2025 (3) TMI 1182 - AT - Central Excise

Classification of goods namely Student Almanac and teacher planner Diaries Workbook Calendars Note-Pads and Scrap books - to be classified under Chapter 49 of the Schedule to the Central Excise Tariff Act 1985 or under Chapter 48 as Articles of Paper or of Paper Board and attract duty @ 12.5% ad valorem? - exemption from waste and scrap under N/N. 27/2011-CE dated 24.03.2011 - invocation of extended period of limitation - Penalty under Rule 26 of the Central Excise Rules of the Central Excise Rules on Director of the assessee. Classification of Student Almanac and teacher planner - HELD THAT - The Student Almanac is the same as a diary except that it is customized to meet the requirements of students of the particular school. Therefore the information relevant to that school is printed in it. The submission of the learned counsel that since Student Almanac is used only by students of a particular school it becomes a product of printing industry cannot be accepted. Undisputedly 90% of the space in the Student Almanac is left blank for students to write. Providing additional information relevant to the school does not make it a product of printing industry. The teacher planner likewise is to help to make notes and therefore stand on the same footing - the submission of the assessee deserves to be rejected. Waste and scrap - HELD THAT - The only submission of the assessee with respect to waste and scrap is that since Student Almanac and teacher planner were exempted from payment of duty the scrap generated also should be exempted by virtue of N/N. 27/2011-CE. The submission of the Revenue is that since Student Almanac and teacher planner and other products such as diaries note pads were exigible to duty the assessee was not entitled to exemption from waste and scrap. For the reasons stated above while dealing with classification of Student Almanac and teacher planner the submission of the learned authorized representative deserves to be accepted and the assessee is not entitled to the benefit of exemption on waste and scrap. Extended period of limitation - penalty - HELD THAT - There was no evidence of intention to evade payment of duty and suppression of facts because it was possible for the assessee to have entertained the belief that the Student Almanac and teacher planner were not exigible to duty and therefore to have NOT declared them in their excise returns - the question of limitation found in favour of the assessee and against the Revenue and the impugned order needs to be upheld in so far as this limitation is concerned. Consequently the penalty under section 11AC was also correctly set aside by the Commissioner (Appeals) in the impugned order. Penalty under Rule 26 of the Central Excise Rules of the Central Excise Rules on Director of the assessee - HELD THAT - In this case there is no confiscation of the goods nor is there any allegation that any Cenvat credit has been wrongly taken - the Commissioner (Appeals) was correct in setting aside the penalty on Shri Kishore Mittal under Rule 26 of the Rules. Conclusion - i) Student Almanac and Teacher Planner are classifiable under Chapter 48 due to their primary purpose for writing similar to diaries. ii) The denial of exemption for waste and scrap as dutiable goods are manufactured alongside exempted goods upheld. iii) There are no evidence of intent to evade duty or suppress facts supporting the decision to set aside the demand for the extended period. iv) The decision to set aside the penalty on the Director upheld as the conditions for imposing a penalty under Rule 26 were not met. Appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

(a) Whether the Student Almanac and Teacher Planner should be classified as products of the printing industry under Chapter 49 or as paper and paper products under Chapter 48 of the Central Excise Tariff Act, 1985.

(b) Whether the assessee is entitled to an exemption from duty on waste and scrap under Notification No. 27/2011-CE.

(c) Whether the extended period of limitation is applicable due to alleged suppression of facts by the assessee.

(d) Whether the penalty imposed on the Director under Rule 26 of the Central Excise Rules, 2002, was justified.

ISSUE-WISE DETAILED ANALYSIS

Classification of Student Almanac and Teacher Planner

- Relevant Legal Framework and Precedents: The classification dispute revolves around whether the goods fall under Chapter 48 or Chapter 49 of the Central Excise Tariff Act. Chapter 48 pertains to paper and paper products, while Chapter 49 pertains to products of the printing industry.

