TMI Blog1985 (1) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... It did not take out a licence under the Central Excises and Salt Act. 3. On 13-12-1977, the officers of the Special Checking Squad, Headquarters, Central Excise Department, Hyderabad, visited the premises of the petitioners and registered a case against it for contravention of Rules 9(1), 174 and 173PP of the Central Excise Rules, 1944, on the ground that, for the period 1-3-1976 to 17-6-1977, the petitioner had employed more than 49 workers; that, for the period 18-6-1977 to 13-12-1977,.the value of the machinery in its unit was more than Rs. 10,00,000/- and hence, its produce was liable to duty and that, the petitioner was also bound to take out a licence under the Act. The statement of the Managing Partner of the petitioner-press was also recorded on the same day. 4. On 9-1-1978 a notice was issued to the petitioner by the 1st respondent (Deputy Collector of Central Excise, Hyderabad), calling upon it to show cause why (i) penalty should not be imposed upon it under Rule 173Q of the Central Excise Rules for contravention of Rules 9(1), 174 and 173PP of the Central Excise Rules; and (ii) duty should not be demanded under Rule 9(2) of the Central Excise Rules on the printed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also other documents required of him. On 24-9-1980, the Deputy Collector passed orders holding all the points in favour of the petitioner. He held that the number of workers did at no time exceed 49; that, the value of the plant and machinery was less than Rs. 10,00,000/- and that, printed cartons are products of printing industry. Indeed, he was of the opinion that, with respect to the classification of printed cartons and the number of workers employed by the petitioner, the appellate order of remand was itself more-or-less conclusive. 7. On 11-12-1980, the Collector of Central Excise issued a notice to the petitioner, under Section 35A of the Central Excise Act, calling upon it to show cause why the order of the Deputy Collector dated, 24-9-1980 should not be reviewed. It was alleged in the show cause notice that, by virtue of the subsequent decision of the Government of India in the case M/s. Vijaya Flexible Containers, Ltd., Bombay, 1980 E.L.T. 646 G.O.I. (F.B.) printed cartons must be treated as products of 'packaging industry', and not of 'printing industry' and, therefore, they are not entitled to any exemption. The said decision overrules the earlier decision of the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, viz. (i) that, printed cartons are the products of printing industry, within the meaning of Notification No. 122/1975 and, therefore, exempt from duty; (ii) that, the impugned order is unsustainable in law, in so far as it holds (a) that, the number of workers employed by the petitioner for the period 1-3-1976 to 17-6-1977 exceeded 49, (b) that, the value of the machinery in its unit for the period 18-6-1977 to 13-12-1977 exceeded Rs. 10,00,000/-and (c) that, the petitioner is liable to penalty under Rule 173Q of the Central Excise Rules, and (iii) that, in the alternative, the petitioner is entitled, to the benefit of Notification No. 119/1975 according to which duty can be levied only on the amount charged for the job work, but not on the total value of the printed cartons. 9. We may indicate that, if we agree with the learned counsel on his first submission, it would not be necessary to examine contentions (ii) and (iii); only if we do not accept his first contention would it be necessary to examine the second contention. The consideration of the third alternative contention also arises if we hold against the petitioner on any of the points urged under the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 217 is brought to our notice holding that, printed cartons are products of printing industry. No other decision, for or against the petitioner's proposition, is placed before us. Learned counsel for the petitioner, naturally, commended strongly for our accepting the view taken by the learned single Judge of the Karnataka High Court, and contended that applying the test of predominance, the cost of printing the cartons is much more than the cost of carton-making. Counsel submitted that the test of 'end-use' applied by the Government of India in the case of M/s. Vijaya Flexible Containers Limited, Bombay and in the impugned order is not at all a relevant test under the Central Excise Act, as held by the Supreme Court in Dunlop India Ltd. v. Union of India, A.I.R. 1977 S.C. 597 = 1983 E.L.T. 1566 (S.C.). He also contended that, an exemption notification should be construed liberally and that, the item "all products of printing industry" in the exemption notification justly and reasonably takes in 'printed cartons' as well. 14. On the other hand, it is contended by Shri K. Nagaraja Rao, the learned Additional Standing Counsel for the Central Government, that the correct approa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the petitioner, is that the 'end-use' of the article was totally irrelevant in the context of the entry where there was no reference to the use or adaptation of the article. The Supreme Court was concerned with the classification of 'V.P. Latex'. 