ORDER
Jyoti Balasundaram, Member (J)
1. M/s. Modasa Packaging P. Ltd. and M/s. Monita Containers P. Ltd. are engaged in the manufacture of paper cups used for packaging/serving ice creams, srikhand, gulab jamuns, tea, coffee, water, etc. falling under Chapter 48 of the Schedule to the Central Excise Tariff Act, 1985, since 1984. They had been claiming classification of the above mentioned product under the erstwhile Tariff Heading 48.18 and later under sub-heading 4819.19, chargeable to nil rate of duty. They were advised by the Assistant Collector to file classification lists under CET sub-heading 4823.90 and accordingly they filed classification lists as above, under protest in May 1989. They were also granted a L4 Licence for manufacture of paper cups in May 1989. Show cause notices were issued to the assessees for modifying the classification lists earlier approved, by changing the classification of the product from CET sub-heading 4823.90 to 4819.12 chargeable to duty @ 35%, as well as for vacating the protest. The Assistant Collector modified the classification lists earlier approved, holding that the printed paper cups fall for classification under sub-heading 4819.12, and held that the modification will be retrospective, on the ground that the assessees had not earlier furnished complete information regarding the manufacture of the printed paper cups. He also denied the benefit of Notification 67/82-C.E., dated 28-2-1982 on the ground that the assessees had availed of the benefit of Modvat credit. Subsequent classification lists were approved under CET sub-heading4819.12. On appeal, the Collector (Appeals) upheld the classification of the printed paper cups and lids under CET sub-heading 4819.12, classification of imprinted cups along with lids under sub-heading 4819.19, and classification of other cups of paper/paper board supplied without lids, meant for serving ice creams, tea, coffee and other beverages under sub-heading 4823.90. He also upheld the Assistant Collector’s orders on denial of the benefit of exemption Notification 67/82. However, he accepted the assessee’s contention that there had been no suppression of facts regarding the manufacture of printed cups and lids, since they had been filing declarations regularly, claiming exemption from the operation of Rule 174A, that the entire process of manufacture had been examined by the Assistant Collector and Range Superintendent during their visit to the assessee’s factories on 2-5-1989, and that they had clearly stated in their letter dated 24-3-1986 (in reply to the Superintendent’s letter dated 10-3-1986) that the paper cups were manufactured by them out of printed pulp board. He, therefore, held that the demands were barred by limitation.
2. Against the order of the Collector (Appeals) dated 26-6-1992, the Revenue has preferred Appeal No. E/4927 and 4928/92-C.
3. In September, 1990, the Central Excise officers visited the factory premises of the assessees and found that they were clearing goods paying appropriate duty under CET sub-heading 4823.90 instead of the CET sub-heading 4819.12 for printed paper cups. Hence, show cause notices were issued proposing recovery of differential duty and proposing imposition of penalty on the companies and their Managing Directors. The extended period of limitation was invoked. The Collector of Central Excise, Ahmedabad vide order dated 23-9-1992 confirmed the duty demands, following the earlier order of the Collector (Appeals) Order-in-Appeal No. 502 to 508/92, dated 9-7-1992 (subject matter of Appeal No. E/4927 and 4928/92-C filed by the Revenue). He imposed a penalty of Rs. 6,00,000/- on Monita Containers, penalty of Rs. 5 lakhs on Shri J.C. Shah, Managing Director of Monita Containers, penalty of Rs. 10 lakhs on M/s. Modasa Packaging (P) Ltd. and a penalty of Rs. 5 lakhs on Shri P.K. Shah, Managing Director of M/s. Modasa Packaging P. Ltd. It is against these orders of the Collector of Central Excise, Ahmedabad, that the Appeal Nos. E/4324, 4326, 4327 and 4328/92-C have been filed by the companies and their Managing Directors.
