Laxmi Board and Paper Mills (P) Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. this is an appeal preferred against the impugned order passed by the collector of central excise (appeals), bombay.2. when the matter had come up for final hearing none has appeared for the appellants. however, we find that there was a request from them to decide the case on merits and based upon written submissions.accordingly, on perusal of the records, we have proceeded to hear the departmental representative for passing this order.3. the appellants are engaged in the manufacture of paper and paper boards. they manufacture inter alia m.g. kraft paper and kraft liner etc. the issue relates to benefit of exemption notification in terms of notification no. 46/83 dated 1-3-1983. arguing for the revenue ms.praveen mahajan, learned sdr, submitted that appellants have claimed benefit of exemption in terms of notification no. 46/83 in respect of paper of the substance having 220 gms. it was declared in the classification list the substance of paper manufactured by them exceeds 25 gms and contained not less than 50% by weight of pulp made from bagasse, jute, stalks, ceral straw and/or waste paper. she said that department was justified in denying the benefit in terms of exemption notification since the notification 46/83 extends concession only to that paper of substance not exceeding 25 gms. since it exceeded the exemption limit they are not eligible for benefit but they claimed concession indicating notification no. 46/83 in the classification list which is a clear case of misdeclaration. she referred to the notification no. 46/83 which reads as under: "paper, other than paper boards, cigarette tissue, glassine paper, grease proof paper, coated paper (including waxed paper) and paper of a substance not exceeding 25 gms per square metre". she said that in the written submission filed by the appellants, they relied upon the decision in their favour which has been decided by the collector of central excise, bombay as per his order no. 31/91 dated 3-5-1991. she contended that decision of the collector is neither binding on the tribunal nor the said order dealt with the issue properly as it referred to two notification nos. 44/83 and 46/83 as can be seen from the order.4. in the grounds of appeal, it was urged by the appellants that the classification list had been approved by the assistant collector.approved classification has been changed without giving reason as to why the concessional rate of duty was not applicable in respect of m.g.kraft paper of 220 gms. in the show cause notice issued by the assistant collector except stating that m.g. kraft paper of 220 gms cannot be classified as paper and therefore, exemption under notification no. 46/83 would not be applicable and they were not entitled to claim the concessional rate of duty. the assistant collector confirmed the demand on the sole ground that as per i.s.i.specification (i.e. 4661 - 1968) the board is defined as paper of the substance not below 180 gm/m. it was contended by the appellants before the authorities below that the notification prescribing the concessional rate of duty does not specify the substance of paper which was eligible for such concessional rate of duty. they strongly relied upon subsequent adjudication order dated 3-5-1991, passed by the collector in their written submission to decide the issue in support of their contention.5. we have carefully considered the matter. the matter is not that simple as it was argued by the departmental representative or as made out by the collector (appeals) in the impugned order. if that was so simple and notification was intended to extend concession to any paper not exceeding 25 mg/sm, there was no necessity for the assistant collector to go into the issue whether the issue in question was a paper or paper board. the notification was issued to give concession to certain class of manufacturers in respect of certain type of paper.further, it was intended to give concession to certain type of paper without any substance and to some type of paper depending upon the substance of paper but excluding paper board as can be seen from the wordings of notification. the assistant collector arrived at the conclusion that this is not a paper but paper board relying upon the i.s.i. standard that the board is defined as paper of substance not below 180 gms. exemption was denied on the ground that m.g. kraft paper in this is having more than 180 gms. we find that as per the i.s.i.specification (is 4661-1968) paper of substance not below 180 gms (and generally 250 gms) characterised by its rigidity is to be treated as board. in this case the product is of the substance upto 220 gms i.e.below 250 gms. the i.s.i. limit generally above which a product is classified as board depending upon the rigidity. the question of rigidity has not been tested and the same was not brought on records and there was no mention in this regard either in the show cause notice or in the order passed by the collector for changing approved classification. hence, in this case whether an item is a paper or a paper board is an important issue to get the benefit of concession in terms of notification no. 46/83. we find that as early as in the year 1955 there was a clarifiction of the central board of excise & customs, on this issue as contained in letter no. 36/121 /54/cus., dated 14-4-1955, which is published at pages 434-435 of central excise tariff of india 84/85 (11th edition) by r.k. jain.it is stated therein that the grammage per square metre is an important criterion for distinguishing paper from board and for this a substance of 180 gms/sq metre may provide a convenient dividing point. it is further mentioned therein that the ultimate decision to classify the particular type of board or paper should depend on the trade usage and classification and not with substance alone. the above clarification of the cbec clarify while a substance of 180 gms. may provide a convenient dividing point, but this should not be the sole deciding factor. but show cause notice was issued in this case on the ground of substance.6. in this case as it was brought on record that the classification list filed by the appellants was duly approved by the assistant collector. although the demand contrary to the approved list was permissible by the same or the successor authority if the early approval was found to be erroneous due to non-consideration of the materials or provisions, but such material evidence should be brought on record while changing the approved classification. show cause notice did not come out with the reason why the item in question could not be treated as paper while department wanted to take different view from the approved classification list. further no attempt has been made to ascertain the trade usage except relying upon the observation made in i.s.i. specification without going into the issue of rigidity. on the other hand the appellants had placed two clarifications from their buyers namely m/s. india textile paper tube co. ltd. and m/s. fine composition pvt. ltd. to show that the product is kraft paper and not board.7. in the absence of any contrary evidence brought on record by the department the certificates produced by the appellants support their contention that this product is paper and not board. the issue was correctly dealt in the subsequent adjudication order passed by the collector as per his order dated 25-3-1991 as it was rightly pointed out by the appellants. taking into consideration that classification list for product in question was finally approved by the assistant collector granting the benefit of notification no. 46/83 dated 1-3-1983 and in view of our foregoing conclusion, we do not find any justification to deny the benefit in terms of notification no. 46/83.in the result, we set aside the impugned order and, accordingly, the appeal is allowed.

