Itc Ltd. v. Commissioner Of Central Excise, Kolkata-Iv

[Order per : Chittaranjan Satapathy, Member (T)]. - Heard both sides.

2. Shri J.P. Khaitan, learned Advocate appearing for the Appellants states that the present Refund Application was initially filed on 30-4-03 and subsequently, resubmitted on 18-7-03. The assessment for the entire period covered by the Refund Claim from March, 2000 to June, 2001 and from April, 2002 to February, 2003, was provisional at the time of filing the Refund Claim. He says that subsequently, the assessment for the period, April, 2002 to February, 2003 has been finalised and the Appellants have filed an Appeal before the Commissioner (Appeals), which is pending, but the issue involved therein, is different from the issue in the Refund Claim. As such, he contends that the present Refund Claim is not time-barred and does not require any reopening of the finalised assessment.

3. He states that the Appellants are seeking exemption in respect of waste paper arising in their factory and being consumed within the factory for making pulp. Initially for such waste paper, the Appellants were claiming exemption under Notification No. 67/95-C.E. But subsequently, they became ineligible for the same as one of the finished goods namely, paper made from unconventional raw materials, became exempt. The Appellants only came to know subsequently that there is an unconditional exemption available under Notification No. 10/96-C.E. dated 23-7-96 under Serial No. 10. The Department has denied the exemption and subsequently the refund on the ground that the Appellants have not proved that the impugned waste paper was not used for manufacture of wood pulp and pulp other than of fibrous cellulosic materials under Notification No. 10/96. The other ground taken by the Department is that in an another Order dated 5-8-03, the Adjudicating Commissioner had held that the Appellants were not eligible for the exemption under Notification No. 10/96 and the Appellants have not appealed against the said Order.

4. Shri Khaitan, learned Advocate explains that the Appellants are not making wood pulp, but they are making pulp other than of fibrous cellulosic materials, and they were never given an opportunity to demonstrate that they are not using the impugned waste paper for pulp of any non-celllulosic materials. He states that the non-cellulosic materials include glass, ceramics, asbestos etc. and pulp of none of these are being produced by the Appellants. He states that the Department has no evidence that they are using the impugned waste paper for manufacture of any other kind of pulp other than of fibrous cellulosic materials. He states that in any case, this is subject to factual verification and if the matter is remanded to the Original Authority, this can be verified from the contemporaneous records kept by the factory of the Appellants.

5. As regards the other objection by the Department, he states that the Order of the Commissioner dated 5-8-03 was passed on the basis of a show cause notice issued by the Department proposing imposition of penalty and interest on an amount of Rs. 30,38,307.00 which the Appellants themselves had paid for the period, March, 2000 to April, 2001 after coming to know that they are no longer eligible for exemption under Notification No. 67/95. In the said show cause notice, there was no proposal to deny exemption under Notification No. 10/96. Only in reply to the show cause notice against the proposal to impose penalty and interest, the appellants had mentioned that they had filed the Refund Claim and claimed exemption under Notification No. 10/96. The Commissioner (Appeals) did not decide the Refund Claim which was pending before the competent authorities, though he has made an observation that the Appellants are not eligible for the Notification No. 10/96. He was not dealing with the Refund Claim and merely dropped the show case notice in favour of the Appellants. Hence, since the Refund Claim claiming benefit of the Notification No. 10/96 was pending before the competent authorities and the Commissioner’s Order dated 5-8-03 was in favour of the Appellants, there was no question of filing any appeal against the same and that cannot be a ground for rejecting the Refund Claim which was filed earlier and was pending.

6. Heard the learned S.D.R., Shri J.A. Khan who supports the impugned Order for the reasons stated therein. He reiterates that the Commissioner (Appeals) was not satisfied on the basis of whatever documents the Appellants had filed before him, that the Appellants were eligible for exemption under Notification No. 10/96. He further states that the lower Appellate Authority has also referred to the Order of the Commissioner dated 5-8-03 and also recorded that the Appellants have not gone in appeal against the same. Hence, the learned S.D.R., Shri Khan says that the Appellants are not eligible for exemption under Notification No. 10/96.

7. We have considered the arguments from both sides. This is a case where the Appellants are using waste paper arising in the course of manufacture of paper and paperboard and the same are being recycled into pulp, which is the best possible use for such waste paper. A reading of the Notification No. 10/96 makes it clear that it is an unconditional exemption Notification which takes into account the industry practice and exempts the industry from a possible duty demand in respect of waste paper which may not have any other use. Prima facie, we are of the view that since the Appellants are not using the impugned waste paper for producing any pulp of non-cellulosic material, they are entitled to the exemption claimed by them. Since the Commissioner’s Order dated 5-8-03 was passed in another context and the Appellants had merely claimed before him that in a parallel proceeding, they have filed a Refund Claim before the competent authorities, his observation that they are not entitled to the exemption under Notification No. 10/96, without dealing with the Refund Claim for passing an appropriate Order, can have no relevance to the parallel proceeding in which the Refund Claim was being dealt. He has, in any case, passed a favourable Order in respect of the Appellants dropping the demand for penalty and interest. His mentioning, in passing, that the Appellants were not eligible for the exemption under Notification No. 10/96 without the Appellants being put to notice for the same, cannot be a valid finding. The Appellants had right to pursue the Refund Claim in the parallel proceeding which was initiated earlier and separately.

8. In the facts and circumstances of the case and in the interest of justice, we are of the view that the matter should go back to the Original Authority for examining with reference to available documentary evidence and any other evidence to be produced by the Appellants as to whether they are eligible for exemption under Notification No. 10/96-C.E. dated 23-7-96. We order accordingly, set aside the impugned Order and remand the matter to the Original Authority. He shall pass a fresh Order after giving a reasonable opportunity of hearing to the Appellants. The Appeal is allowed by way of remand.

(Pronounced and dictated in the open court)