Interpretation of "rags" in an exemption notification upheld concessional duty for pulp made from old cotton clothes.

The exemption dispute turned on whether old cotton clothes used for making pulp could be treated as "rags" for the concessional duty rate under the notification. The notification did not define "rags", and the meaning drawn from the Textile (Consumer Protection) Regulation, 1988 indicated that rags arise from fabric. On the record, the show cause notice itself noted that the raw material used was old cotton clothes, so the material did not support the Revenue's narrower view that only waste paper or a different raw material qualified. The appellant was therefore found eligible for the concessional rate of duty, and denial of the exemption was unsustainable.

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Issues: Whether the appellant was entitled to the concessional rate of duty under Entry No. 163 of Notification No. 12/2012-CE dated 17.03.2012 when the raw material used for making pulp was old cotton clothes and not rags.

Analysis: The dispute turned on the meaning of "rags" in the exemption notification. The record showed that the Revenue proceeded on the footing that the benefit was unavailable unless waste paper was used for making pulp. The notification did not define "rags", and the definition relied upon from the Textile (Consumer Protection) Regulation, 1988 indicated that rags emerge from fabric. The show cause notice itself recorded that the appellant was using old cotton clothes for making pulp. On that basis, the material did not support the conclusion that the appellant was using rags within the meaning attributed by the Revenue.

Conclusion: The appellant was eligible for the concessional rate of duty under Entry No. 163 of Notification No. 12/2012-CE dated 17.03.2012. The denial of exemption was unsustainable.

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