2016 (9) TMI 178 - AT - Central Excise

Captive consumption - core pipes manufactured and captively used - Kraft Paper was cleared or sold from the factory and was also used for manufacture of core pipe which was used for packing of Kraft paper - appellant submitted that, there is no application of Notification No. 67/95-CE and they have also not claimed any benefit under the said notification. - Held that - the Ld. Commissioner (Appeals) have erred in imposing the application of notification No. 67/95-CE wherein it has no application in the facts of this case wherein the appellant have claimed exemption under a different notification being 06/02-CE. We also hold that the said two exemption notifications are not correlated under any provisions of the Act or the Rules. Further, the order of Ld. Commissioner (Appeals) is vitiated as he has wrongly concluded that 36.5 MT of core pipes have been captively consumed, whereas the fact is that neither the core pipe is intermediate product nor it can be said to be captively consumed, as first Kraft paper comes into existence and thereafter, from Kraft paper, core pipe is manufactured for packing purposes. Further, the appellant have included the weight of core pipe in the weight of paper cleared. Therefore, the impugned order is set aside. - Decided in favour of appellant

Summary

Issues:
- Exemption under Notification No. 06/2002-CE for first clearance up to 3500 M.T. of paper
- Allegation of manufacturing and consuming core pipe without duty payment
- Applicability of Notification No. 67/95-CE on core pipe
- Captive consumption of core pipe for winding Kraft paper
- Appeal against Ld. Commissioner (Appeals) order imposing Notification No. 67/95-CE

Exemption under Notification No. 06/2002-CE:
The appellant, a paper manufacturer, was eligible for exemption under Notification No. 06/2002-CE for their first clearance up to 3500 M.T. of paper made from non-conventional raw materials. The exemption required the goods to contain not less than 75% by weight of pulp from specific materials. The appellant manufactured MG Kraft paper and core pipe for packing, both falling under CETA 1985 headings.

Allegation of manufacturing and consuming core pipe without duty payment:
A show cause notice was issued alleging that the appellant manufactured and used 36.55 MT of core pipe for captive consumption without duty payment. The duty amount was calculated based on the value of core pipe as an intermediate product, considering the exemption claimed for Kraft paper under Notification No. 06/2002-CE.

Applicability of Notification No. 67/95-CE on core pipe:
The Revenue contended that core pipe was an intermediate product subject to duty under Notification No. 67/95-CE, even if not sold. The Ld. Commissioner (Appeals) upheld this view, stating that core pipe was captively consumed for Kraft paper winding, making it liable for taxation under the said notification.

Captive consumption of core pipe for winding Kraft paper:
The Ld. Commissioner (Appeals) concluded that core pipe was an intermediate product and thus subject to duty under Notification No. 67/95-CE. The appellant argued against this, claiming core pipe was not intermediate but a finished product used for packing, included in the overall clearance weight limit of 3500 M.T. per financial year.

Appeal against Ld. Commissioner (Appeals) order imposing Notification No. 67/95-CE:
The Tribunal found errors in the Ld. Commissioner (Appeals) order, noting that Notification No. 67/95-CE was inapplicable as the appellant claimed exemption under a different notification. The Tribunal held that core pipe was not an intermediate product and could not be considered captively consumed, as it was manufactured after Kraft paper. The appeal was allowed, setting aside the Ld. Commissioner (Appeals) order.