Industrial Corporation Vs. Collector of Central Excise & Ors  INSC
226 (25 August 1987)
RANGNATH MISRA RANGNATH DUTT, M.M. (J)
1987 AIR 2174 1987 SCR (3)1068 1987 SCC Supl. 374 JT 1987 (3) 394 1987 SCALE
Excise and Salt Act, 1944: ss. 35-L & 36(2)/Excise Tariff, Item No.
17(2)--Excise duty--Effect of Notification No.68/76 dated
16.3.1976---Manufacture of flock paper--Process of screen printing carried
on--Benefit of Notification----Whether available.
Notification No. 68/76 dated March 16, 1976 issued by the Central Government
exempted converted types of papers commonly known as imitation flint papers
obtained by one side of paper being subjected to printing of colour
irrespective of the fact whether or not such paper is subsequently varnished or
glazed by chemicals or embossed, and failing under item 17(2) of Excise Tarrif,
if it was proved that the appropriate duty of excise has already been paid in
respect of the paper used in their manufacture.
appellant registered as small scale industry, which buys white paper on which
duty had already been paid and manufactures flock paper out of it by a manual
process, sought exemption from payment of duty under the aforesaid
notification. His claim was rejected by the Assistant Collector. That order was
set aside by the Appellate Collector who took the view that the wording of the
notification showed that as long as the one side of the paper has been printed
with the colour whatever other process is undertaken of further polishing or
glazing etc. is immaterial, and that in this case the first operation of
printing of one side of the paper with colour has been established. Thereafter
the matter went before the Customs, Excise and Gold (Control) Appellate
Tribunal under s. 36(2) of the Salt Act, 1944, which found that printing is not
only word printing, it extends to numerous other processes whereby a surface is
coated or coloured or is given an imprint, to represent, reproduce, cover,
decorate etc. and it is not just ink that is used for printing. Since in its
opinion in the instant case, there was no colour printing it set aside the
the appeal under s. 35-L of the Central Excise and Salt Act, 1942, the Court,
The process carried on by the appellant is covered by the Notification No.
68/76 dated March 16, 1976 and it is, therefore, not liable to pay any duty.
[1074G] The purpose of the notification is that the paper which would have
otherwise fallen under Item 17(2) of Excise Tariff would, if covered by the
notification, become exempt from duty. The words used therein make it clear
that irrespective of the fact whether or not such paper is subsequently
varnished or glazed by chemicals or embossed, it would be entitled to the
benefit of the notification. The word 'subsequently' makes it clear that the
process need not be simultaneous. The Tribunal failed to notice this aspect.
1074F] The Tribunal rightly indicated that printing did not require ink and
many other processes would also be covered by the term printing. The appellant
has been pleading from the very beginning that the process carried on by it
consists of a colour printing on one side of the paper. The Tribunal has
further recorded a finding that the appellant's process is to paste one side of
the paper with adhesive material. Whether adhesive material is mixed to colour
or colour is mixed with adhesive does not make any difference so long as a
process of screen printing is carried on to colour the paper on one side. The
fact of screen printing is accepted by respondents and that has been the case
of the appellant. The Appellate Collector was, therefore, right in holding that
the appellant was entitled to the benefit of the notification. [1074DE, 1071D]
Appellate Jurisdiction: Civil Appeal No.4534 of 1984.
the Order No. C-496 dated 23.7. 1984 of the Customs, Excise and Gold (Control)
Appellate Tribunal, New Delhi in Appeal No.1117 of 1980---(C).
N. Salve, Ravinder Narain, P.K. Ram and D.N. Mishra for the Appellant.
Das, Mrs. Sushma Suri and R.P. Srivastava for the Respondents.
