Packing material exemption covers branded labels and stickers manufactured for customer use; duty demand and penalty were set aside.

Amended small scale exemption for specified packing materials was construed broadly to cover self-adhesive labels and stickers manufactured for customer use, even where they bore another person's brand name. The attempted distinction between labels and stickers was rejected, and the goods were treated as packing materials rather than branded market goods attracting the brand-name restriction. On that interpretation, denial of exemption was unsustainable. Because the duty demand failed, the associated penalty also could not survive, and both were set aside in favour of the assessee.

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Issues: Whether self-adhesive labels or stickers manufactured for customers as packing materials were eligible for small scale exemption under the amended exemption notification, and whether denial of exemption and penalty were sustainable.

Analysis: The amended notification extended exemption to specified packing materials, including stickers and labels, even where they bore another person's brand name. The expression used in the notification was construed broadly, and the attempted distinction between labels and stickers was rejected. The supply was treated as manufacture of packing material for customer use, not as branded goods traded in the market so as to attract the brand-name restriction. On that basis, the denial of exemption could not be sustained. Once the duty demand failed, the penalty also ceased to survive.

Conclusion: The labels/stickers were held eligible for exemption under the notification, and the demand of duty and penalty were set aside in favour of the assessee.

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