'V.P. Latex' was essentially raw rubber; but, the contention of the State was that, inasmuch as it is used in the manufacture of tyres as a bonding agent by cross-linking with fabrics, it must be classified as synthetic resin. It is in this connection that the Supreme Court observed that the end-use of the article is absolutely irrelevant in the context of the entry where there is no reference to the use or adaptation .of the article. In other words, the said observation means that, one must ordinarily look to, and determine what a given article is, composition-wise or content-wise, as it may be called. The fact that an article can be put to an altogether different use is not a ground for taking it out of its natural placement. A rubber is a rubber, and must be taxed as such. That some one, for his own reasons or purposes, uses rubber as a bonding agent, does not mean that rubber can be taxed as synthetic resin. Another exampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preparing metal cans, it must be treated as a product of printing industry? Would any common man go to a Printing Press for purchasing printed cartons, or printed cans, as the case may be? Cartons and cans are more properly products of packaging industry, Cartons, cans, sachets, are all products of packaging industry. They may also involve some printing to identify the goods inside, and also to attract the customer; but, that does not mean that they become the products of printing industry. The learned Additional Standing Counsel for the Central Government gave an example of a manufacturer of fountain-pens, manufacturing fountain-pens with a gold nib; the cost of the gold nib is several times more than the remaining parts of the fountain-pen; applying the cost-ratio factor, can it be said that the manufacture of that fountain-pen is a gold industry and not a fountain-pen making industry? Ordinarily a Printing Press undertakes printing; but, if it undertakes -whether to attract the customers or for other reasons - certain other jobs of a printer, it ceases to be a printer to that extent. When the notification says "products of printing industry", it must be, reasonably speaking, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion that this definition is not only wide, but must have been set out for a different purpose. According to this definition, cartons, plastic containers, and many other forms of packaging are also included within the expression 'printing' which in our opinion, is going a bit too far. It is difficult to conceive how plastic containers and other forms of packaging like metal cans, tins, etc. become the products of printing industry merely because some or other printing is also involved. The plastic containers must legitimately belong to plastic industry; similarly, the cartons and other forms of packaging rightfully belong to packaging industry. 19. The other text-book brought to our notice is "The Printing Industry" by Victor Strauss, and the third one is a treatise, called "Printing Office Procedure" published by the British Industries Federation." According to the latter, printed cartons fall within the meaning of the term 'printing industry' it says, "Although the typical printer handles a wide variety of work (he is said to be a 'general' or jobbing printer), there is a trend towards specialisation. Some firms concentrate on books, and others on periodicals, printed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein, having regard to the object underlying, and the language used in the exemption notification, we do not think that the Collector of Central Excise was wrong in classifying the printed cartons as not being the products of printing-industry. The most that can be said in favour of the petitioner, is : May be, two views are possible. But, once the authority has taken one view, this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution would not interfere, unless it is shown that the very reasons for classification are foreign to the proper determination of the classification. This court would not act as an appellate authority in such matters. Indeed, the Collector of Central Excise has merely followed a decision of the Government of India, pertaining to printed cartons itself. Accordingly we see no reasons to interfere with the finding of the Collector, Central Excise, that printed-cartons are not products of printing industry. 22. Now coming to the second contention of the learned counsel for the petitioner, it comprises of three sub-contentions, as set out hereinbefore. We shall proceed to deal with them in that order : (a) The first quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts/Industrial Advisers, Hyderabad, with respect to the valuation of the machinery. According to the certificate, the total value of the machinery is Rs. 10,58,691.05. Out of this, they have deducted several items, and then brought it down to Rs. 9,93,393.53 ps. The Deputy Collector accepted this certificate as it stands, but the Collector was of the opinion that certain deductions made in the certificate are not permissible, and if those deductions are disallowed, the value of the machinery does definitely go beyond Rs. 10 lakhs. The three items disallowed by him are : (i) cost of cutting machine (not used for printed cartons) Rs. 1000/-. (ii) cost of cutting machine (not used for printed cartons) Rs. 11,209.50 ps. (iii) cost of cutting machine (not used for printed cartons, and one second-hand machine, not capable of being used for printing card-board) : Rs. 24,049.83 ps. The contention of the learned counsel for the petitioner is that, these three machines are not used for manufacturing printed cartons and must therefore be excluded, his contention is that, while determining the value of the machinery for the purpose of exemption Notification No. 176/1977, the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o register as a dealer; Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty calculated on the basis of the amount charged for the job work. Explanation : For the purposes of this Notification, the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier, after the article has undergone the intended manufacturing process, on charging only for the job work done by him." The petitioner's contention is that, the card-board is supplied by the customer; that, it printing and manufactures the carton according to the design and the specifications prescribed by the customer, and the manufactured product is returned to the customer and that, the charges are collected only for the work done by it, viz. printing and carton-making, which is nothing but a job work. It is submitted that, the product manufactured by the petitioner cannot be sold in open market, nor can it be supplied to any third-party; it has to be returned to the same customer who has supplied the card-board. We are of the opinion that this argument merits acceptance. The Collector of Central Excise has not given any reasons for holding that full v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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