Collector
of Central Excise, Kanpur Vs. Krishna Carbon Paper Co [1988]
INSC 282 (16 September
1988)
Mukharji,
Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
CITATION:
1988 AIR 2223 1988 SCR Supl. (3) 12 1989 SCC (1) 150 JT 1988 (4) 762 1988 SCALE
(2)880
CITATOR
INFO : F 1990 SC 556 (5) R 1990 SC1579 (44) R 1991 SC 407 (6)
ACT:
Central
Excises and Salt Act, I944: Section II-A- Central Excise Tariff- Items 17(2),
17(3) and 68 Carbon paper whether included in the description `paper subjected
to coating'.
%
Construction of Statutes: Language in a taxing statute to be construed in
popular sense as understood by that particular trade and not in strict
technical sense.
HEAD NOTE:
The
respondent-company was engaged in the manufacture of Carbon Paper. It was
served with a notice demanding central excise duty on carbon papers cleared
from its factory during the period 25.3.1979 to 24.9.1979 under section 11-B of
the Central Excises and Salt Act, 1944. The respondent stated in reply that the
notice was without jurisdiction because it was only after 28.2.1982 that the
product was subjected to duty under sub-item (3) of item 17 of the Central
Excise Tariff. The Assistant Collector of Central Excise, confirmed the demand.
The appellate Collector, however, accepted the respondent's contention. The
Collector (Appeals) and the Appellate Tribunal dismissed the Revenue's appeals.
The Tribunal upheld the contention of the respondent that for the period before
its amendment in 1982, carbon paper fell under Tariff item 68 and not under
Tariff Item 17(2), as was contended by the Revenue.
Before
this Court the Revenue contends that (I) carbon paper being akin to coated
paper was covered since 1976 under sub-item (2) of item 17 of the Central
Excise Tariff which included paper which had been subjected to coating;
(2)
the introduction of specific name `carbon paper' as sub- item (3) of item 17 in
1982 was with a view to subject it to a different rate of duty; and (3) the
amendment so far as item 17(3) was concerned was mere clarificatory and was
introduced ex abundanti cautela. The respondent, on the other hand, contends
that if carbon paper was already included then there was no purpose of
introducing these subsequent amendments.
Disposing
of the appeal, it was, PG NO 12 PG NO 13
HELD:
(1) Where no definition is provided in the statute itself for ascertaining the
correct meaning of a fiscal entry, reference to a dictionary is not always
safe. The correct guide is the context and the trade meaning, which is
prevalent in that particular trade where that goods is known or traded. [21D-E]
(2) If
a statute contains language which is capable of being construed in a popular
sense, such a statute is not to be construed according to the strict or
technical meaning of the language contained in it, but is to be construed in
its popular sense, meaning, of course, by the words "popular sense"
that which people conversant with the subject-matter with which the statute is
dealing would attribute to it. The ordinary words in every day use are,
therefore, to be construed according to their popular sense. [23F-G]
(3)
Paper simpliciter cannot include' carbon paper because that would not be in
consonance with the popular understanding of the expression "paper".
