Case Law Citation

M/s. Holostick India Ltd. Vs.  Commissioner of Central Excise (Supreme Court of India), Civil Appeal Nos.2729-2730 OF 2004; Date of Decision: 30th March, 2015

Brief of the Case

In the case of M/s. Holostick India Ltd. Vs.  Commissioner of Central Excise , Hon’ble Supreme Court held that While classifying a product for excise purpose Primary use of the product will prevails over the incidental ones. It further held that merely because a particular embossed hologram is self adhesive, therefore in all cases, it will attract entry 39 related to self adhesive is not correct. While classifying what is to be seen is whether the self adhesive part of the product is of primary use or the printed matter is of primary use. It cannot be that invariably in all cases, the moment a hologram is self adhesive it will fall within entry 39.

Facts of the case

The appellant manufactures security holograms. At the very beginning of the manufacturing process, they use coated metallised film which is classified under Tariff entry 39.20.36 after which the said film is embossed. Post embossing, there is adhesive coating and release coating which results in a hologram which ultimately is cut to size and utilised by customers of the appellant for security purposes.

The Department issued show cause notice and sought to classify the security hologram under Tariff entry 39.19 of the Central Excise Tariff 1999-2000. In the reply, the appellant disputed this and stated that, in fact, the holograms ought to be classified under Tariff entry 49.01.

The Commissioner, Central Excise, by an order agreed with the Department’s classification and classified the said goods under Tariff entry 39.19. An appeal to the CESTAT by the appellant was dismissed.

Contentions of the Appellant

The Appellant contended that a reference to the Rules for Interpretation of the First Schedule to Central Excise Tariff Act, 1985, when properly read, would necessarily yield the result that the said goods would fall only under Entry 49.01. Further, the appellant also cited a decision in ‘Holographic Security Marking Systems Pvt. Ltd. v. C.C.E., Mumbai [2003 (151) E.L.T. 470], an appeal from which was dismissed by the Supreme Court. In addition, appellant cited a judgment of this Court reported in ‘Collector of Central Excise, Shillong v. Wood Craft Products Ltd.’ [1995 (77) E.L.T. 23(S.C.)] in support of the proposition that HSN Explanatory Notes can be relied upon under certain circumstances.

Contentions of the Department

The department contented that entry 49.01 would not at all apply if the ejusdem generis Rule is applied to the various items contained therein. The department contended that is that the expression “other products of the printing industry” should be read ejusdem generis with the three expressions preceding these words, namely, “printed books, newspapers, pictures”.

Another argument was that viewed at from any angle Tariff entry 39.19 is a specific entry dealing with self-adhesive items of plastic, and printing on such items being merely incidental to such products would maintain the classification post entry 39.20 under entry 39.19 and not under entry 49.01. The department further sought to project that since printed books, newspapers and pictures are of general public utility in that they are all knowledge based items, the idea of this Tariff entry is to have knowledge based products of the printing industry which alone would come under 49.01. The department further relied on two circulars viz. Circular No. 142/53/95-CX, dated 14.08.1995 and Circular No. 35/96-Cus., dated 21.06.1996 which provides for classification of similar goods.

Held by Hon’ble Supreme Court of India

Firstly, It is important to set out the relevant tariff entries: –

“39.19

3919.00     Self-adhesive plates, sheets, film, foil, tape, strip and other Flat shapes, of plastics, whether or not in rolls.

39.20 Other plates, sheets, film, foil and strip, of plastics, non-Cellular, whether lacquered or metallised or laminated, supported or Similarly combined with other materials or not.

–     Of polymers of vinyl chloride:

     3920.11   – –   Rigid, plain

     3920.12   – –   Flexible, plain

     3920.13   – –   Rigid, lacquered

     3920.14   – –   Flexible, lacquered

     3920.15   – –   Rigid, metallised

     3920.16   – –   Flexible, metallised

    3920.17   – –   Rigid, laminated

     3920.18   – –   Flexible, laminated

     3920.19   – –   Other

–     Of regenerated cellulose:

