1970 (7) TMI 26 - HC - Central Excise

Court Rules Misstatement Invalid, Grants Refund: Central Excise Case

The court determined that the demand for a differential duty fell under Rule 10 of the Central Excise Rules, 1944, due to a misstatement regarding the ... Paper - Short levy - Chief Chemists report - Evidentiary value Issues Involved:1. Determination of whether the demand of differential duty falls under Rule 10 or Rule 10-A of the Central Excise Rules, 1944.2. Classification of paper manufactured by the petitioner under Entry No. 17(3) or 17(4) of the Tariff Schedule.Detailed Analysis:Issue 1: Determination of Applicable Rule for Differential Duty DemandThe first issue was whether the demand for the differential amount of duty (Rs. 8,735.85) raised by the Central Excise Department against the petitioner falls under Rule 10 or Rule 10-A of the Central Excise Rules, 1944. Rule 10 pertains to the recovery of duties or charges short-levied or erroneously refunded due to inadvertence, error, collusion, or misstatement as to the quantity, description, or value of goods. Rule 10-A is a residuary rule applicable only when no specific provision for collection exists under other rules.The court concluded that the demand falls under Rule 10, as the short-levy was due to a misstatement regarding the description of the goods. Since the papers were initially described as 'printing papers' but should have been described as 'packing and wrapping papers,' it constituted a misstatement. Consequently, Rule 10-A did not apply, and the three-month limitation period under Rule 10 was applicable. The demand for items dated before 2nd July 1962 was thus barred by limitation, rendering the demand illegal for those items.Issue 2: Classification of Paper Under Tariff ScheduleThe second issue was whether the paper manufactured by the petitioner should be classified under Entry No. 17(3) (Printing & Writing paper) or Entry No. 17(4) (Packing & Wrapping paper) of the Tariff Schedule. The petitioner contended that the paper was printing & writing paper, while the Excise Department classified it as packing & wrapping paper based on the Deputy Chief Chemist's report.The court examined the evidence, including:- Three reports from chemists detailing the mechanical strength, sizing material, and penetration test of the paper.- Correspondence between the petitioner and its customers showing the paper's size and use.- Samples of the paper.- Distinguishing features of packing and wrapping papers, such as strength, imperviousness, actual use, and size.The court found that neither the Assistant Collector nor the Collector in Appeal had applied their minds to this evidence. The Assistant Collector relied solely on the Chief Chemist's opinion, which was not definitive and merely suggested a possible use for packing and wrapping. The Collector's order was also non-specific and lacked a detailed analysis of the evidence.The court applied recognized tests to the paper samples and referred to E.J. Labarres' 'Dictionary and Encyclopaedia of paper and paper-making,' which highlighted strength, use of sizing materials, and stiffness as key characteristics of wrapping papers. The court found that the petitioner's paper lacked these qualities and was supplied in a size unsuitable for packing or wrapping purposes.Additionally, the court noted that the paper was known in the market as writing paper and used as such, aligning with the Supreme Court's criterion that an article's classification should be based on how it is known and used in the market.ConclusionThe court concluded that the paper manufactured by the petitioner did not fall under Entry No. 17(4) and should be classified under Entry No. 17(3). The demand by the Excise Department was declared illegal, and the petitioner was entitled to a refund of Rs. 8,735.85. The rule was made absolute with costs.