By TIOL News Service

NEW DELHI, AUG 01, 2013: THE respondents are engaged in the manufacture of Duplex Board/Paperboard and wrappers falling chapter 48 of the Central Excise Tariff Act, 1985. During the relevant period, they were availing the benefit of exemption notification No.6/2001-CE dt.1.3.01. The said notification granted exemption to the first clearance upto 3500 MT of paper and paper board or article made therefrom manufactured, 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 etc. The respondents were clearing their final product, packaged in wrapper and availed the exemption of first clearance of 3500 MT. The Revenue entertained a view that while availing the exemption of 3500 MT, the weight of wrapper was not taken into consideration and as such, there is clearance of Duplex Board/Paperboard and wrapper in excess to the extent of 26.017 MT. The above view was based upon the statement of Shri Bhupinder Singh, Managing Director deposing that the weight of the wrapper was not being shown in the invoices and was not included/mentioned therein. Accordingly the proceedings were initiated against them resulting in confirmation of demand of duty of Rs.66 ,993 /- along with confirmation of interest and imposition of penalty upon them.

On appeal, the Commissioner (Appeals) has set aside the impugned orders. Hence the present appeals by Revenue.

Thus the Revenue is in appeal before the Tribunal for a princely sum of Rs.66 ,993 on the question whether the weight of the wrapper in which the paper was wrapped was included in arriving at the total exempted weight of 3500MTs.

There was difference of opinion between the Members of the tribunal.

Member (J) observed,

We find that there is no evidence on record indicating that the quantity of 3500 MT cleared by the appellants during the financial year 2001-2002. was without taking into consideration the weight of wrapper paper. It is undisputed that the goods were entered in the RG-1 register after wrapping of the same with the wrapper paper. In the invoices also reflected upon the total weight of the packaged paper, which would undisputedly include the weight of wrapper also. The appellant have also referred to trade parlance whereas chargeable weight included the weight of rim and reel wrappers, strings etc. There is no practice showing the weight of wrapper paper and charging the same separately. As such, the Commissioner (Appeals) has held that it is the total weight as reflected in the invoice, which also included the weight of wrapper, which has to be taken into consideration for computing the total clearance of 3500 MT.

She proposed to reject the Revenue appeal.

Member (T) did not agree. He observed,

I am not able to agree with the argument because in the ordinary course of selling finished products nobody bills separately for packing except in the case of special commodities (glass for example) or special packing. There is nothing special about this commodity. So nothing can be read into the fact that there was no separate amount billed for packing material. Secondly in the matter of material sold also invoices are issued indicating the quantity of material described in the invoice. By no stretch of arguments it can be considered that when the appellants were billing for 100 kgs of Duplex Board they meant 99.5 Kgs of Duplex Board and 0.5 Kgs of packing paper (figures assumed for illustration). This position was admitted by the Managing Directors of the respective company during investigation stage. So this is just an argument for argument sake. The invoices issued have to be reckoned to be indicating the quantity of goods described in the invoice. The appellants have not challenged the records showing production of wrapping paper and weight of such wrapping paper which were relied upon to arrive at the quantity of packing paper used. Packing paper manufactured and utilised in the factory of the appellants also are dutiable but for any specific exemption. Since Notification 67/95-CE would not apply in this case such quantity also should be reckoned as cleared under the impugned exemption up to the quantity of 3500 MTs.

He proposed to uphold the Original Order and in the matter of penalty, following the decision of the Delhi High Court in K.P. Pouches Pvt. Ltd. v. Union of India- 2008-TIOL-240-HC-DEL-CX he extended the benefit of paying 25% of the duty confirmed within thirty days of receipt of the final order in this case.

So the following issue was referred to a Third Member:

In the facts and Circumstances of the case ,-

Whether it is to be considered there (sic that) the quantity of paper and paper products sold are inclusive of the weight of wrapping paper and it is to be concluded that the appellants have claimed exemption only for 3500 MTs of paper during the financial years as held by Member (Judicial)

OR

Whether it is to be considered that the quantity of paper and paper products cleared stated in the invoice is net of the packing material and it is to be concluded the appellants have claimed exemption for quantity of paper more than 3500 MTs during the relevant financial years as held by Member (Technical).

The Third Member made some interesting observations:

Plea of Revenue that the conclusion of learned Judicial Member was based on presumption without being based on evidence to show weight of wrapper (container) cleared, has merit.

It is strange how Ld. Commissioner (A) ignored the fact that wrappers cleared were excisable goods and material for the purpose of grant of notification. But he based his decision on irrelevant considerations. If the weight of wrapper in question was also material that needed thorough scrutiny. Ignoring such aspect learned Commissioner buried interest of Revenue. When the appellant had a clear admission of the fact that it had not recorded the weight of the wrapper, the Appellate Commissioner reached to a wrong conclusion. His order was based on no evidence except baseless appreciation of part of recorded statement ignoring material and crucial part thereof. That is contrary to rule of law. So also decision based irrelevant consideration is perverse.

He fully agreed with the Member (T).

In view of the majority order, the impugned order of Commissioner (Appeals) is set aside and duty stand confirmed along with confirmation of interest against the respondents. However, penalty is reduced to 25% of duty if the duty confirmed is deposited within 30 days of receipt of final order.

(See 2013-TIOL-1158-CESTAT-DEL)