Per P.K. Kapoor :

This is an appeal against the order passed by the Collector of Central Excise, Kanpur. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of Printed Plastic Films, Printed Laminates and Pouches made of Printed Laminates. On the basis of intelligence that they were removing excisable goods without obtaining Central Excise licence and without obtaining Central Excise duty, the officers of the Directorate of Anti Evasion searched their Registered Office and the factory premises and seized certain documents and 825 Kgs of flexible laminated printed polyster film valued at Rs.1,07,250/- and other finished goods/Pouches valued at Rs.30,510/- and semi-finished goods weighing 779.200 Kgs. They also recorded the statement of Shri S.K. Maheshwari, Director of the company who in his statement dt. 1.8.89 stated that the appellants had not filed any declaration seeking exemption from licensing control. He also confirmed that the value of the goods cleared during 1988-89 was Rs.93,36,912.89 and between 1.4.89 to 31.7.89 they had cleared goods valued at Rs. 35 lacs. Since no invoices in respect of sales made by the appellants from 1.4.89 onwards were available, on the basis of the records of the sale proceeds of the goods obtained from the appellants bankers, the officers estimated that between 1.4.89 to 31.7.89 the appellants had manufactured and sold goods valued at Rs. 41,43,388.00/-. Having regard to the nature of the goods seized from the appellants factory and the available sales invoices, the officers concluded that the appellants were clearing only laminated printed films and pouches made from such films. After further investigations the appellants were served with a Show Cause Notice dt. 29.1.90 alleging that during the period February, 1989 and July 1989 they had manufactured and cleared dutiable goods without obtaining Central Excise licence required under Rule 174 and without filing and classification/price lists as required under Rules 173B and 173C. It was further alleged that during the years 1988-89 and 1989-90 (upto 31.7.89) the appellants had evaded Central Excise duty amounting to Rs. 14,26,122.57 and Rs. 4,38,497 respectively by clandestinely removing excisable goods without issuing any gate passes and without discharging the duty liability thereon as required under Rule 9(1). The show cause notice also stated that while filing the declaration under Rule 174A in April, 1989, the appellants had deliberately given incomplete information. For these reasons the appellants were asked to show cause as to why the seized goods should not be confiscated and duty amounting to Rs. 18,64,619 should not be recovered. The show cause notice also sought to impose penalty on the appellants and all the Directors of the Company.

2. The appellants denied the charges in the show cause notice. They contended that the Departments contention that they were manufacturing only laminated plastic material was incorrect since a large part of their clearances consisted of non-laminated printed films on which no duty was attracted since they were made out of duty paid plain films received from other manufacturers. They also submitted a break up of the sales of various products claimed to have been manufactured during the relevant period. They further contended that laminated plastic films in roll form and pouches made there from were not classifiable under Headings 39.20 and 39.23 as presumed by the Department. They claimed that since printing was not merely incidental to the primary use of the films were classifiable under Chapter 49 in terms of Note 2 to Section VII of the Schedule to the Central Excise Tariff Act, 1985. It was also contended that the printed polyster polycoated films were not known in the market as 'laminates' which were incapable of being sold. They also contended that it was evident from Circular No. 41/89 dt. 13.7.89 issued by the Board and Trade Notice No. 140/89 issu