1. Appeals are taken up for disposal after waiving deposit of duty demanded and penalties imposed.
2. In the common orders impugned in these appeals, the Commissioner has confirmed the demand for duty of Rs. 3.64 crores approximately, on two grounds. The first, which covers the total duty except for Rs. 3.11 lakhs is on the ground that the paper manufactured by the appellant and cleared as newsprint did not conform to the standards for newsprint prescribed in the Indian Standard Specification No. IS-11688-1986. The remaining duty had been demanded on the quantity of 41499 kgs. alleged to have been cleared without payment of duty. This is the difference in the weight between what was cleared and what was shown in the RG 1 register.
3. The Advocate for the appellant contends that there is no requirement in the tariff that newsprint should conform to the Indian Standard Specifications. Note (3) to Chapter 48 of the tariff defines newsprint as paper intended for the printing of newspapers. All the newsprint in question had been supplied to newspaper publishers. The appellant had been registered as a manufacturer of newsprint by the department of Industrial Policy and Promotion of the Ministry of Industry, Government of India by its order dated 5-6-1996 in accordance with the provisions of Newsprint Control Order, 1962. Reliance is placed upon the order of the Commissioner of Central Excise, Chennai and order dated 1-9-1996 of the jurisdictional Assistant Commissioner for the proposition that the paper manufactured by another unit and by the appellant at a later period was classifiable as newspaper despite not meeting the Indian Standard specifications. With regard to the other charge, it is claimed that the increase in weight was due to gain in moisture in newsprint after it was manufactured and stored and that such increase was within the tolerance limit provided in the circular dated 6-6-1996. It is further contended that in any event the newsprint was cleared under the Notification 8/96 and duty was not payable on it.
4. The Departmental Representative adopts the reasoning in the order of the Commissioner. The cornerstone of the department's charge is the test report of the samples manufactured by the appellant by the Central Pulp and Paper Research Institute, Saharanpur. A copy of the report was not produced before us. However, para 22 of the impugned order reproduced it. The report says that the samples do not meet the specifications in IS 11688-1986 for thickness and roughness. In other words the paper has been held to be not newsprint only because it does not confirm to the Indian Standard specifications.
5. There is no requirement in the tariff that for the paper to be classified as newsprint it must conform to any particular specifications. On the other hand Note 3 to Chapter 48 defines it as paper intended for printing of the newspapers. It is significant to note here that Note 3 to Chapter 48 of the HSN Explanatory Notes defines newsprint with regard to pulp composition, presence or absence of sizing, surface roughness and grammage. Note 3 to Chapter 48 to the Customs Tariff is identically worded as this note. The fact that newsprint is defined in the Central Excise Tariff not with regard to their parameters, but with regard to the intended use shows the intention of the legislature not to apply the generally accepted parameters with regard to newsprint to classify is solely on the basis of end use. Therefore so long as it can be shown that the paper in question was intended for printing newspapers, it conforms to the requirement of this note and hence is classifiable as newsprint.
6. The entire quantity of goods in respect of which duty is demanded had been cleared in terms of the Entry at No. 48.17 of Notification 8/96. The notice in fact specifically alleges inter alia that the appellant wrongly availed this notification. This entry exempts newsprint manufactured by a manufacturer of newsprint registered under Schedule I of the Newsprint Control Order (NCO) 1962 and supplied against a purchase order placed upon such manufacturer by a newspaper publisher which is registered with the Registrar of Newspapers for India, under the provisions of Press and Registration of Books Act, 1867. In reply to a question by us the Advocate for the assessee was not able show us existence of any evidence which would show that the newsprint had been supplied to newspaper publishers. He however, stated that they would be able to produce such evidence within a month of receipt of this order. If it is shown that the paper in question was supplied to newspaper publishers who satisfy the condition contained in the notification for printing newspapers, the goods would have to be considered as newsprint and requirement of the notification would have been satisfied. We therefore direct that this limited aspect be considered afresh by the Commissioner.
7. We are unable to accept the contention that there is a tolerance limit provided in terms of circular of the Board which would permit clearance of newsprint without payment of duty. The duty is upon the weight of the newsprint. The taxable event being the removal from the factory it is the weight of the goods during removal on which duty has to be calculated and paid. The Board's circular cited upon to an earlier circular of 4th January, 1964 which were not produced. It appears that this relates to classification of newsprint, which was earlier based upon its weight or grammage, as it is known in the trade.
It is thus not relevant to the aspect now before us. However, if it can be shown that this quantity was also supplied in accordance with the conditions of the exemption notification by duty demand would not subsist. For determination of this the purchase orders, quantity of newsprint would have to be looked into which was not available before us. This also will have to be determined by the Commissioner the liability to penalty on the assessee and the two other appellants would depend upon the outcome of these two issues and may be redetermined if necessary. Appeals are allowed and the impugned orders are set aside.