2013 (8) TMI 685 - AT - Central Excise

Determination of weight - Benefit of exemption notification No.6/2001-CE dt.1.3.01 - first clearance upto 3500 MT of paper and paper board or article made therefrom - whether the weight of wrapper (packing paper and paper board) shall be taken into account to determine the quantity cleared in a financial year - Held that - appellants have not disclosed gross weight and net weight in respect of each packet of the paper in any of the documents occasioning clearance during material period. Normally when a container contains contents, the gross weight and net weight are exhibited on the container. In the present reference weight of contents and container was not exhibited conspicuously. Weights and Measures Act has adopted the rationale of gross weight and net weight for consumer protection and declaration of MRP. This is to save the consumer from exploitation. It is strange how Ld. Commissioner (A) ignored the fact that wrappers cleared were excisable goods and material for the purpose of grant of notification. But he based his decision on irrelevant considerations. If the weight of wrapper in question was also material that needed thorough scrutiny. Ignoring such aspect learned Commissioner buried interest of Revenue. When the appellants did not challenge manufacture of the wrapper by them and those were cleared and were excisable and to be accounted for, appellant should have come out with clean hands to prove the weight of wrappers cleared. But they have chosen a way to avoid such disclosure. - Matter remanded for re-adjudication.

Summary

Issues Involved:
1. Inclusion of wrapper weight in the total clearance of paper and paperboard for exemption purposes.
2. Interpretation of statements made by the Managing Directors.
3. Admissibility of exemption under Notification No. 6/2001-CE and 6/2002-CE.
4. Validity of the adjudicating authority's order versus the Commissioner (Appeals) order.
5. Imposition and quantum of penalty.

Issue-Wise Detailed Analysis:

1. Inclusion of Wrapper Weight in Total Clearance:
The primary issue was whether the weight of the wrapper used for packaging paper products should be included in the total clearance of 3500 MT to avail exemption under Notification No. 6/2001-CE and 6/2002-CE. The respondents argued that the weight and value of the wrapper were included in the weight and value of the finished goods cleared, as stated in their declaration under Rule 173-B of the Central Excise Rules, 1944. The Commissioner (Appeals) agreed with this argument, stating that the total weight reflected in the invoices included the weight of the wrapper. However, the Technical Member disagreed, emphasizing that the weight of the wrapper was not considered for computing the total clearance, based on the statements of the Managing Directors.

2. Interpretation of Statements Made by Managing Directors:
The statements of the Managing Directors of the respondent companies were pivotal. The Commissioner (Appeals) found that the Managing Directors had clarified that the value of the goods, inclusive of the wrapper, was charged. However, the Technical Member highlighted that the Managing Directors admitted during the investigation that the weight of the wrapper was not included in the invoices, which indicated only the weight of the goods. This discrepancy led to differing interpretations of whether the wrapper's weight was included in the total clearance.

3. Admissibility of Exemption under Notification No. 6/2001-CE and 6/2002-CE:
The respondents claimed exemption for the first clearance of 3500 MT of paper and paperboard. The Commissioner (Appeals) held that the total weight, including the wrapper, was within the exemption limit. Conversely, the Technical Member concluded that the respondents cleared more than 3500 MT by excluding the wrapper's weight from the total clearance, thus exceeding the exemption limit.

4. Validity of the Adjudicating Authority's Order versus the Commissioner (Appeals) Order:
The Commissioner (Appeals) set aside the adjudicating authority's order, which had confirmed the demand of duty, interest, and penalty. The Commissioner (Appeals) found that the weight of the wrapper was included in the total weight of the goods cleared. However, the Technical Member opined that the adjudicating authority's order should be restored, as the weight of the wrapper was not considered, thereby supporting the demand of duty and interest.

5. Imposition and Quantum of Penalty:
The Commissioner (Appeals) had set aside the penalty imposed by the adjudicating authority. The Technical Member, however, proposed restoring the penalty but reducing it to 25% of the confirmed duty if paid within 30 days of the final order, following the decision of the Delhi High Court in K.P. Pouches Pvt. Ltd. v. Union of India.

Majority Decision:
The matter was referred to a third member due to the difference in opinions between the Judicial and Technical Members. The third member agreed with the Technical Member, concluding that the weight of the wrapper was not included in the total clearance, thus supporting the adjudicating authority's order. Consequently, the impugned order of the Commissioner (Appeals) was set aside, and the duty and interest were confirmed against the respondents. The penalty was reduced to 25% of the duty if paid within 30 days of the final order.