Judgment:
1. Being aggrieved by the Order-in-Appeal, dated 24-4-1990, the appellants have filed the captioned appeal. The Id. Collector (Appeals) had held : "The appellants have further contended that the base paper out of which converted paper is manufactured has already suffered duty once and therefore, it could not be subjected to suffer duty once more as this way the amount of cess would exceed l/8th% ad valorem. I do not find any stipulation to this effect in the Notification of the Ministry of Industries No. S.O. 87(E), dated 3-3-1987. In this view of the matter, I find no merit in the appeal of the appellants and while upholding the impugned order, I reject the same." 2. The facts of the case in brief, are that the appellants are engaged in the manufacture of various types of paper and paperboard falling under Chapter No. 48 of the CETA, 1985. The appellants had cleared the papers of coated variety namely, Print Cote Chrome Paper and Pearl Glow Art Paper eligible for exemption under Notification No. 49/87, dated 1-3-1987 without payment of cess as was alleged to be leviable under Notification No. S.O. 87(E), dated 3-2-1987 issued under Sub-section (1) of Section 9 of the Industries (Development and Regulation) Act, 1951 claiming that since the goods were exempt from basic excise duty (BED), they were also exempt from payment of cess. However, the department alleged that though the goods were exempt from BED under Notification No. 63/82 as amended by Notification No. 49/87, they were not exempt from levy of paper cess. Ten show cause notices were issued to the appellants covering the period from 1-6-1986 to 30-6-1989 asking the appellants to explain as to why paper cess should not be collected from them during the aforesaid period. It was contended by the appellants that Notification No. 49/87 which exempted some variety of papers from payment of duty and do not speak about the exemption from cess on paper. It can only be concluded that there is practically no distinction between duty of excise and cess on their product and that the notification exempting duty of excise will also be applicable to cess. It was argued by them that since converted paper was exempted from payment of excise duty hence it was also exempt from levy of cess.
The appellants submitted before the lower authorities that since they had purchased the base paper after payment of cess, therefore, the cess cannot be collected a second time when duty paid base paper is converted into coated type of paper. The lower authorities, after taking into consideration the submissions and the arguments of the appellants, held that cess was payable and confirmed the demand for duty in respect of nine show cause notices only show cause notice dated 22-9-1987 demanding duty amounting to Rs. 14,672.17 was dropped due to its being time barred.
3. Shri G. Shiv Dass, the learned Advocate appearing for the appellants submitted that the Ministry of Industry's Order No. S.O. 862(E), dated 27-10-1980 was amended by the Ministry of Industry's Order No. S.O.87(E), dated 3-2-1981; that this Notification in Clause 2(b) provided : "(b) for the entries in Column (1) of the Table, the following shall be substituted namely :- Paper and Paper Board, all sorts (including newsprint, paste board, mill board, straw board, card board and corrugated board)." The Id. Counsel submitted that the Ministry of Industry (Deptt. of Industrial Development) in their letter No. 20(2)/85-Paper, dated 29-1-1990 clarified as under: "Sub : Levy of cess on waxed paper manufactured from base paper purchased from the market -Draft Audit Para No. 122 / 85-86 -Regarding.
Reference D.O. Letter No. 232/364/89-CX. 7, dated 6th October, 198*9 received from Member (CX), Central Board of Excise and Customs, on the [subject] cited above and to say that this Department has considered the issue. It is reiterated that in terms of Order No. S.O. 862(E), dated 27th October, 1980 as amended by Order No. S.O. 87(E), dated the 3rd February, 1981, a duty of excise shall be levied and collected as a cess for the purpose of development of.
industries under the IDR Act, 1951 on paper and paper boards, all sorts (including newsprint, paste board, mill board, straw board, card board and corrugated boards). As regards applicability of cess on paper products, Department of Industrial Development is of the view that cess is leviable only on base paper. If, however, paper products like waxed paper, coated paper etc. are producted as a result of single integrated manufacturing process, cess becomes leviable on the product.
