R.S. GRAPHICS Vs. CCE

JUDGEMENT

(1.) THE issue involved in this appeal filed by M/s. R.S. Graphics is whether in the facts and circumstances of the matter, penalty under Rule 173Q(1) of the Central Excise Rules, 1944 is imposable on them.

(2.) Shri J. Sankararaman, Ld. Counsel for the appellants, submits that the appellants manufacture on job work printed cartons and were clearing the same without following any Central Excise procedure and without payment of duty under the bona fide belief that the printed cartons were not excisable; that when the Excise officers visited their premises and advised them to pay the Central Excise duty they discharged the duty liability amounting to Rs. 26,63,259 / - for the period 1993 -94 to 1997 -98; that on account of decisions by Tribunal and courts to the effect that printed cartons are treated as products of printing industry, they held the bona fide belief that printed cartons does not attract central excise duty. It was held that printed cartons would not be treated as products of Printing Industry; that again in the case of Metagraphs Pvt. Ltd. v. CCE , the Apex Court held the printed aluminium labels as products of printing industry as printing was not incidental to its use but primary in the sense that it communicates to the customer about the product; that however, the Apex Court adopted different reasoning in holding that Printing cartons are not products of printing industry in the case of Rollatainers Ltd. v. UOI reported in ; that the Apex Court in the case of CCE v. Indian Coated Cartons (P) Ltd. reported in, 1997 (92) ELT 459 (SC) settled the issue by holding that printing cartons are products of packaging industry. The Ld. Counsel submitted that in view of these decisions they entertained the bona fide belief that the cartons in which the printing was done was a product of the printing industry and therefore it did not attract any duty; that the Andhra Pradesh High Court has held in the case of Golden Press v. Deputy Collector reported in that penalty was not leviable as there were conflicting decisions on the issue. He also referred to the decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa reported in, 1978 ELT -J 159 :, ECR C 321 SC wherein it was held that "liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so". The Ld. Counsel also placed reliance on the decision in the case of Siemens Ltd. v. CCE, Allahabad, 1999 (34) RLT 831 :, 1999 (85) ECR 229 (T) wherein it was held that penalty is not imposable where the assessee has taken corrective steps before issue of show cause notice. He mentioned that in the present matter the appellants had paid duty as soon as they were told that the activities undertaken by them attracts central excise duty. Finally, he submitted that as no show cause notice has been issued to them and no central excise duty has been confirmed against them, the question of imposing any penalty does not arise. Reliance has been placed by him on the decision in the case of CCE. v. HMM Ltd.

(3.) COUNTERING the arguments, Shri S. Kannan, Ld. DR submitted that it is not in dispute that the appellants had neither taken any central excise registration for manufacturing printed cartons nor have they followed any central excise procedure before clearing the goods. It is also not in dispute that they had not paid central excise duty which was payable by them. He emphasised that the mere fact that as soon as the department intimated the non payment of duty they have even without asking for show cause notice paid the duty for the past five years period which goes to show that they were aware of the duty liability on their part in respect of printed cartons manufactured by them on job work basis; that the ratio in the decision in the case of HMM Ltd. (supra) is not applicable as in that case the question of imposing any penalty did not arise as the department was not able to sustain its demand whereas in the present matter the entire demand has been paid by the appellants without disputing the same. He also mentioned that the penalty is imposable under Rule 173Q(1) of the Central Excise Rules if a manufacturer removes any excisable goods in contravention of any of the provisions of the rules or does not account for any excisable goods manufactured by him or engages in the manufacture of any excisable goods without having applied for the Registration Certificate; that in the present matter, the appellants have neither taken registration nor accounted for the goods manufactured by them and have removed them in contravention of the provisions as such the penalty has been imposed on them rightly. Finally he submitted that the decision in the case of Siemens Ltd. (supra) is not applicable as in that case the appellants therein were already registered with the department and they had reversed the Modvat credit wrongly taken by them even before the issue of the show cause notice whereas in the present matter the appellants were completely out of control of the Excise officer as they had not even intimated the facts of the manufacture to the department. The Ld. DR also submitted that the period involved is 93 -98 and according to the appellants themselves before this period the matter has been settled that the printing cartons were to be treated as product of packaging industry and not printing industry and as such they cannot claim to hold bona fide belief that their product is not excisable.