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TMI Blog2005 (11) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... of papers being manufactured by the said appellants. In addition, personal penalty of identical amount has also been imposed under the provisions of Rule 173Q(1) of Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944. Further, land, building, plant and machinery of the said appellants has been confiscated with an option to them to redeem the same on payment of redemption fine of Rs. 30 lakhs. Personal penalty of Rs. 10 lakhs each, has been imposed upon the other appellants under the provisions of Rule 209A of Central Excise Rules, 1944. 3. The second set of appeals is by M/s. PAIL against the order-in-original No. 19/99, dated 11-6-99 passed by the Commissioner of Central Excise, Mumbai, confirming demand of duties of Rs. 31,71,34,620/- (Rupees thirty-one crores seventy-one lakhs thirty-four thousand six hundred twenty only) and imposing personal penalty of identical amount. In addition, land, building, plant and machinery belonging to the said appellants has been confiscated with an option to them to redeem the same on payment of redemption fine of Rs. 25 lakhs. Personal penalty of Rs. 5 lakhs each, has been imposed upon the other appellants under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y goods on a lower value under the garb of second quality goods and the appellants have collected higher duty from their customers without depositing the same with the department. The above show cause notice culminated into the orders passed by the Commissioner and impugned before us. 6. Shri C.S. Lodha, ld. Advocate appearing for the appellants has assailed the impugned orders on merits as also on limitation. Shri M.I. Shethna, Sr. Advocate, appearing on behalf of the revenue supported the impugned order . We shall be dealing with the allegations made in the show cause notices, finding of the Commissioner in his impugned order and the submissions made by both sides, on each point in the subsequent paragraphs. 7. Before we deal with the various issues involved, we would like to refer to the history of the exemption given to the paper manufacturing units from time to time and the scope of the same as understood and clarified by the Board, Commissionerate and Trade. It is seen that with a view to encourage the use of unconventional raw materials, Central Government has been issuing exemption Notification granting partial exemption to paper subject to the conditions that unconvent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, starting from the stage of pulp in a factory, and such pulp contains not less than 75% by weight of pulp made from materials other than bamboo, hard woods, soft woods, reeds (other than sarkanda) or rags. Notification No. 23/94-C.E., dated 1-3-94 Provided that the said goods are manufactured, starting from the stage of pulp in the said factory and such pulp contains not less than 50% by weight of pulp made from materials, other than bamboo, hard woods, and soft woods, reeds (other than sarkanda) or rags. A plain reading of the above condition of the notifications reveal that a manufacturer of paper starting from the stage of the pulp which does not contain bamboo, hard woods, soft woods, reeds up to a specific percentage is entitled to the benefit of concessional rate of duty provided under the said Notification. As is evident the intention of the legislature in providing the concessional rate to the papers is, dependent upon the use of the raw materials is to discourage the use of conventional raw materials of soft woods and hard woods. Earlier Notifications also provided the same criteria for providing concessional rate of duty. 8. The benefit of the above notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red over 2262 lots, each lot having different composition, totalling about 90152 MTs of different kinds of paper. Benefit of exemption notification was claimed and extended by the revenue after full and detailed scrutiny. RT-12 returns were repeatedly being filed by them and approved by the revenue, lot registers were repeatedly and regularly scrutinised by the department. As such, raising of demand on the basis of the result of the test report, which according to the Boards itself can not reflect upon the correct contents of the raw materials, is neither justified nor warranted. It has been very strongly argued by Shri Lodha that the Board vide its Circular issued in 1964 has itself admitted that microscopic examination of either the paper or the pulp is not reliable and that is why the procedure prescribing detailed accounts of raw material receipts and consumption was required to be followed by the manufacturer and verified by the jurisdictional Central Excise authorities. Shri Lodha has also argued that if waste paper is considered as one of the unconventional raw materials, the same would give misleading results depending upon the contents and the material used in the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Board has detailed a procedure to be adopted by the paper manufactures. There is no dispute that such procedure was adopted by the appellants. In this scenario, a doubt is raised as to whether the test report can be made the sole basis for arriving at a conclusion that the consumption was not in accordance with the condition of the notification and the records maintained by the appellants. 11. Another point has also been raised by the ld. Advocate and according to us, very effectively. The notification prescribes use of raw materials up to the extent of 50% (or 75%, as the case may be) other than the bamboo, hard woods, soft woods, reeds, etc. As such it is clear that the nature of condition is by way of exclusion of use of certain raw materials. As long as it is shown that 50% of the weight of pulp is made from materials other than the specified materials, the exemption would be available. Admittedly, waste paper is not one of the specified excluded materials. As such, pulp made from waste paper would earn the exemption. However, in a given case, it may happen that the waste paper so used is made out of the specified raw materials like hard woods or soft woods, in which case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter 48) Doubts have been raised whether waste, paper could be considered as non-conventional raw material for the purpose of granting exemption under Notification Nos. 22/94-C.E. and 73/95. The India Paper Makers Association, New Delhi has raised the point. 2. In this regard it may be mentioned that any raw material not covered under the terms of bamboo hardwoods, softwoods is to be treated as an unconventional raw material for the purpose of granting exemption under Notification Nos. 22/94-C.E., dated 1-3-94, 73/95-C.E., dated 20-3-95 and 4/97-C.E., dated 10-3-97 as clarified vide Board s telex dated 28-2-94 issued from F. No. 333/33/93-TRU. To determine the percentage of unconventional raw materials used in the paper pulp for granting the exemption, attention is drawn to Board s Circular No. 5 (Paper)/64, dated 30-6-64 (F. No. 8/37/64-C.X. 6). 3. Trade may be advised suitably taking into account the above mentioned instructions. (Source CBE C. letter F. No. 61/16/97-C.X. 4), dated 24-9-97). Based upon the above letter, the Pune Commissionerate had also issued Trade Notice No. 138/97, dated 29-10-97 clarifying that waste paper has to be treated as unconventional raw m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remanded the matter to the Commissioner on the main point of adjudging the applicability of the notification in the light of the Tribunal and Board s clarifications, we keep the said issue open for decision, if required in the de novo proceedings. 16. Similarly, the issue of limitation, which has been strongly agitated by the appellants, is kept open to the Commissioner for re-deciding, alter adjudicating the matter on the main point during the de novo adjudication, if the authority concludes in favour of the appellants, the question of limitation may not be required to be dealt with. It is only in case the exemption is denied to the appellants, the limitation point would become relevant. However, we make it clear that while deciding on the limitation, if at all, the Commissioner would take into consideration the appellant s plea that all records maintained by them were being scrutinised by their jurisdictional Central Excise authorities from time to time and various checks, as prescribed in Board s circular of 1964 were being conducted. 17. A part of the demand is formed on the ground that first quality paper has been cleared as second quality during the relevant period. The a ..... 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