Packing the dispute of branded goods on packing material

Packing the dispute of branded goods on packingspecific packing materials on representation of the
materialassociations. Even in this budget, the plastic bottles
 were added. An article on this subject pointed out
Prepared By:-this and said that why the exemption is granted to
CA. Pradeep Jain,plastic bottles and not to glass bottles. This has
Sukhvinder Kaur LLB[FYIC]opened the eyes of Board and they were inspired
And CA Ridhi Anchaliafor this latest amendment which will be discussed in
Introduction: -coming paras.
  
There are already two articles published on ourSection 11C Notification: -
website on this issue. The title of these articles was 
"SSI exemption: - The branded issue" and "BrandOops! What happened when the amendment was
name for packing material: - all is well when endsnot given retrospective effect? The very active field
well". The budget has made further amendment whileformation came out with the idea of new demands.
passing the budget to end the controversy. ThisThey said that when the exemption was granted
amendment has prompted us to write this third piecenow then it means it was SSI exemption was not
on this very same issue. We will discuss the issue inavailable for past period. The packed gift was in
brief to have a better understanding of the subjectdepartments hands. The wrapped gift box was
and thereafter will discuss the implications of thisopened by the department and here came out
amendment,demands of duties by way of show cause notices
 issued to the SSI Manufacturers making branded
Provisions related to packing material in Notification: -packing materials.
  
Paragraph 4 of the Notification provides as under: -Thus, there was hue and cry in the industry again.
 The Board had to issue Notification No. 24/2009-CE
4. The exemption contained in this notification shall(NT) on 21.10.09 granting Section 11C exemption to
not apply to specified goods bearing a brand name orSSI units manufacturing packing materials, namely
trade name, whether registered or not, of anotherprinted cartons of paper or paper board, metal
person, except in the following cases: -containers, high density polyethylene woven sacks,
(a) where the specified goods, being in the nature ofadhesive tapes, stickers, pilfer proof caps, crown
components or parts of any machinery or equipmentcorks, metal labels, plastic bags and printed laminated
or appliances, are cleared for use as originalrolls. The exemption from payment of duty had been
equipment in the manufacture of the said machinerygranted on the said goods manufactured by a unit
or equipment or appliances by following thewhere the manufacturer had affixed the specified
procedure laid down in the Central Excise (Removalgoods with a brand name or a trade name of
of Goods at Concessional Rate of Duty foranother person who is not eligible for grant of
Manufacture of Excisable Goods) Rules, 2001:exemption under the relevant Notification. Wow!! The
Provided that manufacturers, whose aggregate valueexemption was granted with retrospective effect.
of clearances of the specified goods for use asFinally, the issue was settled and SSI manufacturers
original equipment does not exceed rupees oneof specified packing material got the relief from the
hundred lakhs in the financial year 2002-2003 asBoard.
calculated in the manner specified in paragraph 1, may 
submit a declaration regarding such use instead ofBut the field formations of the department always
following the procedure laid down in the said Centralhave unique ideas. They started hunting for the
Excise (Removal of Goods at Concessional Rate ofproducts which are not covered by the exemption
Duty for Manufacture of Excisable Goods) Rules,notification and printing brand name of buyer. Each
2001;association approached the Ministry and exemption
 was granted to them. The latest was to give
(b) where the specified goods bear a brand name orexemption to plastic bottles in this series.  
trade name of- 
 Our Finance Minister Mr. Pranab Mukerjee also did not
(i)   the Khadi and Village Industries Commission; orleave the clause untouched and the following
(ii)  a State Khadi and Village Industry Board; oramendment was introduced in paragraph 4: -
(iii) the National Small Industries Corporation; or 
(iv) a State Small Industries Development(i) in clause (e), for the letters and words "PP caps,
Corporation; orcrown corks, metal labels, plastic bags, printed
(v)  a State Small Industries Corporation;laminated roll", the letters and words "PP caps, crown
 corks, metal labels, plastic bags, printed laminated
(c)  where the specified goods are manufactured inrolls, plastic containers and plastic bottles" shall be
a factory located in a rural area;substituted;
  
(d)  where the specified goods are account books,(ii) after clause (e), the following proviso shall
registers, writing pads and file folders  falling underinserted, namely: -
heading 4820 or 4821 of the said First Schedule. 
 "Provided that in respect of plastic containers and
(e) where the specified goods are in the nature of plastic bottles, the exemption under this notification
packing materials and are meant for use as packingshall only where such plastic containers or plastic
material by  or on behalf of the person whose brandbottles are meant for use as packing materials by
name they bear."the person whose brand name such goods bear."
  
