Packing Material Makers stop clearances after Excise controversy

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Packing Material Makers stop clearances after Excise controversy

AIT News Network

NEW DELHI. AIT Office is flooded with calls from Packing Material Makers as the Rumour is hot for last couple of days that small-scale excise exemption is no more admissible to Packing Material manufacturing Units as they are printing the Brand names of others on the Packing Material and hence the exemption of Rs 1.5 Crore turnover under Central Excise Tariff Notification No.8/2003 does not apply to them.

The Packing Material Makers have stopped clearances with effect from 1st April 2008 and are in a dilemma as to whether avail the exemption or to start paying excise from very beginning of the year.

AIT Team did some research and found out that the root of the rumours is a communication C.No. V(30)Tech/Packing Material/64/07/2685/19.02.08 dated 19.2.2008. issued by the Commissioner of Central Excise, Kanpur which is as under:

“Sub : Non applicability of Notification No. 08/2003 on the packaging material bearing other’s brand – reg.

Please refer to the undersigned’s letter C. No V(30)Tech/Packing material /64/2007/31-33 and 848-49 dated 16.01.08/21.01.02008 on the subject as mentioned above.

In the above context, the matter has been Re-examined. On re-examination, it is observed that even though the packing material as mentioned in the said letter dated 16.01.08/21.01.08 of the undersigned may not be used by the packing material manufacturer for packing and clearing any other goods from his factory with the help of such packing material, such packing material itself is classifiable under a definite tariff item by virtue of its own identity as a separate excisable goods and such packing material is also specified in the SSI exemption as one of the goods entitled to the said exemption subject to the fulfillment of the conditions of SSI exemption . Therefore , since such packing material is also a specified goods for the purpose of the SSI exemption , such packing material is also a specified goods for the purpose of SSI exemption such packing material affixed with the brand names of others will not be entitled to the benefits of the SSI exemption in view of the Hon’ble Supreme Court’s order in the case of Kohinoor Blastic Pvt Ltd Vs CCE , Indore (2005(188)ELT3(SC) and in the case of CCE Chandigarh Vs Bhalla Enterprises (2004(178)ELT-225(SC) . There are several CESTAT judgments also in support of such a view.

Accordingly, the instructions contained in the undersigned’s letter No V (30) Tech/Packing material/64/2007/31-33 and 848-49 dated 16.01.08/21.01.2008 on the subject as mentioned above may please be treated as modified to the above extent and action may taken accordingly . In this regard, attention is also invited to the clarifications given vide the undersigned’s DOC no. 02/Commr/KNP/Rev Tar/06/11939-46 dated 06.10.07 and of even C No. 14793 -800 dated 20.12.07 which will remain unaltered.”

Thus according to views of the Commissioner of Central Excise, Kanpur, the packing material affixed with the brand names of others will not be entitled to the benefits of the small –scale excise exemption of Rs 1.5 Crore clearances.

According to RS Sharma Advocate the small-scale exemption is admissible to manufacturers of packing material who are printing the Brandname or Tradename of their clients on the packing material as the packing material itself cannot be treated as Branded goods within the ambit and scope of the Notification. In fact the goods which are packed inside the packing material are to be treated as Branded goods. The views of learned Commissioner of Central Excise do not reflect correct interpretation of exemption Notification No. 8/2003 .Further, even the cases cited in the communication do not apply in such cases. Instead of jumping the gun by issue of controversial communication; the learned Commissioner should have referred the matter to CBEC for issue of clarification in such matters. The clients have already been advised to avail the exemption, Sharma added.

It is high time CBEC clears the air on the issue through a clarification so that the sword of demand and litigation does not hang on the neck of manufacturers.