Excise Duty Liability on Plastic Sheet: CESTAT Remands Matter for Clarification [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal,( CESTAT ) remanded the matter for clarification on excise Duty Liability on Plastic Sheet.

The appeal of M/s Caprihans India Ltd relates to the demand of 34,725/- on clearance of ‘printed plastic sheets’ between September 1997 and July 1998 in which the order of the original authority, fastening duty liability proposed in two show cause notices of 4th March 1998 and 5th August 1998, was confirmed based on earlier order classifying the finished goods against subheading 3920 39 as ‘printed PVC sheets’ instead of ‘nil rate’ of duty chargeable on ‘products of printing industry’ corresponding to subheading 4901 90 in Schedule to Central Excise Tariff Act, 1985 and upheld in order of Commissioner of Central Excise & Customs (Appeals), Nasik. 

The Supreme in an identical issue order that ‘A plain reading of the show cause notice makes it clear that it is not the Department's case that the product after printing has become a different product known to be Printed PVC Sheets. On the contrary, the Department proceeds on the footing that the product after printing is the same as a plastic sheet – the only difference is it is duly printed with design and, therefore, its classification must remain within the plastic industry Chapter i.e. Chapter 39 and does not get shifted to the printing industry Chapter i.e. Chapter 49.  ‘

It was claimed by the appellant that they manufacture plain ‘plastic sheets’ which, upon clearance on payment of duty, are transferred to a group entity at the same premises for printing and, thereafter, sought to be cleared on payment of ‘nil’ duty applicable to goods corresponding to sub-heading 4901 90 of Schedule to Central Excise Tariff Act, 1985. On the other hand, this fine distinction remains unattended in the orders of lower authorities who have proceeded merely to hold that the finished goods conform to the description corresponding to sub-heading 3920.39 of Schedule to Central Excise Tariff Act, 1985 with the applicable rate of duty.

In either situation of the last activity being undertaken by a separate unit, or even by the same unit, legitimizing of clearance, as the manufacture of ‘plastic sheets’ with attendant duty liability at the earlier stage, is implicitly owing to submission of the appellant not having been challenged by the respondent-Commissioner herein. Consequently, we proceed on the assumption that the duty had been discharged on plain ‘plastic sheets’ which are, thereafter, subject to further processing.

The  Supreme Court in re Caprihans India Ltd has held that the activity of ‘printing’ does not amount to ‘manufacture’ and, if such activity was sought to be charged to duty at the last stage, the proceedings would fail on that score. 

In light of the judgement, the two-member bench of Mr C J Mathew, Member (Technical) And Mr Ajay Sharma, Member (Judicial) set aside the impugned order to remand the matter back to the original authority and, while clarifying that duty liability will arise on plain ‘plastic sheets’ only if liability had not been discharged, we restrict recovery, if any, only to such unpaid duties on goods manufactured before printing.

To Read the full text of the Order CLICK HERE

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