[23G-H; 24A]
(4)
Where paper of a special type defined in the particular statute as one
including paper which have been subjected to various treatments such as
coating, impregnating, how that paper be understood, there must be evidence of
that understanding. [24A]
(5)
There is authority of the Indian Standards Institute's publication
"Glossary of Terms used in Paper Trade and Industry" to the effect
that carbon paper is understood as a coated paper in trade. [23A-C]
(6)
The trade notices and the tariff advices issued by the Board are not relevant,
as such, in construing items in Tariff Schedule. [24E-F]
(7)
Understood in the accepted notion of construing entries of fiscal Statute not
from a technical or scientific point of view but from the point of view of the
people in the trade dealing with that particular type of goods and having
regard to the evidence of the Indian Standards Institute and in the absence of
any other evidence to the contrary, on the basis of the definition of paper or
it was in the year 1976, carbon paper would come within item 17(2) of the
Tariff Items, and would not fall into the residuary entry. [23B-C] Sai Giridhara
Supply Co. v. Collector v. Collector of Central Excise, Bombay, [1987] 23 E.L.T. 438 Tribunal;
Commissioner
of Sales Tax, U.P. v. M.S.N. Brothers, Kanpur, PG NO 14 AIR 1973 S.C. 78; King
v. Planters Nut and Chocolate Company Ltd., [1951] C.L.R. Ex. 122; Union of
India and Anr. v. Delhi Cloth and General Mills Co. Ltd.,
AIR 1963 S.C. 791; Grenfell v. I.R.C., [1876] 1 Ex. D 242; Porritts &
Spencer (Asia) Ltd. v. State of Haryana, [1979] I
S.C.C. 82; Kores (India) Ltd. Thane v. Collector of Central
Excise, Thane. 29 E.L.T. 627; State of Uttar Pradesh v. M/s. Kores (India) Ltd., [1977] 1 SCR 837; Attorney-General v. Winstar lay.. [1901] 6
E.R. 740; Khoday Industries Ltd. v. Union
of India, [1986] 23 E.L.T. 337; Orient Paper
Mills Ltd. v. Union of India, [1969] 1 SCR 245; M/s Colgate Palmolive (India) P. Ltd., [1979] E.L.T. J. 567;
Dunlop India Ltd. v. Union of India, AIR 1977 S.C. 597; Md. Qasim Larry, Factory
Manager, Sasamusa Sugar Works v. Muhammad Samsuddin, [1964] 7 S.C.R. 419,
referred to.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 2110 of 1987.
From
the Order dated 8.6.1987 of the Customs Excise and Gold (Control) Appellate
Tribunal, New Delhi in Appeal No. ED/SB/145/84-C in
Order No. 440/87-C.
M.K. Banerjee,
Solicitor General, P. Parmeshwaran, Mrs. Radha Rangaswamy and Mrs. Sushma Suri
for the Appellant.
J.S. Kapil,
Krishan Kumar and Vimal Dave for the Respondent.
The
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. The Collector of
Central Excise, Kanpur, is the appellant in this appeal
under section 35L(b) of the Central Excises and Salt Act, 1944 (hereinafter
called `the Act'). The period involved in this appeal is the assessment period
from 25th March, 1979 to 24th September, 1979, a period of about six months. The respondent M/s.
Krishna Carbon Paper Company was engaged in the manufacture of carbon papers.
During the period from 25th March, 1979 to 24th September, 1979 the respondent
manufactured and cleared from its factory a quantity of 5601 boxes, 20,288
reams and 45 packets of carbon papers for a total value of Rs.7,67,498.40
without payment of any duty under the Act.
The
Superintendent of Central Excise Lakhimpur Kheri, issued notice to the
respondent demanding central excise duty on carbon paper cleared during the
aforesaid period under section II-A of the Act. The respondent submitted a
written reply stating that the notice was without jurisdiction because the
respondent had taken out the central excise PG NO 15 licence immediately on the
direction of the department and it was only after February 28, 1982 that the
product was subjected to duty under sub-item (3) of item 17 by the Central
Excise Budget of 1982. In support of this contention, the respondent relied on
Notifications Nos.
187/82
and 69/82, both dated 28th
February, 1982. It was
contended that the carbon paper was a new item which was specified under
sub-item (3) of item 17 of C.E.T. According to the revenue, however, that the
recasting of Tariff Item 17 in 1976 was irrelevant and that the carbon being
akin to coated paper (one side or both side) was covered under sub- item (2) of
item 17 of the C.E.T. since 1976. The submission of the respondent was that sub-item
(3) of item 17 of the C.E.T. covering the carbon paper including copy paper was
inserted by the Central Excise Budget 1982, but it does not make any
retrospective change. It was, according to the appellant, an introduction of
specific name or variety of paper for being subjected to a different rate of
duty. The carbon paper remained a coated paper already covered under sub-item
(2) of item 17 of C.E.T. The Assistant Collector of Central Excise, Sitapur, by
his order dated 27/30th April, 1983, confirmed the demand for basic excise duty
amounting to Rs.1,15,124,76 and special excise duty of Rs.5,756.23 on carbon
paper cleared during the period from 25th March, 1979 to 24th September, 1979.
