Commissioner of Central Excise, Vs. Elofic Industries - Court Judgment

Excerpt:
1. the commissioner (appeals) in the impugned order dated 27-7-2001 held as under : "5.2. i find from the report of the chemical examiner that the final product namely impregnated filter paper is in the form of corrugated sheet. it is coated/impregnated with synthetic resin. the fibre furnish is composed of chemical pulp. i am inclined to agree with the appellants that for compression it is necessary that there should be more than one sheet of paper or paper board. in other words, after impregnation with synthetic resin, sheets of paper or paper board should be compressed together in one or more operations. 5.3.i observe that the adjudicating authority has ignored that for classification under chapter heading 4811.31, the product should be known commercially as decorative laminate. here the appellants' product is known as impregnated filter paper. i thus find that the order of the adjudicating authority is not legal and proper. hence the same is set aside." 2. the fact of the case in brief are that the respondent herein is engaged in the manufacture of impregnated filter paper: they were availing modvat credit under rules 57a and 57q. the respondents herein filed a c/list to be effective from 1-3-97 classifying their product under subheading 4811.31 and paying duty @ 18% ad valorem. they filed another classification declaration effective from 1-4-1998 claiming classification of their product 'impregnated filter paper' under chapter sub-heading 4811.39.3. the process of manufacture was indicated as, "duty paid base filter paper is purchased from the paper mill, it is threaded with the help of an inpregnating machine and is impregnated with a mixture of phenolic resin, solvent and other special additives. the net web of this impregnated paper is dried in a heating chamber, where the excess solvent gets evaporated. final dried impregnated filter paper is wrapped in rolls with a re-winding machine." the department alleged that the product was classifiable under chapter heading 4811.31 and the duty was paid at the rate of 25%. since the respondents herein had paid duty at the rate of 18%, therefore, show cause notice was issued to the respondents asking them to pay differential duty and also to explain as to why the penalty should not be imposed.4. the assistant commissioner confirmed the demand of rs. 15,89,077/- (rupees fifteen lac eighty nine thousand seventy seven) and imposed a penalty of rs. 50,000/- (rupees fifty thousand). being aggreived by this order the respondents herein filed an appeal before the commissioner (appeals) who held as indicated in the preceding paragraph.5. arguing the case for revenue shri r.c. sankhla, learned dr submits that the commissioner (appeals) in the impugned order observed that for classification of the product under chapter sub-heading 4811.31 should be a decorative laminate whereas the respondent's product is impregnated filter paper. whereas tariff heading no. 4811.31 reads as "products consisting of sheets of paper or paperboard impregnated, coated or covered with plastics (including thermostat resins or mixtures thereof or chemical formulations containing melamine, phenol, urea formaldehydes with or without curing agents or catalysts) compressed together in one or more operations; products commercially known as decorative laminates." learned dr submits that the decorative laminates are separated from other products with semi-colon (;) and entry is not restricted to only products known commercially as decorative laminates and, therefore, impregnated filter paper obtained by impregnating sheet of paper will also fall under chapter heading 4811.31. learned dr further submits that the assistant commissioner while adjudicating the case observed that filter paper received by the party in rolled form is obtained by pressing together or compressing two or more layer of moist pulp, thereafter final product is produced after impregnating by coating method. learned dr submits that a reading of the description of the goods classifiable under chapter sub-heading 4811.39 clearly shows that the product of the respondents herein is made of compressed sheets and since they are coated with phenol they are classifiable under chapter sub-heading 4811.39 carrying the rate of 25%. he, therefore, submits that the impugned order may be set aside and the appeal may be allowed.6. shri k.l. handa, learned consultant for the respondents submits that description against the chapter heading 4811.31 talks of sheets of paper whereas the respondents plea is that of coated single paper. he submits that since the compressed paper sheets are not pressed together by the respondents herein, therefore, the goods shall not fall under chapter sub-heading 4811.31 but will fall under sub-heading 4811.39 carrying the rate of duty @ 18%. he submits that chemical examiner in his test report shows that sample was white sheet of paper. he submits that even chemical examiner who is an expert does not show the white paper impregnated filter paper manufactured by them comprised of compressed sheet of paper. learned consultant submits that the applicant had been manufacturing impregnated filter paper over the last few years. he submits that upto 28th feb., 1997 the respondents have been enjoying concessional rate of duty under notification no. 8/96. he submits that there was only one tariff item for impregnated filter paper upto 28-2-97. he submits that w.e.f. 1-3-97 two sub-headings were provided for impregnated and coated paper and paperboard. these headings were 4811.31, carrying the rate of duty @ 25% and 4811.39 carrying the rate of duty @ 18%. he submits that the applicant filed classification list effective from 1-3-97 and 1-4-98. he submits that whereas in the classification list effective from 1-3-97 the respondents had claimed classification of their product under chapter sub-heading 4811.31. they filed another classification list effective from 1-4-98 claiming classification of their product under chapter subheading 4811.39. he submits that the learned commissioner (appeals) after examining the process of manufacture and the description of the goods correctly held that the production of the respondents herein is classifiable under chapter sub-heading 4811.39. he, therefore, prayed that impugned order may be sustained and the appeal may be rejected.7. we have heard the rival submissions. on careful consideration of the various submissions made by both the sides we note that the contest first was about the paper sheets. respondents herein insisted that it was a single sheet of paper which was impregnated and coated with resins to become filter paper. whereas the department showed that it was not a single sheet but more than one sheet which was compressed.the respondents also referred to the test report of the chemical examiner stating that the chemical examiner observed that the sample was a white sheet of paper. learned dr showed before us that it was not a single sheet but more than one sheet compressed. we find after careful examination that it was not a single sheet of paper but more than one sheet compressed. the contention of the learned consultant for the respondents herein was that they had not done any compression. we however, note that when the goods were cleared, at the time of clearance of the goods described as impregnated filter paper they were more than one sheet compressed together. thus we hold that more than one sheets were compressed together.8. the question of coating and impregnating with plastic was discussed subsequently. there was no dispute that sheets were coated with phenol.in the description of the goods against chapter sub-heading 4811.31 coating with phenol is specifically mentioned. we, therefore, find that both the requirements that is compression of sheets namely more than one sheets being compressed and coated with phenol is established. we, therefore, find that the findings of the commissioner (appeals) are incorrect and not sustainable. accordingly, we hold that the product manufactured and cleared by the respondents herein, described as impregnated filter paper is classifiable under chapter sub-heading 4811.31. in the result, the impugned order is set aside and the appeal is allowed. cross-objection filed by the respondent is also disposed of accordingly.

