Judgment:
2. The relevant facts that arise for consideration are that the appellant herein are manufacturer of coated paper and paper board fallin g under chapter sub-heading No. 4810.10 of the Central Excise Tariff Act, 1985. During the process of manufacturing of such paper and paper boards coated on one or both sides , trimming and cuttings of papers arise in the factory. Appellant cleared these trimming and cuttings from the factory without payment of duty as waste and scrap.
Show cause notice was issued to the appellant directing them to show cause as to why duty be not demanded on such trimming and cuttings, on the ground that these would get classified under chapter heading 4702.00 and chargeable to excise duty. Appellant resisted the show cause notice on the ground that chapter subheading 4702.00 applies to basic paper and paperboard and not to the coated paper. The adjudicating authority did not accept this contention and confirmed the demand and imposed penalty. On appeal, the learned Commissioner (Appeals) upheld the order in original and set aside the penalty imposed on them. Hence the appeal which is filed by the appellant. 2.
Considered the submissions made at length by both sides. It is not in dispute that the appellant is purchasing plain paper from the market and subjecting it to manufacturing process i.e. coating the same with organic or inorganic substances. Such manufactured products fall under chapter heading 48.10 It is not in dispute that during the manufacture of such paper and paperboard coated with organic or inorganic substances, trimming and cuttings arise. On perusal of the tariff heading for the relevant period, we notice that there is no heading for waste and scrap in chapter 48 of the CETA. When the final products manufactured by the appellant fall under chapter 48, the cutting and trimming arising during the manufacture of coated paper would definitely get covered under Chapter heading 48. In the absence of any such heading of waste and scrap under chapter heading 48, we find it unacceptable that the same would be chargeable to duty. 2. The contention of the revenue is that the said product would fall under chapter heading 47.02 is not correct inasmuch as the said chapter heading reads as under: It is noticed by us that the said chapter heading 47 does not have any chapter notes to indicate what to exclude or include in the said chapter. In the absence of any indication, the waste and scrap arising during the course of manufacture of products under chapter sub-heading No. 4810.10, to our mind, will not fall under chapter heading No.47.02. We find strong force in the contention of the appellant that once the paper is coated with organic or inorganic substance, it would fall under the category of coated papers and the waste and trimmings arising from such manufacturing would get automatically covered in chapter 48 and could not get relegated to chapter heading 47.02,and lead to demand excise duty. It is well settled law that duty cannot be demanded on the ground that the waste and scrap are marketable and the assessee sells the same for monetary benefits.
3. Accordingly, in the facts and circumstances of the case as mentioned above, we find that trimming and cutting arising during the course of manufacture of coated papers (during the relevant period) falling under chapter heading 48.10 would not get covered under chapter heading No.47.02, hence impugned order is liable to be set aside and we do so.