C.C.E. & S.T.-Ahmedabad-iii Vs Richa Particle Board Pvt Ltd (CESTAT Ahmedabad)
Introduction: The Central Excise and Service Tax Appellate Tribunal (CESTAT) in Ahmedabad recently ruled on a pivotal matter regarding the exemption of excise duty for pre-laminated bagasse boards.
Background and Facts: The dispute arose from Richa Particle Board Pvt Ltd’s claim for excise duty exemption under Notification No. 6/2006-CE. The company, manufacturing Plain and Prelam Bagasse Board, faced scrutiny when the exemption claim seemed misplaced. The department believed the correct notification applicable was Notification No. 4/2006-CE, leading to the issuance of a show-cause notice for recovery of excise duty.
Revenue’s Arguments
The revenue’s contention centered on:
1. Ambiguity in Exemption Notifications: It was noted that two exemption notifications seemed to overlap. However, the revenue believed that the product, being manufactured from sugarcane bagasse, should attract a rate of 8%.
2. Reliance on Previous Court Rulings: The revenue emphasized the distinction between plain particle boards and bagasse boards in terms of manufacturing, appearance, properties, and market value.
3. Doubts on High Court’s Ruling: The revenue challenged the Gujarat High Court’s ruling that endorsed a NIL rate under Notification No. 6/2006-CE for the petitioner.
Respondent’s Counterarguments
Richa Particle Board Pvt Ltd countered the revenue’s claims by:
1. Beneficial Notification Principle: The company argued that in case of overlapping notifications, the more beneficial one should be favored.
2. Misinterpretation by the Revenue: The company argued that the revenue wrongly inferred that boards using sugarcane bagasse would attract an 8% duty rate. Instead, the company emphasized that their product would have a NIL rate under Notification No. 6/2006-CE.
3. Upholding the High Court’s Decision: The respondent supported the Gujarat High Court’s judgment, clarifying that the product is derived from agro-waste and thus qualifies for exemption.
Tribunal’s Verdict
The tribunal, after careful examination, observed:
1. Clarification on Notifications: The tribunal noted that the respondent’s product unequivocally falls under Notification No. 6/2006 and is thus exempted from excise duty. The appellant cannot be forced to choose a less beneficial notification.
2. Reference to Previous Decisions: CESTAT relied on prior judgments that upheld the principle of choosing the more beneficial notification for the assessee.
3. Upholding the High Court’s Ruling: The tribunal asserted that the Gujarat High Court’s judgment remains binding despite the revenue’s pending appeal in the Supreme Court.
Conclusion: CESTAT’s judgment affirms the rights of businesses to opt for beneficial notifications. The case sets a precedent by emphasizing the importance of clear and unambiguous notifications. It also upholds the principle that businesses cannot be compelled to choose a notification that leads to higher duty liability.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed by revenue against Order-in-Original No. AHM-CEX-003-COMMR-017-13 dated 19.03.2013 passed by the Commissioner of Central Excise, Ahmedabad-I.
1.2 Brief facts of the case are that the respondent are engaged in the manufacture of Plain Bagasse Board and Prelam Bagasse Board falling under Chapter 44109090 and 44101190 respectively of the Central Excise Tariff Act, 1985. They had filed ER -3 return for the quarter ending December 2010 and March 2011 and ER-1 return for the month of April 2011 claiming exemption from payment of Central Excise Duty under Sr. No. 82 of Notification No. 6/2006-CE dated 01.03.2006 as amended. It appeared that the Respondent were manufacturing their products namely “Plain Bagasse Board and Prelam Bagasse Board’ from the Sugarcane Bagasse by adding Resin, transparent paper etc. and therefore the exemption claimed by them under the Notification No. 6/2006-CE dated 01.03.2006 was not correct. The correct and appropriate Notification applicable in the instant case appeared to be Notification No. 4/2006-CE dated 01.03.2006, as amended and accordingly Central Excise Duty at the prevalent rate was required to be paid by them. Therefore a show cause notice dated 06.02.2012 was issued to the respondent proposing to demand and recover central excise duty of Rs. 2,88,67,398/- along with interest and penalty. In adjudication, Learned Commissioner observed that respondent is eligible to avail the benefit of Notification No. 6/2006-CE dated 01.03.2006 as the same is beneficial to them and dropped the proceeding initiated against the respondent. Being aggrieved by the said impugned order the revenue filed the present appeal.
2. Shri Kalpesh Shah, Learned Assistant Commissioner (AR), appearing on behalf of the revenue reiterated the grounds of appeal. He submits that the Ld. Adjudicating authority has observed that there is ambiguity in as much as two different exemption notification seemed to be operating simultaneously and also covering the same products, providing two different applicable rates of duty. In such situation, the beneficial notification should be allowed to the assessee citing various court rulings. It is undisputed facts that the finished products manufactured by the assessee fall under Chapter heading 4410. It is also clear that the assessee has been manufacturing plain bagasse board and prelam bagasse as a raw material. The description provided in Sr. No. 87 to Notification No. 4/2006-CE dated 01.03.2006, as amended, clearly says that if the plain or pre-laminated board is made from sugarcane bagasse, it would have a rate of duty@ 8%. The description and the words in the notification are quite plain and unambiguous.
2.1 He further submits that Rule 3(a) of the General Rules, prescribed to the First Schedule of the Central Excise Tariff Act, 1985 (Tariff Act) says that the heading which provides the most specific description shall be preferred to headings providing a more general description.
2.2 He also submits that the adjudicating authority has relied upon the decision of Hon’ble High Court in the case of Darshan Boardlam Ltd. & 1 (SCAs numbered 1667 of 2012, 2997 of 2012 and 1625 of 2012 which was ruled in similar case that the NIL rate was applicable to the petitioner under Notification number 6/2006-CE dated 01.03.2006 (Serial Number 82). However on going through the High Courts ruling in the case supra, it is seen that the court has failed to consider that Plain Particle board and pre-laminated particle board are different in many ways as compared to bagasse board vis-à-vis their manufacturing processes, physical appearance, chemical properties, usage, value and also in name, as they are sold as particle board (Plain/ pre-lam) in the market. The process through which plain particle board is subjected, leading to the emergence of pre-laminated particle board, amounts to manufacture as per Section 2(f) of the Central Excise Act, 1944. As the plain particle board and pre-laminated particle board are manufactured from sugarcane bagasse, the exemption under Notification No. 6/2006-CE dated 01.03.2006 (Sr.No.82) would not be available to the assessee. The Hon’ble High Court has failed to consider the literal meaning of bagasses as given in the Fairchild’s Dictionary of textiles edited by Dr Isabel B Wingate, Professor of Retail Management, New York University, published by Fairchild Publication, Inc New York. Moreover, the said order of the High Court in SCA numbered 1625 of 2012 has been appealed before the Supreme Court (SLP (Civil) SC numbered 1625 of 2012 has been appealed before the Supreme Court (SLP (Civil) CC Numbered 8380 of 2013). Therefore, the decision in this case has no precedence value. In support, he placed reliance of the following decisions:
