ORDER
S.S. Sekhon, Member (T)
1. Appellant is a declarant assessee under the Central Excise Act, 1944 and the Executive Assistant to the Managing Director of the assessee company. They are in appeal against the duty demand on the assessee after arriving at the classification of the products side fitment/side packaging under heading 4808.10 and top/bottom covers, partitions, sleeves of corrugated sheets under heading 4819.19 for the period 4.5.94 to 22.7.96 and 4819.12 thereafter and penalty on the assessee equivalent to the duty determined under Section 11 AC read with Rule 173Q and Rs. 20.000/- under Rule 209A on the Executive Assistant.
2. Assessee is a manufacturer of various types of corrugated boxes, cartons, cases etc. with or without inherent fitments as per the specifications of the Customers. Prior to Finance Bill, 94-95, all items were exempted vide Notification 48/87 dated 1.3.87 as amended vide Notification 59/88 dated 11.3.88 and there is no dispute prior to 1.3.94. The Notifications were rescinded, consequently the assessee got registered with the excise authority, filed classification lists and followed the procedure. On 4.5.94, a Notification no. 101/94 was issued amending Notification 22/94 dated 1.3.94, bringing in the exemptions, consequently the registration was surrendered. The exemption vide Notification 101/94 amending 22/94 continued by 18/95 dated 6.3.95 and 8/96 dated 22.7.96. Declaration to avail the benefits was filed and accepted.
3. On 30.1.97, the Preventive Officers visited the factory and under Panchnama detained finished goods as they entertained a belief that the goods were not exempt and the small scale exemption limits had been crossed. Further search and enquiries were conducted by the Officers. The assessee explained the process of manufacture, the problems and wrote to Asst. Commissioner and Commissioner, seeking provisional release of the goods and relied upon Boards Order 61139/86-CX2 in this correspondence. The goods under seizure were ordered to be released for want of further directions from C.B.E.C. vide letter dated 17.2.97. A notice dated 30.6.97 was served demanding duty of Rs. 40,73,725/- for the period 4.5.94 to 31.3.97 and imposition of penalty. The same was confirmed by the Commissioner.
4. After hearing both sides and considering the submissions, it is found –
a) (i) As regards the product ‘Fitments/Packings’, the claim of the assessee that they should be classified under heading 4819.19 (during 4.5.94 to 22.7.97) and thereafter under 4819.12 was rejected and classification was confirmed under 4808.10 on the ground that they are nothing but plain corrugated sheets cut to size as per the customers specification and after finding that the heading 48.19 covers cartons/boxes, cases, bags and the subject goods were not used for packing of material, but serve the purpose of extra protection of the material packed in containers.
(ii) The manufacturing process is, after the craft paper is corrugated in single or double ply or triple ply as desired on the corrugating machine. The same is cut to specific size and then given bends in a special machine to create creasing based on drawings supplied. Such entities duly cut to size and also shape and creased as per drawings no longer retain the characteristic of a sheet/roll of corrugated papers. After that they are stapled and stitched. This size and shape and folding on creasing and slotting results in a specific entity, which is to be used in the packing to be placed in the carton/box containers for the item it is specifically designed. These corrugated entities from sheets, specifically further worked, are not understood as corrugated sheets. There is no evidence to that effect. On the contrary, they attain a new commercial identity viz. inherent fitments to a carton/box, container. Further manufacture conducted on a sheet falling under 48.10 has taken place and the levy once again would be attracted on the resultant commercially new product.
(iii) This new product would be most appropriately classified under heading for carton/box etc. i.e. 48.19, as claimed, by applying the Boards order No. 61/39/86-CX2 dated 2.4.86, which reads as follows:-
“A doubt has been raised as to whether dividers, partition plates and other accessories made out of corrugated paper/paper board end used as inherent fitment placed inside the corrugated box with a view to adequately protect and keep the packed products in their positions, are part and parcel of the corrugated boxes classifiable along with same or such positions, dividers, are classifiable under 4818.90 as other articles of papers/paper board”.
2. The matter has been examined and it is clarified that such parts of boxes used for aforesaid purpose cannot be separately classified under heading 4818.90 as other articles of paper/paper board. They will be classified under the heading under which the box itself is classifiable”.
This instruction of the Board would settle the issue for all ‘inherent fitments’, when the following paragraph in the Book, ‘Corrugated Packaging’:-
“In addition to functioning as transport container, corrugated boards are also used as inner fitments and accessories known in the industry as inherent fitments. They anchor the contents within the carton box to arrest truant movement. They provide cushion and protect fragile articles from damage during transit”.
is read along with it. The attempt of the Commissioner to separately classify, these entities, on grounds of protection/cushioning, etc. would not be upheld. Even if they perform such function, they are to be classified as the carton/box they are meant for i.e. 4819.12 & 4819.19 as claimed by the assessee and stipulated by Boards orders and the purpose and understanding in the trade and people dealing with the same.
b) (i) There is no dispute as regards classification of top/bottom covers/sleeves under heading 4819.19 for the period 4.5.94 to 22.7.96. On a perusal of the heading 4819, it is amply clear that 4819.19 would cover all types of cartons, boxes, containers and cases, including flattened or folded, assembled or not, except those for match sticks or those that are printed, which would be under 4819.12. The top/bottom covers/sleeve would therefore be covered under the term “unassembled”, even when supplied separately or along with the other parts of the cartons etc.
(ii) Sr. No. 3 of Notification No. 22/94 as amended by 101/94 dated 4.5.94 reads as “Cartons, Boxes, Containers, Cases (including flattened or folded boxes and flattened or folded carton) of corrugated paper or paper board whether in assembled or unassembled condition”. Therefore, there is no reason to arrive at a finding that top/bottom/covers/sleeves would not be covered by this exemption under Sr. No. 3, apply
(iii) Notification 18/95 dated 16.3.95 under Sr. No. 23 exempts all products as per Sr. No. 3 of Notification 22/94 as amended by 101/94 and for same reasons would exempt top/bottom cover/sleeves.
(iv) Board’s order G/39/82-CX2 dated 2.9.86 would also apply in this case and because of clarification and exemption to Notification cannot be decided.
c) The reliance of the appellant in the case of Winder Misra Diamond Tools Ltd. 1998 (837 ELT 670) is well founded to entitle them to the exemption.
d) The benefit of full exemption to side panel/packing even if they are considered as sheets under Sr. No. 4 of Notification 27/94 for the period 4.5.94 to 16.3.95 and under Sr. No. 24 of Notification 18/95 would be available.
e) The show cause notice accepts that ‘inherent fitments’ had been shown in the declaration filed to be a product manufactured. There is no requirement in the declarations to be filed or and under Rule 174 & 174A of the Central Excise Rules 1994, as applicable to declare the mode of clearance. What is required is to declare the commodity manufactured. Therefore, the finding ‘mode of separate supply of fitments was not disclosed’ to be a reason to call for suppression/misdeclaration and to invoke proviso of Section 11A(1) cannot be upheld.
f) In view of the findings, no duty demands can be made. Consequently, the penalties as arrived at on the assessee are not called for and are to be set aside and appeal allowed.
g) Since no goods are found liable to confiscation, the seized goods having been released, penalty under Rule 209A Central Excise Rules on the other appellant the Executive Asst. to Managing Director cannot be upheld. The same is to be set aside and appeal allowed.
5. Consequent to the findings, the order is set aside and appeals allowed.
(Pronounced in Court on 07-07-2004)