The Appellate Collector, however, set aside the order of the Assistant
Collector and was of the view that the carbon paper could not be classified
under Tariff Item 17(2) of the Act, as it was before 1982. The Collector
(Appeals) accepted the respondent's contention that the carbon paper was
brought under the purview of Tariff Item 17 for the first time in 1982 when it
was introduced as sub-item (3) of Item 17 of the First Schedule to the Act with
effect from 1st March, 1982. Being aggrieved thereby the appellant preferred an
appeal before the Appellate Tribunal. The Appellate Tribunal dismissed the
appeal. Hence, this appeal.
The
question for decision in this appeal is whether carbon paper before the
introduction of Central Excise Budget in 1982 and consequential amendment in
tariff, fell under item 68 of the First Schedule to the Act, as held by the
Tribunal or under item 17(2) of the Tariff Item, which was claimed by the
Collector of Central Excise. Following its previous decision in the case of Sai
Giridhara Supply Co. v. Collector of Central Excise, Bombay, [1987] 23 E.L.T.
438 Tribunal, the Tribunal upheld the contention of the respondent and held
that for the period before the amendment of Central Excise Budget, in 1982,
carbon paper fell under Tariff Item 68 and not under Tariff Item 17(2), as it
then was. The Tribunal did not go into the question of the PG NO 16 limitation,
namely, whether the claim was barred in any event by the lapse of time in view
of section 11-A of the Act. The Tribunal came to the finding that the carbon
paper in question fell under Tariff Item 68 of the Central Excise Tariff. Shri Kapil
on behalf of the respondent submitted before us that the claim, in any event,
was barred by lapse of time in view of section 11-A of the Act. In view of the
fact that the Tribunal did not decide this question if we are persuaded to
reject the revenue's contention in this appeal, the matter has to be remanded
back to the Tribunal to decide this question as to limitation, as there is no
decision of the Tribunal on this aspect of the matter.
Before
the contentions are appreciated, it will be appropriate to refer to the
position of Tariff Item 17 at three different phases, namely, in 1975, after
the amendment in 1976 and after the further amendment to item No. 17 by the
Finance Act of 1982. Item No. 17 was amended with effect from 27th February,
1982 and two specific entries were added. These were (3) and (4). It is
necessary to set out in the position at different points of time. It was as
follows:
"Tariff
Item 17-Position in I975 ------------------------------------------------------------
Item No. Description of goods Rate of Duty
------------------------------------------------------------
17.
Paper, all sorts (including paste board, mill-board, strawboard and cardboard),
in or in relation to the manufacture of which any process is ordinarily carried
on with the aid of power (1) Cigarette tissue Rs. 3 per Kg.
(2)
Blotting, toilet, target tissue Rs. 1 and 20 other than cigarette tissue paise
per kg.
teleprinter,
typewritting;
manifold,
bank, bond, art paper, chrome paper, tubsized paper, cheque paper, stamp paper,
cartridge paper, (waxed paper, polythelene coated paper), parchment and coated
board (including art board, chrome board and for playing cards) PG NO 17 (3)
Printing and writing paper, 90 paise per kg.
packing
and wrapping paper, strawboard and pulp board, including grey board, corrugated
board, duplex and triplex boards, other sorts (4) All other kinds of paper and
Re. 1 and 20 paper board, not otherwise paise per kg.
specified.
Position
in 1976
17.
Paper and Paper Board,All sorts Thirty percent (including paste-board,
mill-board ad valorem.
straw-board,
cardboard and corrugated board), in or in relation to the manufacture of which
any process is ordinarily carried on with the aid of power (1) Uncoated and
coated print and writing paper (other than poster paper) Twenty-five per cent
ad valorem (2) Paper board and all kinds of paper (including paper or paper
hoards which have been subjected to various treatments such as coating,
impregnating corrugation, creping and design printing), not elsewhere
specified.
