ORDER
Jyoti Balasundaram, Member (J)
1. The appellants herein manufacture inter alia packing and wrapping paper (undisputedly this is indeed known as Kraft paper). They filed a classification list effective from 1-4-1983 and claimed exemption in terms of Notification No. 46/83 dated 1-3-1983 which covers all papers other than certain excluded varieties such as paper board, certain tissue paper etc. The classification list was approved .extending the benefit of this notification; subsequently a show cause notice was issued on 23-3-1985 covering the period from March 1983 to February 1984 raising a duty demand on the ground that the appellants were not entitled to the benefit of Notification 46/83 at a lower rate but were liable to pay differential duty applying Notification 47/83 dated 1-3-1983 to the goods in dispute. The Additional Collector confirmed the demand on the ground that the Notification 47/83 was specific for all sorts of paper commonly known as kraft paper…’. He applied the extended period of limitation on the ground that the appellants were guilty of suppression of fact. He also imposed a penalty of Rs. 5,000/-.
2. The learned Counsel Shri A.V. Naik submits that Notification 46/83 covers all types of paper, barring certain categories and since the packing and wrapping paper manufactured by them is not one of the excluded categories, the appellants are entitled to general exemption in terms of this notification and it cannot be denied to them only for the reason that Notification 47/83 provides different rate of duty specifically for kraft paper. He submits that demand is barred by limitation since the benefit of Notification 46/83 was claimed in the classification list the samples were drawn and tested and only after the testing of the sample the classification list was approved by extending the benefit of Notification No. 46/83 and therefore, there has been no suppression on the part of the appellants in order to justify invoking the proviso to Section 11A of the Central Excise Act, 1944. Lastly he submits that even though there was no proposal for penalty the Adjudicating authority has imposed a penalty and this, therefore, requires to be set aside.
3. The learned DR Shri Satnam Singh reiterates the impugned order in respect of the claim to the benefit of the notification. He submits that the suppression lies in the fact that the assessee did not describe the goods as kraft paper but only reproduced the description of the goods contained in Notification 46/83, in order to wrongly avail of the lower rate of duty under Notification No. 46/83 and therefore, the extended period has rightly been applied by the department in this case.
4. We have heard the rival submissions. We agree with the learned DR that Notification 47/83 which specifically covers all sorts of paper commonly known as kraft paper, will specifically cover the goods in dispute. The fact that all types of paper excluding certain categories (and the paper in dispute is not one of the excluded categories) are covered by Notification No. 46/83 is not material since there is a specific notification viz. Notification No. 47/83 specifically covering kraft paper. In other words, when there is a general exemption and a specific exemption and there is no other distinguishing feature as for example, applicability of Notification 47/83 to paper mills other than small paper mills prescribed in Notification 46/83, the appellants are entitled to the benefit of Notification 47/83 and not covered by Notification 46/83. Therefore, the duty demand is sustainable on the merits of the matter. However, the appellants have made out a strong case in support of their contention that the demand is barred by limitation. The description of the goods in the classification list is according to the Notification No. 46/83. But the matter does not end here. Samples of the disputed product were drawn and tested, as seen from page 15 of the paper book which is the test memo dated 21-2-1983. The classification list was approved subsequent to the drawal and testing of samples. It is not the case of the department as reflected either in the show cause notice or the impugned order that the description of the goods was insufficient or that there was a mis-description of the goods. On the other hand, the charge of suppression has been laid at the door of the appellants on the ground that a claim for wrong notification namely Notification 46/83 has been made instead of Notification 47/83. Claim of a wrong notification is not by itself sufficient to hold that the assessees are guilty of suppression since it is open to the assessee to claim the benefit of notification which it thinks is available while it is the duty of the department while approving the classification list to satisfy itself as to whether the notification is available and only on such satisfaction, the benefit is to be extended. In this view of the matter, we agree with the appellants that there has been no suppression on their part so as to warrant the applicability of extended period of limitation. The penalty is also unjustified in the absence of proposal for imposition of penalty in the show cause notice. In the result, while holding that the appellants are not entitled to Notification 46/83 we hold that the demand is barred by limitation and accordingly set aside the demand and penalty. The appeal is thus allowed.