2005 (10) TMI 91 - SC - Central Excise

Whether Mono-Ammonium Phosphate which was used as manure in the manufacture of complex fertilizers was entitled to the benefit of the said exemption notification dated 28-2-1982 as amended by several notifications? Held that - The only requirement for availing the benefit of the said notification was payment of excise duty on base paper or base paperboard wherefore also a legal fiction has been raised in the explanation appended thereto. The Tribunal denied the benefit of the said notification to the Appellant herein without considering the import thereof that it refers to the Modvat credit directly that too only on base paper. Similarly the finding of the Tribunal that the container must be manufactured only from base paper may render the exemption notification inapplicable in a large number of cases. The Appellant however is not correct in contending that it would be entitled to the exemption notification in respect of the entire container. It would be entitled to exemption only to that extent for which excise duty has been paid i.e. on paperboard. As the question as to whether three layers of base paper have been used for manufacture of the container or not has not been raised before any authority the matter is remitted back to the Assistant Commissioner Central Excise and Customs for determination of the said question. Appeal allowed to the aforementioned extent.

Issues Involved:
1. Interpretation of exemption notification dated 28-2-1982 (as amended).
2. Eligibility for concessional rate of duty under Notification No. 67/82-C.E.
3. Application of Modvat credit rules.
4. Determination of excise duty on composite paper containers.

Issue-Wise Detailed Analysis:

1. Interpretation of exemption notification dated 28-2-1982 (as amended):
The appeal questioned the interpretation of an exemption notification dated 28-2-1982, as amended by several notifications. The notification in question provided a concessional rate of duty for printed cartons, boxes, containers, and cases, subject to the condition that the appropriate duty of excise or additional duty under the Customs Tariff Act had already been paid in respect of the base paper or base paperboard used in their manufacture.

2. Eligibility for concessional rate of duty under Notification No. 67/82-C.E.:
The appellant, a manufacturer of cardboard containers, claimed eligibility for the concessional rate of duty under Notification No. 67/82-C.E., dated 28-2-1982. The Assistant Commissioner of Central Excise and Customs issued a notice alleging that the appellant was not eligible for the concessional rate of duty, leading to the demand for differential duty. The Tribunal upheld this view, but the appellant contended that they used three layers of base paper (for which no Modvat credit was taken) and one layer of LDPE coated paper (for which Modvat credit was availed), thus claiming entitlement to the exemption.

3. Application of Modvat credit rules:
The appellant filed a Modvat Declaration under Rule 57G of the Central Excise Rules, 1944, declaring LDPE Coated Paper as an input for the final excisable goods (composite paper containers). The Tribunal inferred that the appellant indirectly took Modvat credit on the base paper, which was contested by the appellant. The appellant argued that taking Modvat credit for one input should not disqualify them from the exemption.

4. Determination of excise duty on composite paper containers:
The exemption notification stipulated that the benefit would be available only if the appropriate duty had been paid on the base paper or base paperboard used in manufacturing. The Tribunal's interpretation that the containers must be manufactured only from base paper was challenged. The Supreme Court noted that the notification should be construed based on its language, and the eligibility clause should be given a strict meaning. The Court emphasized that once the eligibility criteria are satisfied, the conditions should be construed liberally.

Conclusion and Judgment:
The Supreme Court concluded that the appellant was entitled to the exemption to the extent that excise duty had been paid on the base paper or base paperboard. The matter was remitted back to the Assistant Commissioner, Central Excise and Customs, for determination of whether three layers of base paper were used in the manufacture of the containers. The appeal was allowed to this extent, and no costs were awarded.

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