1998 (11) TMI 198 - AT - Central Excise

Paper - Kraft paper for packing and wrapping is eligible for exemption under Notification No. 47/83-C.E.

Summary

Issues: Classification under Notification 46/83 vs. Notification 47/83, Suppression of facts, Imposition of penalty

Classification under Notification 46/83 vs. Notification 47/83:
The case involved a dispute regarding the classification of packing and wrapping paper manufactured by the appellants under Notification 46/83 and Notification 47/83. The appellants claimed exemption under Notification 46/83, which covers all papers except certain excluded varieties, while the department argued that Notification 47/83, specifically for kraft paper, should apply. The Additional Collector upheld the duty demand under Notification 47/83, citing suppression of fact and imposed a penalty. The Tribunal analyzed the issue and concluded that since Notification 47/83 specifically covered kraft paper, the goods in dispute fell under this notification. However, the appellants successfully argued that the demand was time-barred as there was no suppression on their part. The Tribunal set aside the demand and penalty, allowing the appeal.

Suppression of Facts:
The department alleged that the appellants suppressed facts by not describing the goods as kraft paper in order to wrongly avail of the lower duty rate under Notification 46/83. The department applied the extended period of limitation based on this suppression. However, the Tribunal found that the appellants did not suppress any facts as they claimed the benefit of the notification they believed was applicable. The Tribunal emphasized that the department should ensure the correct application of notifications when approving classification lists, and mere claim under a different notification does not constitute suppression. As a result, the Tribunal held that there was no suppression to justify the extended period of limitation.

Imposition of Penalty:
The Adjudicating authority imposed a penalty even though there was no proposal for it in the show cause notice. The appellants argued against the penalty, stating that its imposition was unjustified. The Tribunal agreed with the appellants, noting that in the absence of a proposal for a penalty in the show cause notice, imposing a penalty was unwarranted. Consequently, the Tribunal set aside the penalty along with the demand, ultimately allowing the appeal in favor of the appellants.