G. Sankaran, Senior Vice-President

1. This is an appeal against Order No. 112/88 passed by the Collector of Central Excise, Bangalore. By this order, the Collector demanded from the appellants Central Excise duty amounting to Rs. 18,50,885.79 on the printed and waxed twist wrap paper, cut to size, for packaging confectionary, manufactured and cleared by the appellants during the period 1986-87 and 1987-88 upto February 1988. He also imposed a penalty of Rs. 1,50,000 on the appellants under Central Excise Rule 173Q(1) for violation of several provisions of the excise law.

2. The facts of the case, briefly stated, are that the appellants are engaged in the manufacture of waxed twist wrap paper, cut to size, for packing confectionary, in reel form. They do these processes on paper procured from the market or on job work basis on paper received from customers. The processes carried out by the appellants on the duty-paid paper so received from outside are :-

- printing

- waxing &

- slitting

big rolls of paper of width ranging from 330 mm to 660 mm into width ranging from 25 mm to 80 mm. The paper so slit is, according to the reply to the show cause notice dated 15-7-1988 and the Superintendent's letter dated 12-5-1987 issued to the appellants, cleared in reels. The Collector in his order, however, says that they were cleared cut to size. The appellants' claim before the adjudicating authority and before us is that the goods were classifiable under Heading 48.11, sub-heading 4811.40 of the Schedule to the Central Excise Tariff Act, 1985 ("the CET" - for short) with the benefit of duty exemption in terms of Central Excise Notification No. 49/87, dated 1-3-1987 as a converted type of paper. This claim has been negatived by the Collector who has held that the goods fall under Heading 48.18, sub-heading 4818.90 as "other article of paper", not eligible for the benefit of the notification aforesaid.

3. If the appellants' claim is sustainable, then, the other issues determined by the Collector, namely, violation of several provisions of law, amount of duty liability to be paid by the appellants and the penalty imposed on them - all become irrelevant. Thus the central issue is whether printed and waxed twist wrap paper, slit to size (in reel form as claimed by the appellants and as cut to size as held by the Collector), for packing confectionary, is classifiable under Heading 4811.40 of the Schedule with the benefit of duty exemption in terms of Notification 49/87 or not.

4. We have heard Shri V. Sridharan, Advocate, for the appellants and Shri Sunder Rajan, DR, for the respondent-Collector.

5. Before we consider the rival contentions, it is necessary to sort out the question whether the goods were cleared in reels or cut to size because this has a direct bearing on the classification of the goods. As noted earlier, the Superintendent of Central Excise, in his letter dated 12-5-1987 to the appellants, has clearly stated that the goods in question cannot be called a converted type of paper inasmuch as big rolls of paper are slit into smaller width after printing and wax coating and cleared in the form of reels. He further says that twist wrap paper in the form of reels manufactured by the appellants are 'articles of paper', specified under sub-heading 4818.90 of the Schedule. The show cause notice dated 15-7-1988 states that the appellants have manufactured and cleared excisable goods, namely, printed and waxed twist wrap paper cut to size without making it clear whether they are cleared in reels. In their reply dated 23-11-1988, however, the appellants categorically said that they slit big rolls of larger widths into smaller widths and cleaned the same in reels. The Collector's order also in the opening sentence says that the appellants are manufacturers of printed and waxed twist wrap paper, cut to size for packing confectionary, in reel form. Against this background and in the absence of any contrary fact or circumstance it is not at all cle