1985 (8) TMI 211 - AT - Central Excise

Summary

Issues Involved:
1. Proper classification of carbon paper under the First Schedule to the Central Excises and Salt Act, 1944 (CET).

Summary:

Issue: Proper Classification of Carbon Paper

The appeal was initially a revision application before the Central Government, transferred to the Tribunal u/s 35P of the Central Excises and Salt Act, 1944. The core issue is the classification of carbon paper manufactured by the appellants under the CET.

Appellants' Arguments:
1. Budget Changes and Classification: The 1976 budget changes did not classify carbon paper under item 17(2) CET. It was only in 1982 that carbon paper was specifically included under item 17 by the Finance Act.
2. Transformation of Base Paper: The base paper used was duty-paid tissue paper under Item No. 17, CET. Post-processing, it lost its identity as paper and was known in trade as an article of stationery, not paper.
3. Commercial Understanding: Paper is commercially understood as a product for writing, drawing, printing, or packing. Carbon paper does not fit this definition.
4. Onus of Proof: The department failed to prove the classification. Trade notices from various Collectorates classified carbon paper under item 68 CET as an article of stationery.

Respondent's Arguments:
1. Residual Item 68: Item No. 68 CET is a residual item, to be used only if no other specific item is applicable. Item No. 17 is more specific for carbon paper.
2. Inclusive Nature of Item 17(2): Item 17(2) covers paper subjected to treatment, regardless of its trade name. Hence, carbon paper falls under Item 17(2).
3. Supreme Court's Decision: The Supreme Court's decision in the Kores (India) Ltd. case does not apply as the Central Excise tariff entry is broader.
4. Previous Tribunal Decisions: The Tribunal had previously classified carbon paper under Item 17(2) in various cases.

Tribunal's Analysis:
1. Scope of Item 17(2): Item 17(2) CET includes all kinds of paper subjected to treatments like coating. Carbon paper, being coated tissue paper, falls under this item.
2. Supreme Court's Ruling in Kores Case: The Supreme Court's decision in the Kores case was based on a narrow sales tax entry, unlike the broad scope of Item 17(2) CET.
3. Trade Understanding: The Indian Standards Institution's Glossary classifies carbon paper as a type of coated paper, supporting its classification under Item 17(2).
4. Previous Tribunal Decisions: The Tribunal's previous decisions consistently classified carbon paper under Item 17(2).

Conclusion:
The Tribunal concluded that carbon paper, during the material period, fell for classification under Item No. 17(2), CET and not under Item No. 68. The appeal was rejected, and the impugned order was upheld.