2000 (1) TMI 925 - AT - Central Excise

Summary

Issues:
Eligibility of Modvat credit on paper wrappers used in soap manufacturing under Notification 177/86-C, interpretation of Chapter Heading for printed soap wrappers, applicability of Notification 177/86 to the case, and validity of the Collector's order.

Eligibility of Modvat Credit:
The issue revolves around the Modvat credit availed by the appellants on paper wrappers used in soap manufacturing. The department alleges that the credit exceeded the permissible limit under Notification 177/86-C, leading to show cause notices and a demand for recovery. The appellant argues that the restriction applies only to paper and paperboards, not articles of paper like printed soap wrappers. Citing precedents, they contend that printed wrappers are articles of paper and not subject to the credit limit. The interpretation of the notification's restriction is debated, with the appellant asserting that limiting the credit to 10% is unreasonable and not the government's intention.

Interpretation of Chapter Heading:
The classification of printed soap wrappers under Chapter Headings is contested. The appellant challenges the department's classification under Heading 48.19, arguing that the wrappers fall under different sub-headings like 4823.19, 4819.12, and 4811.30. They assert that the printed wrappers are articles of paper and not plain paper or paperboards as claimed by the department. Citing a previous order, it is argued that only printed soap wrappers under Chapter 4823.19 are subject to the Modvat credit limit, not those under other headings.

Applicability of Notification 177/86:
The appellant disputes the applicability of Notification 177/86 to their case, citing differences in products and periods. They argue that if the printed wrappers are considered articles of paper, the notification does not apply. Precedents are cited to support the contention that printed soap wrappers fall under the category of articles of paper, exempting them from the notification's restrictions.

Validity of Collector's Order:
The Collector's order, which concluded that the appellant availed a higher rate of credit than legally permissible, is challenged for its vagueness and lack of discussion on why the input falls under a specific Chapter heading. The order's interpretation of Chapter 2823.19 is disputed, with the appellant arguing that the description does not cover paper wrappers. Citing a bench order and previous decisions, it is contended that the printed soap wrappers should be classified as articles of paper and not subject to the notification's restrictions.

In conclusion, the appeals are allowed, the impugned order is set aside, and the Modvat credit availed by the appellant is confirmed as valid.