Judgment:
1. This is an appeal preferred against the impugned order passed by the Collector of Central Excise (Appeals), Bombay.

2. When the matter had come up for final hearing none has appeared for the appellants. However, we find that there was a request from them to decide the case on merits and based upon written submissions.

Accordingly, on perusal of the records, we have proceeded to hear the departmental representative for passing this order.

3. The appellants are engaged in the manufacture of paper and paper boards. They manufacture inter alia M.G. kraft paper and kraft liner etc. The issue relates to benefit of exemption notification in terms of Notification No. 46/83 dated 1-3-1983. Arguing for the Revenue Ms.

Praveen Mahajan, learned SDR, submitted that appellants have claimed benefit of exemption in terms of Notification No. 46/83 in respect of paper of the substance having 220 gms. It was declared in the classification list the substance of paper manufactured by them exceeds 25 gms and contained not less than 50% by weight of pulp made from bagasse, jute, stalks, ceral straw and/or waste paper. She said that department was justified in denying the benefit in terms of exemption Notification since the Notification 46/83 extends concession only to that paper of substance not exceeding 25 gms. Since it exceeded the exemption limit they are not eligible for benefit but they claimed concession indicating Notification No. 46/83 in the classification list which is a clear case of misdeclaration. She referred to the Notification No. 46/83 which reads as under: "paper, other than paper boards, cigarette tissue, glassine paper, grease proof paper, coated paper (including waxed paper) and paper of a substance not exceeding 25 gms per square metre". She said that in the written submission filed by the appellants, they relied upon the decision in their favour which has been decided by the Collector of Central Excise, Bombay as per his order No. 31/91 dated 3-5-1991. She contended that decision of the Collector is neither binding on the Tribunal nor the said order dealt with the issue properly as it referred to two Notification Nos. 44/83 and 46/83 as can be seen from the order.

4. In the grounds of appeal, it was urged by the appellants that the classification list had been approved by the Assistant Collector.

