ORDER
R.K. Abichandani, J. (President)
1. These two appeals are directed against the order of the Commissioner (Appeals) by which the demand of duty against the appellant Company and imposing penalty, besides ordering interest to be paid, classifying the ice cream containers for cone (conical containers) under sub-heading 4823.90 of Chapter 48 was confirmed and the penalty on the other appellant to the extent to which it was reduced to Rs. 1 lakhs.
2. The appellant Company was manufacturing cone containers made from Printed Aluminium Foils, which, according to the assessee, were classifiable under sub-heading 7616.90 of Chapter 76. According to the Revenue, these were classifiable under sub-heading 4823.90 of the Schedule to the Tariff Act and not under sub-heading 7616.90. On these facts, short payment of Central Excise Duty to the tune of Rs. 2,37,663/- was alleged against the assessee Company and a demand came to be issued. The case of the assessee in response to the Show Cause Notice was that, that they had correctly classified the goods under subheading 7616.90. It was pointed out that, aluminium foil, was a metal foil backed with paper and in that very condition, it was purchased as a raw material for making cones and such raw material i.e. aluminium foils backed with paper, was classified by its manufacturer under sub-heading 7607.50. The Appellate Commissioner held that, as per the Interpretative Rules, where composite goods are made up of different components and cannot be classified by reference to Rule 2, then the classification has to be according to the principles contained in Rule 3. Accordingly, classification was required to be made as per Rule 3(b) and such Rules were required to be classified as if they consisted of the material or components which gave them their essential criteria. It was held that, as per the contents of the material, 70.7% was the paper which, therefore, was the essential component for ice cream containers for cones. He, therefore, held that, Conical Containers for ice cream have to be classified under Chapter sub-heading 4823.90.
3. The learned advocate appearing for the appellants submitted that, paper cannot be said to be the essential criteria in a cone container for ice cream because the outer metal foil, which was printed and showed the nature of the product, was an essential feature which was more specific than paper in general. It was also argued that Chapter 48 was not applicable to “metal foil backed with paper” as per the Chapter Note 1 (I). He placed reliance on the decision of the Tribunal of a Division Bench in I.T.C. Ltd. v. Commissioner of Customs, Chennai , in which it was held that, Chapter Note under the Customs Act [Chapter 48 – 1 (m)] did not cover “metal foil backed with paper or paperboard”. He also referred to the decision of a Five Member Bench of the Tribunal in Hindustan Packaging Co. Ltd. v. Collector of Central Excise, Vadodara , in which it was held that, aluminium foil backed by paper and polyethylene was classifiable under sub-heading 7606 of the Schedule to the Central Excise Tariff Act and not as “laminated paper” under sub-heading 4811.29. It was also pointed out that the appeal against this decision was withdrawn before the Hon’ble Supreme Court and, therefore, dismissed as per the order dated 07.11.1997, reported in 1998 (97) ELT A139 (SC).
4. The learned Authorized Representative for the Department strongly supported the reasoning adopted by the authorities below and submitted that, the contents of paper, being more than the aluminium foil, were classifiable under Chapter 48 as paper products. He also submitted that Rule 3(b) of the Interpretative Rules was correctly invoked by the authorities below and since the paper content of the product was more than 70%, it cannot be classified as an aluminium product. He placed heavy reliance on the decision of a Division Bench of the Tribunal in Royal Cushion Vinyl Products Ltd. v. Collector of Central Excise, Baroda , in which it was held that, Vinyl Floor Coverings were classifiable under Item 22F(4) of the erstwhile Central Excise Tariff Act and not under Tariff Item 22G since the percentage of mineral fibres was 39.1%, which constituted major item in manufacture of floor coverings. It will be noticed from paragraph 7 of the said decision that the Tribunal took note of the fact that, Item 22F(4) referred to the goods in which mineral fibres or yarn or both premominated in weight.
5. In our opinion, in view of the specific Chapter Note excluding “metal foil backed with paper or paperboard” in Chapter 48, there is no scope for anyone to argue that notwithstanding that Chapter Note, the metal foil backed with paper should be considered as paper under Chapter 48 and its products as paper products. Chapter 48 Note 1 (I) reads as follows :
1. This Chapter does not cover:
…
(I) Metal foil backed with paper or paperboard (Section XV)
When the Note is specific in its excluding the said goods, they cannot be included by mere reference to the title of Chapter 48: “Paper and Paperboard; Articles of Paper Pulp, of Paper or of Paperboard”, as was sought to be urged on behalf of the Revenue. Even the contention that the Chapter Note will not apply because Rule 3(b) of the Interpretative Rules, is misconceived, as it has been specifically provided in Rule 1 of the Rules for the interpretation of the First Schedule that, “The titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereafter contained.” Therefore, if there is no specific Chapter Note requiring otherwise, Rule 2 onwards including Rule 3(b) of the Rules for the Interpretation can be invoked. In the present case, Chapter Note 48 – 1 (I) is very specific leaving no option to resort to Rule 3(b). We, therefore, hold that the Commissioner (Appeals) has committed an error in not taking into consideration Chapter 48 Note 1 (I) of the Schedule to the Central Excise Tariff and classifying the product under subheading 4823.90. The product “Ice Cream Containers for Cones (known as Conical Containers)” is classifiable under sub-heading 7616.90 and not under 4823.90. The impugned order is, therefore, set aside and the appeals are accordingly allowed.
(Dictated and pronounced in the open court)