would not get stuck and would remain half open. This paper board Cut Out is nothing but duty paid paper board cut to specific size and shape. For want of better description, this paper board cut out is also described as a .....

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t for the particular brand of cigarettes. Hinge lid type of packets are prepared on highly sophisticated, automatic imported machines which are capable of packing cigarettes at a very high speed. Speed is the essence of an economical and commercially viable process of packing cigarettes in hinge lid type of packets. The paper board Cut Out is an in process material and is cut within the automatic process of packing on such machine itself. The process for packing cigarettes in the hinge lid type .....

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e Package Commodity Rules, 1977, framed under the Standard of Weights & Measures Act, 1976 are already printed on the HL blanks . These printed HL blanks are stacked on a conveyor belt or hopper depending on the type of machine used and are fed into the machine in a flat form. These HL blanks travel on one route within the said machine and at different stages, the requisite folding and gluing is done on the inner sides of the folded HL Blanks . On another stream within the same machine, prep .....

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ons is installed in the machine as a component part thereof. The paper board fed into the machine is cut within the same machine by this automatic cutter at extremely high speed so as to provide the requisite number of cut outs for hinge lid packet of cigarettes, which are prepared in numbers ranging from 110 to 420 packets per minute. In yet another stream within the same machine, cigarettes of a particular brand, which have been separately made, are fed in bulk into a hopper. The desired quant .....

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another stream of the same machine, the printed HL Blanks in flat form comes, on which glue has been put at specified places on the inner portion including the sides of the HL Blank . The bundle of aluminium foil containing cigarettes and the paper board cut out sitting on it, is then automatically placed, in continuity in the same machine, on top of the printed HL Blanks , which are in flat form, on which glue has already been put, as stated above. Thereafter, in a continuous process within the .....

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into consideration packets of 10s and 20s), about 3,000 cigarettes are packed per minute. On the slowest machine, 110 packets per minute i.e. about 1.8 packets per second are prepared and on the fastest machine 420 packets per minute i.e. about 7 packets per second are prepared. These are the only machines available for packing cigarettes in hinge lid type of packets which are all imported. It is impossible to conceive that at any stage of this process of packing on such high speed automatic mac .....

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the desired size and shape of the cut out , and such specially designed cutter is a component part of the said automatic packing machine. Keeping in view the aforesaid process of packing hinge lid type of packets, it is not conceivable and indeed it is impossible to even suggest that such paper board cut out s which cannot be taken out of the machine, can be considered as a commodity which can ordinarily be taken to the market for buying or selling. There is no manufacturer of cigarettes or any .....

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es required to prepare the same, buying and selling of such paper board Cut Out is not at all conceivable. Trading of such cut outs is not done in the cigarette industry. The preparation of paper board Cut Out at an intermediary stage within the automatic machine involves only cutting of paper boards to the desired size and shape and nothing more. Mere cutting of paper board to a particular size and shape cannot amount to manufacture . No new commercial commodity known to the market comes into e .....

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other. A different size and shape of paper board Cut Out is required for each brand of Cigarettes packets of the hinge lid type. Such paper board Cut Out is not a standard item. Such paper board Cut Out is not available in the market and is not a product which is ordinarily brought to the market for sale and purchase. It is not a standard item or goods known and generally dealt with in the market. It is not a product having a commercial name. They are cut to size and shape for a particular brand .....

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lity and manufacture is not satisfied in respect of such paper board Cut Out . I say that the aforesaid paper board cut out for both type of packets, i.e., Shell type as well as hinge lid type, cannot be described as a marketable commodity and the preparation thereof, in the manner aforesaid, cannot be described as a manufacturing process. As such no duty of excise is leviable thereon. -Sd- DEPONENT 4. The appellants also appeared for personal hearing and also led evidence in support of the cont .....

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in the factory premises itself is not tenable in view of the ruling of Hon ble Delhi High Court in M/s Zupiter Printing versus Union of India, 1991 (34) E.C.R. 7, where it has been observed that it is a common practice for the manufacturers of cigarettes to acquire cigarette packets and parts thereof from parties who are engaged mainly in the manufacture of cigarette packets and their parts. In the case of the M/s Zupiter Printing the party was manufacturing only outer shells of cigarette packet .....

