V.T. Raghavachari, Member (T)

1. Show Cause notice dated 27-2-1985 was sent to the appellants M/s Super Printers with reference to the manufacturing activity carried on by them under an agreement with M/s I.T.C. It was mentioned in the notice that out of raw material supplied by M/s ITC the appellants were manufacturing slides (for cigarette boxes) falling under T.I. 68 CET, but that they had not taken out a licence therefor. They were directed to show cause why they should not be called upon to take out a licence and file classification list as also price list. They were also called upon to show cause why exemption claimed by them in terms of notification No. 77/83 as amended should not be denied since the slides were manufactured by the appellants on behalf of M/s ITC who were not eligible for any such exemption. On the above premises they were further called upon to show cause why an amount of Rs. 98,400.29P should not be demanded as duty from them in respect of slides manufactured and cleared during the period 30-8-84 to 10-2-85 and why duty should not be demanded for the clearances effected after 10-2-85 also. In their reply the appellants contended that they were the manufacturers of the slides and not M/s ITC and relied upon the terms of the agreement in support of this contention. They claimed that the value of their clearances was such that they were entitled to duty free clearances under Notification No. 77/83 and they were not liable to take out a licence or observe other excise formalities. They therefore claimed that no duty could be demanded from them. On adjudication the Assistant Collector under order dated 9-9-85 rejected the above contentions and directed the appellants to comply with the requirements set out in the show cause notice and further confirmed the demand as raised and also directed that duty shall be payable by them on their clearance's after 10-2-85 also. The appeal against the said order was dismissed by the Collector (Appeals) under his order dated 24-7-86. This appeal is against the said order.

2. We have heard Shri Sriram Panchu, Advocate for the appellants and Shri K.C. Sachar for the Department.

3. The allegations in the show cause notice were (1) the appellants were the manufacturers of slides out of raw material supplied by ITC; (2) In terms of Notification No. 305/77-M/s ITC are to be treated as the actual manufacturers of slides, the manufacture thereof by the appellants being on behalf of M/s ITC; (3) Since M/s ITC were not eligible for exemption in terms of Notification No. 77/83 the appellants were not entitled to duty free clearances and must therefore take out a licence, file classification list, price list etc. and observe other excise formalities.

4. From the terms of the agreement between the appellants and M/s ITC (the relevant terms being extracted in the reply dated 29-4-85 to the show cause notice and also in the order of the Assistant Collector) it is seen that M/s ITC were to supply at their cost the ink and the board for manufacturing and printing the slides; the manufacture was to be strictly in accordance with the specifications and details of M/s ITC and to their satisfaction; the first set of cutting and creasing rollers and printing gluts were supplied by M/s ITC to the appellants, these being returnable to the ITC on the expiry of the agreement; M/s ITC had right to reject such of the slides as did not conform to their specifications and details. The agreement further stipulated that the relationship between M/s ITC and the appellants was always to be one of principal and principal and not principal and agent. The contention for the appellants is that they had been functioning as printers even before this contract with M/s ITC was entered into and that in fact they carry out the work of printing for other customers also apart from M/s ITC and that the appellants owned their own machinery on which the work for M/s ITC was being carried out and not exclusively on the