HOLOSTIK INDIA LTD. AND ORS. Vs. COMMISSIONER OF CENTRAL EXCISE
LAWS(CE)-2015-9-9
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on September 25,2015

Holostik India Ltd. And Ors. Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE Respondents




JUDGEMENT

R.PERIASAMI,MEMBER (T) - (1.)All the four appeals are arising out of common order passed by Commissioner of Central Excise, Chennai -II. Therefore, they are taken up together for disposal.
(2.)The brief facts of the case is that appellants are manufacturers of holograms and clearing the same to the State Excise and Prohibition Department, Govt. of Tamil Nadu classifying the product under 4901 of the Central Excise Tariff and clearing the same without payment of duty. The department issued SCN No. 46/2014 dt. 8.5.2014 classifying the goods under chapter 3919 of CET and chargeable to appropriate rate of duty and demanded duty of Rs. 22,01,01,514/ - under proviso to Sec. 11A(1) and also proposed for penalty under Sec. 11AC. Penalty was also proposed on the co -noticees under Rule 26. Adjudicating authority in his impugned order dt. 12.12.2014 by relying Tribunal s order in the appellant s own case i.e. Holostick India Ltd. v/s. CCE Meerut -II - : 2004 (167) ELT 301 (Tri. -Del.) classified the goods under 3919 of CET along with interest and confirmed the demand and also imposed equal penalty under Sec. 11A and imposed penalty of Rs. 5 crores on Shri U.K. Gupta, Chairman of appellant company (Appeal No. E/40500/15) and Rs. 2 crores on Shri S.K. Garg, Technical Director (E/40501/2015) and Rs. 2 crores on Shri M. Manoranjan Mahapatra, Senior Manager (E/40503/15). Hence appellants filed the respective appeals before Tribunal.
(3.)Ld. Counsel, Dr. G.K. Sarkar appearing for the appellant submits that the appellant had a manufacturing unit at Noida. He explained that they are exclusively supplying security holograms to the Government of Tamil Nadu to State Excise & Prohibition Wing. He drew our attention to the agreement dt. 6.9.2011 enclosed at page 145 of the paper book signed between Commissioner of Prohibition and Excise, Department of Prohibition and Excise, Govt. of Tamil Nadu and appellant M/s. Holostik India Ltd. He drew our attention to the definition provided in the agreement clause (2)(v) and as per the definition, they have supplied Polyester Hologram Excise Label. He submits that as per definition Polyester Hologram Excise Label" means "Tamper Evident Transfer Foil on Metallized Polyester Film of Ultra Clear EMCL Grade (35 -40) Micron thickness) with standard quality adhesive material on the label suitable to be affixed firmly. He also drew attention to pages 23 of 24 of grounds of appeal at paras B.6, B.7, B.9 and B11 and explained the process of manufacture of hologram from the inputs i.e. stamping foils (Chapter heading 3212, HMPS adhesive (CH 3506) Release paper (CH 4810). He further submits that before they started manufacturing of hologram, the design and art work is approved by the Tamil Nadu State Excise Department and the hologram grade includes logo of Tamil Nadu Government and signature of the State Excise Commissioner and high security features such as Multi -level animation effect, Four Channel image, Pearl Effect, Micro text, 3D True Object image etc. He further submits that product hologram is rightly classifiable under chapter 3901 whereas the adjudicating authority has classified it under chapter heading 39199090. He drew our attention to page 138 of OIO (para -27) where the Commissioner has made the grounds and classified the product under chapter 39 based on the Tribunal s order in their own case (supra) and Board s circular No. 35/96 -Cus. dt. 21.6.96.
3.1 He further submits that their case is squarely covered by Tribunal s decision in the case of Holographic Security Marketing Systems Pvt. Ltd. v/s. CCE : 2003 (151) ELT 470 (Tribunal) wherein the Tribunal held that hologram produced or printed with stamping foil is rightly classifiable under chapter 4901. He further submits that Revenue preferred appeal against Tribunal s above order and the Hon'ble Supreme Court dismissed the Revenue s appeal in CCE v/s. Holo, 2003 (158) ELT A181 (SC). When this Tribunal decision was relied before the adjudicating authority, adjudicating authority has not accepted the above decision. In this regard, he relied Tribunal s order in their own case reported in : 2004 (167) ELT 301. He further submits that product manufactured at their Noida unit is entirely different than what was manufactured in Chennai. At Noida unit, they have produced Holograms out of polyester film which is classified under 39. He submits that they have used stamping foil at Chennai for making Holograms supplied to Govt. of Tamil Nadu which is classified under chapter 32121000. He further submits that against the Tribunal s order of Noida unit, they preferred appeal before the Hon'ble Supreme Court and the Hon'ble Supreme Court in their order reported in : 2015 (318) ELT 529 (SC) set aside the Tribunal s order. and Hon'ble Supreme Court has settled the issue finally and also set aside the Board s circular dt. 21.6.96. The Hon'ble Supreme Court categorically held that the primary use of the product (hologram) is security and not the quality of being adhesive and classified under 4901.

3.2 He drew attention to chapter note 2 of chapter 49 of HSN Explanatory Notes and the general exclusion of Headings 3918, 3919, 4814 or 4821 which are excluded from this chapter heading 39 even if they are printed with motifs, characters or pictorial representations which are not merely incidental to the primary use of the goods. He further submits that their product is not covered under exclusion clause of Heading 3918 and 3919 and the stamping foil is classifiable under chapter 32121000. In view of Hon'ble Supreme Court s decision in their own case, the product is classifiable under chapter 49 as a product of 'printing industry' chargeable to NIL rate of duty. He produced copy of invoice etc. Accordingly, he pleaded to set aside the demand and penalty.

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