There
was further amendment to Item No 17 by the Finance Act of l982. Item 16 was
amended with effect from 27.2 1982, and two specific entries were added. They
are (3) and (4) which are reproduced below:
------------------------------------------------------------
Item No. Description of goods Rate of Duty
------------------------------------------------------------
17. xx
xx xx (3) Carbon and other copying papers 32 1/2% ad (including duplicator
stencils) and valorem papers, whether or not cut to size and whether or not put
to in boxes PG NO 18 (4) Boxes, cartons, bags and other 32 1/2% ad
packing-containers (including flattened valorem or folded boxes and flattened
or folded cartons), whether or not printed and whether in assembled or
unassembled conditions." The short question with which we are concerned
is, whether during the relevant period, namely, 25th March, 1979 to 24th
September, 1979 when the position mentioned above was prevailing, whether
carbon papers could be included in "all kinds of paper including the paper
which have been subjected to coating", would come within sub-item (2) of
item 17 as mentioned hereinbefore or under residuary item 68 of the Central
Excise Tariff.
The
Tribunal followed a previous decision in Sai Giridhara Supply Co. v. Collector
of Central Excise, Bombay, (supra). There, the Tribunal had
discussed the various aspects of the matter and felt itself bound by the
decision of the Karnataka High Court to which reference will be made later. The
Tribunal has referred to the observations of Buckley L.J. where the Lord
Justice observed that once a precedent was held to be a binding one, then no
deviation therefrom was permissible within the judicial polity except in the
well accepted categories of cases enumerated in the judgment. Those
contingencies, the Tribunal found, were not applicable to the facts of this
case.
It is
well-settled that in order to ascertain the correct meaning of a fiscal entry
reference to a dictionary is apt to be a somewhat delusive guide, as it gives
all the different shades of meaning. In the instant case, our attention was
drawn to the extract from the Oxford English Dictionary, Volume III, page 436
where the meaning of the word "paper" has been given. It reads as
follows:
"Paper
(pei'per), sb. Also 4 papure, 4-6 papir. 5 papire, papyre, (paupire, 5-6
pauper, 5-7 papyr, 6 papre.
[a.
AF. papir = OF, Papier (=Pr. Papier, Cat. Paper, Sp. papel `paper', It. papira
papyrus), ad. L. papyrus the papyrus or paper-reed of the Nile, also
writing-material made of it, a Gr. nanvpos the papyrus-reed. From the
writing-sheets made of the thin strips of papyrus the name was transferred to
paper made of cotton, and thence to paper of linen and other fibres. These
extensions took place before the word became English, so that here its
application to papyrus is only a later retrospective use.] PG NO 19 I. The
simple word. *Without a or pl. (exc. as denoting a particular kind).
I. A
substance composed of fibres interlaced into a compact web, made (usually in
the form of a thin flexible sheet, most commonly white) from various fibrous
materials, as linen and cotton rags, straw, wood, certain grasses, etc., which
are macerated into a pulp, dried, and pressed (and subjected to various other
processes, as bleaching, colouring, sizing, etc., according to the intended
use); it is used (in various forms and qualities) for writing;
printing,
or drawing on, for wrapping things in, for covering the interior of walls, and
for other purposes." Our attention was also drawn to the meaning of the
carbon paper in `Pulp and Paper Manufacture', second edition. volume II which
has been described as follows:
"Carbon
paper is made by coating paper with a mixture consisting principally of a wax
and a pigment. The color is obtained from the pigment, usually a carbon black
of low oil absorption, plus toners, usually lake pigments or oil- soluble dyes,
which are added to increase the blackness. The wax, which acts as a binder for
the pigment, must have a viscosity low enough to permit slight penetration into
the paper, but not so low that the wax strikes through or sweats oil. Waxes
with a melting point between 105 to 120 F. and a viscosity of about 60 or 70 Saybolt
at 210 F. are generally used. The principal wax used is carnauba, although some
ceresin, beeswax, candelilla, ozokerite. ouricury, and synthetic waxes are also
used. Special grades of micro- crystalline waxes may be added to soften the
coating and improve the printing qualities. In addition to the above
ingredients, non-drying oils (mineral oils) are used to soften the coating and
control the amount of coating transferred to the copy. Oleic acid is sometimes
used as a solvent for oil-soluble dyes.
