Holding

The remand was limited to the determination of the correct duty rate/differential duty and the penalty, and the amortization plea could not be considered.

Summary

Paper Products Ltd., a manufacturer of printed flexible packaging, was found by the Central Excise authorities to have omitted the cost of its printing cylinders from the assessable value of its laminates and pouches, leading to a demand for additional duty and a penalty. The Tribunal remanded the matter to the adjudicating authority, specifying that it should decide only two issues: the correct rate of duty (and any differential duty) and the correct amount of penalty. The appellant sought to introduce a plea that the cylinder cost had been amortized over time, but the Commissioner held that this issue was outside the scope of the limited remand. The Supreme Court affirmed that the remand was indeed limited to the two specified issues and that the amortization plea could not be considered, while reducing the penalty from Rs.10 lakhs to Rs.5 lakhs. The appeals were dismissed.

Issues considered

The scope of the Tribunal's remand: whether it was limited to determining the correct duty rate and penalty only.
Whether the appellant could raise the amortization of printing cylinder costs in the remand proceedings.
Determination of the correct rate of central excise duty and any differential duty payable.
Determination of the appropriate penalty under Rule 173Q of the Central Excise Act.
Applicability of exemption Notification No.49/87 and the Board order dated 5.5.1989 to the appellant's goods.

Legislation cited

Central Excise Act, 1944

Subjects

central exciseremandlimited remandamortizationduty valuationpenaltyprinting cylindersexemption notificationassessment valueCEGATCESTAT

Judgment

- .... PAPER PRODUCTS LTD.
v.
A
COMMNR. OF CENTRAL EXCISE, MUMBAI

JULY 12, 2007

[DR. ARIJIT PASA YAT AND LOKESHWAR SINGH PANTA, JJ.] B

~
/ Central Excise-Adjudication proceedings-Remand-Held: On facts,
remand was not an open one-Terms of the remand were limited and specific.

Appellant-assessee is engaged in the manufacture of printed flexible c
packaging laminates and pouches. The printing of these goods is done by
means of printing cylinders manufactured by a division of Appellant Appellant
did not include the charges for making printing cylinders in the assessable
value of the laminates and pouches. The Department accordingly demanded
duty which was alleged to have been short levied and also imposed penalty. D
Tribunal remanded the matter for decision on two issues, viz. the correct rate
'T and amount of duty and the correct amount of penalty payable. On remand,
Appellant took the plea that the cost of printing cylinders had been amortized.
The Commissioner, however, declined to entertain the plea of Appellant holding
that the question of amortization could not be considered in the remand
proceedings. E
The question which arose for consideration in the present appeals is
whether the remand was limited to the determination of correct rate of duty
and penalty and it was not open to the Appellant to take the plea regarding
amortization of the cost of printing cylinders.
• i" F
Disposing of the appeals, the Court

HELD: 1.1. The decision of the Tribunal which remanded the matter
was clear and specific as to the terms of the remand. The Tribunal noted in
paragraph 6 that the stand taken before it, that the cost of the cylinder had
been amortized in the price of the packing material was totally contradictory' G
to the stand taken before the adjudicating authority, in the absence of any
....... material placed before him to support the present stand. It said "in these
• circumstances, it follows that the amount collected unde:- separate invoices
represented, as admitted before the Adjudicating Authority, a part of the cost
315 H
"
>--

316 SUPREME COURT REPORTS (2007) 8 S.C.R.
...
A of printing cylinder". While it noted in paragraph 8 in accordance with the
).... -
view taken in Flex Industries case that the cost of Cylinder must be reflected
in the assessable value of the final product over a considerable period by
amortizing the cost, it stressed again that the appellant before it had no case
before the adjudicating authority and the costing of cylinder had been
amortized. It specifically stated in paragraph 12 the matter was being
B remanded to the adjudicating authority for passing a fresh order after deciding
the two aspects, what is the correct rate of duty, if any, chargeable, the correct
amount of differential duty, if any payable, and the correct amount of penalty. '(

fPara 6) (318-E-H; 319-AI

c related1.2.to the
A bare reading of para IO makes the position clear that it only
particular plea and no other plea which was covered by para 8.
The scope of limited remand has been highlighted by this Court in Mohan
Lal' s case. Above being the position, there is no merit in these appeals so far
"
as levy of duty is concerned. However, considering the factual scenario the
penalty is reduced to Rs.5 lakhs frol'n Rs.IO lakhs.
D f Paras IO and I I) 1319-F; 320-E)
~-

Mohan Lal v. Anandibai and Ors., AIR (1971) SC 2177, relied on.