Approved classification has been changed without giving reason as to why the concessional rate of duty was not applicable in respect of M.G.kraft paper of 220 gms. In the show cause notice issued by the Assistant Collector except stating that M.G. kraft paper of 220 gms cannot be classified as paper and therefore, exemption under Notification No. 46/83 would not be applicable and they were not entitled to claim the concessional rate of duty. The Assistant Collector confirmed the demand on the sole ground that as per I.S.I.specification (i.e. 4661 - 1968) the board is defined as paper of the substance not below 180 gm/m. It was contended by the appellants before the authorities below that the notification prescribing the concessional rate of duty does not specify the substance of paper which was eligible for such concessional rate of duty. They strongly relied upon subsequent adjudication order dated 3-5-1991, passed by the Collector in their written submission to decide the issue in support of their contention.

5. We have carefully considered the matter. The matter is not that simple as it was argued by the departmental representative or as made out by the Collector (Appeals) in the impugned order. If that was so simple and notification was intended to extend concession to any paper not exceeding 25 mg/sm, there was no necessity for the Assistant Collector to go into the issue whether the issue in question was a paper or paper board. The notification was issued to give concession to certain class of manufacturers in respect of certain type of paper.

Further, it was intended to give concession to certain type of paper without any substance and to some type of paper depending upon the substance of paper but excluding paper board as can be seen from the wordings of notification. The Assistant Collector arrived at the conclusion that this is not a paper but paper board relying upon the I.S.I. standard that the board is defined as paper of substance not below 180 gms. Exemption was denied on the ground that M.G. kraft paper in this is having more than 180 gms. We find that as per the I.S.I.specification (IS 4661-1968) paper of substance not below 180 gms (and generally 250 gms) characterised by its rigidity is to be treated as board. In this case the product is of the substance upto 220 gms i.e.

below 250 gms. the I.S.I. limit generally above which a product is classified as board depending upon the rigidity. The question of rigidity has not been tested and the same was not brought on records and there was no mention in this regard either in the show cause notice or in the order passed by the Collector for changing approved classification. Hence, in this case whether an item is a paper or a paper board is an important issue to get the benefit of concession in terms of Notification No. 46/83. We find that as early as in the year 1955 there was a clarifiction of the Central Board of Excise & Customs, on this issue as contained in letter No. 36/121 /54/Cus., dated 14-4-1955, which is published at pages 434-435 of Central Excise Tariff of India 84/85 (11th Edition) by R.K. Jain.

It is stated therein that the grammage per square metre is an important criterion for distinguishing paper from board and for this a substance of 180 gms/sq metre may provide a convenient dividing point. It is further mentioned therein that the ultimate decision to classify the particular type of board or paper should depend on the trade usage and classification and not with substance alone. The above clarification of the CBEC clarify while a substance of 180 gms. may provide a convenient dividing point, but this should not be the sole deciding factor. But show cause notice was issued in this case on the ground of substance.

6. In this case as it was brought on record that the classification list filed by the appellants was duly approved by the Assistant Collector. Although the demand contrary to the approved list was permissible by the same or the successor authority if the early approval was found to be erroneous due to non-consideration of the materials or provisions, but such material evidence should be brought on record while changing the approved classification. Show cause notice did not come out with the reason why the item in question could not be treated as paper while department wanted to take different view from the approved classification list. Further no attempt has been made to ascertain the trade usage except relying upon the observation made in I.S.I. specification without going into the issue of rigidity. On the other hand the appellants had placed two clarifications from their buyers namely M/s. India Textile Paper Tube Co. Ltd. and M/s. Fine Composition Pvt. Ltd. to show that the product is kraft paper and not board.

7. In the absence of any contrary evidence brought on record by the department the certificates produced by the appellants support their contention that this product is paper and not board. The issue was correctly dealt in the subsequent adjudication order passed by the Collector as per his order dated 25-3-1991 as it was rightly pointed out by the appellants. Taking into consideration that classification list for product in question was finally approved by the Assistant Collector granting the benefit of Notification No. 46/83 dated 1-3-1983 and in view of our foregoing conclusion, we do not find any justification to deny the benefit in terms of Notification No. 46/83.

In the result, we set aside the impugned order and, accordingly, the appeal is allowed.