- Court's Interpretation and Reasoning: The Tribunal analyzed the primary purpose of the Student Almanac and Teacher Planner. It concluded that these items are primarily meant for writing, similar to diaries, and thus fall under Chapter 48. The Tribunal noted that 90% of the space in these products is for writing, with only 10% being printed material.

- Key Evidence and Findings: The Tribunal found that the Student Almanac and Teacher Planner are similar to diaries, which also contain some printed information but are primarily used for writing purposes. The customization for schools does not change their primary function.

- Application of Law to Facts: The Tribunal applied the classification criteria to determine that the primary purpose of the goods is for writing, classifying them under Chapter 48.

- Treatment of Competing Arguments: The Tribunal rejected the assessee's argument that the products should be classified under Chapter 49 due to their printed content, emphasizing the primary purpose of the goods.

- Conclusions: The Tribunal upheld the classification under Chapter 48, rejecting the assessee's appeal.

Exemption for Waste and Scrap

- Relevant Legal Framework and Precedents: Notification No. 27/2011-CE provides an exemption for waste and scrap generated during the manufacture of exempted goods.

- Court's Interpretation and Reasoning: The Tribunal reasoned that since the Student Almanac and Teacher Planner are dutiable, the exemption for waste and scrap does not apply.

- Key Evidence and Findings: The Tribunal found that dutiable goods are manufactured alongside exempted goods, disqualifying the exemption.

- Application of Law to Facts: The Tribunal applied the notification's criteria, determining that the exemption does not apply due to the presence of dutiable goods.

- Treatment of Competing Arguments: The Tribunal accepted the Revenue's argument that the exemption is not applicable.

- Conclusions: The Tribunal upheld the denial of the exemption for waste and scrap.

Extended Period of Limitation

- Relevant Legal Framework and Precedents: The extended period of limitation under Section 11A(4) of the Central Excise Act is applicable in cases of fraud, collusion, willful misstatement, or suppression of facts.

- Court's Interpretation and Reasoning: The Tribunal agreed with the Commissioner (Appeals) that there was no evidence of intent to evade duty or suppress facts. The classification issue was debatable and under litigation.

- Key Evidence and Findings: The Tribunal noted the lack of evidence for intentional evasion, considering the bona fide belief of the assessee.

- Application of Law to Facts: The Tribunal found that the extended period was not applicable due to the absence of willful suppression or intent to evade duty.

- Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument for applying the extended period, supporting the assessee's position.

- Conclusions: The Tribunal upheld the Commissioner (Appeals) decision to set aside the demand for the extended period.

Penalty on Director under Rule 26

- Relevant Legal Framework and Precedents: Rule 26 of the Central Excise Rules imposes penalties for certain offenses related to excisable goods.

- Court's Interpretation and Reasoning: The Tribunal found that the conditions for imposing a penalty under Rule 26 were not met, as there was no confiscation of goods or wrongful Cenvat credit.

- Key Evidence and Findings: The Tribunal found no evidence of actions justifying a penalty under Rule 26.

- Application of Law to Facts: The Tribunal determined that the penalty was not applicable due to the absence of conditions warranting it.

- Treatment of Competing Arguments: The Tribunal rejected the Revenue's argument for imposing a penalty, supporting the Commissioner (Appeals) decision.

- Conclusions: The Tribunal upheld the decision to set aside the penalty on the Director.

SIGNIFICANT HOLDINGS

- The Tribunal held that the Student Almanac and Teacher Planner are classifiable under Chapter 48 due to their primary purpose for writing, similar to diaries.

- The Tribunal upheld the denial of exemption for waste and scrap, as dutiable goods are manufactured alongside exempted goods.

- The Tribunal found no evidence of intent to evade duty or suppress facts, supporting the decision to set aside the demand for the extended period.

- The Tribunal upheld the decision to set aside the penalty on the Director, as the conditions for imposing a penalty under Rule 26 were not met.

The Tribunal dismissed the appeals filed by both the assessee and the Revenue, upholding the impugned order.