Jyoti Balasundaram, Member (J)

1. The appellants herein had filed a declaration on 3-5-1988 claiming exemption from licensing control under Notification No. 174/86 dated 1-3-1986 in respect of the products manufactured by them in their factory. It was mentioned in the declaration that they were manufacturing (i) printed self-adhesive paper labels (ii) plastic labels which were classifiable under sub-heading No. 4821.00 and 3926.93 respectively and their products were exempted unconditionally under Notification No. 228/86 dated 3-4-1986. Supdt. of Central Excise informed them that their products were classifiable under Chapter sub-heading No. 3910.00 and that they were not eligible for small scale exemption, as the S.S.I. Unit certificate produced by them was not for the said unit in respect of which exemption was claimed. They were, therefore, informed to take out a Central Excise licence immediately. From the declaration filed by the assessee, it was observed that Mrs. Tara Sarup and Mr. Arun Sarup were common Directors in both the companies, viz. M/s. Syn Pack P. Ltd. and also in M/s Amar Tara Ltd. M/s Amar Tara Ltd. had classified their product, viz. P.V.C. Self-Adhesive Papers under sub-heading 3919.00 of the Central Excise Tariff Act, 1985 whereas in case of M/s. Syn Pack P. Ltd., the same product was classified as falling under sub-heading 3926.90. This showed that the Directors were well aware of the fact that printed P.V.C. Self-Adhesive Tapes were properly classifiable under sub-heading No. 3919.00 attracting duty @ 25% Adv. As regards printed Self-Adhesive paper labels manufactured by them, they had declared the said product as falling under sub-heading No. 4821.00 and claimed an exemption under Notification No. 228/86 dated 3-4-1986 as amended. The said Notification No. 228/86 dated 3-4-1986 grants exemption from duty to paper labels whether or not printed and not to printed self-adhesive paper labels.

Since the value of clearances effected by the assessee from both the units had exceeded the limit of Rs. 7.5 lakhs during the financial year 1987-88 and they had not availed of any of the exemptions contained in the Notifications as specified under para 4(b) of the Notification No. 175/86 dated 1-3-1986, as amended and they had also not availed any exemption under Notification No. 175/86 dated 1-3-1986 during any preceding financial year, it appeared that they were not eligible for exemption under Notification No. 175/86 dated 1-3-1986 as amended, either during the year 1987-88 or any further period.

2. M/s. Syn Pack Pvt. Ltd., Bombay were, therefore, required to show cause as to why :

(a) small scale exemption claimed by the assessee in their declaration filed with the jurisdictional Range Supdt. under Notification No. 175/86 dated 1-3-1986 under their letter F. No. SP/CES/88 dated 3-5-1988 should not be denied;

(b) the products, viz. printed P.V.C. Self-Adhesive tapes, plastic labels and printed self-adhesive paper labels manufactured and cleared by them should not be classified under Chapter sub-heading No. 3919.00 and 4821.00 of Central Excise Tariff Act, 1985, respectively;

(c) Central Excise duty amounting to Rs. 3,54,343.75 (Basic Rs. 3,47,980.34 and Special Rs. 6,363.41) on the goods cleared during the period from 1-10-1987 to 31-8-1988 should not be demanded and recovered Excises from them under Rule 9(2) read with Section 11A of the Central Excises Salt Act, 1944; and

(d) a penalty should not be imposed on them under Rule 9(2) and/or Rule 52A and/or Rule 173 of the Central Excise Rules, 1944.

3. The adjudicating authority held as follows :-

"On plain reading of Chapter No. 49 and sub-heading No. 4901 it is seen that it covers "printed books, newspapers, pictures and other products of the printing industry; manuscripts, type-scripts and plans and as such, it can be seen that the products, viz. printed self-adhesive paper labels, printed self-adhesive tapes and self-adhesive printed paper laminated with plastics