1987 (9) TMI 197 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for the benefit of Notification No. 70/76.
2. Definition and use of "mechanical pulp" in the context of the notification.
3. Interpretation of the proviso allowing the use of up to one-third of other materials by weight.

Issue-wise Detailed Analysis:

1. Eligibility for the Benefit of Notification No. 70/76:

The respondents manufactured millboard and claimed the benefit of Notification No. 70/76. The Assistant Collector initially held that the use of straw and jute cuttings disentitled the respondents to the benefit of the said notification. However, the Collector (Appeals) allowed the plea that the goods were covered by the notification. The notification exempts straw board and mill board from a portion of the excise duty, provided certain conditions are met, including the materials used in manufacturing.

2. Definition and Use of "Mechanical Pulp":

The learned departmental representative argued that the millboard produced should conform to the specifications given in the notification. Since straw and jute were used, which are not specified materials, the millboard was not eligible for concessional assessment. However, it was pointed out that the respondents converted straw and jute into mechanical pulp in their own mill, which is a permissible raw material under the notification. The respondents provided evidence from literature indicating that mechanical pulp can be produced from non-wood materials like straw and jute. The Revenue did not produce any evidence to contradict this, and the learned SDR's reliance on Chapter 47 of CCN, which primarily discusses wood pulp, was not sufficient to disqualify the respondents' claim.

3. Interpretation of the Proviso Allowing the Use of Up to One-Third of Other Materials by Weight:

The respondents argued that even if the millboard should be made out of specified materials, the addition of straw and jute, which did not exceed one-third of the weight of other materials, did not disqualify them from the benefit of the notification. They referred to a judgment by the Hon'ble High Court of Allahabad in the case of R.G. Paper and Straw Board and Another v. Union of India and Others, which held that the proviso allowing the use of up to one-third of other materials is applicable to both millboard and strawboard. The Tribunal found that the respondents' use of straw and jute was within the permissible limit and, therefore, the benefit of the notification was available to them.

Conclusion:

The Tribunal observed that the respondents consistently maintained that they converted straw and jute into mechanical pulp, which was then used to manufacture millboard. There was no denial from the Revenue regarding this process. The Tribunal accepted the respondents' plea that mechanical pulp can be produced from non-wood materials like straw and jute. Furthermore, the Tribunal upheld the interpretation that the proviso allowing the use of up to one-third of other materials by weight applies to millboard as well. Consequently, the appeal by the Department was rejected, and the benefit of the notification was granted to the respondents.