ORDER
S.S. Kang, Vice-President
1. Appellants filed this appeal against the adjudication order whereby the Commissioner of Central Excise held that during the period July 1987 to March 1992. The appellants wrongly classified the Kraft paper under Tariff heading 4804.11 of the Central Excise Tariff and wrongly availed the benefit of Exemption Notification No. 48/89-C.E., dated 1-3-1989 as the Kraft paper manufactured by the appellants is not containing 75% by weight of pulp made from bagasse.
2. Brief facts of the case are that appellants are engaged in the manufacture of Kraft paper and they were claiming the classification under Heading 4804.11 of the Central Excise Tariff and benefit of the Notification No. 48/89-C.E., dated 1-3-1989 on the ground that they were manufacturing Kraft paper containing not less than 75% by weight of pulp made from Bagasse. A show cause notice was issued on 6-7-1992 for the period July 1987 to March 1992 demanding duty and imposition of penalty on the ground that Kraft paper manufactured by the appellants is not covered under 4804.11 of Central Excise Tariff and are not entitled for the benefit of notification.
3. The contention of the appellants is that to determine the quantity of bagasse containing pulp, Department is taking 29% recovery of pulp from the bagasse. The Adjudicating authority held that bagasse content in pulp in the case of the appellants was ranging between 60.12% to 61.73% as against 75% required for the classification of the goods under Heading 4804.11 of the Central Excise Tariff. The contention of the appellants is that the Adjudicating authority has adopted arbitrary ratio of 29% on the basis of statement of various persons in the industries who are engaged in the manufacture of Kraft paper and on some technical literature. The statements recorded by the Revenue shows various range of percentage in respect of the yield and pulp from bagasse.
4. The contention of the appellants is also that the Revenue was calculating the percentage of Bagasse by taking into account the weight of the Kraft paper. The Kraft paper contains moisture as well as additives. The appellants relied upon the decision of the Tribunal in the case of Sikka Paper Mills Limited v. Commissioner of Central Excise, Meerut, reported in 1999 (111) E.L.T. 432 (Tribunal) where the Tribunal held that the benefit of moisture contents of 5% and additives 3% from the total weight of the paper in order to arrived at the quantity of pulp. The contention is that if this quantity of moisture and additives is allowed then their Kraft papers content more than 75% by weight of pulp made from bagasse. Appellant also relied upon the I.S.I. specification regarding kraft paper which shows that kraft paper contains 10% moisture.
5. The appellants also submitted that the demand is time barred as no suppression can be alleged against the appellants. The Revenue issued the Trade notice No. 71 /84, dated 9-5-1984 to clarifies the position regarding the benefit of Notification No. 142/81-C.E., which also provided exemption to the Kraft paper containing not less than 75% by weight of pulp made from bagasse. This Trade notice lays down a procedure to be followed by the manufacturer and as per this procedure, manufacturer has to be maintained a mixing register and this Trade notice also clarifies that percentage of bagasse shall be determined on the basis of pulp alone and not on the weight of papers which would include other additives. The Department also issued another Circular dated 18-12-1987, whereby it was clarified that the instructions issued under earlier Circular would squarely reply in respect of the writing and printing paper containing not less than 75% by weight from pulp made by bagasse. The contention is that as appellants was maintaining the records as per Trade notice and their classification list is duly approved by the Revenue. Therefore, no suppression with intend to evade payment of duty can be alleged against the appellants and the revenue wrongly calculated the percentage of pulp containing bagasse by taking into consideration the weight of Kraft paper.
6. The contention of the Revenue is that appellants were wrongly classifying the Kraft paper manufactured by them under Heading 4804.11 of Central Excise Tariff. Therefore, the extended period is rightly invoked. The contention is also that as the Adjudicating authority after collecting the necessary data in respect of moisture contents in bagasse come to conclusion that the maximum recovery that pulp from bagasse, if weight inclusion of moisture is taken, is only of 29%. The Adjudicating authority after taking into consideration the receipt of the Bagasse by the appellants and by applying principles of 29% recovery of pulp from the Bagasse held that percentage of bagasse in the pulp used in the Kraft paper is between 60% to 61% only. Therefore, the appellants were wrongly classifying their Kraft paper under Heading 4804.11 of the Central Excise Tariff.
