2015 (7) TMI 895 - SC - Central Excise

Classification - Whether pulp of waste gunny bags/jute waste is to be treated as the pulp made from the material rags - Benefit of Notification No. 22/94-CE dated 01.03.1994 - Concessional rate of duty - . According to the Tribunal, pulp out of rags was specifically excluded from the Notification. - Held that - Pulp from the waste of jute bags or gunny bags would not be covered by the term rags appearing in Notification dated 01-03-1994 as it could never be the intention to exclude non-conventional material from the benefit of the aforesaid Notification when that was precisely the purpose for which this Notification was issued to encourage use of non-conventional material for the purposes of manufacturing paper or paper products. Still, we would now like to take note of the dictionary meaning that is assigned to the aforesaid terms, that too from the Dictionary of Paper by American Paper and Pulp Association, which obviously is the most relevant and authenticated dictionary for the purpose of the present case as what is in vogue and understood in paper industry is contained in such a dictionary. Thus, almost all the books on the subject uniformly define rag or rag pulp as one which is made from cotton waste or cotton textile material. On the other hand, the learned counsel appearing for the Revenue could not point out to a single dictionary or could take us through any technical literature which even remotely suggests that jute gunny bags come under the category of rags in the context of paper technology. - Tribunal has simply brushed aside the aforesaid material with a mere observation that it is not relevant and this approach of the Tribunal cannot be justified. - impugned decision of the Tribunal does not stand judicial scrutiny and warrants to be set aside - Decided in favour of assessee.

Issues Involved:

1. Eligibility for concessional rate of duty under Notification No. 22/94-CE.
2. Interpretation of the term "rags" in the context of the Notification.
3. Applicability of the extended period of limitation under Section 11A of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility for Concessional Rate of Duty:

The primary issue involves the eligibility of the assessee, a paper mill, for a concessional rate of duty under Notification No. 22/94-CE dated 01.03.1994. This Notification provides a concessional rate of duty at 5% for paper and paperboard made from non-conventional materials, provided the pulp contains not less than 75% by weight of materials other than bamboo, hardwoods, softwoods, reeds (other than sarkanda), or rags. The assessee contended that the pulp made from waste gunny bags/jute waste does not fall under the excluded materials listed in the Notification and thus qualifies for the concessional rate.

2. Interpretation of the Term "Rags":

The crux of the dispute is whether the pulp made from waste gunny bags/jute waste should be treated as pulp made from "rags," which is excluded from the benefit of the Notification. The Revenue argued that waste gunny bags/jute waste are equivalent to "rags," thus disqualifying the assessee from the concessional rate. The Commissioner initially ruled in favor of the assessee, stating that "rags" should not encompass waste gunny bags/jute waste, considering the purpose of the Notification to encourage the use of non-conventional materials. The Commissioner referred to technical literature and expert opinion to support this interpretation. However, the Tribunal overturned this decision, asserting that "rags" include worn-out, soiled, and torn textile materials, which would cover waste gunny bags/jute waste.

3. Applicability of Extended Period of Limitation:

The Revenue issued show-cause notices invoking the extended period of limitation under Section 11A of the Central Excise Act, 1944, for the period from 01.04.1995 to 31.10.1999. The Commissioner ruled that the show-cause notice dated 28.04.2000 was barred by limitation and that the extended period could not be invoked. The Tribunal concurred with this aspect of the Commissioner's order, treating the demand for the specified period as time-barred.

Judgment Analysis:

The Supreme Court delved into the purpose and history of the Notifications regarding concessional rates for paper made from non-conventional materials. The Court emphasized the eco-friendly objective behind such Notifications, aimed at reducing deforestation by encouraging the use of waste materials like jute waste, gunny bags, etc. The Court noted the shift from a "Positive List" of qualifying materials to a "Negative List" of excluded materials in the Notifications over time, highlighting the significance of this change.

The Court rejected the Tribunal's simplistic interpretation of "rags," stating that the term must be construed contextually and purposively. The Court pointed out that jute waste and gunny bags were explicitly included in earlier Notifications' "Positive List" as non-conventional materials. Thus, it would be illogical to exclude them under the term "rags" in the "Negative List" of the current Notification.

The Court referred to authoritative technical literature and dictionaries, which uniformly defined "rags" as materials made from cotton waste or cotton textile, not jute or gunny bags. The Tribunal's dismissal of this evidence was deemed unjustified.

Conclusion:

The Supreme Court set aside the Tribunal's decision, restoring the Commissioner's order. The Court held that pulp from waste gunny bags/jute waste does not fall under "rags" in the Notification and thus qualifies for the concessional rate of duty. The demand for the period from 01.04.1995 to 31.10.1999 was also confirmed as time-barred.

No costs were awarded.

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