2007 (2) TMI 416 - AT - Central Excise

Summary

Issues: Classification of newsprint under Heading 4801.00 and denial of Modvat credit.

In this case, the issue revolved around the classification of newsprint under Heading 4801.00, which attracts a nil rate of duty. The respondents, engaged in newsprint manufacturing, cleared goods by paying duty and availed Modvat credit for capital goods. The Revenue alleged that since newsprint attracts nil duty, clearing goods with duty payment was improper. The lower authority upheld the Revenue's claim, but the Commissioner (Appeals) set it aside, leading to the Revenue challenging this decision.

The definition of newsprint under Heading 4801.00 was crucial, as it specified that newsprint is paper intended for printing newspapers and manufactured by specific newsprint manufacturers for registered newspapers. The assessee argued that since they supplied to non-registered customers, they did not meet the newsprint definition criteria, making the nil duty rate inapplicable. Consequently, they paid duty at 8% under Notification No. 6/2003. The Commissioner (Appeals) accepted this argument, emphasizing that the disputed clearances were indeed to non-registered customers, thus not qualifying as newsprint clearances eligible for nil duty.

The Revenue did not dispute the factual position that the clearances were to non-registered customers, thereby acknowledging that such transactions did not fall under newsprint classification. Consequently, the assessee rightfully paid duty on their products and was entitled to Modvat credit for the duty paid on capital goods. The Tribunal found no fault in the Commissioner (Appeals)'s decision and rejected the Revenue's appeal, thereby upholding the allowance of Modvat credit. The stay petition was also disposed of in light of this judgment.