Flex Industries Ltd v. Commissioner of Central Excise, Meerut, (1997)
91 ELT 120, referred to.
E
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5317-5318 of
2002.
j '
From the Judgment and Order No. CII 1838-39-02-WZB dated 11.06.2002
of the CEGAT. West Bench at Mumbai in E-Stay-468/02-Mum and Appeal E/
F 566/02-Bom. ... •
WITH

C.A. No. 7098 of 2005.
~
G D.A. Dave Darius Shroff, R.N. Karanjawala, Ruby Singh Ahuja, Bharat
Singh, Manu Aggarwal and Manik Karanjawala for the Appellant.

Nagendra Rai, Aruna Gupta and B. Krishna Prasad for the Respondent.
>- ~

The Judgment of the Court was delivered by
H
PAPER PRODUCTS LTD. " COMMNR. OF CENTRAL EXCISE, MUMBAI [PASA YAT, J.) 317
DR. ARIJIT PASAYA T, J. l. Challenge in these appeals is to the orders A
passed by the Customs, Excise and Gold (Control) Appellate Tribunal, West
Regional Bench at Mumbai (in short the 'CEGAT') and Customs, Excise and
Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (in short the
'CESTAT').

2. As common points are involved, they are taken up together for B
disposal.

3. So far as Appeal Nos.5317-5318/2002 are concerned they relate to
order passed by CEGAT in Appeal No.E/566/02-Bom. Appeal No.5318 of2002
relates to rejection of the application for rectification filed. Appeal No.7098 bf C
2005 relates to Appeal No.E/3617/04-MUM. For convenience the factual
position in Civil Appeal Nos.5317-18 is noted:

"·
4. Paper Products Ltd. the appellant was engaged in the manufacture of
printed flexible packaging laminates and pouches. The printing of these goods
is done by means of printing cylinders. These cylinders were being D
manufactured by Helio Gravure, Thane, a division of Paper Products Ltd. The
Department investigation led it to believe that the charges for making printing
cylinders were recovered by the appellant separately from the buyers of that
product and did not include these charges in the assessable value of the
laminates pouches etc. Notice dated 1.2.1994 was issued demanding duty of E
Rs.43.59 lakhs which was alleged to have been short levied. The Collector
passed orders in December 1994 confirming the demand and imposed penalty.
The assessee challenged the order to the Tribunal. The Tribunal in its order
reported in Paper Products Ltd. v. Collector of Central Excise, Bombay,
( 1999) 110 EL T 671 held that the charges that were paid for printing cylinders
were includible in the value of the pouches and other such goods. It also held F
with regard to the service charges that the appellant recovered from its buyers
"the activity for which the charges recovered must be regarded as an activity
essential to enable the appellant to print the laminated cartons which are the
appellant's final products and in this view also, the charges collected would'
be part of the assessable value." The Tribunal also noted that the appellant G
before it "had no case before the Adjudicating Authority that the cost of
cylinders had been amortized to any extent" by the appellant. A further
contention was raised before the Tribunal that duty chargeable on the finished·
product during a substantial part of the disputed period was nil either on
account of the order of the Board dated 5.5.1999 or exemption notification 49/ H
87 dated 1.3.1987. The Tribunal noted that those contentions had not been
318 SUPREME COURT REPORTS (2007) 8 S.C.R.
L
A raised before the adjudicating authority observed that these stands would
>--
require factual investigation and felt that the controversy should be decided
by the adjudicating. authority and, therefore, remanded the case to the
adjudicating authority for deciding on the two issues what is the correct rate
of duty chargeable and correct amount of differential duty payable and the
correct amount of penalty imposable. The Commissioner passed orders with
B
regard to the remand proceedings by order dated 31. I 0.200 I. The said order
was challenged before CEGA T.
'f
5. In his order, the Commissioner took the stand that the order of the
Tribunal, and the order passed by the bench on a subsequent application for
c rectification of mistake in that order, made it clear that the question of
amortization was not to be considered by him in the remand proceedings. He
examined the applicability of notification 49/87 and the order of the Board
dated 5 .5 .1989 and found that neither of them wou Id apply. The assessee had
not been shown fulfillment of the condition subject to which the exemption
of notification 49/87 was available and the circular of the Board did not relate
D
to the disputed period.
)-.

