By TIOL News Service

MUMBAI, JUNE 04, 2015: ALMOST three years ago we reported the order passed by the CESTAT allowing the stay petition filed by the appellant, viz. Dy. Chief Manager, (Printing & Stationery), Central Railway. That application involved a CE duty amount of Rs.2.17crores with penalties galore.

To know what the issue is all about, read further -

Herein below is the Table extracting the entries as appearing in the Notification 10/2003-CE dated 01.03.2003:

TABLE

As is evident, the goods mentioned at the aforesaid Serial numbers were chargeable to Nil rate of duty in terms of the above exemption notification.

This notification was rescinded/superseded by notification 10/2006-CE dated 01.03.2006 and the goods mentioned above met the following fate-

TABLE

Noting that the goods that were exempted earlier have now been charged to 8% duty, the Revenue authorities trained their guns on the Central Railway Printing Press, Mumbai which is engaged in printing of registers, accounts books, various forms, order books, receipt books and similar articles and served demand notices for recovery of Central Excise duty on the "goods" allegedly manufactured and "cleared" by the assessee.

The Division Bench headed by the Vice President while granting stay - 2012-TIOL-749-CESTAT-MUMinter alia observed -

"6. In the present case, there is no evidence on record to show that the goods in question which are printed by the Central Railway Printing Press are capable on being bought and sold in the market. In these circumstances, prima facie, the applicant has a strong case in their favour. Therefore, pre-deposit of duty, interest and penalty is waived and recovery thereof is stayed during the pendency of the appeal."

Many similar orders have been given birth to thereafter and appeals have been filed against them. The total CE duty involved is more than Rs.12crores.

The appeals were heard in the month of March and orders were passed recently.

The appellant relied upon a plethora of judgments and emphasised that since the burden of proof regarding the marketability of the product has not been discharged by the Revenue the entire proceedings in this case is liable to be dropped only on this ground alone. It is also submitted that when all these printed products are printed with the name of Central Railway and printed information contained therein are meant for railways function it is very obvious that these material cannot be used by any other person, therefore, it is not capable of being sold or purchased, and on this fact also demand is not sustainable.

The AR reiterated the findings of the order passed by the lower authority and submitted that the product in question is printed paper and same are correctly classifiable under chapter 4820. Case laws were also relied upon to buttress the stand of the department.

The Bench after considering the submissions inter alia observed -

"5. We find that in the show cause notices as well as in the impugned order it was contended that appellant are engaged in manufacture of registers, accounts books, various forms, order books, receipt books, letter pad, memorandum pads and similar articles binding folders, file cover, mainly business and other articles of stationary papers and paper board. However, ld. Sr. Counsel for the appellant produced almost all types of forms and printed materials which are printed in the appellant's printing press and it was observed that products being manufactured by them in their printing press are mostly of various printed forms and not registers, books and pads therefore looking to the nature of the product being manufactured by the appellant it is found that same are not classifiable under chapter 48, all the forms are printed with very detailed information and only some blank column are printed for filling up by manuscript or typescript therefore in our considered view the product of appellant is correctly classifiable under chapter 49. We have gone through various judgments on the identical issue and found that in those judgments product are more or less identical and same were held classifiable under chapter 49."

Thereafter the Bench extracted paragraphs from the decisions in Gopsons Papers Ltd. - 2006-TIOL-868-CESTAT-DEL, Alpha Carbonless Paper Mfg. Co. Pvt. Ltd. - 2014-TIOL-224-CESTAT-MUM, Metagraphs Pvt. Ltd. -2002-TIOL-457-SC-CXand concluded -

"From above judgments it is crystal clear that product in question being in the form of various printed forms with some blanks is product of printing industries and the same is classifiable under chapter 49 and excluded from chapter 48 therefore in our considered view the product in question are classifiable under chapter 4901 and hence not liable for duty. On the issue of marketability, in view of the fact that all the printed products are contained details related to and for the purpose of various day to day function of Central railway, these products are indeed used in-house by Central Railway. Excisability of the product comes into play only when paper is printed. When bought out paper are printed and comes into existence an excisable product then test of marketability has to be under gone. After printing of the plain paper with the details containing therein all these forms leaflet, folders etc. can be used by Central railway alone and it can neither be used nor shall be useful for any other person other than Central Railway. This undisputed facts is more than sufficient reason to hold that the product is not marketable because same is neither capable of being bought and sold nor can be factually bought and sold. As regard the marketability, the contention of the Revenue is that the product is commercially known in the market does not hold water for the reason that if the product in the present case since not capable being bought and sold, cannot be commercially known as marketable. We agree with the submission of Ld. Sr. Counsel that Revenue has not undertaken any exercise to prove that this very product are marketable. Therefore admittedly the Revenue has not discharged the burden lies on them as regard the test of marketability of the product. The judgments in this regard relied upon by the Ld. Sr. Counsel squarely applicable to the present case that if the burden of proof of marketability does not discharged by the Revenue by producing the evidence then claim of appellant that the goods in question is not marketable must be accepted and no contrary view can be taken."

Citing passages from the decisions in Gujarat Narmada Valley Fertilizers - 2005-TIOL-89-SC-CX-LB, Tata Iron & Steel Co. Ltd. - 2004-TIOL-25-SC-CX, Bhor Industries Ltd. - 2002-TIOL-38-SC-CX, Moti Laminates - 2002-TIOL-38-SC-CX and Cipla Ltd. - 2008-TIOL-66-SC-CX, the Bench held -

"On going through above judgments it is found that since, in the present case, first the Revenue has not discharged the burden of proof that the product in question is marketable or otherwise and from the nature of the product coupled with the fact that printed material printed in the appellants' printing press is not for general use in the market but for their own use, the goods clearly not marketable. We are fully in agreement with the Ld. Sr. Counsel that in terms of definition of excisable goods and explanation thereto the goods should be capable of being bought and sold and that too for consideration. In the present case goods being printed with name and details of Central Railway is not capable of being bought and sold for consideration hence the same is not marketable goods. In view of our above discussion, we are of the considered view that product in question are not dutiable on both the counts of classification as well as marketability. We therefore set aside the impugned orders and allow the appeals with consequential relief, if any, in accordance with law."

Reduced to Cinder : Did the department also train their guns on the Western Railway, Northern Railway, Southern Railway, Eastern Railway, Konkan Railway etc. and their own backyard?

(See 2015-TIOL-1024-CESTAT-MUM)