CESTAT Allows Excise Duty Exemption for Pre-Laminated Bagasse Board

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:

• Union of India Vs. West Coast Paper Mills Ltd. – 2004 (164)ELT 375 (SC).
• Commissioner of Central Excise, Belgaum Vs. Vasavadatta Cement – 2008(087).

3. Shri Hiren J Trivedi, Learned Counsel, for the respondent supported the finding of the impugned order and submits that it is settled law duly substantiated by various authorities and judgments of the Judicial court that in case of two notification operating simultaneously, for the same product, provide two different applicable rates of duty, the beneficial notification should be allowed to the assessee.

3.1 He also submits that it is erroneous to infer that plain or Prelam Bagasse Board using sugarcane Bagasse as raw material would be falling under Chapter 4410 at Sr.No.87, will have a rate of duty @8%. It is so because Plain and Prelam Bagasse Board in any chapter falling under Sr. No. 82 will have NIL rate of duty applicable. Even by the basic premise that the Notification No. 4/2006-CE dated 01.03.2006 having been issued first and on realization that any Bagasse Board would manufactured from the agro waste would attract NIL rate of duty. It is also to be understood that, the Bagasse Board has to be 100% wood free Plain or Pre-laminated particle or Fiber Board, if falling under Notification No. 4/2006-CE while if it is Bagasse Board than it will fall under Notification No. 6/2006-CE. Thus it is crystal clear that, the Bagasse Boards described at Sr. No. 87 also qualify for consideration as Sr. No. 87 and therefore will attract NIL rate of excise duty.

3.2 It is incorrectly inferred by the revenue to consider that the heading which provides the most specific description shall be preferred over the headings providing a more general description. This inference is contrary to the very essence of both the Notification which has similar description, but with conveyance of amplified meaning. While Notification No. 4/2006-CE dated 01.03.2006 state about sugarcane Bagasse Board, Notification No. 6/2006-CE dated 01.03.2006 state for any Bagasse Board. This leads to infer that the later Notification include the former as far as Bagase is concerned i.e. not only sugarcane but any other Bagasse from other agri-waste is included. It is crystal clear that any finished goods products from bagasse can avail exemption under Notification No. 6/2006-CE dated 01.03.2006.

3.3 He also argued that Hon’ble High Court of Gujarat in SCA No. 1667/2012, 2997/2012 and 1625/2012 have rightly ruled that NIL rate was available under Notification No. 6/2006-CE dated 01.03.2006. It is improper for the revenue to comment upon the ruling of Hon’ble High Court of Gujarat. The revenue has not been able to show the distinction between Plain and Prelam Particles Boards vis-à-vis Bagasse Board. It is not correct of say that Hon’ble High Court has not considered the literal meaning of Bagasse, which is agro waste and therefore qualify to be considered for exemption from central excise attracting Notification No. 6/2006-CE dated 01.03.2006. The process of manufacture is in conformity that the finished products which is commercially known as Bagasse Board.

4. We have heard both the sides and perused the appeal record. We find that issue to be decided in this matter is that whether the bagasse based plain and pre-laminated boards manufactured and cleared by the respondent falling under Chapter 44109090 and 44101190 of Central Excise Tariff Act, 1985 respectively are liable for payment of excise duty @8% adv. as provided under Notification No. 4/2006-CE dated 01.03.2006 (Sr. 87) or eligible for full exemption under notification No. 6/2006-CE dated 01.03.2006 (Sr.No.82). The relevant entry of aforesaid notifications read as under: –

Entry (Sr. No. 87) of Notification No. 4/2006-CE dated 01.03.2006

Entry (Sr. No. 82) of Notification No. 6/2006-CE dated 01.03.2006.

4.1 We find that the department have chosen Notification No. 4/2006-CE dated 01.03.2006 only on the ground that the description of the impugned product is matching with the entry in the said notification. However, we note that there is no dispute that the appellant is manufacturing bagasse board which is covered by Sl. No. 82 of Notification No. 6/2006-CE dated 01.03.2006 . No evidence and reason has been produced by the department regarding the dispute that as to why the product manufactured by the respondent cannot be called as bagasse board. We find that the impugned goods are eligible to get exemption without any condition under these two notifications. The respondent cannot be compelled to opt for a notification which has higher duty liability. The Hon’ble Supreme Court in various decisions held that the assessee can claim a notification which is more beneficial to them. Reference can be made to Supreme Court decision in the following cases:

• Share Medical Care v. UOI – 2007 (209) E.L.T. 321 (S.C.).
• Collector of Central Excise, Baroda v. Indian Petro Chemicals – 1997 (92) E.L.T. 13 (S.C.)
• HCL Ltd. v. CC, New Delhi – 2001 (130) E.L.T. 405 (S.C.).
• Similar view has been held by the Tribunal in Arvind Ltd. v. CCE, Ahmedabad-III – 2016 (334) E.L.T. 146 (Tri.-Ahmd.).

4.2 We also find that on the identical issue a matter came before the Hon’ble High Court of Gujarat in the case of M/s Darshan Boardlam Ltd. Vs. Union of India- 2013 (287) E.L.T. 401 (Guj.) supra wherein the Hon’ble High Court held that pre laminated bagasse board is entitled for exemption under Notification No. 6/2006-CE dated 01.03.2006 (Sr. 82) dated 01.03.2006.

4.3 We are of the view that merely because the revenue’s appeal is pending in the Hon’ble Supreme Court, Hon’ble high court judgments do not loose its binding nature in view of the judicial discipline. Therefore, following the above judgments we are of the view that respondent is entitled for exemption Notification No. 6/2006-CE dated 01.03.2006 (Sr.No.82) dated 01.03.2006.

5. Accordingly, the impugned order is upheld. The Revenue’s appeal is dismissed. Cross Objection also disposed of.

(Pronounced in the open court on 21.08.2023)