7. In this case the dispute is whether the Kraft paper manufactured by the appellant is classifiable under Heading 4804.11 of the Central Excise Tariff. This heading covers Kraft papers containing not less then 75% by weight of pulp made from bagasse. The Adjudicating authority comes to conclusion after taking into consideration the moisture contents in bagasse, the maximum recovery of pulp from bagasse is 29%. The Adjudicating authority held as under :
“From the above so many statements of the manufacturers and the technical literature on the subject it is evident that the bagasse contains 30% to 50% of moisture and not 15% to 25% as stated by Shri U.S. Khurana in his statement dated 14-5-1992. It is thus evident that the maximum recovery of pulp can be at the most 48% of oven dry weight of bagasse as per the literatures, experiments conducted by Central Paper & Pulp Institute Dehradun and the statements of the neighboring manufacturers of the area. Taking the average percentage of moisture @ 40% the maximum yield of fiber from bagasse can be at the most 28.8%. The plea of Shri U.S. Khurana that the percentage of moisture contained in the bagasse is 15% to 25% only is negated by the statement dated 14-1-1992 of Shri Amarjit Singh Kohli, Manager of the unit who categorically stated that the percentage of moisture varies from 30% to 40% and the statement dated 28-5-1992 of Shri M.P. Tewari Chief Chemist of M/s. Sir Shadi Lal Sugar & General Mills from where the party had purchased substantial quantity of bagasse. Similarly the statement dated 14-5-1992 of Shri U.S. Khurana to the effect that they had purchased bagasse containing only 10% of moisture from local dealers and if percentage of moisture was more than 10% adjustment in weight was done is also a concocted and false in view of statement dated 1-6-1992 of Shri Sanjeeva Kumar, Prop. of M/s. Jain Bandu Traders, and statement dated 2-6-1992 of Shri Harbans Singh, Prop. of M/s. Ansu Trading Co. It can thus be safely concluded that the moisture content in bagasse purchased by the part from Sugar factories was well as local dealers was 50% and thus the maximum recovery of pulp from bagasse if the weight inclusive of moisture is taken is 28.8% or say at the most 29%.”
8. We find that this percentage is fixed only on the statements of other manufacturers of Kraft papers and taking into consideration some technical literature. The contention of the appellants is that while arriving at the percentage of bagasse in the pulp, the Adjudicating authority taken into consideration the weight of the Kraft paper, which contains moisture as well as other additives. In the case of Sikka Paper Mills Limited (supra), the Tribunal upheld the order of the Commissioner of Central Excise whereby the benefit of moisture contents of 5% and additive 3% from the total weight of papers was allowed in order to arrive at the quantity of pulp. Further, we find that the Trade notice relied upon by the appellants specifically provides that the content of bagasse is calculated with reference to the weight of the pulp alone and not with the reference of the weight of the papers, which would include other additives.
9. The Commissioner of Central Excise in the impugned order after taking into the weight of the Kraft paper for calculating the percentage of bagasse used in the pulp comes to the conclusion that the percentage of bagasse is 60% to 61%. In these circumstances, we find force in the arguments of the appellants that the percentage of pulp is to be calculated as per the Trade notice and as per the above decision of the Tribunal after deducting the moisture contents and the contents additives. The appellants also brought to our notice that the ISI specification regarding Kraft paper, which shows that Kraft paper, consists of 10% moisture. We also take note of the fact that no sample was taken for testing by the Chemical Examiner which was the safest method to determine the composition of the product.
10. In respect of the contention of the appellants that the demand is time bar, we find that appellants were regularly filing the classification list which was duly approved and also maintaining record as Mixing register, Digester register as per Trade notice. Therefore, no suppression can be alleged against the appellants. In view of the above discussion, we find merit in the arguments of the appellants, on merit as well as on limitation. The impugned order is set aside and the appeal is allowed.