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Sunrise Packaging Company Vs. Collector of C. Ex. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1989)(44)ELT384TriDel
AppellantSunrise Packaging Company
RespondentCollector of C. Ex.
Excerpt:
.....that m/s. sunrise packaging company, the appellants, are engaged in the manufacture of paper and paper board falling under item no. 17(2) of the first schedule to the central excises and salt act, 1944 (cet, for brevity's sake). during the material time the appellants were engaged in production inter alia 5 ply corrugated boards with one layer of bitumenised paper. the appellants claim that such board attracted duty exemption under central excise notification no. 46/71, dated 24-4-1971. the department's allegation is that the appellants manufactured 14,997 pieces weighing 25,940.95 kgs. of corrugated boards. the fifth ply of which was of hessian laminated with kraft paper obtained by bonding a layer of hessian with another layer of kraft paper by means of bitumen in between. it was.....
Judgment:
1. The captioned appeal was originally filed as a revision application before the Central Government which, under Section 35P of the Central Excises & Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.

2. The facts of the case, in brief, are that M/s. Sunrise Packaging Company, the appellants, are engaged in the manufacture of paper and paper board falling under Item No. 17(2) of the First Schedule to the Central Excises and Salt Act, 1944 (CET, for brevity's sake). During the material time the appellants were engaged in production inter alia 5 Ply corrugated boards with one layer of bitumenised paper. The appellants claim that such board attracted duty exemption under Central Excise Notification No. 46/71, dated 24-4-1971. The department's allegation is that the appellants manufactured 14,997 pieces weighing 25,940.95 kgs. of corrugated boards. The fifth Ply of which was of Hessian laminated with kraft paper obtained by bonding a layer of hessian with another layer of kraft paper by means of bitumen in between. It was alleged that corrugated board manufactured using the 5th Ply of the nature just described did not attract the benefit of duty exemption under the aforesaid notification and was chargeable to duty at 40% ad valorem under Notification No. 15/78, dated 24-1-1978.

The department worked out the duty on the aforesaid quantity of goods at Rs. 89,483.88p. The Assistant Collector of Central Excise, Calcutta issued a notice to the appellants calling upon them to explain why penalty whould not be imposed on them under Rule 173Q of the Central Excise Rules, why their plant and machinery should not be considered under Rule 173Q and why excise duty amounting to Rs. 89,483.38p. on the quantity of corrugated board used for captive consumption in the manufacture of boxes without payment of duty should not be realised from them under Rule 9(2) read with Rule 10(2). After holding adjudication proceedings the Collector of Central Excise, Calcutta passed an order on 9-11-1980 confirming the demand of duty and imposing a penalty of Rs. 20,000/- on the appellants. In appeal, the Board passed an order dated 21-8-1981 modifying the Collector's order to the effect that duty was leviable on the 5 ply corrugated boards at 5% ad valorem only and not 40% ad valorem as decided by the Collector. The basis for this decision was that paper laminated to hessian by bitumen was not "bitumenised paper" as claimed by the Appellants. The Board also set aside the penalty imposed by the Collector on the appellants.

2. We have heard Shri Pramod Kumar Harlalka for the appellants and Shri V. Lakshmikumaran, Senior Departmental Representative for the respondent. Shri Harlalka submitted that hessian laminated bitumenised paper was nothing but bitumenised paper falling within the purview of Serial No. 3 of Notification No. 46/71 read with Clause (b) of its second proviso and Notification No. 159/78. In this connection he referred to Indian Standard Institution specification No. 1398-1968 which lays down quality specification for bitumen laminated, water proof packing paper. There were three types described in the specifications and type 3 was water proof paper manufactured with one ply of hessian cloth and one of kraft paper laminated with bitumen. He stated that there was no separate Indian Standards specification for bitumenised paper. It would follow, therefore, that bitumenised paper and hessian laminated bitumenised paper were basically one and the same thing. He also referred to trade notices dated 5-1-1980 and 3-3-1981 issued by the Collector of Central Excise, Calcutta to the effect that Hessian laminated bitumen sandwiched water proof paper produced by bonding 2 layers of paper with bitumen, with layer of hessian in the middle, or by bonding one layer of hessian with another layer of paper, was classifiable under Item 17(2) CET. The second of the trade notices was more or less to the same effect.

3. Shri Lakshmikumaran, Senior Departmental Representative, on behalf of the respondent, submitted that the crucial issue was whether bitumenised water proof paper was the same thing as bitumenised hessian laminated paper. A somewhat similar issue arose for decision of the Tribunal in Koran Printing and Packaging, Bombay v. Collector of Central Excise, Bombay, 1984 (15) E.L.T. 570 wherein it was held that waxed paper coated on one side with sodium benzoate was eligible for duty exemption as wax-coated paper under Notification No. 71/76. While stating that the ratio of the said decision would apply to the facts of the present case. Shri Lakshmikumaran defended the orders of the lower authorities for the reasons stated therein.

4. Notification No. 46/71 Central Excise dated 24-4-1971 as amended by Notification No. 159/78, dated 26-8-1978, which we are called upon to construe reads as follows: "In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in M.F. (DR and 1) 135/67 C.E., dated the 3rd July, 1967, the Central Government hereby exempts corrugated board of the description given in column (2) of the Table hereto annexed and falling under sub-item (2) of Item 17 of the said Schedule, from so much of the duty of excise leviable thereon as it in excess of duty specified in the corresponding entry in column (3) of the said table ---------------------------------------------------------------------------------Sl.No. Description of corrugated board Duty--------------------------------------------------------------------------------(1) (2) (3)-------------------------------------------------------------------------------- duty of excise, or the appropriate additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), as the case may be, has been paid.

Provided further that where corrugated board, has been produced: (a) wholly out of Kraft Paper or out of paper and paper board of the type known as kraft liner of corrugating medium of a substance equal out of bitumenised paper or duplex board, on which the appropriate duty, if any, has been paid, then such corrugated board shall be exempted from the whole of the duty of excise leviable thereon."-------------------------------------------------------------------------------- We are concerned with Serial No. 3 of the Table in the notification and Clause (b) of the second proviso.

5. It is a common position before us that the product in question falls under Item No. 17(2) CET. The simple question is whether it could be said to have been manufactured partly out of kraft paper of the type referred to in Clause (a) of the second proviso (about this also there is no dispute) and partly out of Bitumenised paper. We have already noted the respective contentions of the two sides. In this context, we note that, even according to the respondent, as amended by the two trade nodes at pages 57 and 58 of the appellants' paper book hessian lined or laminated paper of several descriptions given in the notices are classifiable under Item 17(2) CET. We have to consider whether the presence of a layer of hessian would take away the paper from the purview of the expression "bitumenised paper" for the purpose of the notification. We do not think so. For this we have in support, our decision in the Kiran Printing and Packaging case (supra). In that case, the product was paper coated with wax on one side and with a solution of sodium Benzoate on the other side to impart anti-rust property. Notification No. 71/76 conferred duty exemption inter alia on waxed paper. The Tribunal held that such paper can be described either wax-coated paper or as sodium benzoate coated paper. The fact that it was not entirely coated with wax was apparently not considered to come in the way of its being called a wax-coated paper. On the same analogy, we do not see that the presence of layer of hessian should debar the paper under consideration from being called bitumenised paper. Once this position is reached, it follows that Serial No. 3 and Clause (b) of the second Proviso to the Notification 46/71 are attracted. We allow the appeal with consequential relief to the appellants.


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