Case Law Details
Lion Paper Industries Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Case Overview: The recent order by the CESTAT (Customs, Excise, and Service Tax Appellate Tribunal) Ahmedabad involves Lion Paper Industries and the Central Excise Department regarding the eligibility for exemption under Notification No. 04/2006-CE dated 01.03.2006 for Kraft Paper manufacturing. The primary contention from the Department was that Lion Paper Industries did not possess a pulping machine, disqualifying them from the claimed exemption.
Key Points from the CESTAT Order:
- Exemption Condition: The issue revolved around whether Lion Paper Industries qualified for the exemption, which requires that Kraft Paper be manufactured from the pulp stage.
- Department’s Argument: The Department argued that Lion Paper Industries did not have a pulping machine during the relevant period, making them ineligible for the claimed exemption.
- Appellant’s Submission: Lion Paper Industries, represented by Shri R Subramanya, submitted various documentary evidence supporting the existence of a pulping plant. The appellant contended that the Adjudicating Authority wrongly denied the exemption without a valid basis.
- Adjudicating Authority’s Finding: The Adjudicating Authority’s order, particularly Para 28, indicated that, during the audit and investigation, it appeared that Lion Paper Industries had not installed the pulping machine. However, no concrete evidence or documentation of the Central Excise Officer’s visit was provided.
- Lack of Substantiating Evidence: The Tribunal observed that the Adjudicating Authority’s findings lacked a proper basis. The assertion that Lion Paper Industries did not install a pulping machine was made without supporting evidence, and no record of the Central Excise Officer’s visit was presented.
- Appellant’s Documentation: Lion Paper Industries had submitted various documents, including the purchase invoice of the pulping machine and evidence of procuring paper waste, suggesting manufacturing from the pulp stage.
- Department’s Reliance on Supplier Response: The Department’s claim of the appellant lacking a pulping machine was based on correspondence with the supplier, where no response was received. The Tribunal noted that this alone could not conclusively prove the absence of a pulping machine.
- Prima Facie View: The Tribunal expressed a prima facie view that Lion Paper Industries did have the pulping machine during the relevant period. However, due to the lack of verification by the Department, an opportunity was given to conduct a detailed examination.
- Remand and Fresh Order: The impugned order was set aside, and the appeal was allowed by way of remand to the Adjudicating Authority. The Department was directed to conduct a detailed verification and pass a fresh order within two months, following the principles of natural justice.
Conclusion: The CESTAT Ahmedabad’s order emphasizes the importance of evidence and proper verification in tax matters. In this case, the Tribunal found the Department’s denial of exemption lacked a substantive basis, highlighting the need for a thorough examination before making such determinations. The decision underscores the significance of adherence to natural justice principles and the requirement for concrete evidence in excise and tax-related disputes.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is that whether the appellant is eligible for the exemption Notification No. 04/2006-CE dated 01.03.2006 (Sr. No. 90) in respect of Kraft Paper which contains the condition that if the Kraft Paper is manufactured from the pulp stage. The whole case of the department is that the appellant did not have the pulping machine. Therefore, the Kraft paper was not manufactured from the pulp stage. Hence, the appellant are not eligible for exemption.
2. Shri R Subramanya, Learned Counsel appearing on behalf of the appellant submits that the appellant have produced various documentary evidence to show that the appellant were having pulping plant. However, brushing aside all the documentary evidence, the Adjudicating Authority has held that the appellant did not have the pulping plant without any basis, therefore, the exemption wa denied.
2.1 He invited our attention to the finding of the Adjudicating Authority. particularly Para 28 of the impugned order that though the Adjudicating Authority has recorded that during the course of audit and visit by the Central Excise officers to the unit and further investigation, it appeared that the noticee has not installed the pulp machine in their factory premises during the relevant period. However, neither any such fact was recorded in the show cause notice nor any evidence was brought in the impugned order to this effect. Therefore, entire basis of the adjudication order is on exemption and presumption.
3. Shri A R Kanani, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. On query from the bench about the evidence to the effect the recording of the Adjudicating Authority about the visit of Central Excise Officer to confirm the installation of pulping machine, he could not give any evidence from the record.
4. We have carefully considered the submission made by both the sides and perused the records. We find that the entire case of the department is that since the appellant did not have the pulping machinery, therefore it cannot be said that the Kraft paper was manufactured from the pulp stage and consequently they are not eligible for exemption Notification No. 04/2006-CE. In this regard, we have seen the Para 28 of the impugned order, which is reproduced below:
“28. The above said three conditions are the mains legs of the said Notification which required to be fulfilled for availment of exemption. It is on record and admitted by the Noticee that they have chosen to avail the benefit of Notification that 04/2006-CE from 01.03.2008 to 28.02.2011. Hence they were not eligible for benefit of Notification No. 08/2003-CE dated 01.03.2003 as amended (SSI exemption) during this period. Now the question comes as to whether Noticee has fulfilled the conditions of the said Notification or otherwise. The Audit team has raised objection as stated above and thereafter inquiry was conducted by the Department as to whether there is any violation of the condition of the Notification. During the course of Audit and visit by the C. Excise officers to the unit and further investigation, it appeared that the Noticee has not installed pulping machine in their factory premises during the relevant period, hence manufacture form the stage of pulp to the final product is not possible in the said factory premise. Therefore they have violated the basic condition of Notification and not eligible for exemption.”
From the above Para, it is seen that the Adjudicating Authority has stated that on the visit of the Central Excise officer, it appeared that the noticee has not installed pulping machine in their premises during the relevant period. However, there is absolutely no evidence of visit of the Central Excise Officer as neither any documentary evidence nor panchnama was recorded about visit of the factory. Therefore, such observation of the Commissioner appears without any basis. Since the entire case is based on the assumption that the pulping machine was not installed but the department could not adduce any evidence to this allegation.
4.1 Moreover, the appellant have produced various documents such as purchase invoice of the pulping machine and also the fact that the appellant have been procuring the paper waste. It prima facie appears that the appellant have manufactured the goods from the pulp stage. It is obvious that if the Kraft paper is manufactured out of waste paper, it is only possible by first making pulp from waste paper then to manufacture the Kraft paper.
4.2 We also observed that the sole basis of the department to hold that the appellant did not have pulping machine is the correspondence made with the supplier of pulping machine but no reply was received from the pulping machine supplier. We note that the correspondence was made after seven years of purchase of the machine. Merely because the department could not get the response that itself will not conclude that the appellant have not purchased the pulping machine. In this position, it was incumbent on the department to physically verify, whether the pulping machinery installed in the appellant’s factory is of the relevant period which department failed to do such exercise.
4.3 In this fact of the case, we are of the prima facie view that the appellant did have the pulping machine at the relevant time. However, since the revenue has not carried out any verification, one opportunity is given to the Revenue to conduct the detail verification that the pulping machine was installed at the relevant point of time in the factory of the appellant or otherwise. Thereafter, to pass a denovo speaking order in the present matter.
5. Accordingly, the impugned order is set aside appeal is allowed by way of remand to the Adjudicating Authority for passing a fresh order within a period of two months from the date of this order, after following the principle of natural justice.
(Pronounced in the open court on 02.11.2023)
