1. The issue involved in these two appeals is whether the product, manufactured by M/s. Holostick India Ltd., is classifiable under Heading No. 49.01 of the Schedule to the Central Excise Tariff Act as the product of printing industry as claimed by them or under Heading No. 39.19 of the Tariff as self-adhesive film as confirmed by the Commissioner under the impugned Order.
2. Shri V. Sridharan, learned Advocate, submitted that the Appellants Company manufactures security holograms and holographic films; that the art work prepared by artist and computer having logo/company buyers name, etc. is itched/transferred to glass plate having coating of lacquer with laser and optics; that then glass master is made; that by the process of electroforming, image on the nickel masters could be replicated/reproduced with the help of nickel sulphamate plating solution; that from Nickel Master, additional Nickel masters are made which are called "shims or production plates"; that by the process of embossing, the holographic effect of the Nickel shim is transferred on to the coated and metallised polyster PET film with the help of heat and pressure; that the reproduced shim is cut into the desired size and mounted on the main stamper roller with the help of screws; that the main stamper roller and two pressure rollers on the embossing machines are heated and the coated and metallised polyster film is passed in between the two successive pressure roller systems and holographic effect is automatically transferred on the film; that the lamination is the final process of holographed metallised polyster film with silicon coated release paper; that solvent base or water based acrylic pressure sensitive adhesive is used in this process for gumming cum lamination purposes; that the laminated material is thereafter cut into desired sizes; that the Commissioner, under the impugned Order, has classified the impugned product under Heading 39.19 as self-adhesive film relying upon HSN Explanatory Notes according to which the heading also includes articles printed with motifs, characters or pictorial representations which are not merely incidental to the primary use of the goods.
3. The learned Counsel, further, submitted that the impugned product is a product of printing industry as the printing of holographic effect is not merely incidental to the primary use of the goods (holograms); that the metallised and coated polyster film without printing is not called hologram and cannot be sold to customers; that hologram is a communicative product, containing image of the customer's company and the ultimate buyer of the product decides whether the product is genuine or not by looking at the hologram affixed on the product. He also mentioned that as per Note 2 to Chapter 49, "printed" also means reproduced by means of a duplicating machine, produced under the control of a computer, embossed, photographed, photocopied, thermocopied or typewritten."; that it is thus apparent that method adopted for transferring the holographic material on to the film is by way of embossment which comes under the term 'printed' for the purpose of Chapter 49 of the Tariff. He also referred to Explanatory Notes of HSN according to which 'self-adhesive printed stickers' fall under Heading 49.11 of HSN relating to "other Printed Matter, including Printed Pictures and Photographs." Reliance has been placed on the decision in the case of CCE, Bombay v. New Jack Printing Works (P) Ltd., 1999 (105) E.L.T. 440 (T), wherein printed hanger consisting of sheet of paper bearing picture of television set with bold letters 'Salura' printed has been classified under Heading 4901.90 as the essential character of the hanger that of a advertising display material was provided by the characters and letters printed on it. He further mentioned that the Supreme Court has reversed the decision in Metagraphs P.Ltd. v. CCE, 1996 (88) E.L.T. 630; that similar decision in Johnson & Johnson Ltd. v. CCE - 1995 (78) E.L.T. 193 has been set aside by the Supreme Court in Johnson & Johnson - 1997 (94) E.L.T. 286 (S.C.).