Brief history: -So the SSI exemption list of packing materials was
 now extended by adding two more packing materials
To have a better look on the above subject wenamely packing bottles and plastic containers. Thus,
proceed with a glance on the decision of the Apexfrom the onwards if the units manufacturing plastic
Court in the case of M/s Kohinoor Elastics Pvt Ltdcontainers and plastic bottles who are affixing the
[2005 (188) ELT 3 (SC)]. The unit was manufacturerbrand name or trade name of another person on the
of elastic tape and was affixing the brand name ofsame, are eligible to avail exemption under Notification
his customer who was manufacturer of8/03-CE from Feb 27, 2010.
undergarments. The above action was performed as 
per specific instructions of the customer. The benefitLatest Development: -
of SSI Exemption was denied saying that it is not 
available to the goods bearing a brand name/ tradeThe latest amendment is made vide Notification No.
name of the customer, for whom goods are24/2010-CE, dated 29.04.2010 by which the clause (e)
manufactured by a SSI unit, as per the orders of theand proviso thereto of paragraph 4 of Notification
customer for their further use by the customer inNo. 8/2003-CE, dated 01.03.2003 has been substituted
the manufacture of his final product.with following clause: -
  
The department waked up from the sleep and finally"(e) where the specified goods are in the nature of 
their nightmare for collecting revenue became truepacking materials and are meant for use as packing
with the scope of this judgment. To make its dreammaterial by  or on behalf of the person whose brand
come true of collecting revenue the Board came outname they bear."
with the circular on 16.07.08 instructing the field 
formations to take action wherever SSI units hadThe effect of substitution of this provision is that
evaded duty by claiming SSI Exemption but werenow, small scale exemption granted by Notification
manufacturing goods bearing brand name or tradeNo. 8/2003-CE will be available to all kinds of packing
name of another person.material bearing brand name of another entity. As
 already stated, it was the outcome of the article
So the Excise Authorities became vigilant and startedwritten by that great scholar who wrote when the
investigating the SSI units. Haphazardly the revenueexemption is granted to plastic bottle then why not
came out with demands for payment of excise dutygive it to glass bottle also. This has proved the eye
imposing the allegation that the units engaged in theopener to Board. They gave away their policy of
manufacture of branded goods at the instructions ofgiving individual exemption to the products whose
the customer were not eligible to avail SSIassociation has approached them. Now, the
exemption. In the same league the small scale unitsexemption was granted to all packing materials.
manufacturing flexible packing material on specific 
directions of their customers were also proceededBefore Departing: -
against by the Department. 
 Finally the Government has given a big benefit to all
If department can wake up why not the assessees.the small scale manufacturers manufacturing packing
So the eyes of the aseessees also opened and amaterial on behalf of other persons. But the point is
flower of   protest against the action of thewhy the Government wants to walk on the snail's
Department blossomed in the garden of Trade andtrail. Why the Government always take the action
Industry making various representations which lead toafter the reaction has already caused some harm?
amendment of the Notification No. 8/2003 - CE. TheThe government for the development of the SSI's
Board now came out with a new Notification No. 47should employ them with the best benefits. Then
2008-CE, dated 01.09.08 amending the saidwhy does not Government take the first step itself.
Notification by adding clause (e) to paragraph 4 whichWhy always the Government wants the assessee to
read as under:come forward and represent himself.
  
"(e) Where the specified goods are in the nature ofEven in this case also, it is not final. Still the
packing materials, namely, printed cartons of paper orretrospective amendment for all the packing materials
paper board, metal containers, HDPE woven sacks,is required. Again, the so called field formation will
adhesive tapes, stickers, PP caps, crown corks, metalcome into action and issue show cause notice. The
labels."associations will represent the matter. The Board will
 call for the reports from all the Commissionerates.
Although this was a welcome step taken by theThen will come the retrospective amendment. All the
Government for the assessees but a thorn was leftdemands will be dropped. Why this action of
behind with the flower. The word ‘namely' in theretrospective amendment is taken along with the
para restricted the availability of SSI exemption tonotification? Nobody has the answer. The board has
printed cartons of paper or paper board, metalits own style of functioning.
containers, HDPE woven sacks, adhesive tapes, 
stickers, PP caps, crown corks, metal labels. ButOn the last, one more point is being raised through
packing material like pouches and plastic bags werethis article. Why not this exemption should also be
left for the exemption. A great favour!!!!extended to manufacturers of components? Let us
 wait for another round of litigation by the
Afterwards, these were also added on thedepartment for such manufacturers then the history
representation of the association. This practice waswill be repeated.
continued till presentation of this budget to add