ABC PAPER Vs. COMMISSIONER OF CENTRAL EXCISE
LAWS(CE)-2015-2-57
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on February 12,2015

ABC PAPER Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE Respondents

JUDGEMENT

RAKESH KUMAR - (1.)THE appellant are manufacturers of printing and writing paper chargeable to Central Excise duty. The period of dispute is from September 2005 to April 2007.
(2.)They, for manufacture of paper, manufacture pulp containing not less than 75% by weight of the pulp made from the materials other than bamboo, hard wood, soft wood, reeds (other than Sarkanda) or rags. Some of such pulp is also purchased from outside. After manufacture of the pulp of the required specification in their factory or procuring such pulp from outside, they sent such pulp to M/s. Anmol Paper, who converted the pulp into paper rolls on job work basis and the paper rolls were returned to the appellant's unit. M/s. Anmol Papers were operating under job work Notification No. 214/86 -C.E. and were sending back the paper rolls under job work challans without payment of duty against an undertaking given by the principal manufacturer (appellant) that they will use those goods for manufacture of finished products which would be cleared on payment of duty. The appellant, thereafter, subjected the paper rolls to further process of cutting and trimming and cleared the printing and writing paper in sheets on payment of duty. The appellant, however, were availing of duty exemption under Notification No. , dated 1 -3 -2002 (serial Nos. 86 & 86A) and subsequently Notification No. , dated 1 -3 -2006 (serial Nos. 90 and 91). These exemption notifications prescribed a concessional rate of duty for the paper and paper board or the articles made therefrom manufactured starting from the stage of pulp, in a factory, and such pulp contains less than 75% by weight of the pulp made from the materials other than bamboo, hard wood, soft wood, reed (other than the sarkanda) or rags. This exemption is subject to non -availment of the SSI exemption and the exemption is applicable to first clearance in a financial year upto 3500 MT, and there is no dispute that these conditions are satisfied. There is also no dispute that the pulp from which the printing and writing paper is manufactured is of the required specifications, as mentioned in the notification. The only objection of the Department on the basis of which the exemption has been denied is that the paper has not been manufactured in the same factory. It is on this basis that the Commissioner vide order -in -original dated 24 -1 -2008 in respect of two show cause notices dated 6 -11 -2006 and 20 -3 -2007 confirmed the total duty demand of Rs. 1,41,89,683/ - for the period from September 2005 to January 2007 against the appellant along with interest thereon under Section 11AB and beside this, imposed penalty of Rs. 40,00,000/ - under Rule 25 of the Central Excise Rules. Appeal No. E -954/2008 has been filed against this order. For April 2007, the Joint Commissioner vide order -in -original dated 16 -12 -2008, denied the above exemptions and confirmed the duty demand of Rs. 27,71,823/ - against the appellant company along with interest under Section 11AB and imposed penalty of equivalent amount under Rule 25 of the Central Excise Rules. On appeal being filed to Commissioner (Appeals) against this order of the Joint Commissioner, the same was upheld vide order dated 30 -9 -2010. Against this order of the Commissioner (Appeals), Appeal No. E/66/2011 has been filed along with stay application. Heard both the sides.
Shri Hari Shankar, Senior Advocate and Shri S. Sunil, Advocate, the ld. Counsels for the appellant, pleaded that there is no dispute that the appellant have manufactured the printing and writing paper from the pulp of the required specifications, and that the appellant have not availed the SSI Exemption and that the exemption has been availed of in respect of first clearance of a financial year of quantity upto 3500 MT, that both these exemptions prescribed concessional rate of duty in respect of paper and paper board or article made therefrom manufactured starting from the stage of pulp in a factory out of the pulp of the specification as specified in the notification, that in terms of the Board's Circular No. 40/40/94 -TRU, dated 6 -6 -1994 on the question as to whether concessional rate of duty would be available when the pulp used to manufacture of paper or paper board had been manufactured in the same factory or whether the exemption would still be available if the paper had been made from the bought out pulp, it has been clarified that the exemption Notification Nos. 22/94 -C.E., 23/94 -C.E. and 24/94 -C.E., would be available to the paper to paper board etc., if manufactured from the pulp of the required specifications regardless of whether the pulp itself is manufactured in the same factory or not, that there is nothing in the board's circular from which. It can be inferred that the benefit of these exemptions would not be available if the conversion of pulp into paper is outsourced and is done in some other factory on job work basis, that the only ground on which the benefit of this exemption is sought to be denied is that the pulp has not been converted into paper in the same factory, that there is no basis for denying the exemption on this ground, that the exemption would be available to a manufacturer of paper/paper board irrespective of whether the pulp of the required specification is also manufactured in the factory or the pulp is bought out and the exemption cannot be denied just because the conversion of pulp into paper is done in another factory, and that in view of this, the impugned order is not correct.

