2017 (4) TMI 94 - AT - Central Excise

Benefit of N/N. 4/2006-C.E., dated 1-3-2006 - manufacture of security paper which is used only for the purpose of printing of currency notes and other security instruments of the Government of India - denial on the ground that the security papers did not bear water mark, security thread, etc. - Held that - only condition mentioned in the Notification is security paper should be cylinder mould vat made and no other condition is prescribed. In such situation, denial of exemption on the ground that security paper supplied by the appellant as manufactured by the appellant is not of that category as certain features as mentioned in the internet sources is not figuring there - In case the original authority entertained certain doubts regarding correctness of claim by the appellant, the same should have been verified with expert opinion or by reference to the Government authorities or recipient of those goods to find out security paper. Instead of that, the impugned order proceeded to deny the nature/scope of exemption based on certain unsubstantiated definition of the term. There is no justification for such interpretation - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of exemption under Notification No. 4/2006-C.E. for the manufacture of security paper used in printing currency notes and security instruments of the Government of India.

Analysis:
The appeals involved a dispute regarding the denial of exemption to the appellants under Notification No. 4/2006-C.E., dated 1-3-2006. The appellants, engaged in manufacturing security paper for printing currency notes and other government security instruments, claimed exemption under Serial No. 94 of the said Notification. The issue revolved around whether the security paper manufactured by the appellants met the criteria specified in the Notification for exemption.

The Tribunal noted that the condition for claiming exemption required the product to be "security paper (cylinder mould vat made)" manufactured by the Security Paper Mill and supplied to specific Presses as listed in the Notification. The absence of a specific definition of "security paper" in the Notification led to a misinterpretation by the original authority, who relied on external sources to conclude that security paper must have features like watermarks and security threads. However, the Tribunal emphasized that the Notification only specified the requirement for the paper to be cylinder mould vat made, without additional conditions.

The Tribunal found fault with the original authority's reliance on external definitions and failure to verify the claim with expert opinion or government authorities. It was highlighted that the appellants were explicitly named in the Notification, and the security paper they supplied was authorized by the Government for clearance to specified recipients. The Tribunal concluded that the denial of exemption based on unsubstantiated definitions was unjustified, as the only stipulation in the Notification was regarding the manufacturing process of the paper.

Ultimately, the Tribunal held that the impugned orders denying the exemption were not sustainable and set them aside, allowing the appeals in favor of the appellants. The judgment emphasized the need for a strict interpretation of the conditions specified in the Notification and the importance of verifying claims through appropriate channels rather than relying on external sources for defining terms like "security paper."