M/S. Abc Paper vs C.C.E. Jallandhar

[Arising out of Order-In-Original No. V(48)15/CE/47/Com.Adj/Jal/8/7846 dated: 29.01.2008 passed by CCE Jallandhar]

Excise Appeal No. E/66/2011 -Ex[DB]

[Arising out of Order-In-Appeal No. 243/CE/APPL/CHD-II/2010 dated: 30.09.2010 passed by Commissioner (Appeals) Chandigarh]

For approval and signature:

Hon'ble Mr. Rakesh Kumar, Member (Technical)

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. ABC Paper ...Appellant

(A Division of Amrit Banaspati Co. Ltd.)

Vs.

C.C.E. Jallandhar Respondent

(Hqr. At Chandigarh)

Appearance:

Mr. C. Harishankar & S. Sunil, Advocates for the Appellants

Mr. Pramod Kr. Jain, Jt. CDR for the Respondent

CORAM:

Hon'ble Mr. Rakesh Kumar, Member (Technical)

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing/decision.12.02.2015

FINAL ORDER NO. 50415-50416 /2015-Ex(Br)

Per Rakesh Kumar (for the Bench):

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. 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 papers rolls were returned to the appellants unit. M/s Anmol Papers, were operating under job work notification no. 214/86-CE and were sending back the paper rolls under job work challans without payment of duty against an undertaking given by the principal manufacturer (Apellant) 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. 06/02-CE dated 01.03.2002 (serial No. 86 & 86A) and subsequently notification no. 4/06-CE dated 01.03.2006 (serial no. 90 and 91). These exemption notifications prescribed a concessional rate of duty for the paper and paper board or the articles made therefrom manufacture is starting from the stage of pulp, in a factory, and such pulp, not 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 24.01.2008 in respect of two show cause notices dated 06.11.2006 and 20.03.2007 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 30.09.2010. Against this order of the Commissioner (Appeals), appeal No. E/66/2011 has been filed along with stay application.

2. Heard both the sides.

3. 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 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 manufacture of staring 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 Boards circular no. 40/40/94-TRU dated 06.06.94 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 no. 22/94-CE, 23/94-CE, and 24/94-CE, 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 nothing in the boards 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.

4. Shri Pramod Kumar, the Ld. Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner. He pleaded that boards circular dated 06.06.1994 is in respect of notification no. 22/94-CE, 23/94-CE, and 24/94-CE while the present dispute is in respect of the said notification no. 06/02-CE dated 01/02/2002 and 04/06-CE. He also pointed out to para 3 of the Boards circular which states that the words starting from the stage of pulp in the notification no. 22/94-CE, 23/94-Ce, 24/94-CE 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 there from. 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.

5. We have considered the submissions from both the sides and perused the records. Notification no. 6/02-CE dated 01.03.2002 (Serial No. 86 and 86A) and successor notification no. 4/06-CE (Serial No. 90-91) prescribe the concessional rate of duty for paper and paper board or articles made there from 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 avail of exemption under notification no. 8/03-CE dated 01.03.2003. 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-CE. 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. 6/02-CE and 4/06-CE. 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 in 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)

(Rakesh Kumar)

Member (Technical)

(S.K. Mohanty)

Member(Judicial)

Neha

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