2025 (11) TMI 1090 - AT - Central Excise

Corrugated rolls, stiffeners and liners held parts of boxes, classifiable under tariff 4819 1090; concessional 6% duty under 4819 10 applies

CESTAT MUMBAI - AT allowed the appeal, holding that corrugated rolls, stiffeners and liners are parts of corrugated boxes and correctly classifiable under ... Classification corrugated rolls/liners - As per revenue these products are known in the industry as “fitments” and cannot be treated as part and parcel of corrugated boxes - Benefit of concessional rate of Basic Excise Duty (BED) availed by the appellants in respect of corrugated rolls/liners in terms of Serial No.171 of N/N.12/2012- C.E. dated 17.03.2012 as amended - HELD THAT:- The facts of the case and the various documents placed on record indicate that the appellants are manufacturing the excisable goods i.e., corrugated boxes along with rolls, stiffeners and liners classifiable for such corrugated boxes. Therefore, the corrugated boxes manufactured by the appellants are correctly classifiable under tariff item 4819 1010, and goods under dispute viz., rolls, stiffeners and liners being part of the corrugated boxes are correctly classifiable under tariff item 4819 1090. Since, the concessional rate of BED vide Serial No.171 of Notification No.12/2012-C.E. dated 17.03.2012 is applicable for goods of chapter heading 4819 10, the disputed goods are also eligible for the concessional rate of BED at 6%. It is also found that on the issue of classification of dividers, partitions, plates, fitments, as parts of corrugated boxes and extending the concessional rate of BED, the CBEC had clarified vide its communication dated 02.09.1986 to the field formations that such parts of corrugated boxes cannot be separately classified as other articles of paper/paper board; and the parts of corrugated boxes will be classifiable under the heading under which the corrugated box itself is classifiable. The above issue was examined by the Coordinate Bench of this Tribunal in the case of Wadco Packaging Private [2004 (7) TMI 475 - CESTAT, MUMBAI], wherein it was held that appellants are eligible for concessional rate of duty and the duty demands were set aside. The impugned order dated 03.02.2015 in upholding the confirmation of the adjudged demands by the original authority in denying the concessional rate of duty and consequent imposition of penalty on the appellants is not legally sustainable - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether corrugated rolls, stiffeners and liners (fitments/parts/accessories) manufactured and cleared along with corrugated boxes are classifiable with the corrugated boxes for purposes of the Central Excise Tariff (heading 4819) and thereby eligible for the concessional basic excise duty (BED) rate provided to goods under sub-heading 4819 10. 2. Whether separate classification of such fitments under a different sub-heading attracting higher duty is permissible where the fitments are manufactured and supplied in connection with corrugated boxes and satisfy conditions of the relevant notification providing concessional duty (Serial No.171 of Notification No.12/2012-C.E.). 3. Whether penalty and differential duty demands confirmed by the original authority and upheld on appeal are legally sustainable when fitments are held to be part of corrugated boxes and concessional rate is claimed. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification of fitments (rolls, stiffeners, liners) with corrugated boxes under heading 4819 and eligibility for concessional BED Legal framework: Classification of goods is governed by the terms of the tariff headings and any relevant Section or Chapter notes of the Central Excise Tariff Act, 1985. Heading 4819 encompasses 'Cartons, boxes, cases... of paper or paper board', with sub-headings 4819 10 for 'Cartons, boxes and cases, of corrugated paper or paper board' and 4819 50 for 'Other packing containers'. The concessional BED is available for goods covered under the relevant sub-heading (4819 10) subject to conditions in the Notification. Precedent treatment: The Coordinate Bench decision (Wadco Packaging) treated inherent fitments/dividers/partitions made of corrugated paper as classifiable with the corrugated box itself, applying a CBEC clarification (letter dated 02.09.1986) to hold that such parts cannot be separately classified as other articles of paper/paperboard. Interpretation and reasoning: The Tribunal examined the nature of manufacture, commercial identity and use of the disputed items. Documentary evidence (purchase orders, excise invoices, ER-1 returns) showed that fitments were manufactured and supplied in connection with corrugated boxes for customers, often under the same purchase order though sometimes transported separately. The tariff wording and Chapter structure indicate that items which are inherent fitments to corrugated boxes fall within the ambit of the heading for the boxes. The CBEC clarification explicitly states that dividers, partitions and similar accessories made of corrugated paper used as inherent fitments are to be classified under the heading of