2002 (5) TMI 362 - AT - Central Excise

Issues Involved:
1. Classification of the product as self-copying paper or computer stationery.
2. Marketability of the intermediate product.
3. Applicability of Central Excise duty on the intermediate product.
4. Reliance on expert opinions and technical reports.
5. Applicability of the extended period of limitation for duty demand.
6. Valuation of the intermediate product.

Detailed Analysis:

1. Classification of the Product:
The primary issue was whether the product manufactured by the appellants, which involves printing and spot coating, should be classified under Heading 48.16 as self-copying paper or under a different heading as computer stationery. The appellants argued that their product is computer stationery, not self-copying paper, because it is printed and coated only at specific spots as per customer requirements. The Tribunal found merit in the appellants' argument, noting that the product is essentially printed computer stationery and not self-copying paper. The Tribunal also referred to the Central Board of Excise and Customs' Circular No. 11/91-CX. 4, which classified similar products under sub-heading 4901.90.

2. Marketability of the Intermediate Product:
The appellants contended that the intermediate product, i.e., the printed and coated paper before perforation, punching, and fan-folding, is not marketable. They argued that it cannot be sold in the market without these final processes and would only be considered waste paper. The Tribunal agreed, noting that the printed coated paper bears the name of the customers and has no use for anyone else, thus supporting the appellants' claim that the product is not marketable in its intermediate form.

3. Applicability of Central Excise Duty:
The Department demanded Central Excise duty on the intermediate product, claiming it was self-copying paper classifiable under Heading 48.16. The appellants argued that the product, being computer stationery, should not attract duty at the intermediate stage. The Tribunal held that the product is not classifiable under Heading 48.16 and thus should not attract Central Excise duty at the intermediate stage.

4. Reliance on Expert Opinions and Technical Reports:
The appellants presented opinions from the Institute of Paper Technology and other trade experts, stating that their product is different from self-copying paper. The Tribunal noted that the Department did not provide any contrary expert opinion and thus accepted the appellants' expert opinions. The Tribunal emphasized the importance of independent expert opinions in such matters, referencing previous Tribunal decisions.

5. Applicability of Extended Period of Limitation:
The appellants argued that they were under a bona fide belief, supported by the Board's Circular, that no duty was applicable to their product. They also contended that there was no intent to evade duty, as all inputs were duty-paid and modvatable. The Tribunal did not address this issue in detail, as the appeal was allowed on merit.

6. Valuation of the Intermediate Product:
The appellants challenged the valuation method used by the Department, arguing that the intermediate product's value could not exceed the value of duly coated self-copying paper available in the market. The Tribunal did not delve into the valuation issue, as the appeal was allowed on the primary issue of classification.

Conclusion:
The Tribunal concluded that the product manufactured by the appellants is computer stationery and not self-copying paper. Consequently, the intermediate product is not classifiable under Heading 48.16 and should not attract Central Excise duty. The Tribunal set aside the impugned order and allowed the appeal, thus resolving the classification and duty applicability issues in favor of the appellants.

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