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hape and size and embossed with the word Pull it was held that the product is a result of an integrated and continuous process and cannot be assessed separately, particularly in view of the fact that cigarette is assessed in packed condition. The Learned Commissioner also referring to the ruling in the case of M/s Albert David Ltd. versus C.C.E. 2004, (60) R.L.T. 412 observed that poly pouches which emerged in the continuous uninterrupted integrated process of filling of milk in them are not cap .....

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ra). It was further observed that the test of marketability is established. The articles of cigarette packets i.e. slides/slits (inner frames) is marketable beyond doubt in the light of above case law as well as the ruling in M/s Zupiter Printing (supra). 5. Being aggrieved the appellant assessee is before this Tribunal challenging the finding of the Learned Commissioner on the ground that the slides/slits (inner frame) are not marketable, whereas the Revenue is in cross objections in support of .....

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ely of CETA 1985. It was the argument of the assessee that plastic bodies were manufactured to suit the design requirements of the assessee EMR. The plastic body is not a standardised item or goods known and generally dealt with in the market and as such the High Court has rightly found that it is not marketable. Further Court continued to hold that the plastic body, which is a part of the EMR is exempt under clause 5(d) of Notification No. 160/1986 CE, wherein the contention of Revenue was that .....

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ts and is not available in the market for being bought and sold. It is not a standardised item or goods known and generally dealt with in the market. It has been manufactured by the respondent assessee for its captive consumption. It is not a product known in the market with any commercial name. Further observed that the plastic body of EMR does not satisfy the criteria of marketability, taking notice of the fact that different manufacturer of the same product have a different plastic body to su .....

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mour Units (CCAU) for the installation of break waters in the outer harbour for the purpose of keeping the water calm and tranquil, whether the said CCAU constitute excisable goods. The Hon'ble Court observed that these CCAU units weight is about 50 metric tones each. They are like Tripods which usher the water calm and tranquil. In order to constitute goods twin tests have to be satisfied namely, process constituting manufacture and secondly marketability. In the facts of the case the secon .....

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der. They are of certain specifications and are harbour or location specific. It would depend on the water level required to be maintained in the harbour. There is no evidence to show that these blocks could be used in any other harbour. Accordingly, it was held that the goods CCAU fail the test of marketability and hence not excisable to excise duty. The Learned counsel also relies on the ruling in the case of M/s Gujarat Nermada Valley Fertiliser Company Ltd. versus Collector of Excise & C .....

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ble commodity, then the article is subject to excise duty. The fact that an article falls within the schedule by itself does not make it marketable. Actual sale is not necessary, but articles must be capable of being sold in market or known in market as goods. 8. The Learned counsel also referred to the ruling of the Apex Court in the case of C.C.E. versus M/s I.T.C. Ltd. (their own case) reported at 2003 (152) E.L.T. 241, wherein the question before the Apex Court was whether cigarette packets .....

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, store board, cardboard and Corey wooded board) and articles thereof specified below, in or in relation to the manufacture of which any processing is carried on with the aid of power, where exempt. Whereas boxes cartoons bags and other packing containers (including flattened or folded boxes and flattened or folded cartons), and whether in assembled or unassembled condition were liable to ad valorem duty. The Notification No. 66/82 CE provided exemption to articles of paper or paperboard, except .....

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sus M/s Punjab Anand Lamp Industries 1989 (43) E.L.T. 816, wherein the question was whether the packets/wrappers of the GLS bulbs were commercially known and marketable as packets, boxes or containers. It was held that the bulbs or tube shells had no independent market and were utilised for captive consumption for the end product. In the present case, it is to be understood that in context, cigarette packet cannot be termed as container as discussed in M/s Punjab Anand Lamp industries (supra), b .....

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Union of India (supra). The petitioner M/s Zupiter Printing was manufacturing cigarette outer shells of printed sheets supplied by M/s Godfrey Philip India Ltd, manufacturer of cigarettes. There are facts on record revealing that such packets or parts thereof are manufactured as per the order and are sold. This leaves no doubt that such packets are manufactured and are marketable. The Apex Court held that a cigarette packet containing shell and the slide covering all sides would be a box. Furth .....

