2017 (11) TMI 1264 - AT - Central Excise

Area based exemption - N/N. 49/2003 dated 10.06.2003 - writing or printing paper for printing of educational textbooks - Held that - the entry in the negative list of the exemption notification is based on end use of the manufactured paper. There is no other technical specification to identify the writing or printing paper which will fall under the excluded category for exemption. The exclusion is based on end use, namely, for printing of educational textbooks - Admittedly, the paper can be used for printing of books of any kind. The bar of exemption will operate only when the paper is used for printing of educational textbooks. When the appellant had received purchase orders and sold the paper directly to the publishers of education textbook, it is clear that they are running the risk of losing the exemption under Notification No.49/2003. There can be no contest on the grounds that the end use is not in their control. When they sold the paper to a known publisher of educational textbook, it is apparent that they are aware of the usage of paper. They cannot take a plea that they have no control on them when end use is recognizable. Quantification of duty liability - Held that - not all papers cleared by them to the 11 publishers can be considered as used for printing educational textbooks - When the Revenue proceeded to demand duty on this ground, it is necessary to categorically establish and calculate the duty liability only with reference to paper for printing educational textbooks. This aspect requires re-look by the original authority - Re-quantification of duty liability has to be done based on the documents and verification regarding the paper cleared by the appellant for printing of educational textbooks - In case of reduction in the duty liability based on re-verification, the penalty also shall accordingly be re-quantified. Time limitation - Held that - the appellants cannot take a plea that they are filing returns and regular check by the officers will absolve them from the duty liability for extended period - It is only in the knowledge of the appellant that they are selling printing paper to the publishers/printers of educational textbooks, which is an excluded category for exemption - extended period rightly invoked. Decided partly against appellant and part matter on remand.

Summary

Issues: Duty liability on writing or printing paper for printing of educational textbooks under area based exemption notification.

Analysis:
1. The dispute in this case revolves around the duty liability of the appellant on writing or printing paper used for printing educational textbooks. The appellant had been availing area based exemption under Notification no.49/2003. The Revenue alleged that the appellant cleared paper for educational textbooks and initiated proceedings to demand Central Excise duty and impose penalties.

2. The appellant contested the findings, arguing that they have no control over the use of goods sold, not all clearances were for educational textbooks, and the demand is time-barred. The Revenue supported the original authority's findings, restricting the demand to sales directly to publishers of educational textbooks.

3. The Tribunal analyzed the exemption notification and found that the exclusion was based on the end use of the paper, specifically for printing educational textbooks. The term "educational textbooks" was interpreted based on common understanding, not limited to specific publishers. The Tribunal emphasized that conditions of exemption must be met, even if the end use is beyond the appellant's control.

4. While acknowledging the appellant's lack of control over end use, the Tribunal held that selling directly to educational textbook publishers implied awareness of the paper's use. However, the quantification of duty liability required a reevaluation as not all papers sold to publishers may have been used for educational textbooks.

5. The Tribunal dismissed the appeal against duty demand, agreeing with the original authority's reasoning. It emphasized the need for re-quantification of duty liability based on specific papers used for educational textbooks. The limitation defense raised by the appellant was rejected, stating that knowledge of sales to excluded categories negates the plea of regular filings absolving duty liability.

6. In conclusion, the Tribunal found the appeal meritless, dismissing it while directing the original authority to re-calculate duty liability as per the discussion. Any reduction in duty would lead to a corresponding adjustment in penalties. The judgment was pronounced on 16.10.2017.