ORDER
S.S. Kang, Vice-President
1. Heard both sides.
2. The appellant filed this appeal against the order-in-appeal passed by the Commissioner (Appeals). The brief facts of the case are that the appellants are engaged in the manufacture of paper and were availing the benefit of credit in respect of inputs used in the manufacture of paper and the same was cleared on payment of duty. With effect from 1-4-2001 the appellant opted for benefit of Notification No. 3/2001, dated 1-3-2001 in respect of the paper and paperboard or articles 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 material other than bamboo, hard woods, reeds or rags etc. The Revenue issued a show cause notice asking reversal of credit in respect of the inputs lying in stock and finished goods lying in stock in view of the provisions of Rule 57AG of Central Excise Rules. The adjudicating authority confirmed the demand and imposed a penalty.
3. The appeal filed by the appellant was dismissed.
4. The contention of the appellant is that they were manufacturing various types of papers and they were availing the benefit of Notification No. 3/2001 in respect of the one quality of paper only. Other type of papers such as paper of textbook etc. were being cleared on payment of duty. The contention is that common inputs are being used in the manufacture of all papers and during the period they availed the benefit of Notification No. 3/2001 in respect of one type of paper. The appellants were also paying duty in respect of the paper, which is not covered under this notification. The contention is that as they were taking credit in respect of common inputs used in respect of paper, which is cleared under Notification No. 3/2001 and cleared on payment of appropriate duty, therefore, the reversal of credit in respect of inputs lying in stock and credit in respect of the inputs contained in the final product is uncalled for.
5. The contention of the Revenue is that the appellants opted to the benefit of Notification No. 3/2001 which exempt paper from payment of duty up to 3500/MTs, therefore, in view of the provisions of Rule 57AG(3) the appellants are liable for reversal of credit in respect of the inputs lying in stock as well as contained in the final product.
6. We find that in this case the appellants are manufacturing various types of papers. The appellants opted for availing the benefit of Notification No. 3/2001 in respect of the paper and paperboard, which is manufactured in the factory out of the pulp containing 75% of weight of materials other than bamboo, reeds or rags. It is admitted by the Revenue that the appellants were also manufacturing other types of papers, which are being cleared on payment of duty. Rule 57AG(2) provides that the manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufactured by them under a Notification shall be required to pay an amount equivalent to the credit allowed to him in respect of inputs lying in stock or used in any finished excisable goods lying in stock on the date when such option is exercised.
7. In this case the appellants were also manufacturing the paper other than covered under the Notification No. 3/2001, which was being cleared on payment of duty and the common inputs were used in the manufacture of all types of papers. Therefore, in this situation, the reversal of credit in respect of the inputs lying in stock and contained in the final product is uncalled for. The appellant also, during argument, submitted that they were reversing the credit in respect of the inputs and which are contained in the papers cleared under Notification No. 3/2001. In this situation, we find merit in the argument of the appellant and demand is unsustainable and set aside and the appeal is allowed.
(Dictated and pronounced in open Court on 4-5-2005)