6. The contention of the counsel for the appellant before CEGA T was r '
that the Commissioner should have taken into account the plea that the
casting had been amortized. He relied upon the decision of the Tribunal in
E Flex Industries Ltd. v. Commissioner of Central Excise, Meerut (1997) 91 ELT
120. According to CEGAT, that was not of any assistance to the appellant.
The decision of the Tribunal which remanded the matter was clear and specific
as to the tenns of the remand. The Tribunal noted in paragraph 6 that the
stand now taken before it, that the cost of the cylinder had been amortized
in the price of the packing material was totally contradictory to the stand
F
taken before the adjudicating authority, in the absence of any material placed
before him to support the present stand. It said "in these circumstances, it
-y •
follows that the amount collected under separate invoices represented, as
admitted before the Adjudicating Aµthority, a part of the cost of printing
cylinder". While it noted in paragraph 8 in accordance with the view taken
G in Flex Industries case (supra) that the cost of Cylinder must be reflected in
the assessable value of the final product over a considerable period by
amortizing the most, it stressed again that the appellant before it had no case
before the adjudicating authority and the costing of cylinder had been
j. ;...._/;>
amortized. It specifically stated in paragraph 12 the matter was being remanded
H to the adjudicating authority for passing a fresh order after deciding the two
aspect, what is the correc( rate of duty, if any, chargeable, the correct amount
PAPERPRODUCTSLTD.1·. COMMNR.OFCENTRALEXCISE,MUMBAJ[PASAYAT,J.] 3 J9

of differential duty, if any payable, and the correct amount of penalty. A
.''
7. The CEGAT found that the tenns of remand were specific. The order
of remand so far as relevant reads as follows:

"The last contention urged is that during a substantial part of the
dispµted period, duty chargeable on the finished products of the B
appellant was nil rate of duty either on account of Board order, dated
5.5.1989 or on account of exemption Notification No.49/87, dated
1.3 .1987. These contentions have not been raised before the
Adjudicating Authority who, therefore, did not have the opportunity
to apply his mind in this regard. Though these contentions have not C
been raised before the lower authority, we are inclined to grant the
appfllant permission to raise these contentions at this stage.
Consideration of these contentions would require reference to the
approved classification lists and the description of the goods covered
by the Board's order and the notification and also require factual
investigation. In this view, this controversy should be decided by the D
Adjudicating Authority."

8. Leamedicounsel for the appellant submitted that the remand was an
open one and not a limited one. Therefore, the view expressed is not correct.
It was submitted that the penalties imposed were higher.
E
9. Learned counsel for the respondents supported the impugned orders.

10. A bare reading of para I 0 makes the position clear that it only related
to the particular plea and no other plea which was covered by para 8. The
scope of limited remand has been highlighted by this Court in Mohan Lal v. F
Anandibai and Ors., AIR ( 1971) SC 2177. It was observed at para 9 as follows:

"9. Lastly, counsel urged that now the suit has been remanded to the
trial Court for reconsidering the plea of res judicata, the appellant
should have been given an opportunity to amend the written statement
so as to include pleadings in respect of the fraudulent nature and G
antedating of the gift deed Ext. P-3. These questions having been
decided by the High Court could not appropriately be made the
subject-matter of a fresh trial. Further, as pointed out by the High
Court, any suit on such pleas is already time-barred and it would be
unfair to the plaintiff-respondents to allow these pleas to be raised by H
amendment of the written statement at this late stage. In the order, the
320 SUPREME COURT REPORTS [2007) 8 S.C.R.
•
A High Court has stated that the judgments and decrees and findings
of both the lower courts were being set aside and the case was being
remanded to the trial Court for a fresh decision on merits with
advertence to the remarks in the judgment of the High Court. It was
argued by learned counsel that, in making this order, the High Court
has set aside all findings recorded on all issues by the trial Court and
B
the first appellate Court. This is not a correct interpretation of the
order. Obviously, in directing that findings of both courts are set
aside, the High Court was referring to the points which the High Court
considered and on which the High Court differed from the lower
courts. Findings on other issues, which the High Court was not called
c upon to consider, cannot be deemed to be set aside by this order.
Similarly, in permitting amendments, the High Court has given liberty
to the present appellant to amend his written statem~nt by setting out
all the requisite particulars and details of his plea of res judicata, and
has added that the trial Court may also consider his prayer for allowing
D any other amendments. On the face of it, those other amendments,
which could be allowed, must relate to this very plea of res judicata. _,,...
It cannot be interpreted as giving liberty to the appellant to raise any
new pleas altogether which were not raised at the initial stage. The
other amendments have to be those which are consequential to the
amendment in respect of the plea of res judicata."
E
11. Above being the position, there is no merit in these appeals which
are dismissed, so far as levy of duty is concerned. However, considering the
factual scenario the penalty is reduced to Rs.5 lakhs from Rs. I 0 lakhs.