Judgment of the Court was delivered by RANGANATH MISRA, J. This appeal under
Section 35-L of the 1070 Central Excise and Salt Act, 1944 (hereafter referred
to as the 'Act ) is directed against the Appellate order of the Customs, Excise
and Gold (Control) Appellate Tribunal. The appellant buys white paper from the
market on which duty has already been paid and manufactures flock paper out of
to the appellant it is registered as a Small Scale Industry with the
Directorate of Industry, Government of Maharashtra and employs nine workers in
all. The process of conversion of paper into flock paper is said to be as
follow:"Solution of P.V.A. Emulsion thickened with c.m.c. and coloured
with dyes is applied on one side of paper manually with the help of hand-made
screen; then flock is sprinkled by hand with the help of man-made sheeves.
Thereafter paper is put on dryers for drying and finally when the paper is
dried extra flock is removed manually by tapping with fingers and the paper
becomes ready." The appellant had made it clear to the Assistant Collector
that it had no coating or laminating machine and the process was essentially
manual. It claimed the benefit of Notification No. 68/76-CE issued by the
Assistant Collector issued a show cause notice and rejected the claim of the
appellant after cause was shown and by order dated 27th of July 1979, held that
the appellant should take out the requisite excise licence and start paying
central excise duty on flock paper under Tariff Item No. 17(2) of the Central
Excise Tariff. He also directed the appellant to pay the duty for a period of
five years preceding the date of issue of the show cause notice. A small
penalty was also imposed. The appellant carried an appeal to the Appellate
Collector against the aforesaid order who by his order dated 4th of October.
1979, held:"At the time of hearing they (appellants) produced a piece of
flock paper manufactured by them, and submitted that if this flock paper was
put into the glass of water, the flocking material would disappear and
thereafter it would be seen that the paper which has been used for this purpose
is only printed with the colour on one side. The experiment was performed in my
office and it was seen that the paper was printed with colour on one side and
the other side remained as it is after the flock material has been fixed to it.
appellants submitted that their appeal may be decided without a personal
hearing as any delay in personal hearing would cause them a great hardship and
that they 1071 being a small scale manufacturer their activities have come to
virtual halt because of this order of the Assistant Collector.
have gone through the appeal petition and I find that the Assistant Collector
has agreed that one side of the paper is coloured by printing with colour, but
since the flocking material had been stuck to this paper, the Assistant
Collector has held it to be flock paper and demanded the duty on it. The
wording of the Notification No. 68/76 as amended under Sr. No. 3A(ii) clearly
show that as long as the one side of the paper has been printed with the colour
whatever other process is undertaken of further polishing or glazing etc. is
immaterial. In this case the first operation is that of printing one side of
the paper with colour which has been established beyond doubt by the
appellants. What further process is done on this paper is immaterial as glazing
and embossing etc. have been allowed under this notification to be done to the
coloured side of the paper. In view of this, the order of the Assistant
Collector is set aside so far as the classification of this material is
concerned ..... " On 5.9.1980, a show cause notice purporting to be under
Section 36(2) of the Act was issued by the Central Government to the appellant
which inter alia stated:
examination of the records of the case the Central Government are tentatively
of the view that the order of the Appellate Collector is not proper, legal and
correct. The process of manufacture of flocked proper cannot prima facie be
considered to be equivalent to printing of colour inasmuch as use of ink
appears to be inevitably linked up with a printing process as understood and no
ink was used in the particular process. Hence it would appear that the flocked
paper manufactured by the assessee would be perhaps not eligible for the
benefit of notification No. 68/76." "The Central Government,
therefore, in exercise of the powers vested in them under section 36(2) of the
Central Excise and Salt Act, 1944, propose to set aside the order of the
Appellate Collector of Central Excise, Bombay, or to pass such order as is
deemed fit after consideration of the submissions of the assessee .......
