The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the kraft paper manufactured from the pulp stage is eligible for exemption from excise duty under exemption notification.
Lion Paper Industries, the appellant assessee was engaged in the manufacture of kraft paper and claimed the exemption under exemption Notification No. 04/2006-CE in respect of Kraft Paper which contains the condition that if Kraft Paper was manufactured from the pulp stage.
The assessee appealed against the order passed by the adjudicating authority for rejecting the claim of excise duty exemption claimed by the assessee.
R Subramanya, the counsel for the assessee contended that the assessee had produced various documentary evidence to show that the assessee had a pulping plant and the manufacture of kraft paper by the assessee is eligible for excise duty exemption under exemption notification 04/2006 Central Excise.
A R Kanani, the counsel for the department contended that the assessee 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.
The Bench observed that Kraft paper was manufactured out of waste paper, it was possible by first making pulp from waste paper and then manufacturing the Kraft paper and the Kraft paper manufactured from the pulp stage is eligible for exemption under exemption notification.
Also, the department could not get a response that would not conclude that the assessee had not purchased the pulping machine, it was incumbent on the department to physically verify, whether the pulping machinery installed in the assessee’s factory was of the relevant period which department failed to do such exercise.
The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) remanded the matter back to the adjudicating authority to conduct the detailed verification that the pulping machine was installed at the relevant point of time in the factory of the assessee.
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