the box itself. Where the fitments are designed, cut, creased and formed to serve as internal components of a corrugated box (thereby acquiring a new commercial identity as fitments), they should be classified with the box under 4819 10 rather than as generic sheets under another heading. Ratio vs. Obiter: Ratio - Fitments that are inherent to corrugated boxes and manufactured/supplied as parts thereof are classifiable with the corrugated box under heading 4819 10 and are eligible for the concessional BED applicable to that heading. The Tribunal's reliance on the CBEC clarification and the factual finding that the disputed items were manufactured as parts/support for the boxes constitute binding reasoning for the outcome. Obiter - Discussion of manufacturing processes and general industry practice supports but is ancillary to the principal classification rule. Conclusion: Corrugated rolls, stiffeners and liners that are inherent fitments or parts of corrugated boxes are classifiable under sub-heading 4819 10 (or 4819 10xx as appropriate) and thus fall within the scope of the concessional BED entry applicable to corrugated boxes. Issue 2: Applicability of the concessional notification where fitments are supplied separately or cleared separately Legal framework: Concessional entries apply subject to conditions specified in the Notification (Serial No.171 of Notification No.12/2012-C.E.), including the requirement that the unit manufactures cartons/boxes and parts as set out in the condition relevant to the entry. Declarations and statutory returns (e.g., ER-1) record the commodities manufactured and cleared. Precedent treatment: Wadco Packaging held that mode of clearance (separate supply) does not vitiate the entitlement where the commodity manufactured and declared includes inherent fitments; the Board's clarification supports treating such components as part of the box irrespective of separate physical clearance. Interpretation and reasoning: The Tribunal found that the appellants had furnished ER-1 returns and excise invoices indicating manufacture and supply of both boxes and fitments, and that condition No.13 relevant to the notification was fulfilled. The Tribunal accepted that logistical reasons (separate transport/clearance) do not alter the character of the goods as inherent parts of the boxes. There is no requirement in the declarations to specify the mode of clearance; what matters is the commodity manufactured and claimed under the notification. Ratio vs. Obiter: Ratio - Separate physical clearance or transportation of fitments does not disqualify them from being treated as part of the corrugated box for concession purposes where they are manufactured as inherent fitments and properly declared. Obiter - Practical observations on packing practices and space constraints are explanatory. Conclusion: The concessional notification applies to fitments even when cleared or transported separately, provided they are manufactured as parts of corrugated boxes and the notification's conditions are met and declared. Issue 3: Sustainment of differential duty demand and penalty when fitments are classified with boxes and concessional duty is applicable Legal framework: Demands for differential duty, interest and penalties arise where concessional duty is erroneously availed; however, such demands and penalties require a legally sustainable basis for classification and suppression/misdeclaration under relevant provisions (e.g., Section 11A(4), Section 11AC, Rule 25 as applicable). Precedent treatment: The Tribunal in Wadco Packaging set aside duty demands and penalties where inherent fitments were acceptably claimed as part of boxes and where there was no suppression or misdeclaration merely because goods were physically supplied separately. Interpretation and reasoning: Given the Tribunal's conclusion that the disputed goods qualify as parts of corrugated boxes and fall under the concessional entry, there is no legal basis for the confirmed differential duty demands or for imposition of penalty. The adjudicating authorities' re-classification and demand failed to take into account the tariff heading interpretation, CBEC clarification and the factual matrix demonstrating manufacture and declaration of fitments as components of boxes. Ratio vs. Obiter: Ratio - Where concessional classification is correctly established for fitments as parts of boxes, demands for differential duty and penalties premised on separate classification are unsustainable. Obiter - Remarks on the absence of requirement to declare mode of clearance are supportive. Conclusion: The differential duty demands and penalties confirmed by the adjudicating authorities are not legally sustainable and must be set aside where the fitments are properly classifiable with corrugated boxes and the notification conditions are satisfied. Cross-references - The classification analysis (Issue 1) directly informs the conclusions on notification applicability and the unsustainability of duty/penalty demands (Issues 2 and 3); the CBEC clarification (02.09.1986) and the Coordinate Bench precedent are central to all three issues.