2002 (11) TMI 444 - AT - Central Excise

Summary

Issues:
- Whether Modvat credit on decorative laminated sheets should be restricted to Rs. 800/- per tonne under the third proviso to Notification No. 177/86-C.E.
- Whether inputs used by the appellants are articles of paper and paperboard, and not subject to the restriction.
- Whether the inputs can be reclassified at the receiving end.
- Whether the impugned decision of the Commissioner was correct in restricting the Modvat credit.

Analysis:

1. Modvat Credit Restriction: The appellants contested the duty demand and penalty imposed based on a common order. The core issue revolved around the restriction of Modvat credit to Rs. 800/- per tonne under the third proviso to Notification No. 177/86-C.E. for decorative laminated sheets.

2. Classification of Inputs: The appellants argued that the inputs they used were articles of paper and paperboard classified under sub-heading 4823.90. They relied on Board's Circular No. 13/91 to support their claim that the restriction should not apply to their inputs.

3. Reclassification of Inputs: The appellants emphasized that the duty was paid by their suppliers under sub-heading 4823.90, and the classification of inputs should not be altered at the receiving end. They contended that the adjudicating Commissioner erred in reclassifying the inputs as paper/paperboard instead of articles of paper/paperboard.

4. Legal Precedents: The appellants cited various case laws, including Tata Oil Mills, Hindustan Lever Ltd., and others, to support their argument regarding the classification of the inputs as articles of paper and paperboard.

5. Department's Argument: The Department, represented by the learned D.R., supported the Commissioner's decision, emphasizing the everyday usage parlance to determine the classification of paper and paperboard. However, the Jt. C.D.R. highlighted Apex Court decisions regarding the classification of decorative laminates under Chapter 39.

6. Judgment: After considering both sides and reviewing the case records, the Tribunal concluded that the issue was not about the classification of input materials but whether the credit should be restricted to Rs. 800/- per tonne. The Tribunal found in favor of the appellants, noting that the restriction did not apply since the inputs were articles of paper/paperboard, as classified at the origin under sub-heading 4823.90. The Tribunal overturned the impugned orders, allowing the appeals with consequential relief.