4. Alternatively the learned Advocate contended that the product which emerges at the final stage of manufacturing process is the printed aluminium laminated film and not self-adhesive film; that is silicon coated paper is stuck to one side of the polyester film; the product is a laminated product; that since the impugned product is a laminated film it is classifiable under Heading 39.20 which covers "other plates, sheets, film, coil and strip, of plastics, non-cellular, whether lacquered or metallised or laminated, supported or similarly combined with other materials or not." Finally he mentioned that the extended period of limitation is not invocable as the Appellants had filed a declaration under Rule 173B of the Central Excise Rules, 1944; that a manufacturer is not required to give the process of manufacture undertaken by him and it is for the Authority to ask for the manufacturing process if they so desire. Reliance has been placed on the decision in CCE v. Dabur India Ltd., 2001 (137) E.L.T. 434 (T); that further in the declaration, dated 18-8-94, process of manufacture was mentioned in brief; that they had written to the Chairman, Central Board of Excise and Customs, a letter dated 26-5-99 proposing that holograms be used to prevent loss of excise Revenue; that pursuant thereto, Deputy Director, Anti-Evasion visited their factory and acquainted with the raw materials as well as with the processes involved in the manufacture of holograms and other allied holographic products; that thus the question of any suppression on the part of the Appellants does not arise at all; that finally the sale price is to be considered as cum-duty price and the duty alleged to be payable is to be excluded in terms of the decision of the Larger Bench of the Tribunal in Srichakra Tyres Ltd. v. CCE, 1999 (108) E.L.T. 361; that penalty is not imposable as the matter involves dispute on classification; that for the same reason no penalty can be imposed on Shri U.K. Gupta, Chairman and Managing Director; that moreover there is no evidence led in by the Department to show that he was having the belief that the goods were liable for confiscation; that accordingly penalty under Rule 209A cannot be imposed on him.
5. Countering the arguments, Shri Jagdish Singh, learned Departmental Representative, submitted that the product in dispute is a self-adhesive film as only one side is laminated; that self-adhesive film is specifically classifiable under Heading 39.19 of the Tariff and, therefore, it cannot be classified under Heading 39.20 of the Tariff merely because it is laminated since Heading 39.20 applies to "other plates, sheets, film foil and strips, of plastics"; that in terms of Note 2 to Section VII of the Tariff and HSN Explanatory Notes Heading 39,19 includes articles printed with motifs, character or pictorial representation which are not merely incidental to the primary use of the goods; that thus any printing, even if it imparts a character essential to its primary use, would not take away the product from Heading 39.19 of the Tariff. He also referred to Circular No.35/96-Cus., dated 21-6-96 wherein it has been clarified by the Ministry that self-adhesive embossed holograms will fall under Heading 39.19 of the Customs Tariff. The learned Departmental Representative also relied upon the decision in Johnson and Johnson Ltd. v. CCE, 1996 (88) E.L.T.465 (T) wherein printed plastic labels were held not to be the product of printing industry and were classified under Heading 39.19 of the Central Excise Tariff and mentioned that the said decision has been followed in Mahavir Decorative Products P. Ltd. v. CCE, Pune, 1999 (31) RLT 410 (CEGAT). He also contended that the Supreme Court decision was not in respect of self-adhesive holograms and was not considering Note 2 to Section VII and the Explanatory Notes of HSN. Finally, he submitted that the extended period of limitation is invocable as the declaration was silent about the fact that the product is a self-adhesive product and as such vital information had been suppressed from the Department. He also relied upon the decision in BPL India -2002 (143) E.L.T. 3 (S.C).
6. In reply the learned Advocate mentioned that individual sticker cannot be called a film for being classified under Heading 39.19 of the Tariff. He also referred to the decision in Holographic Security Marking Systems Pvt. Ltd. v. CCE, Mumbai, 2003 (151) E.L.T. 470 (T).
The learned Departmental Representative countered by submitting that Heading 39.19 covers within its ambit "other flat shapes of plastic" also and that the decision in Holographic Security Marking System was dealing with a completely different product that is stamping foils on which holograms were obtained by printing.
7. We have considered the submissions of both the sides. The two rival Headings of the Central Excise Tariff reads as under : 39.19 Self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes of plastics, whether or not in rolls.
49.01 Printed books, newspaper, pictures and other products of the printing industry; manuscripts, typescripts and plans.