" 1072 The appellant showed cause and with the change in the scheme of the
Act, the matter came before the Tribunal for disposal. Before the Tribunal, on
behalf of the appellant, two contentions were raised: firstly, the Collector
was right in holding that the benefit of the Central Government Notification
was available to the appellant and secondly the proceeding was barred by
limitation. The Tribunal found, with reference to the opinion indicated in the
show cause notice, as follows:
Government of India was wrong to speak of ink as inevitably linked up with a
printing process. This is only the character printing or word printing. But
printing is not only word printing; it extends to numerous other processes
whereby a surface is coated or coloured or is given an imprint, to represent,
reproduce, cover, decorate etc. etc. and it is not just ink that is used for
printing." It further found that the Appellate Collector was wrong in
holding that the appellant was entitled to the benefit of the notification in
question and concluded that there was no colour printing; it did not deal with
the question of limitation and set aside the Appellate order.
the aspects raised before the Tribunal are reiterated before us in this appeal,
namely,-(1) The Appellate Collector was right and the Tribunal is wrong in
holding that the appellant was not entitled to the benefit of the notification;
and (2) The show cause notice was issued after the expiry of the period of
limitation and, therefore, the Tribunal had no jurisdiction to reverse the
order of the Collector.
Notification No. 68/76 dated 16.3. 1976, as far as relevant. reads thus:
Sl. No. Description Rate of Duty Condition (1) (2) (3) (4) 1.
Following varieties of paper, namely:-(i) ........................
Converted types of Nil If it is proved to the paper commonly known satisfaction
of proper as imitation flint officer that the apppaper or leatherette ropriate
duty of paper or plastic coated excise or additional paper, or by any other
duty leviable under name, obtained by one section 2A of the side of paper being
subjecIndian Tariff Act, ted to printing of colour, 1934 (32 of 1934), as with
or without design, the case may be, has irrespective of the fact already been
paid in whether or not such paper respect of the paper is subsequently
varnished used in their manuor glazed by chemicals or facture.
and falling under sub-item (2) of the aforesaid Item No. 17.
........................ (underlining by us) The appellant has throughout claimed
that it buys duty paid paper from the market and subjects one side thereof to
colour printing without design and while so printing adhesive material is added
to hold the spread of flocking done by hand. The extra flocking material is
removed manually and the paper is ready. The notification is in wide terms;
paper by any name is intended to be covered by it. After the process referred
to is undertaken, irrespective of the fact whether or not such paper is
subsequently treated in the manner indicated therein, the benefit appears to
have been intended to be made available. The purpose of the notification is
that the paper which would have otherwise fallen under Item 17(2) of Excise
Tariff would, if covered by the notification, becomes exempt from duty. In an
affidavit filed in this Court, the respondent-department has stated:"It is
further submitted that the product does not merit classification as a paper
'obtained by one side of paper subjected to printing of colour' under
notification No. 68/76-CE. It is also submitted that in the manufacture 1074 of
flocked paper the process of application of adhesive, coloured or otherwise to
the surface of the base paper through a silk screen is printing of adhesive
only and not one of imparting colour. The paper obtained immediately after
printing with adhesive coloured or otherwise is not a finished product itself
as in the case of papers envisaged in the notification." The learned
counsel for the appellant produced a sheet of flocked paper in court during
hearing of the appeal. We carried the experiment as indicated in the order of
the Appellate Collector and found that the adhesive and flocking material got
washed out and what remained was the base paper coloured on one side and white
on the other. This is exactly what the Appellate Collector had found.
Tribunal rightly indicated that printing did not require ink and many other
processes would also be covered by the term printing. The appellant has been
pleading from the very beginning that the process carried on by it consists of
a colour printing on one side of the paper. The Tribunal has recorded a finding
that the appellant's process is to paste one side of the paper with adhesive
adhesive material is mixed to colour or colour is mixed with adhesive does not
make any difference so long as a process of screen printing is carried on to
colour the paper on one side. The counter-affidavit of the respondents in this
Court accepts the position that there is screen printing and that has been the
case of the appellant.
words used in the notification make it clear that irrespective of the fact
whether or not such paper is subsequently varnished or glazed by chemicals or
embossed would be entitled to the benefit of the notification. The word 'subsequently'
makes it clear that the process need not be simultaneous. The Tribunal failed
to notice this aspect.
are of the view that the process carried on by the appellant is covered by the
notification and it is, therefore, not liable to pay any duty. We set aside the
finding of the Tribunal and restore that of the Appellate Collector.
appeal is allowed. There would be no order for costs.