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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, M.JAGANADHA RAO
Golden Press - Appellant
Versus
Deputy Collector of Central Excise, Hyderabad - Respondent
Decided On : 01-19-85
CENTRAL EXCISE - NOTIFICATION NO. 122/1975 - PRINTED CARTONS - EXEMPTION - NOT PRODUCTS OF PRINTING INDUSTRY - NOTIFICATION NO. 119/1975 - JOB WORK - VALUE FOR DUTY - PENALTY.
Fact of the Case:
The petitioner, a printing press, manufactured printed cartons. It did not take out a license under the Central Excise Act. The Central Excise authorities visited the petitioner's premises and registered a case against it for contravention of the Central Excise Rules. The petitioner was issued a show-cause notice and was asked to show cause why penalty should not be imposed upon it and why duty should not be demanded on the printed cartons which have been removed without payment of duty. The petitioner submitted an explanation and claimed exemption under Notification No. 122/1975. The Deputy Collector passed orders holding that the petitioner was liable to take out a license and pay duty upon the printed cartons. The petitioner preferred an appeal to the Appellate Collector, which was disposed of on 18-5-1979 and the matter remitted to the Deputy Collector for re-examination of the case. The Deputy Collector passed orders holding all the points in favor of the petitioner. 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. The petitioner submitted an explanation on 5-1-1981 in which, each of the grounds mentioned in the show-cause notice was disputed. The Collector passed final orders on 4-8-1981, holding that printed cartons are not the products of printing industry; that, the number of workers employed by the petitioner during the period 1-3-1976 to 17-6-1977 exceeded 49; that, the value of the machinery in its unit for the period 18-6-1977 to 13-12-1977 was more than Rs. 10,00,000.00 and that, the petitioner is also liable to penalty in a sum of Rs. 50,000.00 under Rule 173q of the Central Excise Rules. The petitioner approached the High Court by way of a writ petition.
Finding of the Court:
1. Printed cartons are not the products of the printing industry within the meaning of Notification No. 122/1975 and, therefore, not exempt from duty. 2. The petitioner is liable to pay duty on the printed cartons manufactured by it during the period 18-6-1977 to 13-12-1977, as the value of the machinery in its unit exceeded Rs. 10,00,000.00. 3. The petitioner is entitled to the benefit of Notification No. 119/1975, and the value for the purpose of levy of duty shall only be the charges collected by the petitioner for doing the job work, viz. printing and carton-making. 4. The penalty of Rs. 50,000.00 levied by the Collector is set aside.
Issues: 1. Whether printed cartons are products of the printing industry and, therefore, exempt from duty under Notification No. 122/1975? 2. Whether the petitioner is liable to pay duty on the printed cartons manufactured by it during the period 1-3-1976 to 17-6-1977? 3. Whether the petitioner is liable to pay duty on the printed cartons manufactured by it during the period 18-6-1977 to 13-12-1977? 4. Whether the petitioner is entitled to the benefit of Notification No. 119/1975? 5. Whether the penalty of Rs. 50,000.00 levied by the Collector is valid?
Ratio Decidendi: 1. The expression "products of the printing industry" in Notification No. 122/1975 must be reasonably construed, and not liberally. Printed cartons are not products of the printing industry, but of the packaging industry. 2. The petitioner is not liable to pay duty on the printed cartons manufactured by it during the period 1-3-1976 to 17-6-1977, as the number of workers employed by it during that period was only 47. 3. The petitioner is liable to pay duty on the printed cartons manufactured by it during the period 18-6-1977 to 13-12-1977, as the value of the machinery in its unit exceeded Rs. 10,00,000.00. 4. The petitioner is entitled to the benefit of Notification No. 119/1975, as it is engaged in job work, and the value for the purpose of levy of duty shall only be the charges collected by the petitioner for doing the job work. 5. The penalty of Rs. 50,000.00 levied by the Collector is not valid, as the petitioner had a bona fide belief that it was not liable to take out a license.
Final Decision: The writ petition is allowed in part. The petitioner is not liable to pay duty on the printed cartons manufactured by it during the period 1-3-1976 to 17-6-1977. The petitioner is liable to pay duty on the printed cartons manufactured by it during the period 18-6-1977 to 13-12-1977, but the value for the purpose of levy of duty shall only be the charges collected by the petitioner for doing the job work. The penalty of Rs. 50,000.00 levied by the Collector is set aside.
( 1 ) THIS writ petition is directed against the orders of the Collector, Central Excise, Hyderabad, dated 4-8-1981, passed by him in exercise of his power of review under Section 35a of the Central Excise and Salt Act, 1944.
( 2 ) THE petitioner is a printing Press. According to it, it carries on business as manufacturer of printed cartons and other Printing Jobs; for the purpose of manufacturing Printed Cartons, the raw material i. e. , the card-board, is supplied by the customer who also specifies the content and design of printing. The manufacture of cartons involves printing, cutting, creasing and pasting. The petitioner says that, in this process, printing charges constitute the bulk of the total charges. The manufacture of printed cartons is said to be the main activity of the petitioner. 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. 00 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 cartons which have been removed without payment of duty, contrary to Rules. It was alleged in the show-cause notice that the petitioner has manufactured excisable goods, i. e. , printed cartons, without obtaining a Central Excise licence and removed the same without payment of duty. The petitioner was called upon to submit an explanation, to produce evidence in support of its case, and also to indicate whether it desires a personal hearing. The petitioner submitted an explanation on 18-3-1978. In this explanation, the petitioner claimed exemption under Notification No. 122/75 CB, dated 5-3-1975. It also submitted that the number of workers employed by it did never exceed 49 that, the capital investment on the plant and machinery installed in its factory also did never exceed Rs. 10,00,000. 00 and that, therefore, it is not liable to take out a licence or to pay duty before removing the goods. The petitioner submitted that printed cartons are products of printed industry and, therefore, exempt under Notification No. 122/1975. On 12-2-1979, the Deputy Collector passed orders holding that the petitioner had employed 50 or more workers; that, the value of the machinery in its unit was over Rs. 10,00,000. 00 and that, printed cartons are not the products of printing industry and, therefore, the petitioner is liable to take out a licence and pay duty upon the said cartons. The Deputy Collector, however declined to impose penalty, because he was of the opinion that the removal of the goods by the petitioner without paying duty was due to ignorance, and under a genuine impression that its products are not chargeable to duty. He only demanded the appropriate duty on the cartons removed.
( 5 ) THE petitioner preferred an appeal to the Appellate Collector against the order dated 12-2-1979. The appeal was disposed of on 18-5-1979 and the matter remitted to the Deputy Collector for re-examination of the case, and for a fresh determination of the numb
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