     3920.21   – –   Film, plain

     3920.22   – –   Film, lacquered

     3920.23   – –   Film, metallised

     3920.24   – –   Film, laminated

     3920.25   – –   Sheet, plain

     3920.26   – –   Sheet, lacquered

     3920.27   – –  Sheet, metallised

     3920.28   – –   Sheet, laminated

     3920.29   – –   Other

–     Of other plastics:

     3920.31   – –   Rigid, plain

     3920.32   – –   Flexible, plain

     3920.33   – –   Rigid, lacquered

     3920.34   – –   Flexible, lacquered

     3920.35   – –   Rigid, metallised

     3920.36   – –   Flexible, metallised

     3920.37   – –   Rigid, laminated

     3920.38   – –   Flexible, laminated

     3920.39   – –   Other

49.01- Printed books, newspapers, pictures and other products of the Printing industry; manuscripts, typescripts and plans

4901.10     –   Transfers (decalcomanias)

4901.20     –   Maps and hydro graphic or similar charts of all kind  Including atlases, wall maps, topographical plans and globes, printed

4901.90     –   Other”

The Hon’ble Court noted that the original coated metallised film that has been used by the appellant has already been classified under sub-Heading 3920.36 as a flexible metallised film of plastic. The fact that it got laminated later would not take it out of this particular sub-Heading. The only question which arises is, after such classification, whether the relevant tariff entry would be 39.19 or 49.01.

The Hon’ble Court further stated that on a cursory reading of entry 39.19, it becomes clear that it is part of a general scheme dealing with various items of plastics and must be read together with 39.20 as 39.20 begins with the expression “Other plates….”. The Hon’ble court further states that what is important is that various sheets, films, etc. of plastic should become “self adhesive” in order to attract 39.19. The Hon’ble Court further noticed about tariff entry 49.01 is that it refers to printed books, newspapers and pictures and it is clear that printed books, newspapers and pictures, manuscripts, typescripts, maps and plans of all kinds, are included within this entry whether in public interest knowledge is being disseminated or not by such products. In fact, it becomes clear from a reading of the Explanatory Notes to “HSN” that this Heading would include a large number of “obvious products” which are set out in Explanatory Note and that they include a large number of products which have absolutely nothing to do with disseminating knowledge.

The Hon’ble Court further states that it is clear that the expressions “manuscripts, typescripts and plans” which are also part of the Heading also do not reveal that there is any one genus to which all these items can be attributed. All these expressions speak of printed matter.

The Hon’ble Court further states that whether Note No. 2 to entry 49 can be applied in this case or not. The same reads as follows: –

“Except for the goods of Heading No. 39.18 or 39.19, plastics, rubber and articles thereof, printed with motifs, characters of pictorial representations, which are not merely incidental to the primary use of the goods, fall in Chapter 49.”

The Hon’ble court points out that whether printing is only incidental to the primary use of the goods or is something more than something merely incidental. It is important to remember that the primary use of the product is security and not the quality of being adhesive. The Hon’ble Court cited an example of an adhesive tape with a monogram printed upon it. The primary use of such tape is by virtue of its adhesiveness to bind and package containers in which goods are to be stored and transported. In such an example, the printed monogram of such adhesive tape would be incidental to the primary use of the said goods – the adhesive tape. In the present case, the factor of adhesiveness is incidental to the primary use to which the goods are put, namely, that they are to be used for security purposes. The Hon’ble court stated the relevance of HSN Explanatory Notes by citing the judgment of this Court in ‘Collector of Central Excise, Shillong v. Wood Craft Products Ltd.’ [1995 (77) E.L.T. 23 (S.C.)] in which it has been decided that for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN.

The Hon’ble Court states that Circular No. 35/96-Cus., dated 21.06.1996 does not set out the law correctly. It is clear that merely because a particular embossed hologram is self adhesive, therefore in all cases, it will attract entry 39 is not correct. While classifying what is to be seen is whether the self adhesive part of the product is of primary use or the printed matter is of primary use. It cannot be that invariably in all cases, the moment a hologram is self adhesive it will fall within entry 39.

In view of above it cannot be said that self adhesive aspect of the product is more important than the security aspect of the said product and order of the CESTAT is, therefore, set aside.

Direct Link to download full text of the judgement

http://judis.nic.in/supremecourt/imgs1.aspx?filename=42569

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