All
carbon papers must be free of offset, flaking, wrinkles, curl, or other
defects, and must give a good impression on the copy paper. The coating must be
hard enough not to smear in hot weather, but the exact degree of hardness
depends upon the intended use, that is, whether PG NO 20 the paper is designed
as a pencil carbon, a typewriter carbon, or a one-time carbon. The amount of
coating varies from a very thin coating used in making one-time carbons to a
very heavy coating used in making high-grade typewriter carbons for multiple use.
The latter, in which the paper may be reused up to 40 to 50 times, must have a
coating of very high color value and the coating must be compounded so that
only a small amount is transferred to the copy sheet. A simplified formula for
a typewriter carbon would be as follows:
Carnauba
was.............................34% Ozokerite.................................6%
Deeswax...................................7%
Petrolatum................................6% Mineral
Oil..............................25% Carbon black.............................13%
Toners....................................6% Oleic
acid................................3% In the coating of carbon paper, the
molten was mixture is applied to the paper at a temperature of about 200 F.
Coating
is done on a carbon paper coater which consists of an inking roll which is
supplied with coating directly from a bath or from a heated fountain. The
inking roll revolves in a direction opposite to that of the paper web. Excess
coating is scraped off the paper by an equalizer rod and the sheet then passed
over a water-cooled cylinder to chill and harden the coating. Crystallization
of the wax occurs Upon chilling, and this process continues over a period of
several days. For this reason, it is customary for cart-on manufacturers to age
their coated paper for two to seven days before shipping.
It is
absolutely essential that the coating be absorbed evenly by the paper.
Therefore the paper must have a smooth surface, uniformly high density, good
formation and above all, be free of pinholes. Further requirements are high
strength, low basis weight, and freedom from flaws such as slime spots and dirt
specks. Because of these rigid requirements, the base stock for carbon tissue
is difficult to make. The best grades made from new cotton or linen rags, or
from manila hemp, whereas the cheaper grades are made PG NO 21 from sulfate and
sulfite pulps. The stock is beaten for a considerable period of time, often up
to thirty hours, in order to develop maximum strength. The stock is only
lightly sized. Calcium carbonate is often used as a filler, but the ash should
not be over 5%. The basis weight is usually 4, 5 1/2, 7, or 10 lb. per ream (20
x 30-500). The 4- 1b. paper is used when a large number of copies is to be
made; the 5-- and 7-lb. papers are suitable for ordinary work.
Carbon
paper under the specifications of the Indian Standard Institute, is described
as follows:
"Carbon
Paper-paper coated (generally on one side) with a pressure transferable
pigmented layer, used for making copies at the same time as an original
manuscript or typescript is made." It is well-settled, as mentioned
before, that where no definition is provided in the statute itself, as in this
case, for ascertaining the correct meaning of a fiscal entry reference to a
dictionary is not always safe. The correct guide, it appears in such a case, is
the content and the trade meaning. In this connection reference may be made to
the observations of this Court in Commissioner of Sales Tax, U.P.v. M/s.S.N
Bothers, Kanpur, AIR 1973 S.C.68 at page 80 para 5.
The
trade meaning is one which is prevalent in that particular trade where that
good is known or traded. If special type of good is subject matte of a fiscal
entry then that entry must be understood in the context of that particular
trade, bearing in mind that particular word.
Where,
however, there is no evidence either way then the definition given and the
meaning following from particular statute at particular time would be the
decisive test.
