2015 (5) TMI 164 - AT - Central Excise

Denial of concessional rate of duty - exemption under notification no. 06/02-CE dated 01.03.2002 - SSI exemption - paper not been manufactured in the same factory - Held that - Notification no. 6/02-CE dated 01.03.2002 (Serial No. 86 and 86A ) and successor notification no. 4/06-CE (Serial No. 90-91) prescribe the concessional rate of duty for paper and paper board or articles made there from manufactured/ starting from the stage of pulp in factory, and the pulp is of a specified specification/ that is, containing not less than 75% by weight of the pulp made from the materials other than Bamboo, hard wood, soft wood/ reed (other than sarkanda ) or rags. This exemption is subject to certain conditions as mentioned in the notification, and one of the condition is that this exemption would be available to papers/ paper board cleared for home consumption from factory in any financial year up to first clearances of aggregate quantity not exceeding 3500 MT and that this exemption shall not be applicable to a manufacturer of the said goods who avails of exemption under notification no. 8/03-CE dated 01.03.2003. - when in this case it is the appellant who is liable to pay duty on the paper and not the job worker who converted pulp into paper rolls on job work basis, the exemption under these notifications cannot be denied to them. In view of this, we hold that the impugned order in not correct. The same is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Denial of duty exemption under notification nos. 06/02-CE and 4/06-CE for manufacturing printing and writing paper due to conversion of pulp into paper done in a different factory.
2. Imposition of duty demand, interest, and penalty by the Commissioner and Joint Commissioner for the period from September 2005 to April 2007.
3. Appeal filed against the orders of the Commissioner and Joint Commissioner for denying duty exemptions.

Analysis:
The case involved the appellant, a manufacturer of printing and writing paper, facing a dispute regarding duty exemption under notification nos. 06/02-CE and 4/06-CE for the period from September 2005 to April 2007. The appellant manufactured paper from pulp meeting specified requirements, availed concessional duty rates, and outsourced the conversion of pulp into paper rolls to another factory. The Department denied the exemption, asserting that the conversion must occur in the same factory from which the paper is cleared. The Commissioner and Joint Commissioner imposed duty demands, interest, and penalties, leading to appeals against these decisions.

During the hearing, the appellant's counsels argued that the exemption conditions were met, the pulp was of required specifications, and the conversion location did not affect eligibility for the exemptions. They referenced a Board's circular clarifying that the exemption applies regardless of where the pulp-to-paper conversion takes place. On the other hand, the Department defended its position by emphasizing factory-specific exemption applicability and the need for the conversion to occur in the same factory. The Board's circular was interpreted differently by both parties to support their arguments.

After considering the submissions and examining the records, the Tribunal reviewed the exemption notifications, which required the paper manufacturing process to start from pulp meeting specified criteria. The appellant fulfilled the exemption conditions, including the first clearance quantity limit and non-availing of other exemptions. Although the pulp-to-paper conversion was outsourced, the appellant ensured the duty payment for the final product. The Tribunal ruled that since the appellant was liable for duty payment, the exemption could not be denied based on the conversion location. Consequently, the impugned orders were set aside, and the appeals were allowed, including the disposal of the stay application related to one of the appeals.

In conclusion, the Tribunal's decision clarified the eligibility for duty exemptions under specific notifications, emphasizing the importance of meeting exemption conditions irrespective of the location of the pulp-to-paper conversion process. The ruling provided clarity on the interpretation of the exemption criteria and upheld the appellant's right to avail of the duty exemptions despite outsourcing a part of the manufacturing process.