1987 (8) TMI 85 - SC - Central Excise

EXEMPTION GRANTED UNDER NOTIFICATION TO CONVERTED TYPES OF PAPER...OBTAINED BY ONE SIDE OF PAPER SUBJECTED TO PRINTING OF COLOUR FLOCK PAPER MANUFACTURED BY APPLYING ADHESIVE EMULSION COLOURED WITH DYES TO ONE SIDE OF PAPER AND SPRINKLING FLOCK WHETHER SUCH PAPER SUBSEQUENTLY VARNISHED OR GLAZED IMMATERIAL FOR GRANT OF EXEMPTION UNDER NOTIFICATION NO.68/76-CE DATED MARCH 16, 1976.

Summary

Issues:
1. Interpretation of Notification No. 68/76-C.E. under the Central Excise and Salt Act, 1944.
2. Classification of flocked paper as per the Central Excise Tariff.
3. Jurisdiction of the Tribunal to reverse the order of the Collector based on a show cause notice issued after the expiry of the limitation period.

Analysis:
The Supreme Court judgment involved an appeal under Section 35-L of the Central Excise and Salt Act, 1944, against the Appellate order of the Custom Excise and Gold (Control) Appellate Tribunal. The appellant, a Small Scale Industry, bought white paper from the market and manufactured flock paper through a manual process involving the application of P.V.A. Emulsion, colored with dyes, and flock sprinkling. The Assistant Collector initially rejected the appellant's claim for exemption under Notification No. 68/76-C.E. and directed payment of central excise duty. The Appellate Collector, however, set aside the order, emphasizing that the process involved color printing on one side of the paper. Subsequently, a show cause notice was issued by the Central Government challenging the Appellate Collector's decision. The Tribunal later ruled against the appellant, stating that there was no color printing involved. The issues raised before the Supreme Court included the entitlement to the notification benefits and the jurisdiction of the Tribunal due to the limitation period.

Regarding the interpretation of Notification No. 68/76-C.E., the Supreme Court analyzed the language of the notification, which exempted certain types of paper obtained by printing of color, irrespective of subsequent treatments. The Court noted that the appellant's process of screen printing adhesive material on one side of the paper constituted color printing, making it eligible for the notification benefits. The Court emphasized that the process need not be simultaneous and upheld the appellant's claim for exemption under the notification.

In terms of the classification of flocked paper, the Court disagreed with the Tribunal's finding that there was no color printing involved in the appellant's process. The Court conducted an experiment confirming that the adhesive and flocking material washed out, leaving the base paper colored on one side. This supported the Appellate Collector's conclusion that the process indeed involved color printing, aligning with the notification's criteria for exemption.

Regarding the jurisdiction issue, the Court held that the Tribunal erred in setting aside the Appellate Collector's order based on the show cause notice issued after the limitation period. The Court reinstated the Appellate Collector's decision, ruling in favor of the appellant and exempting them from paying any duty. The judgment allowed the appeal without any order for costs, concluding the legal proceedings.