Bagasse-based pulp content for kraft paper must be computed on pulp alone; regular records also defeat suppression for limitation.

Kraft paper claiming exemption on the basis of bagasse-derived pulp content must have the qualifying percentage determined by reference to the pulp alone, after excluding moisture and additives, rather than by the gross weight of the finished paper. On that basis, denial of classification benefit under Heading 4804.11 and Notification No. 48/89-C.E. was unsustainable. Regular filing of approved classification lists and maintenance of prescribed records, including mixing and digester registers, did not support an allegation of suppression with intent to evade duty. The extended limitation period was therefore unavailable, and the demand was time-barred.

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Issues: (i) Whether kraft paper was correctly classifiable under Heading 4804.11 of the Central Excise Tariff and entitled to exemption under Notification No. 48/89-C.E. dated 1-3-1989 on the basis that it contained not less than 75% by weight of pulp made from bagasse; (ii) whether the demand was barred by limitation in the absence of suppression.

Issue (i): Whether kraft paper was correctly classifiable under Heading 4804.11 of the Central Excise Tariff and entitled to exemption under Notification No. 48/89-C.E. dated 1-3-1989 on the basis that it contained not less than 75% by weight of pulp made from bagasse.

Analysis: The composition of the product had to be determined with reference to the pulp used, and not by taking the gross weight of the finished kraft paper, which included moisture and additives. The record also showed that the Trade Notice required bagasse percentage to be worked out on the basis of pulp alone, and the Tribunal's earlier decision recognised deduction of moisture and additives while arriving at pulp content. The adjudication was further weakened by the absence of chemical sample testing, which was the safest means to verify composition.

Conclusion: The classification and exemption denial were not sustainable. The assessee's kraft paper was to be considered on the correct basis of pulp content, and the benefit of the notification could not be denied on the reasoning adopted in the impugned order.

Issue (ii): Whether the demand was barred by limitation in the absence of suppression.

Analysis: The assessee had regularly filed classification lists which were approved by the department and maintained the prescribed records, including the mixing register and digester register, in accordance with the Trade Notice. In these circumstances, the record did not justify an allegation of suppression with intent to evade duty.

Conclusion: The extended period was not invocable and the demand was time-barred.

Final Conclusion: The appeal succeeded on merits and on limitation, the impugned order was set aside, and the duty demand did not survive.

Ratio Decidendi: For kraft paper claiming exemption on the basis of bagasse-derived pulp content, the relevant percentage must be determined with reference to the pulp alone after accounting for moisture and additives, and not by taking the weight of the finished paper; regular disclosure and maintenance of prescribed records negate suppression for limitation purposes.

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