8. The basic contention of the Appellants is that the essential character to the impugned product is imparted by printing and as such the impugned products is classifiable under Heading 49.01 of the Tariff. The process of manufacture as has been detailed in show cause notice dated 4-2-2000 reveals that 'shim' is mounted on the embossing machine and also the metallised polyester film in base and roll form; the impression of shim are then transferred from the surface of the said production plates to the surface of their polyester film roll through optimal applications of heat and pressure; the embossed metallised polyester film roll is continuously coated on its reverse with a water-based pressure-sensitive adhesive and dried, and thereafter it is continuously laminated with the silicon coated surface of release paper to make a laminated roll. It is thus clear that the impugned product is laminated as well as is having adhesive quality.
The holograms are stuck to various products by their customers. As the product manufactured by the Appellants possesses the quality of self-adhesive, it cannot be classified in Heading 39.20 of the Tariff as the said heading applies to "other plates, sheets, film, foil and strip, of plastics, whether lacquered or metalised or laminated, supported or similarly combined with other materials or not." As the product does not cease to be a self-adhesive product, it has to be classified under Heading 39.19 and cannot be classified under Heading 39.20 merely because one side of it has been laminated.
9.1 The other question which remains to be examined is whether printing of hologram will make the impugned product a product of printing industry so as to be classified under Heading 49.01 of the Tariff. Note 2 to Section VII of the Tariff reads as under : "2. 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." 9.2 Explanatory Notes of HSN in Section VII clarifies Note 2 as under : "Goods of Heading 39.18 (floor coverings and wall or ceiling coverings of plastic) and Heading 39.19 (self-adhesive plates, etc.
of plastics), even if printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods, do not fall in Chapter 49," It is thus apparent that even if printing is of essential nature, the product of 39.19 would remain classifiable under Heading 39.19 and will not be regarded as "a product of printing industry". This view is further strengthened by the Explanatory Notes of HSN below Heading 39.19 which reads as under : "It should be noted that this heading includes articles printed with motifs, character or pictorial representations which are not merely incidental to the primary use of the goods (See Note 2 to Section VII)." General Explanatory Notes of HSN below Chapter 49 clearly mentions that "Goods of Heading 39.18, 39.19, 48.14 or 48.21 are also excluded from this Chapter, even if they are printed with motifs, characters or pictorial representations, which are merely incidental to the primary use of the goods." For this reason "self-adhesive printed stickers designed to be used, for example, for publicity, advertising or mere decoration, e.g. "comic stickers" and "window stickers" mention in HSN Notes below Heading 49.11 would not cover the products of Heading 39.19. In view of this, the decisions relied upon by the learned Advocate are not applicable to the facts of the present matters. In Holographic Security Marking Systems case the product involved was "stamping foils" falling under Heading 32.12 of the Tariff which was classified under Heading 49.01 after the hologram was printed thereon.
The Tribunal observed that "until the product became transformed because of the printing of the material on it, it continued to be stamping foil......". In the present case even after printing, because of Note 2 to Section VII, the product continues to remain classified under Heading 39.19 of the Tariff. We thus hold the classification of the impugned product under Heading 39.19 of the Tariff.
9. We, however, agree with the learned Advocate that the extended period of limitation is not applicable as the Appellants had filed the declaration and brief manufacturing process was also mentioned besides mentioning the name of the product "Hologram and Articles of Holography and film". Their bona fide is also evident from the fact that a team of officers visited their factory and saw the raw materials and manufacturing process. The visit may be, as observed by the Commissioner in the impugned Order, with respect to promoting their product in the Revenue Department, the fact remains that the process of manufacturing was not concealed from the Department, Accordingly, the demand of duty can be made only for the normal period specified in Section 11A(1) of the Central Excise Act at the relevant time and that too after redetermining the assessable value in terms of the decision of the Larger Bench in the case of Srichakra Tyres Ltd. In view of these facts and circumstances no penalty is also imposable on both the Appellants. We, therefore, set aside the penalty imposed on both the Appellants. The matter is thus remanded to the adjudicating authority for recomputing the duty in terms of this Order.