4. We have heard Shri H.K. Jain, learned SDR and Shri Rohan Shah, learned Advocate.
5. Our findings are recorded as under :
5.1 Classification of the products in dispute
We find that the Collector of Central Excise (Appeals) in his order dated 26-6-1992 (which has been followed by the Collector of Central Excise in his order dated 23-9-1992 so far as classification is concerned), has applied the ratio of the judgment of the Apex Court in the case of G. Claridge & Company Ltd. v. Collector of Central Excise, Pune reported in 1991 (52) E.L.T. 341 (S.C.) for coming to the conclusion that the paper cups, both printed and imprinted with lids, fall for classification under Heading 48.19 since they are to be considered as packing containers, in view of the fact the such paper cups are being extensively used by ice-creams, srikhand manufacturers, who sell the same in retail outlets as ready to serve in retail packs, and such cups are also used for transporting the product (whether ice-cream or srikhand) from the factory premises of the manufacturers to the retail outlets, including the vendors. The relevant extract from the judgment of the Apex Court is reproduced below:
’11. The above definitions would show that the expression ‘container’ is used in three different senses : in a broad sense, it means a receptacle which contains; in a narrower sense, it means a receptacle in which articles are covered or enclosed and transported; and in a more limited sense, it means enclosures used in shipping or railways for transport of goods. If used in a broad sense, ‘container’ would include a tray because it is a receptacle which contains articles and, therefore, an egg tray would be a ‘container’. But an egg tray would not be a ‘container’ in a narrower sense because articles placed in it are not covered or enclosed and they cannot be transported as such. It is, therefore, necessary to ascertain whether the expression ‘container’ in Item 17 of the old Tariff and Heading 48.18 of the new Tariff has been used in the broad sense to include all receptacles in which the articles are covered or enclosed and transported. For this purpose, the context in which the word ‘container’ has been used in these entries has to be examined. In Hem 17 of the old Tariff, the word ‘containers’ is preceded by the words ‘boxes, cartons, bags and other packing’ and in Heading 48.18 of the new Tariff, the word ‘containers’ is preceded by the words ‘cartons, boxes’ and is followed by the words ‘and cases’. It is a well-accepted canon of statutory construction that when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. It is based on the principle that words take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. [See Devendra M. Surti v. State of Gujarat 1969 (1) SCR 235 at p 2401 Considering the expression ‘containers’ in the context in which it is used in the relevant tariff items, we are of the opinion that the said expression has to be construed to mean packing containers’ which are analogous to boxes and cartons, that is an enclosed receptacle which can be used for storage and transportation of articles En trays being receptacles which are not covered or enclosed cannot be used for transportation of articles and, therefore, they cannot be regarded as ‘containers’ under the above-mentioned entries in the Excise Tariff.’
5.2 In view of the finding of the Hon’ble Supreme Court as above, we are of the view that the classification of printed and imprinted paper cups with lids has been correctly determined by the lower authorities who have classified printed paper cups with lids under CET sub-heading 4819.12 and unprinted paper cups with lids under CET sub-heading 4819.19. The classification of other cups of paper/paper boards supplied without lids has also been correctly decided under CET sub-heading 4823.90. Accordingly, we uphold the finding on the classification of the 3 products in dispute.
5.3 Limitation: In the order assailed by the Revenue, the Collector of Central Excise (Appeals) has held that the demands are barred by limitation while in the order of the Collector of Central Excise, assailed by the assessees the adjudicating authority has departed from these findings recorded in the earlier order of the Collector of Central Excise (Appeals). We find that right from the beginning of their manufacturing activity, the assessees were filing declaration with the Department claiming exemption from licensing control in which they have described the said products as known in trade parlance visits to the factories of the assessees. The Superintendent from time to time by visits to the factories of the assessees. The Department had allotted code Nos to the assessees so as to enable them to claim exemption, and so as to enableeasy verification of the same whenever products were subjected to ckecks in transit. On 10-3-1986, the jurisdictional Superintendent of Central Excise wrote to the assessees seeking details of raw materials from which the paper curare manufactured along with the process of manufacture. The reply of the respond dents become very relevant for determining whether there was full disclosure to the Department or whether the disclosure was insufficient thereby making available to the Department, the extended period of limitation. The reply is reproduced herein below:
Superintendent, 24-3-1986
Central Excise,
Himatnagar.
Dear Sir,
Sub : - Paper cups - Central Excise - Licensing Control - matter reg.
Please refer to your letter No. MP/Budget/86/302, dated 10-3-1986 which was received by us on 24-3-1986.
Please note that the basic raw materials used for the manufacture of paper cup is printed pulp board and cut into blanks (sizes). These are fed in the machine for the side walls and bottoms are formed directly from the roll on the same machine. Thereafter the framed cups are checked, stacked and packed.
The cups are used for serving ice-cream, hot & cold beverages, etc.
Our nett sale of manufactured goods from 1-4-1985 to 28-2-1986 is Rs. 15,67,382.63. Further the sales figure for March, 86 will be furnished to you in due course.
Thanking you.
Yours faithfully,
For Monita Containers Pvt. Ltd.
Sd/-
Managing Director.