In the
famous Canadian case in King V. Planters Nut and Chocolate Company Limited,
[1951] C.L.R. Ex. 122 Cameron J.
observed
that it is not botanist's conception as to what constitutes a fruit or
vegetable....but rather what would ordinarily in matters of commerce in Canada be included there should be the
guide. Similarly, this Court has held in Union of India and Anr.V. Delhi Cloth and General Mills Co. Ltd.,
A.I.R. 1963 S.C. 791 at page 79 para 12 that the view of the Indian Standard
Institute as regards what is refined oil as known to the market in India must
be preferred in the absence of any other reliable evidence. It must be PG NO 22
emphasised in view of he regards what is refined oil as known arguments
advanced in this case that the meaning should be as understood in the
particular trade. In this case, we are construing not paper as such but a
particular brand of paper with a meaning attributed to it. Sub item (2)of item
17 as was the position in 1976 paper referred to all kinds of paper including
paper or paper boards which have been subjected to various treatments such as
coating, impregnating. So, therefore, if all kinds of paper including coated
paper is the goods, we have to find out the meaning attributed to those goods
in the trade of those kinds of paper where transactions of those goods take
place.
It is
a well-settled principle of construction, as mentioned before, that where the
word has a scientific or technical meaning and also an ordinary meaning
according to common parlance, it is in the latter sense that in a taxing
statute the word must be held to have been used, unless contrary intention is
clearly expressed by the legislature.
This
principle is well-settled by a long line of decisions of Canadian, American,
Australian and Indian cases. Pollock J. pointed out in Grenfell v. I.R.C.,
[1876] I Ex. D 242 at 248 that if a statute contains language which is capable
of being construed in a popular sense, such a statute is not to be construed
according to the strict or technical meaning of the language contained in it,
but is to be construed in its popular sense, meaning, of course, by the words
"popular sense'' that which people conversant with the subject- matter
with which the statute is dealing would attribute to it. The ordinary words in
every day use are, therefore, to be construed according to their popular sense.
The same view was reiterated by Story, J. in 200 Chests of Tea, [ 1824] 9 Wheaton US
435 at 438 where he observed that the legislature does not suppose our
merchants to be naturalists, or geologists, or botanists. See the observations
of Bhagwati, J. as the learned Chief Justice then was, in Porritts &
Spencer (Asia) Ltd. v. State of Haryana,[l9791] I S.C.C. 82.
But
there is a word of caution that has to be borne in mind in this connection, the
words must be understood in popular sense, that is to say, these must be
confined to the words used in a particular Statute and then if in respect of
that particular items, an artificial definition is given in the sense that a
special meaning is attached to particular words in the Statute then the
ordinary sense or dictionary meaning would not be applicable but the meaning of
that type of goods dealt with by that type of goods in that type of market,
should be searched. In the instant case, we have "all kinds of papers
including papers subjected to coating, impregnating etc." If there is a
market meaning or trade meaning of that kind of a paper that should be adhered
to.
In
this case, there is no direct evidence how these peculiar goods are dealt with
in the particular market dealing with PG NO 23 those goods. But there is
evidence how these are to be understood in the light of the specifications of
the Indian Standard Institute which we have mentioned before. It is instructive
to refer in this connection a passage of the Tribunal's decision in Kores
(India) Ltd. Thane v. Collector of Central Excise, Thane, (29 E.L.T. 627, where
the Tribunal observed that on the point whether carbon paper is understood as a
coated paper in trade, there is authority of the Indian Standards Institute's
publication "Glossary of Terms used in Paper Trade and Industry"--IS:
4661.
Therefore,
understood in the accepted notion of construing entries of fiscal Statute not
from a technical or scientific point of view but from the point of view of the
people in the trade dealing with that particular type of goods and having
regard to the evidence of the Indian Standard Institute and in the absence of
any other evidence to the contrary, the Tribunal was justified in holding that
on the basis of the definition of paper as it was in the year 1976 carbon paper
would come within item 17(2)of the Tariff Items.
