2016 (12) TMI 280 - AT - Central Excise

Eligibility of exemption under N/N. 101/94-CE dated 04.05.1994 - manufacture of vapour corrosion inhibitor coated papers falling under subheading no. 4811.80 and VCI coated paper cartons falling under sub heading no. 4819.90 of Central Excise Tariff - Held that - in the case of converted paperboard, clause four applies as both the lower authorities have not controverted the submissions of the appellants that the converted paper is to be used by the buyers for the intended purpose. As regards the demands raised on the ground that appellant had manufactured bags out of the converted papers hence not eligible for the benefit of notification, we find that the lower authorities have again misdirected themselves. It is seen from the samples produced before us that the said samples indicate that they are in the form of collapsible boxes or cases in which materials/items can be used as packing. In our view, the final product which is in form of collapsible boxes and cases will be covered under the notification number 101/94 - we hold that the appellant is eligible to avail the benefit of notification 101/94 CE for the products manufactured and cleared by them - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Interpretation of notification no. 101/94-CE regarding exemption eligibility for converted paper products.
2. Validity of duty demand and penalty imposition under Section 11AC.
3. Consideration of submissions by lower authorities and appellate authority.
4. Applicability of notification conditions to the manufacturing activities of the appellant.
5. Determination of eligibility for benefit under notification no. 101/94-CE based on the nature of the manufactured products.

Analysis:
1. The appeal revolved around the interpretation of notification no. 101/94-CE concerning the exemption eligibility for converted paper products used in manufacturing cartons, boxes, containers, and cases. The appellant argued that their products fell under the notification's purview as they manufactured waterproof cartons for exporting motors, highlighting the chemical treatment applied to the paper. The contention was supported by the unconditional nature of the notification, emphasizing the need to consider the purpose for which the converted paper was sold.

2. The duty demand and penalty imposition under Section 11AC were challenged by the appellant, citing the issuance of the show-cause notice in 1997 for the period between May 1994 and March 1995. The appellant raised the issue of limitation regarding the demand and emphasized the declarations made before the authorities regarding their manufacturing activities during the period in question.

3. The lower authorities and the appellate authority upheld the duty demand and penalty imposition, asserting that the appellant's manufacturing of bags from converted papers did not qualify for exemption under notification no. 101/94-CE. However, the appellate tribunal found merit in the appellant's case, emphasizing that the converted paper sold by the appellant, even for manufacturing bags, could still be eligible for the notification's benefit.

4. The tribunal analyzed the notification's clauses and concluded that the converted paper intended for use by buyers in manufacturing cartons, boxes, containers, and cases would qualify for exemption under notification no. 101/94-CE. The tribunal highlighted that the final product, even in the form of collapsible boxes or cases, would fall within the notification's ambit, emphasizing the purpose for which the converted paper was ultimately used.

5. Ultimately, the tribunal ruled in favor of the appellant, holding that they were eligible to avail the benefit of notification no. 101/94-CE for the products manufactured and cleared by them. The impugned order was set aside, and the appeal was allowed based on the tribunal's interpretation of the notification and the nature of the appellant's manufacturing activities.