(3.)SHRI Pramod Kumar, the ld. Jt. CDR defended the impugned order by reiterating the findings of the Commissioner. He pleaded that Board's Circular dated 6 -6 -1994 is in respect of Notification Nos. 22/94 -C.E., 23/94 -C.E. and 24/94 -C.E. while the present dispute is in respect of the said Notification No. 6/2002 -C.E., dated 1 -2 -2002 and 4/2006 -C.E. He also pointed out to para 3 of the Board's circular which states that the words "starting from the stage of pulp" in the Notification Nos. 22/94 -C.E., 23/94 -C.E., 24/94 -C.E. only indicate that the process involved in converting pulp to paper/paper board or articles made therefrom has to take place in the same factory from which these goods are cleared, and that the primary aspect is that the same factory must processed the specified pulp to culminate in the manufacture of paper or paper board or articles made therefrom. He, therefore, pleaded that since in this case the conversion of pulp into paper has not been done in the same factory from which the paper had been cleared, the exemption would not be available. He also emphasized that the exemption is factory specific and is applicable only in those cases where the conversion of pulp into paper and paper board or articles made therefrom is done in the same factory. We have considered the submissions from both the sides and perused the records. Notification Nos. , dated 1 -3 -2002 (Serial No. 86 and 86A) and successor Notification No. (Serial Nos. 90 -91) prescribe the concessional rate of duty for paper and paper board or articles made therefrom manufactured, starting from the stage of pulp in factory, and the pulp is of a specified specification, that is, containing not less than 75% by weight of the pulp made from the materials other than Bamboo, hard wood, soft wood, reed (other than sarkanda) or rags. This exemption is subject to certain conditions as mentioned in the notification, and one of the condition is that this exemption would be available to papers/paper board cleared for home consumption from factory in any financial year up to first clearances of aggregate quantity not existing 3500 MT and that this exemption shall not be applicable to a manufacturer of the said goods who avails of exemption under Notification No. , dated 1 -3 -2003. There is no dispute that the paper has been manufactured from the pulp of the specified specifications and the other two conditions of the notification, as mentioned above, are also satisfied. The appellant manufacture the pulp of the required specification in their own factory and some quantity of such pulp is also procured from outside. However, conversion of pulp into paper, has been outsourced to M/s. Anmol Papers, who convert the pulp into paper on job work basis and return the paper rolls without payment of duty under job work challans under Notification No. 214/86 -C.E. There is no dispute that for this purpose, the appellant have given the required declaration, that the paper rolls received from M/s. Anmol Papers would be used by them for manufacture of the finished products which would be cleared on payment of duty. The appellant subjected to the paper rolls, received from the job worker, to the process of cutting and trimming and cleared the finished paper sheets on payment of duty by availing the exemption under Notification No. and The point of dispute is as to whether the appellant would be eligible for these exemptions. The Department seeks to deny the exemption on the ground that for availing of these exemptions, the conversion of pulp into paper must be done in the same factory from which the paper is cleared, and that since, in this case the conversion of pulp into paper rolls has been outsourced and has done in the factory of M/s. Anmol Papers, the exemption would not be available. In our view when in this case it is the appellant who is liable to pay duty on the paper and not the job worker who converted the pulp into paper rolls on job work basis, the exemption under these notifications cannot be denied to them. In view of this, we hold that the impugned order is not correct. The same is set aside. The appeals are allowed. The stay application in respect of Appeal No. E/66/2011 also stands disposed of.
(Dictated and pronounced in open Court)

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