2018 (12) TMI 10 - AT - Central Excise

Benefit of concessional rate of duty of 6% on the paper board manufactured - It appeared to Revenue that unless waste paper is more than 75% by weight, the appellants were not eligible for benefit of concessional rate of duty - N/N. 12/2012 dated 17.03.2012 - Extended period of limitation. Held that - Revenue had an impression that unless waste paper is used for making pulp, the appellant is not eligible for concessional rate of duty provided under N/N. 12/2012 - the definition of rags as submitted by the learned counsel for the appellant and as contained in Textile (Consumer Protection) Regulation 1988, that rag emerge out of fabric and they do not emerge out of old cotton clothes. It is admitted in the show cause notice that appellant was using old clothes for making pulp. Revenue could not make out a case that appellant was not eligible for the said benefit - appeal allowed - decided in favor of appellant-assessee.

Issues:
1. Eligibility for concessional rate of duty under Notification No.12/2012-CE.
2. Interpretation of the term "rags" in the context of the notification.
3. Admissibility of benefit under the notification based on raw material used.
4. Correct classification of raw material as "rags" or "old cotton clothes."

Analysis:

Issue 1: Eligibility for concessional rate of duty under Notification No.12/2012-CE:
The appeal was directed against an Order-In-Original passed by the Commissioner, Central Excise & Service Tax, Ghaziabad, regarding the eligibility of the appellants for the concessional rate of duty on 'Paper Board' under Notification No.12/2012-CE. The Revenue contended that the appellants were not eligible for the benefit due to the composition of the raw material used in manufacturing the paper board.

Issue 2: Interpretation of the term "rags" in the context of the notification:
The crux of the matter revolved around the interpretation of the term "rags" as used in the notification. The Revenue argued that the use of old cotton clothes by the appellants did not meet the criteria of the notification as they presumed that unless waste paper was used in making pulp, the benefit of the notification was not admissible. However, the appellant's counsel highlighted the definition of "rags" as per Textile (Consumer Protection) Regulation 1988, emphasizing that rags emerge out of fabric and not out of old cotton clothes.

Issue 3: Admissibility of benefit under the notification based on raw material used:
The Revenue's contention was that the appellants did not meet the requirements of the notification as they were using old cotton clothes as raw material instead of waste paper. The Tribunal analyzed the raw material used by the appellants and concluded that they were indeed using old cotton clothes and not rags, as defined in the regulation. Therefore, the Tribunal held that the appellants were eligible for the concessional rate of duty under the notification.

Issue 4: Correct classification of raw material as "rags" or "old cotton clothes":
The Tribunal's decision was based on the correct classification of the raw material used by the appellants. By considering the definition of "rags" and the nature of the raw material employed in the manufacturing process, the Tribunal determined that the appellants were using old cotton clothes, which did not fall under the category of rags as presumed by the Revenue. Consequently, the Tribunal set aside the impugned order and allowed the appeal, granting the appellants the entitlement to the consequential relief as per law.

In conclusion, the Tribunal's detailed analysis and interpretation of the relevant legal provisions led to the decision in favor of the appellants, establishing their eligibility for the concessional rate of duty under Notification No.12/2012-CE for the period in dispute.

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