F 12. So far as appeal No.7098 of2005 is concerned, the primary stand is
that the Commissioner at Hyderabad has accepted the stand of the assessee-
appellant. But it appears in the instant case the admitted position was that
there is a separate charge. CESTA T's order makes the position clear. The
relevant portion of CEST AT order reads as follows:

G (ii) With reference to show cause notice dated 23.6.1994, the reply
vi de letter dated 26 July 1994 (Page 159). It was stated that the
printing cylinders are manufactured by them in their factory i.e. M/s.
Hello Gravure out of different materials and are incorporated with their
various customers' motifs or designs. The printing cylinders cannot -
.be considered as an input of flexible packaging laminate and its value
H cannot be included in the value of the flexible packaging laminate.
PAPER PRODUCTS LTD. 1·. COMMNR. OF CENTRAL EXCISE, MUMBAI [PASA YAT,J.} 32 J

(iii) In respect of show cause notice dated 5. I 0.1994 vide their letter A
dated 14.11.1994 (Page 164) it was stated that the charges for making
printed cylinders are collected by them for Mis. Helio Gravure to
whom these charges accrue and are shown in their books. They
cannot obviously collect these charges in their invoices as these
charges do not form part of cost of flexible packaging but they are
part of cost of printing cylinders. They further stated the costs for B
artwork design and development of cylinders, which were reimbursed
to them by their customers and accrue in the books of Mis. Helio and
are incurred by their customers and not by them and therefore these
costs are not to be included in the manufacturing cost.

XX XX JO<: XX
c
(vi) In respect of show cause notice dated 8.9.1995, vide reply dated
26th September, 1995 (Page 173) they submitted that cost of making
printed cylinder is divided into two types of costing:

(a) Cylinder per se, which is made of metal i.e. copper, is the D
property of Mis Helio Gravure. The cost of the metal cylinder is
amortized in the flexible packaging laminate products.

(b) Amortization is also done for the Artwork and the design
work that are incorporated in the Cylinder."
E
13. It is to be noted that the Commissioner had adjudicated 23 show
cause notices covering the period from 7.9.1993 to 31.3.2000. Earlier these
notices were adjudicated vide Order in Original No.3112001 Commr.M VI dated
3.10.2001 against which Appeal No.El568102 Mum was filed. The appeal was
disposed of by the CEGA T with the following observations:
F
"The counsel of the appellant contends that identical issue, the
inclusion in the cost of manufacture of finished goods i.e. printed
plastic sheets, the cost of cylinders and a part recovery from the
buyers, has already been considered by the Tribunal in Flex Industries
Limitedv. CCE, (1997) 91 ELT 120. He says that the Commissioner has
not considered the cost sheets duly attested by the cost accountant, G
which was produced in support of its contention. We have seen
copies of these cost sheets. While the Commissioner has concluded
in his order that no evidence of amortization was furnished before
him, it appears that he has not considered these cost sheets. We
therefore propose to remand the matter to hirrt for this purpose. In this H
322 SUPREME COURT REPORTS (2007) 8 S.C.R.

A process, the appellant shall be entitled to address the Commissioner
on the issues raised in the notices and advance arguments in support.
The department is also at liberty to advance submissions before the
Commissioner. The Commissioner shall thereafter pass orders on the
issues raised in the notices in accordance with law."

B 14. The stand seems to be that separate charge was made after Flex
Industries case. The finding of CESTAT is to the following effect:
f
"From the perusal of various replies to the show cause notice
submitted by the appellant, as pointed out by the Jt. CDR, it is
apparent that the appellant has changed its stand from time to time.
c At times a plea has been taken these charges are not includible due
to the fact these are reimbursed by the customers being the printing
cylinder cost, and at times plea has been taken that those charges are
not towards cost of the cylinders but for maintenance of printing
cylinder."
D 15. That being so, the demand as levied does not suffer from any ;--
infirmity. But so far as penalty under Rule 173Q is concerned the same
appears to be on the higher side. Considering the background facts the
quantum of penalty is reduced from Rs. I crore to Rs.50 lakhs.

E 16. The appeals are disposed of accordingly.

B.B.B. Appeals disposed of.

+ •

; 4';