Modvat credit restriction on paperboard inputs did not apply where the goods were classified under paper and paperboard headings.

Modvat credit on decorative laminated sheets was held to be unrestricted where the inputs were classified and duty-paid as articles of paper and paperboard under sub-heading 4823.90. The credit cap in the third proviso to Notification No. 177/86-C.E. did not apply to such goods under Rule 57A, because the Board's circular excluded articles of paper and paperboard from the restriction. The contrary departmental reliance on cases involving products outside Chapter 48 was found inapposite, and tariff classification principles were preferred over common parlance. The assessee therefore succeeded on the credit issue and the restrictive view was set aside.

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Issues: Whether Modvat credit on decorative laminated sheets was restricted to Rs. 800 per tonne under the third proviso to Notification No. 177/86-C.E. read with Rule 57A of the Central Excise Rules, 1944, when the inputs were classified and duty-paid as articles of paper and paperboard under sub-heading 4823.90.

Analysis: The dispute concerned not the classification of the input material in the abstract, but the applicability of the credit restriction. The classification and duty payment at the origin showed the goods under sub-heading 4823.90, which covered articles of paper and paperboard. Under the Board's circular, the restriction did not apply to articles of paper and paperboard. The decisions cited for the department dealt with products classifiable outside Chapter 48 and did not assist in treating the present inputs as paper or paperboard. The principle that tariff interpretation rules prevail over common parlance also supported the assessee's stand.

Conclusion: The restriction of Rs. 800 per tonne was not applicable. The Commissioner's contrary view was set aside and the assessee succeeded on the credit issue.

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