Commnr. Of Central Excise, Meerut-Ii vs M/S. Sundstrand Forms P.Ltd

2. In order to decide the issues arising in the present case in proper perspective, basic facts leading to filing of the present appeal are being recapitulated hereunder.

7. On intelligence, a team of Central Excise Officers visited the factory premises of the respondent herein at Noida and examined the manufacturing process of the carbonless stationery. It was found that the respondent-company was purchasing carbonless paper in roll form, coated with chemical on backside or front side or on both sides, from the market and such carbonless paper was subjected to the process of only printing and perforation, etc., for the manufacture of the stationery.

8. The Commissioner, Central Excise, Meerut-II issued a show cause notice dated 30.04.1998 wherein it was alleged that the respondents were engaged in evasion of duty on carbonless paper which emerged at the intermediate stage during the course of manufacture of carbonless stationery from the plain paper. Therefore, they were asked to show cause as to why duty amounting to Rs. 49,05,335.00 which was allegedly not paid on the carbonless paper manufactured and removed from their factory during the period from 1993-94 to 1997-98 [upto 12/97] should not be recovered from them under Rule 9(2) of the Central Excise Rules, 1944 read with provisions of Section 11A(1) of the Central Excise Act, 1944 invoking extended period of 5 years and also to show cause as to why penalty and interest on the evaded duty should not be imposed upon it. The said notice proposed to charge duty on the said carbonless paper emerging at the intermediate stage under sub-heading No. 4816.00 to the Schedule to the Central Excise Tariff Act, 1985.

According to the Department, such carbonless papers could be further used into the manufacturing of the stationery in continuous process, as it was evident from the process of manufacture and statement of the party that the process of perforation, punching and fan folding, etc., was responsible to convert carbonless paper/other paper into computer stationery.

11.The Department classified the product as "the coated paper" at the intermediate stage under Heading 48.16 of the Tariff Act which applies to carbon paper, self-copying paper and other copying or transfer papers. Notice alleged that the printing of certain words only specified the buyer but it would not in any way make them unmarketable, as the Page 7 of 23 carbonless paper which emerged at the intermediate stage in the course of the manufacture of the carbonless stationery was similar to carbonless paper purchased from the market and the only difference was that in the case of the respondent the carbonless paper manufactured at their end was printed with some words relating to the buyers.

29. The Tribunal, however, while dealing with the appeal filed before it upset the aforesaid findings holding that respondent- assessee was engaged in the manufacture of printed computer stationery and not self copying paper, and therefore, the intermediary products of the respondent cannot be classified under Heading 48.16.

31. Having examined the record and the description of the goods in the headings and upon noticing rules of interpretation of the Schedule to the Central Excise Tariff Act, we are of the considered opinion that although the Page 18 of 23 respondent company may be registered for newspapers, etc., but it cannot be said that either the end product or the intermediary product would fall under Chapter 49, heading 49.01. End product here is admittedly computer stationery which would specifically fall under Chapter 48, heading 48.20, sub heading 4820.00.

32. When we read heading 48.16 with sub heading 4816.00, we find that it includes within its extent carbon paper, self-

copy paper and other copying or transfer papers but other than those articles included in heading 48.09 which is specifically relatable to a particular size of paper and therefore we are in agreement with the findings recorded by the Commissioner that the intermediary products in the present case would fall and are classifiable under heading 48.16.

33.The next issue that is required to be decided is as to whether the intermediary products are marketable or not.

39. In terms of findings arrived at and on appreciation of the materials on record, we are of the view that the findings arrived at by the Tribunal by upsetting the findings of the Commissioner vide its order dated 14.05.2002 were unjustified and uncalled for. The Judgment and Order Page 22 of 23 passed by the Tribunal is therefore set aside and we restore the order dated 28.12.2000 passed by the Commissioner Central Excise, Meerut-II, U.P.

40.Accordingly, the appeal is allowed but leaving the parties to bear their own costs.

.....J [Dr. Mukundakam Sharma] ............................................J [Anil R. Dave] New Delhi August 30, 2011 Page 23 of 23