2007 (1) TMI 449 - AT - Central Excise

Summary

Issues: Classification of newsprint for duty purposes, applicability of exemption notification, Modvat credit denial

Classification of newsprint for duty purposes:
The case involved the classification of newsprint for duty purposes under Chapter Note 4 of Chapter 48. The Central Government's notification defined newsprint as paper intended for printing newspapers and manufactured by a specified newsprint manufacturer, supplied against a purchase order from a registered newspaper. The respondents supplied newsprint to both registered and unregistered newspapers, leading to a duty payment at 8% instead of the nil tariff rate under Chapter 48. The issue was whether the respondents' newsprint could be classified under Chapter Heading 4801 and avail the nil tariff rate.

Applicability of exemption notification:
The Revenue argued that since the tariff rate was nil under Chapter 48, any exemption from duty payment should not apply. They contended that the Commissioner (Appeals) should have disallowed the Modvat credit taken by the respondents. However, the Tribunal found no merit in the Revenue's argument, emphasizing that if the paper was not classifiable as newsprint under Chapter Heading 4801, the duty had to be paid by classifying it under the proper heading. The Tribunal analyzed the exemption Notification No. 6/2002, which provided a concessional rate of duty at 8% for papers falling under Chapter 48, regardless of the sub-heading.

Modvat credit denial:
The respondents had availed Modvat credit on capital goods, which was initially denied by the lower appellate authority but later allowed by the Commissioner (Appeals). The Revenue appealed this decision, seeking a stay of the order. The Tribunal, after hearing the arguments, decided to address the appeal on its merits. The Tribunal concluded that since the respondents' paper did not satisfy the conditions of the exemption notification, they were obligated to pay duty and could not claim exemption from the duty payment. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals)'s decision to allow the Modvat credit to the respondents.

This judgment clarifies the classification of newsprint for duty purposes, the applicability of exemption notifications, and the entitlement to Modvat credit, providing a detailed analysis of each issue and the Tribunal's decision based on the legal provisions and notifications involved.