Judgment:
1. The Commissioner (Appeals) in the impugned order dated 27-7-2001 held as under : "5.2. I find from the report of the Chemical Examiner that the final product namely impregnated filter paper is in the form of corrugated sheet. It is coated/impregnated with synthetic resin. The fibre furnish is composed of chemical pulp. I am inclined to agree with the appellants that for compression it is necessary that there should be more than one sheet of paper or paper board. In other words, after impregnation with synthetic resin, sheets of paper or paper board should be compressed together in one or more operations.

5.3.I observe that the adjudicating authority has ignored that for classification under Chapter Heading 4811.31, the product should be known commercially as decorative laminate. Here the appellants' product is known as impregnated filter paper. I thus find that the order of the Adjudicating Authority is not legal and proper. Hence the same is set aside." 2. The fact of the case in brief are that the respondent herein is engaged in the manufacture of impregnated filter paper: They were availing Modvat credit under Rules 57A and 57Q. The respondents herein filed a C/List to be effective from 1-3-97 classifying their product under subheading 4811.31 and paying duty @ 18% ad valorem. They filed another classification declaration effective from 1-4-1998 claiming classification of their product 'impregnated filter paper' under Chapter sub-heading 4811.39.

3. The process of manufacture was indicated as, "Duty paid base filter paper is purchased from the paper mill, it is threaded with the help of an inpregnating machine and is impregnated with a mixture of phenolic resin, solvent and other special additives. The net web of this impregnated paper is dried in a heating chamber, where the excess solvent gets evaporated. Final dried impregnated filter paper is wrapped in rolls with a re-winding machine." The Department alleged that the product was classifiable under Chapter Heading 4811.31 and the duty was paid at the rate of 25%. Since the respondents herein had paid duty at the rate of 18%, therefore, show cause notice was issued to the respondents asking them to pay differential duty and also to explain as to why the penalty should not be imposed.

4. The Assistant Commissioner confirmed the demand of Rs. 15,89,077/- (rupees fifteen lac eighty nine thousand seventy seven) and imposed a penalty of Rs. 50,000/- (rupees fifty thousand). Being aggreived by this order the respondents herein filed an appeal before the Commissioner (Appeals) who held as indicated in the preceding paragraph.