2. Further, cess is not leviable on waxed paper, manufactured by a paper converter in his premises after buying base paper from the market. These views are based on the advice of Ministry of Law." The Id. Counsel submitted that it was clarified in Para 2 of this letter that cess is not leviable on waxed paper, manufactured by a paper converter in his premises after buying base paper from the market. These views are based on the advice of Ministry of Law. He submitted that the admitted position was that the appellants purchased base paper from the market; that this base paper was duty paid; that this paper was coated by the appellants and thus was a converted paper and that since cess duty was paid on the base paper according to the clarification of the Ministry of Industry, the coated paper described as 'Print Cote Chrome Paper' and 'Pearl Glow Art Paper' is not chargeable to cess duty again. He submitted that having regard to this clarification, their case was squarely covered by this clarification and therefore, prayed that the impugned order may be set aside and the appeal may be allowed.
4. Shri A.K. Madan, the Id. SDR submitted that the correct legal position was that paper cess is levied under Notification issued under Sub-section (1) of Section 9 of the Industries (Development and Regulation) Act, 1951; the Central Excise duty is levied under the Section 3 of the CESA, 1944; that exemption of Central Excise duty issued in terms of Sub-rule (1) of Rule 8 of the Central Excise Rules exempting the goods from payment of Central Excise duty does not automatically exempt the goods from payment of paper cess. The Id. SDR submitted that the legal position was that Notification No. 63/82 as amended by Notification No. 49/87 exempted the goods under Sub-rule (1) of Rule 8 of Central Excise Rules, 1944; that in this Notification, there was no reference that the goods were also exempted from payment of cess and therefore, he submitted that the exemption under Notification No. 63/82 as amended by Notification No. 49/87 shall not be automatically construed to exempt the paper cess leviable under S.O.No. 862(E), dated 27-10-1980 as amended by S.O. No. 87(E), dated 3-2-1981. The Id. SDR submitted that the Tribunal was not bound by the clarification given by the Ministry of Industry. He therefore, prayed that the impugned order may be upheld.5. Heard the submissions of both sides. It is a fact that Central Excise duty is levied and collected under Section 3 of the CESA, 1944.
It is also a fact that cess is levied and collected under Sub-section (1) of Section 9 of the Industries (Development and Regulation) Act, 1951. It is also a fact that an exemption Notification issued under Sub-rule (1) of Rule 8 does not automatically cover the exemption of cess unless there is a mention that the exemption under Notification issued under Sub-rule (1) of Rule 8 will also be applicable to exemption of cess. A scrutiny of the Notification No. 63/82 and Notification No. 49/87 reveals that there is no mention that exemption under these notifications shall also apply to exemption of cess levied under Sub-section (1) of Section 9 of the Industries (Development and Regulation) Act, 1951.
6. It was argued by the Id. Counsel for the appellants that while issuing S.O. 862(E), dated 27-10-1980, the Central Government specified "the classes of goods manufactured or produced wholly or in part, of Pulp, Paper, Paper Board and Newsprint in the scheduled industry of Paper and Pulp Industry as mentioned in Col. (1) of the Table below" on which a duty of excise shall be levied and collected as a cess. This indicated that cess on paper and paper products is leviable once only and in case cess was paid on base paper, there is no question of payment of cess on paper products like waxed paper, coated paper etc.
Since Notification No. 862(E), dated 27-10-1980 was issued by the Deptt. of Industrial Development and therefore, any clarification given on the interpretation of any meaning of the Notification given by the Department of Industrial Development has a persuasive value. We find that demands pertain to the period from 1-6-1986 to 30-6-1989, whereas the clarification has been given on 6-10-1989. We find that this letter is in the form of clarification and therefore, shall be applicable retrospectively. As the Notification has been interpreted and clarification has been given by the Ministry issuing the notification after consulting the Ministry of Law. We hold that the clarification is acceptable and shall be applicable retrospectively.
7. Having regard to the clarification given by the Department of Industrial Development, we hold that a cess is payable once only on paper and paper board or its products. In the instant case, the question of payment of cess again on coated paper described as Print Cote Chrome Paper and Pearl Glow Art Paper does not arise and we hold accordingly.
8. In the above view of the matter, the impugned order is set aside and the appeal is allowed.