Inapt Prosecution – Disastrous Results
Inapt Prosecution – Disastrous Results
The Hon’ble Supreme Court, in recent past, has disposed off two appeals pertaining to classification and Excise-ability of ‘Printed Wrappers’. A combined reading of these judgements clearly indicates that lapses at prosecution stage may give results diagonally opposite, even in identical situations. One of these two cases pertains to M/s Headway Lithographic Co., Civil Appeal No. 8646 of 2003, decided on 7th April, 2015 and the other pertained to M/s Fitirite Packers Mumbai, Civil Appeal No. 2733 of 2007 , decided on 7th October, 2015.
In both the above cases, the Parties were doing printing work, as per clients requirements, and printed logo, product description, name, etc. on the purchased papers(raw material). In both these cases, the Original Authority(Central Excise authorities) found the process undertaken as ‘amounting to manufacturing’ and the resultant product classifiable under Chapter 48 of the First Schedule to the Central excise Tariff Act ,1985, and hence chargeable to duty. Accordingly, demands of duty were raised which were confirmed by the adjudicating authorities.
Both the parties preferred appeal before CESTAT against the adjudication orders. The parties took identical grounds before the Hon’ble Tribunal. They argued that the paper in question, whether printed or plain, is meant for packing / wrapping of the product and thus, printing activity, undertaken by them is merely incidental to the primary use of the product. Hence, the process undertaken by them, does not amount to manufacture and they are not liable to pay any Central Excise Duty. The parties also took an alternate plea, assuming the printing on the plain paper, undertaken by them, is not merely incidental to the primary use of the paper and hence, the process undertaken amounts to manufacture, then also the resultant product merits classification under Chapter 49, attracting Nil rate of duty. In support of this argument, the parties placed reliance on Chapter Note 12 of Chapter 48, as per which, if the printing is not merely incidental to the primary use of the product then the resultant product will merit Classification under Chapter 49.
In the case of M/s Headway Lithographic Co., the Hon’ble Tribunal held that the process of printing on Plain Paper brings about a new and distinct product named ‘wrapper’ and hence, the said process amounted to manufacture. However, the issue of classification of said ‘wrappers’ was yet to be decided by the Tribunal. The party, feeling aggrieved by the decision of Hon’ble Tribunal which considered the process undertaken by them as ‘amounting to manufacture’ preferred appeal before the Hon’ble Supreme Court. The Apex Court, while disposing off the said appeal found that the issue of classification is inextricably linked to the issue of manufacture. The Hon’ble Supreme Court, placing reliance on the aforesaid Chapter Note 12 of the Chapter 48 held that the resultant product merits classification in Chapter 49 only, attracting Nil rate of duty. The Hon’ble Supreme Court further held that since in any case no duty is payable, hence it is not necessary to decide the issue of manufacture and allowed the appeal of the party.
In the case of M/s Fitrite case , the Hon’ble Tribunal accepted the contention of the departmental representative that printing is merely incidental to the primary use of paper and hence the resultant product will remain classified under Chapter 48. However, the Hon’ble Tribunal further held that since the printing activity undertaken by the party is merely incidental to the primary use of the product , no new product emerged. Therefore, the process undertaken by the party does not amount to manufacture. Accordingly the Hon’ble Tribunal held that the party is not liable to pay any duty and allowed the appeal. The Department appealed before the Hon’ble Supreme Court on the issue of manufacture. The same bench of Hon’ble Supreme Court which had decided Headway Lithographic case, disposed off the said appeal. The Hon’ble Supreme Court held that the issue of classification has attained finality at tribunal level, as the party has not preferred appeal against the said judgment. On issue of manufacture, the Hon’ble Supreme Court, held that ‘wrapper’ are different commercial commodity then plain paper and hence, the process undertaken by the party amounted to manufacture. Accordingly, the Hon’ble Supreme Court, set-aside the Orders of Hon’ble Tribunal and restored the orders of adjudicating authority confirming the demand.
