2019 (5) TMI 1170 - AT - Central Excise

Manufacture of paper / paper board - Principal Process of lifting of pulp is done by hand or not - Benefit of N/N. 3/2005-CE dated 24.02.2005 (from 28.02.2005) - condition as mentioned in sub-heading No. 4802.20 (upto 27.02.2005) and in Notification - extended period of limitation - HELD THAT - The expressions lifting the pulp is done by hand , if read with prefixed words the Principal Process , it would make clear that lifting of the pulp by hand is required to be only on the Principal Process and not the entire process. In this context, if we look into the manufacturing process mentioned above, it would be noticed that the liquid with pulp fibres is the mixture of waste paper, waste paper tubes / coals and sludge pulp, which is pumped into a storage tank through pipe lines. The main process is the liquid with pulp fibres form layer on the cylinder moulds is transferred through the felt over a sheet copper roll, from where the wet sheets are cut / slit and lifted by hand. On close reading of the CBEC Circular 61/6/71-CX.2 dated 14.6.1972 and the letter of KVIC, it appears that the Principal Process can be described as lifting of pulp or lift of a wet sheet of paper - In the present case, it is found from the manufacturing process that wet sheets are cut / slit and lifted by hand and therefore, the condition of the Tariff heading and the notification are fulfilled. In the HSN, it is stated that these pulps are obtained by a series of mechanical or chemical cleaning / screening and de-inking processes. To extend the benefit of exemption notification, only the Principal Process of lifting of pulp by hand would be looked into - Therefore, the benefit of the exemption notification cannot be denied to the appellants, as the liquid with pulp fibres is pumped from the pulpier to storage tanks through pipe lines. Other issue is that during the visit of the officers, it was found that width of all the three cylinders Mould Vats exceeded the limit of 40 inches, as prescribed in Condition No. (b) of the Tariff / notification. It is contended by the appellant that while measuring the width of cylinder Mould VAT, the perforated portion of the cylinder, where the pulp layer is formed would be considered - HELD THAT - It appears from the impugned order that this measuring of the perforated portion of the cylinder Mould Vat was not taken into account and therefore, the question of violation of Clause (b) of the Tariff / notification cannot be sustained. Extended period of Limitation - HELD THAT - The issue involved interpretation of the Tariff heading and the notification. Hence, it cannot be construed that there is suppression of fact, with intent to evade duty - extended period of limitation cannot be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against order passed by Commissioner of Central Excise, Nagpur regarding manufacturing process of hand-made paper/paper board, invocation of extended period of limitation, interpretation of Tariff heading and notification, violation of width limit of cylinder Mould Vats.

Manufacturing Process of Hand-made Paper/Paper Board: The main issue revolved around whether the appellants satisfied the condition of "the Principal Process of lifting the pulp is done by hand" as per relevant Tariff heading and notification. The Tribunal analyzed the manufacturing process in detail, emphasizing that lifting of pulp by hand is required only on the Principal Process and not the entire process. The CBEC Circular and KVIC letter clarified that lifting of pulp or a wet sheet of paper can be considered as the Principal Process. The Tribunal concluded that the appellants fulfilled the condition as wet sheets were cut/slit and lifted by hand, entitling them to the benefit of the exemption notification.

Invocation of Extended Period of Limitation: The Tribunal agreed with the appellant's argument that the extended period of limitation should not be invoked. It was noted that the issue involved interpretation of the Tariff heading and notification, and there was no intent to evade duty. Previous proceedings in favor of the appellant further supported the decision not to invoke the extended period of limitation.

Interpretation of Tariff Heading and Notification: The Tribunal clarified that to extend the benefit of exemption notification, only the Principal Process of lifting pulp by hand should be considered. Emphasis was placed on the words "principal process" in the Tariff heading and notification. The Tribunal held that the benefit of the exemption notification cannot be denied to the appellants as the liquid with pulp fibres was pumped from the pulper to storage tanks through pipelines.

Violation of Width Limit of Cylinder Mould Vats: Another issue raised was the width of the cylinder Mould Vats exceeding the prescribed limit. The appellant argued that the measurement should consider the perforated portion where the pulp layer is formed. The Tribunal found that the measurement of the perforated portion was not taken into account, leading to the conclusion that the violation of the width limit clause in the Tariff/notification could not be sustained.

Conclusion: After thorough analysis and consideration of the arguments presented, the Tribunal found no merits in the impugned order. Consequently, the appeals were allowed in favor of the appellants, setting aside the previous order passed by the Commissioner of Central Excise, Nagpur.