2004 (8) TMI 462 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty confirmed against the appellants by the adjudicating authority.
2. Applicability of sub-heading Note 1(a) of Chapter 48 to writing and printing paper.
3. Benefit of sub-heading Note 1(a) to goods supplied to different educational institutions.
4. Imposition of penalty on the appellants.

Analysis:

1. The appeal was filed against the duty demand and penalty confirmed by the adjudicating authority. The appellants, engaged in the manufacture of writing and printing paper, cleared goods at nil rate of duty to educational institutions. The dispute arose when the benefit of sub-heading Note 1(a) of Chapter 48 was denied by the adjudicating authority due to alleged non-satisfaction of conditions.

2. Sub-heading Note 1(a) of Chapter 48 specifies the conditions for applying nil rate of duty to writing or printing paper supplied directly from the manufacturer's factory to specific entities. The Tribunal found that the appellants' supply to the Delhi Bureau of Text Books met the conditions of this sub-heading note. A previous order by the Tribunal had also allowed the benefit of this sub-heading note to the appellants in a similar case. Consequently, the duty demand on goods supplied to the Delhi Bureau of Text Books was set aside.

3. However, the Tribunal ruled that the benefit of sub-heading Note 1(a) could not be extended to goods supplied to the Central Board of Secondary Education and National Open School, as these entities were not covered under the specified conditions. Therefore, the duty demand confirmed for goods supplied to these institutions without payment of duty was upheld.

4. On the issue of penalty, the appellants argued that since they had deposited a substantial amount of duty, no penalty should be imposed. The Tribunal disagreed, stating that the duty was paid only after a show cause notice was issued, and the appellants had wrongly claimed the benefit of the sub-heading note at the time of clearance. Consequently, a penalty of Rs. 10 lakhs was imposed, considering the circumstances of the case.

In conclusion, the impugned order was modified with respect to duty and penalty. The appeal was disposed of with the duty demand set aside for goods supplied to the Delhi Bureau of Text Books, upheld for goods supplied to other institutions, and a penalty of Rs. 10 lakhs imposed on the appellants.