5.4 Prior to the filing of the classification lists, the jurisdictional Assistant Collector visited the assessee’s factory premises on 2-5-1989 and examined the entire process of manufacture of the goods, and thereafter, the assessees were directed under cover of Superintendent’s letter dated 11-5-1989 to apply for Central Excise Licence and to file classification lists under CET sub-heading 4823.90 and not under CET sub-heading 4819.19 as shown in the assessees’ application for grant of L4 licence. The L4 licence was granted under Chapter 48 for manufacture of paper cups. A show cause notice dated 12-5-1989 was issued to the assessees proposing to recover duty under CET sub-heading 4823.90 for the period October, 1988 to March, 1989 and the notice also stated that the manufacturing process had been examined by the Department. The assessees filed classification lists under protest, classifying the products manufactured by them under CET sub-heading 4823.90, as directed, under cover of letter dated 15-5-1989. In the classification list, the product was described as paper cup container for packing ice-creams, srikhand, etc. The assessees replied to the show cause notice dated 12-5-1989 on 6-6-1989; the Assistant Collector approved the classification list finally, classifying the products under CET sub-heading 4823.90 as proposed in the notice, and the order of approval became final in the absence of any challenge by the Department. In the meanwhile, in May 1989, the assessees applied for job work permission under Rule 57F(2) clearly mentioning that the laminated paper made out of base paper and LDPE granules will be sent directly to the processors, M/s. Shree Rama Lamination P. Ltd. and Shree Rama Packaging, who will send the laminated papers to printers for printing and thereafter receive it back. In the same letter, they also stated that some-times they will receive the raw materials in their factory and after taking Modvat credit, they may send the same to the processors for lamination and/or printing. On 1-6-1989, the assessees filed declaration in terms of Rule 57G clearly indicating that the intermediate product for paper cups and paper lids were laminated printed/plain paper /board falling under CET sub-heading 4811.30, and the declaration was acknowledged by the Assistant Collector and permission granted under Rule 57F(2), on 8-64989. Further, the application dated 5-6-1989 for grant of credit under Rule 57H, clearly mentioning inputs in stock as printed/laminated pulp board was allowed on 14-2-1990.
5.5 From the above narration, it is clear that the assessees had disclosed to the Department that they were inter alia using printed pulp board as raw material for the manufacture of paper cups and paper lids. This information was supplied by the assessees right from 1986 when CET sub-heading 4818.2 (sic) covered “printed cartons, boxes, containers and eases, made wholly out of paper or paper board of Heading or sub-headings…”. In other words, the fact as to whether a container or carton was printed or not, was relevant even for the purpose of classification in the year 1986-87. The process of manufacture was also examined by the Department as seen from the recital in the show cause notice dated 12-5-1989, in which there is no allegation of suppression. Even in the show cause notice dated 18-9-1990 proposing revision of classification from CET sub-heading 4823.90 to 4819.12 for the period 20-3-1990 to 31-8-1990, we find there is no allegation of suppression – this notice was vacated and the demand raised therein was dropped by the Assistant Collector’s order dated 2-7-1993, following the Collector (Appeals) Order No. 502 to 508/92, dated 9-7-1992 (which is the subject matter of the appeals filed by the Revenue before us). The allegation of suppression has been raised for the first time in the notice dated 9-10-1990, proposing revision of classification to CET sub-heading 4823.90 from CET sub-heading 4819.12. The allegation has been upheld by the Assistant Collector’s order dated 30-5-1991, but set aside by the Collector (Appeals) order dated 26-6-1992. Even in the subsequent notice dated 21-3-1991 covering the period from September, 1990 to February, 1991 for recovery of duty under CET sub-heading 4819.12, suppression has not been alleged. In view of the above, and noting that the classification lists had been filed under CET sub-heading 4823.90 as directed by the Department (as against the initial claim of the assessees for classification under CET sub-heading 4819.12 for printed paper cups and lids of paper/paper board it cannot be held that the assessee’s claim for classification under CET sub-heading 4823.90 is deliberate with intention to pay nil rate of duty. Therefore, we are of the view that no suppression or misdeclaration with intent to evade payment can be attributed to the assessees so as to make applicable the extended period of limitation. Hence, we hold that the demands are barred by limitation.
6. Retrospective operation of revision of classification :
The appeals filed by the Revenue are restricted to pleading that the findings of the Collector (Appeals) on time barred nature of the demands are required to be set aside, and hence we are not called upon to go into the question as to whether a demand can be raised only from the date of the show cause notice, even though the Assistant Collector is competent to review approved classification lists.
7. In the light of our above findings, we hold that the printed paper cups with lids fall for classification under CET sub-heading 4819.12, unprinted paper cups with lids fall under CET sub-heading 4819.19 and other cups of paper/paper board without lids fall under CET sub-heading 4823.90, and that the demands raised against the assessees are barred by limitation. The penalties are also set aside, in view of the above.
8. The appeals are disposed of in the above terms.