2004 (7) TMI 500 - AT - Central Excise

Tribunal denies exemption for pencils and crayons under Tariff Item 68

The Tribunal ruled against the appellants, renowned manufacturers of pencils and crayons, in a case concerning the interpretation of duty under Tariff ... Benefit of Notification No. 104/82-C.E. exempting ‘pencils’. Issues:Interpretation of duty under Tariff Item 68 and exemption for crayons and pencils under a notification.Analysis:The case involved an appeal pending since 1991 concerning the interpretation of duty levied under Tariff Item 68 and the exemption provided for crayons and pencils under a specific notification. The appellants, renowned manufacturers of pencils and crayons, had been paying duty on these products before the issuance of the notification. The notification, issued following the Finance Minister's budget speech for the year 1982-83, fully exempted goods like pencils and erasers from duty. However, the appellants ceased filing classification lists for pencils and crayons, leading to Show Cause Notices for duty recovery on crayons. The appellants argued based on the definition of 'crayons' and 'pencils' from a dictionary, emphasizing that crayons, despite being encased in wood and leaving a colored streak, should not be considered pencils eligible for exemption under the notification.The Tribunal examined the definitions of 'crayons' and 'pencils' provided by the appellants and concluded that the entities in question, although encased in wood and leaving a colored streak, did not meet the criteria to be classified as pencils for the purpose of the notification. The Tribunal found no evidence to support the understanding that crayons were commonly known as pencils in the trade. As a result, the Tribunal denied the benefit of exemption under the notification and upheld the duty demands. The Tribunal also noted the appellants' failure to comply with Central Excise Rules, particularly Rule 173B, by not filing a classification list, which led to the invocation of the proviso to Section 11A for duty recovery. Since the appellants could not demonstrate any exemption from filing classification lists, the demands and orders of the lower authorities were confirmed.In conclusion, the Tribunal dismissed the appeal, ruling in favor of confirming the duty demands on crayons and denying the appellants the benefit of exemption under the notification for pencils and crayons.