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the market, hence not excisable under Tariff Item 17(4). M/s Zupiter Printing filed writ petition before the Hon'ble Delhi High Court challenging the order on the ground inter alia that the Board has no authority under the law to give direction to a quasi judicial authority like the Assistant Commissioner, who was seized of the matter on the judicial side nor can outer shells of the cigarette packet which are open from both sides be classified as box or container. The fact in the said case w .....

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Printing to classify the outer shell under Tariff Entry No. 17(4) and further to obtain licence and apply for re-classification. This direction of the Superintendent was objected to the petitioner (M/s Zupiter Printing). The Hon'ble High Court considered the issue on merits and observed that a cigarette packet, according to the petitioner, consists of two component parts, one component part is described as outer shell, the other a slide which is inserted in the shell to complete the packet. .....

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This is neither an encasement nor a receptacle which can hold the thing in itself. Even if we do not give much importance to the dictionary meaning of the word box still the currect guide in such a case is the context and the trade meaning. It was further observed that the definition of goods makes it clear that to become goods an article must be something which can ordinarily come to the market to be sold and bought. But at the shell stage, it can neither be bought nor sold in the market. Accor .....

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dered the evidentiary value of affidavits and opinion of experts and trade as to nature and marketability of goods. It was held that the same cannot be summarily rejected without any material or cross-examination and just on opinion. Relying on the observations of the Apex Court in M/s Mehta Parikh & Company versus Income Tax Commissioner, 1956 SC 554 clearly suggest that when affidavits are filed before an officer, normally speaking, if he so desires to challenge the correctness of the aver .....

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bacco Company Ltd. versus Union of India, 1992 (58) E.L.T. 418 wherein the Hon'ble Madras High Court held that it is clear from Notification No. 66/1982 C.E. that the intention was to exempt all containers and boxes falling under Tariff Item No. 17(4) relating to paper and paperboard and articles thereof except printed cartons and printed boxes. Further held that carton box could not be in any way used to describe a packet of cigarettes. It was also observed that it is settled law that for t .....

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bserved that it is not in dispute at the stage of assembly. It is not only the packet which is assembled, but a packet of cigarettes containing cigarettes therein. Thus, if this assembly is to be treated as manufacture, the manufacturer is not of a packet but of a cigarette packet containing cigarettes. Thus, a cigarette packet cannot be subjected to duty twice over. Even otherwise, it is submitted that the outer shells and inner slides cannot be subjected to any separate assessment. Whatever it .....

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subsequent period, wherein an assessee brings additional material on record and the courts below. It could the Tribunal held in favour of the assessee the same was upheld by the Apex Court. 11. Accordingly, the Learned counsel for the appellants prays for allowing the appeals holding that slides /slits (inner frames) are not taxable/dutiable under the Central Excise Act since they are not marketable and no material is brought by Revenue in support of marketability. 12. The Learned AR for Revenu .....

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rd loses its identity and gets a new name that is slide/slit. Further the process of manufacture of slide/slit does not involve mere cutting of paperboard into smaller sizes. So far the contention of the appellants that the Commissioner (Appeals) has mixed the issue of inner frames and slides/slits is not correct as the Learned Commissioner (Appeals) in his order has discussed both type of items and given his findings. Accordingly, further placing reliance on the ruling in the case of Delhi Clot .....

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d product nor marketable will be a travesty of truth and miscarriage of Justice, in view of the fact that the paperboard was transformed into slide a product which are well-known in the cigarette industry and the fact that parts of cigarette packets have been found to be manufactured by cigarettes manufacturer, thus establishing the marketability of the goods beyond doubt. 14. Having considered the rival contentions we find that the findings of the Learned Commissioner (Appeals) are erroneous an .....

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appellant as true and correct. Further we find that the Learned Commissioner have relied upon the ruling in the case of M/s Zupiter Printing (supra). We find that the said ruling supports the case of the appellant herein, as the issue therein was taxability of cigarette shells only manufactured by M/s Zupiter Printing by way of job work for the cigarette manufacturer. The question in that case was limited to whether the cigarette shells are excisable if they are considered as a box. Further we f .....

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