Tribunal rules printing on paperboard, not manufacturing cartons. Show cause notice for duty deemed unfounded.

The Tribunal concluded that the appellant was not manufacturing printed cartons but was engaged in printing on paperboard. The cartons were found to come into existence in the hands of independent scorers and laminators, with whom the relationship was deemed to be on a principal-to-principal basis. The show cause notice demanding duty from the appellant for manufacturing printed cartons through hired laborers was deemed unfounded, leading to the impugned order being set aside, and the appeals being allowed.

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Issues Involved:
1. Whether the appellant had manufactured and cleared printed cartons.
2. Whether the independent laminators and scorers can be considered as hired laborers of the appellant.
3. Whether the relationship between the appellant and the scorers and laminators is on a principal-to-principal basis.
4. Whether the trading unit is a dummy unit of the appellant.

Detailed Analysis:

1. Whether the appellant had manufactured and cleared printed cartons:

The Tribunal noted that the appellant unit was engaged in the activity of printing on the board, and the major activity after printing, which brought into existence separate goods classified under Tariff sub-heading 4819.12 of CET, was carried out by independent scorers and laminators. The Commissioner, in the impugned order, held that the trading unit was a dummy unit of the appellant, but did not provide evidence of financial flow back to demonstrate that the two units were one and the same. The Tribunal had previously remanded the case for de novo consideration, noting that the facts of the appellant's case were identical to those of M/s. Coronation Litho Works, where the Commissioner had held that the scorers and laminators were independent entities and the printed cartons came into existence in their hands.

2. Whether the independent laminators and scorers can be considered as hired laborers of the appellant:

The Senior Counsel argued that even if the trading unit and the appellant-unit are considered to be one and the same, it would not answer the question of whether the appellant had manufactured and cleared printed cartons. The relationship between the appellant and the scorers and laminators was on a principal-to-principal basis, as established by evidence showing that the scorers and laminators were independent units with separate registrations and financial operations. The Commissioner's finding that the scorers and laminators were hired laborers was deemed a serious error, as there was no charge in the show cause notice to that effect.

3. Whether the relationship between the appellant and the scorers and laminators is on a principal-to-principal basis:

The Tribunal found that the relationship between the appellant and the scorers and laminators was on a principal-to-principal basis. The scorers and laminators were independent entities, having their own separate registrations, filing separate returns, and charging for their services independently. The Tribunal referred to the Apex Court judgment in Basant Industries v. CCE, Kanpur, which held that the activity of some processes carried out by the job worker did not make the job worker a hired laborer. The evidence showed that the scorers and laminators were more than 49 in number and were independent units with separate business operations.

4. Whether the trading unit is a dummy unit of the appellant:

The Tribunal noted that the Commissioner had held the trading unit to be a dummy unit based on the appellant's partner utilizing the premises of the trading unit, but had not provided evidence of financial flow back to show that the two units were one and the same. The Tribunal emphasized that the existence of common business premises, telephone, and some common employees did not imply financial flow back. The trading companies were independent entities with separate registrations and financial operations. The Tribunal referred to the Board's Circular No. 56/56/94-CX, dated 14-9-94, which clarified that if the relationship between the raw material supplier and the job worker is on a principal-to-principal basis, the job worker will be the actual manufacturer.

Conclusion:

The Tribunal concluded that the appellant was only performing the activity of printing on paperboard, which is classifiable as printed board under chapter sub-heading 4811.90 of CET. The cartons, classified under chapter sub-heading 4819.12 of CET, came into existence in the hands of independent scorers and laminators. The relationship between the appellant and the scorers and laminators was on a principal-to-principal basis. The show cause notice demanding duty on the appellant for the manufacture of printed cartons by getting the work completed from hired laborers (scorers and laminators) was against the evidence on record. The impugned order was set aside, and the appeals were allowed.

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