The aforesaid judgment of the Apex Court in the case of M/s Fitrite, raises an important question as to whether the Hon’ble Supreme Court could have taken up the issue of classification of the ‘wrappers’ even in the absence of appeal of the party on the issue. The answer to the above question lies in Rule 33 of Order 41 of the CPC, which reads as under:-
“33. Power of Court of Appeal – The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees:
Provided that the Appellate Court shall not make any order under Section 35-A, in pursuance of any objection on which the Court from whose decree the appeal is preferred has omitted or refused to make such order.”
The above legal provision was explained by the Hon’ble Supreme Court in the case of Mahant Dhangir and Anr. v. Madan Mohan and Ors., 1 SCR 679 in the following words:
“The sweep of the power under Rule 33 is wide enough to determine any question not only between the appellant and respondent, but also between respondent and co-respondents. The appellate court could pass any decree or order which ought to have been passed in the circumstances of the case. The appellate Court could also pass such other decree or order as the case may require. The words “as the case may require” used in Rule 33 of Order 41 have been put in wide terms to enable the appellate court to pass any order or decree to meet the ends of justice. What then should be the constraint. We do not find any. We are not giving any liberal interpretation. The rule itself is liberal enough. The only constraint that we could see, may be these : That the parties before the lower court should be there before the appellate Court. The question raised must properly arise out of the judgment of the lower court. If these two requirements are there, the appellate Court could consider any objection against any part of the judgment or decree of the lower court. It may be urged by any party to the appeal. It is true that the power of the appellate Court under Rule 33 is discretionary. But it is a proper exercise of judicial discretion to determine all questions urged in order to render complete justice between the parties. The Court should not refuse to exercise that discretion on mere technicalities.”
All the requirements of the aforesaid legal provision are satisfied in this case, particularly, in view of the judgment of Hon’ble Supreme Court in M/s Headway Lithography Co. case wherein the Hon’ble Apex Court, itself had held that the issue of classification is inextricably linked to the issue of manufacture and proceeded to decide the classification even when the classification issue was not in dispute before it and was still pending before the Hon’ble Tribunal. It is also imperative to mention here that the Hon’ble Tribunal had held that the product in question merits classification under Chapter 48, accepting the plea of the Departmental Representative that the printing on the paper is merely incidental to the primary use of paper , and now the Hon’ble Supreme Court has held that the printing on the paper is not merely incidental to the primary use of paper.
Under Article 142 of the Constitution of India the Hon’ble Supreme Court in exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any case or matter pending before it. In the case of Supreme Court Bar Association v. Union of India,  2 SCR 795, Hon’ble Supreme Court explained its powers under Article 142 as under : –
The plenary powers of this Court under Article 142 of the Constitution are inherent in the Court and are complementary to those powers which are specifically conferred on the Court by various statutes though are not limited by those statutes. These powers also exist independent of the statutes with a view to do complete justice between the parties. These powers are of very wide amplitude and are in the nature of supplementary powers. This power exists as a separate and independent basis of jurisdiction apart from the statutes. It stands upon the foundation and the basis for its exercise may be put on a different and perhaps even wider footing, to prevent injustice in the process of litigation and to do complete justice between the parties. This plenary jurisdiction is, thus, the residual source of power which this Court may draw upon as necessary whenever it is just and equitable to do so and in particular to ensure the observance of the due process of law, to do complete justice between the parties, while administering justice according to law. There is no doubt that it is an indispensable adjunct to all other powers and is free from the restraint of jurisdiction and operates as a valuable weapon in the hands of the Court to prevent “clogging or obstruction of the stream of justice”.”
The Apex Court, on many occasions, has exercised these powers to do complete justice. From the above, it is imperative that, even if, the party had not approached the Hon’ble Supreme Court on Classification, then also the outcome would have been entirely different if the party, even at argument stage, would have brought to the notice of Hon’ble Court its own earlier decision in M/s Headway Lithography Co. case and aforesaid legal and Constitutional Provisions.