2009 (12) TMI 358 - AT - Central Excise

Cenvat Credit- The appellants are engaged in manufacture of newsprints and other varieties of papers. Newsprints in reels are exempted from payment of duty. Duty has been demanded from the appellant for the period from 9-7-04 to 20-2-07 on the ground that newsprint in reels cleared by them is not covered by provisions of Rule 6(3)(a)(v) of Cenvat Credit Rules as it stood prior to 1-3-07. Equivalent amount of penalty has also been imposed. Held that- impugned goods covered by heading 4801 of Central Excise Tariff even though heading reads Newsprint in rolls and sheets . In view of decision of Tribunal in Andhra Pradesh Paper Mills Ltd. and the other Sri Ramchandra papers Board (P) Ltd. observed, since impugned goods classified under heading 4801, same are covered under Rule 6(3)(a) only. Newsprint in reels and newsprint in rolls synonymous in dictionaries, treated same by ISI and in view of decision of Tribunal in Andhra Pradesh paper mill Ltd, order not sustainable.

Summary

Issues:
Interpretation of Rule 6(3)(a)(v) of Cenvat Credit Rules regarding newsprints in reels and sheets exemption; Applicability of Rule 6(3)(b) for payment of duty on exempted goods; Classification of newsprints in reels under CETH 4801.

Analysis:

1. Interpretation of Rule 6(3)(a)(v):
The case involved a dispute over the interpretation of Rule 6(3)(a)(v) of Cenvat Credit Rules concerning the exemption of newsprints in reels from duty payment. The Department contended that "newsprints in reels" were not covered under this rule, necessitating payment of 8%/10% of the value of the exempted goods at the time of clearance. However, the Tribunal referenced past decisions and held that newsprints in reels fall under the category of "newsprints in rolls or sheets" as per CETH 4801, thus attracting Rule 6(3)(a) only. The Tribunal emphasized that if no Cenvat credit was taken for inputs used in the manufacture of exempted goods, there was no basis for demanding payment under Rule 6.

2. Applicability of Rule 6(3)(b):
The Tribunal examined the applicability of Rule 6(3)(b) for payment of duty on exempted goods when manufacturers are not maintaining separate accounts for inputs used in both dutiable and exempted products. It was clarified that the provision of Rule 6(3)(b) was not relevant in this case as the newsprints in reels were correctly classified under heading 4801, falling under Rule 6(3)(a) of the Cenvat Credit Rules. The Tribunal's decision was supported by the classification consistency in various dictionaries, ISI standards, and previous judicial precedents.

3. Classification of Newsprints in Reels under CETH 4801:
The issue of whether newsprints in reels could be considered synonymous with "newsprints in rolls or sheets" under CETH 4801 was extensively debated, with arguments based on dictionary meanings, standards, and legal interpretations. However, the Tribunal relied on previous judgments, specifically the case of Sri Ramachandra Paper Boards (P) Ltd., to conclude that newsprints in reels were indeed covered under Rule 6(3)(a) of the Cenvat Credit Rules. This classification alignment led to the allowance of the appeal with consequential relief to the appellant, highlighting the consistency in the legal interpretation and application of the relevant rules.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Ahmedabad, clarified the interpretation of Rule 6(3)(a)(v) of Cenvat Credit Rules, affirmed the classification of newsprints in reels under CETH 4801, and established the inapplicability of Rule 6(3)(b) in the given scenario. The decision provided a comprehensive analysis based on legal precedents and statutory provisions, ensuring clarity on the duty payment obligations for the manufacture of exempted goods.