5. Arguing the case for Revenue Shri R.C. Sankhla, learned DR submits that the Commissioner (Appeals) in the impugned order observed that for classification of the product under Chapter sub-heading 4811.31 should be a decorative laminate whereas the respondent's product is impregnated filter paper. Whereas Tariff Heading No. 4811.31 reads as "Products consisting of sheets of paper or paperboard impregnated, coated or covered with plastics (including thermostat resins or mixtures thereof or chemical formulations containing melamine, phenol, urea formaldehydes with or without curing agents or catalysts) compressed together in one or more operations; products commercially known as decorative laminates." Learned DR submits that the decorative laminates are separated from other products with semi-colon (;) and entry is not restricted to only products known commercially as Decorative Laminates and, therefore, impregnated filter paper obtained by impregnating sheet of paper will also fall under Chapter Heading 4811.31. Learned DR further submits that the Assistant Commissioner while adjudicating the case observed that filter paper received by the party in rolled form is obtained by pressing together or compressing two or more layer of moist pulp, thereafter final product is produced after impregnating by coating method. Learned DR submits that a reading of the description of the goods classifiable under Chapter sub-heading 4811.39 clearly shows that the product of the respondents herein is made of compressed sheets and since they are coated with phenol they are classifiable under Chapter sub-heading 4811.39 carrying the rate of 25%. He, therefore, submits that the impugned order may be set aside and the appeal may be allowed.

6. Shri K.L. Handa, learned Consultant for the respondents submits that description against the Chapter Heading 4811.31 talks of sheets of paper whereas the respondents plea is that of coated single paper. He submits that since the compressed paper sheets are not pressed together by the respondents herein, therefore, the goods shall not fall under Chapter sub-heading 4811.31 but will fall under sub-heading 4811.39 carrying the rate of duty @ 18%. He submits that chemical examiner in his test report shows that sample was white sheet of paper. He submits that even chemical examiner who is an expert does not show the white paper impregnated filter paper manufactured by them comprised of compressed sheet of paper. Learned Consultant submits that the applicant had been manufacturing impregnated filter paper over the last few years. He submits that upto 28th Feb., 1997 the respondents have been enjoying concessional rate of duty under Notification No. 8/96. He submits that there was only one tariff item for impregnated filter paper upto 28-2-97. He submits that w.e.f. 1-3-97 two sub-headings were provided for impregnated and coated paper and paperboard. These headings were 4811.31, carrying the rate of duty @ 25% and 4811.39 carrying the rate of duty @ 18%. He submits that the applicant filed classification list effective from 1-3-97 and 1-4-98. He submits that whereas in the classification list effective from 1-3-97 the respondents had claimed classification of their product under Chapter sub-heading 4811.31. They filed another classification list effective from 1-4-98 claiming classification of their product under Chapter subheading 4811.39. He submits that the learned Commissioner (Appeals) after examining the process of manufacture and the description of the goods correctly held that the production of the respondents herein is classifiable under Chapter sub-heading 4811.39. He, therefore, prayed that impugned order may be sustained and the appeal may be rejected.

7. We have heard the rival submissions. On careful consideration of the various submissions made by both the sides we note that the contest first was about the paper sheets. Respondents herein insisted that it was a single sheet of paper which was impregnated and coated with resins to become filter paper. Whereas the Department showed that it was not a single sheet but more than one sheet which was compressed.

The respondents also referred to the test report of the chemical examiner stating that the chemical examiner observed that the sample was a white sheet of paper. Learned DR showed before us that it was not a single sheet but more than one sheet compressed. We find after careful examination that it was not a single sheet of paper but more than one sheet compressed. The contention of the learned Consultant for the respondents herein was that they had not done any compression. We however, note that when the goods were cleared, at the time of clearance of the goods described as impregnated filter paper they were more than one sheet compressed together. Thus we hold that more than one sheets were compressed together.

8. The question of coating and impregnating with plastic was discussed subsequently. There was no dispute that sheets were coated with phenol.

In the description of the goods against Chapter sub-heading 4811.31 coating with phenol is specifically mentioned. We, therefore, find that both the requirements that is compression of sheets namely more than one sheets being compressed and coated with phenol is established. We, therefore, find that the findings of the Commissioner (Appeals) are incorrect and not sustainable. Accordingly, we hold that the product manufactured and cleared by the respondents herein, described as impregnated filter paper is classifiable under Chapter sub-heading 4811.31. In the result, the impugned order is set aside and the appeal is allowed. Cross-objection filed by the respondent is also disposed of accordingly.