Last year, some printers from the Malad division, Mumbai division five had been served notices and reminders. They were asked to intimate year-wise value of goods bearing brand name and trade name, cleared by them at nil rate of duty, for the time period - November 2003 to August 2008. Moreover, they had been asked to pay duty with interest immediately. This was represented by me before the Chief Commissioner of Central Excise & Service Tax, Mumbai divison one.
The facts of the case were:-
1. Printers and manufacturers of printed/ unprinted packaging materials have been enjoying SSI exemption from Central Excise Duty (on initial clearances of varying limits notified from time to time) as the Government had clarified that the ‘Trade/ Brand Name' restriction imposed in 1987 would not apply to those goods.
2. But, the judgment of a Division Bench of the Supreme Court in 2005 in the case of Kohinoor Elastics Private Limited, Indore, Vs Commissionerate of Central Excise, Indore ruled that "SSI exemption in terms of paragraph (4) of Notification No.8/2003 (see below) - CE will not be available to manufacturers of any specified goods in the Tariff (if they are printed/ affixed/ embossed with the Brand/Trade Name of the another person"; and that the clarificatory circular issued by the Government (71/71/94 dated 27.10.1994) excluding certain specified goods from the purview of this Brand/ Trade Name restriction is invalid and unsustainable. However, the Division Bench was pleased to refer the matter to a larger Constitution Bench of the Apex Court for a final decision as to whether the Government's circular will prevail over its decision or vice versa.
3. As a sequel to the aforesaid judgment, some of the Commissionerates of Central Excise (in Kanpur, Bangalore, Vijayawada, Jaipur etc) had served notices (NOT Show Cause Notices) since February 2008 on some printers and corrugated box manufacturers directing them to effect future clearances of packaging materials like cartons, boxes etc. printed with the ‘Trade/ Brand Names' of the products of their customers, only against payment of duty, on the plea that they are not eligible for SSI exemption of Central Excise in terms of Notification No.8/2003, as per the aforesaid Supreme Court Judgment. The manufacturers were also directed to furnish details of clearances (executed without payment of duty) of such ‘Brand/ Trade name' printed packaging materials for the past years from 2003-04, ostensibly for the purpose of imposing duty on such clearances, retrospectively.
4. The All India Federation of Master Printers and the Federation of Corrugated Box Manufacturers of India represented the issue to the Government in March 2008 followed with personal meetings with the Revenue Secretary and the high officials of the CBEC. Eventually the Government issued Notification No.47/2008-CE dated 01.09.2008, amending the earlier Notification No.8/2003-CE to include Sub-clause (e) in paragraph 4 therein, for excluding from the purview of the ‘Trade/Brand Name restriction', the following ‘specified goods' -
"packing materials, namely, printed cartons of paper or paperboard, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP caps, crown corks, metal labels"
But the benefit of the SSI exemption for these goods was given effect to only prospectively from 01.09.2008. And, the quantum of duty-free clearances for the seven months from 01.09.2008 to 31.03.2009 had been proportionately restricted to Rs 90 lakh (against Rs 150 lakh for the whole year).
5. The problem of liability to duty for the back period (Nov 2003 to August 2008) thus remained unresolved. Therefore, The All India Federation of Master Printers and the Federation of Corrugated Box Manufacturers of India, submitted a further representation to the CBEC requesting issue of an appropriate order under Sec.11C waiving the back duty also, as the manufacturers have only abided by the Government's own circulars and availed of the SSI exemption of duty - and are not guilty of any suppression or evasion.
6. Finally the efforts paid off and the CBEC issued notification no. 24/2009 dt. 21-09-2009 w.r.t. packing materials manufactured bearing brand name of other person. This notification under Sec.11AC grants exemption up to 31.08.2008, giving a sigh of relief to those who had been latched with notices demanding huge amount of duties and penalties.
But recently, the same Malad printers were served notices from the Excise Dept. asking for data of 'paper tags' cleared under Not. 8/2003 from Sep-08 to Nov-09. The logic is that Not.47 dt 1-9-08 and Not.24 dt. 21-10-09 does not mention about ‘paper or paper board labels' and mentions only about the following:-
Packing materials, namely, printed cartons of paper or paper board, metal containers, high density polyethylene woven sacks, adhesive tapes, stickers, pilfer proof caps, crown corks, metal labels.
Under our guidance, they wrote to the Department saying that though Paper & Paper Board Labels were not mentioned in the Notification no. 24/ 2009, it is deemed to be covered. More we wrote to them that, it is relevant to note that "Paper tags" fall under the subheading 4821 10 10; and clause (d) under paragraph 4 of the Notification No.8/2003 categorically excludes the specified goods falling under heading 4821, from the mischief of the brand name / trade name restriction.
The clause 4 of Notification No. 8/2003 reads as follows:
The exemption contained in this notification shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases:-
(d) Where the specified goods are account books, registers, writing pads and file folders falling under heading 4820 or 4821 of the First Schedule;"
The actual wording of this clause is tricky - in the sense that it would have made for greater clarity had it spelled out also the specified goods, namely ‘Paper and Paper board labels of all kinds' alongside the heading 4821 - the intention of the Government to exclude these articles can hardly be doubted. Moreover, when ‘metal labels' have been specifically excluded under clause (e) of the same paragraph, there could be no reason why paper / tags should not be excluded from the mischief of the brand-name restriction.
But the department was not convinced and now they have put demand notice of lakhs of rupees on these printers. Now, the AIFMP has represented the facts of this case to the CBEC, New Delhi. A reply is expected, soon.
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