Learned
counsel for the respondent placed reliance on the observations of this Court in
State of Uttar Pradesh v. M/s. Kores (India) Ltd., [977] 1
SCR 837 where this Court was concerned with a notification under section 3-A of
the U.P. Sales Tax Act, 1948 The question fell for consideration before this
Court in that case was whether carbon paper was taxable as paper and further
whether ribbon was accessory or part of typewriter. This Court reiterated that
a word which is not defined in an enactment has to be understood in its popular
and commercial sense with reference to the context in which it occurs. The word
has to be understood according to the well established canon of construction in
the sense in which persons dealing with and using the article understand it.
For this principle this Court relied on the observations of Lord Tenterden in
Attorney-General v. Winstanley, [1901] 6 E.R. 740 and the observations of
Pollock, J. in Grenfell v. Commissioners of Inland Revenue, [ 1876] 1 Ex. D 242
at 248. Pollock, J. was construing the Stamp Act, where he correctly emphasised
that the words should be construed in popular sense meaning thereby the sense
in which people conversant with the subject-matter with which the Statute is
dealing, would attribute to it.
That
is the correct test. This Court observed further at page 839 of the report that
in popular parlance, the word 'paper' is understood as meaning a substance
which is used for bearing, writing, or printing, or for packing, or for drawing
on, or for decorating, or covering the walls. Carbon paper is not commonly
understood as paper. This Court thus held that paper simpliciter cannot include
carbon paper because that would not be in consonance with the popular PG NO 24
understanding of the expression "paper". But where paper of a special
type defined in the particular statute as one including paper which have been
subjected to various treatments such as coating, impregnating, how that paper
be understood, there must be evidence of that understanding. In the absence of
that evidence, the natural meaning following from the expression used in the
statute should be adhered to. In that light, it appears to us that in view of
the facts of this c..se and in the principles of law as prevailing in 1976
papers of all kinds including paper with coating and impregnating and the views
of the Indian Standard Institute, would include carbon papers .
Learned
counsel drew our attention to the decision of the Karnataka High Court in Khoday
Industries Ltd. v. Union of India and Ors., [1986] 23 E.L.T. 337 where the
learned single Judge held that carbon paper is an article of statutory
classifiable under item 68 of the Central Excise Tariff al1d not under item
17(2) as coated paper prior to its amendment with effect from 27th February,
1982. He took into account the Trade Notice No. 56/76 and Tariff Advice No.
5/76. The Trade Notice No. 5/76. The issued by the Collector was based on the
instructions issued by the Boarsl as per Tariff Advice No .5/76. Carbon paper
was commercially recognised only as an article of stationery falling under item
68 of the Central Excise Tariff and not under Item 17(2). This was in respect of
the position as it stood prior to 1976 when paper did not include coated paper
or impregnated paper. It appears from the said judgment of the High Court that
the Trade Notice 56/76 was issued by the Collector on 2nd March, 1976 and Item
17 was amended on 27th May, 11976 and sub-clause (2) as amended among other
things included coated paper. the trade notices and the tariff advices are not
relevant, as such, in construing items in Tariff Schedule. In this connection,
reference may be made to the observations of this Court in Orient Paper Mills
Ltd. V. Union of India, [1969] 1 S.C.R. 245 where this Court observed that a
quasi-judicial body exercising quasi- judicial power is not bound by the
directions of the Board.
There
is no provision in the Act empowering the Board to issue directions to the
assessing authorities or the appellate authorities in the matter of deciding
disputes between the persons who are called upon to pay duty and the
department. Therefore, trade notices as such issued by the Board are not
relevant considerations.
The
point which Shri Kapil, further, urged is that Item No. 17 was amended by the
Finance Act of 1982 and two specific entries were added, namely, Items nos.
17(3) and 17(4) we have noted before. His contention was that if the PG NO 25
carbon paper was already there then there was no purpose of introducing these
subsequent amendments. Shri Kapil relied on a Full Bench decision of the
Government of India in the case of M/s. Colgate Palmolive (India) (P) Ltd.,
[1979] E.L.T. J 567 where the Government of India observed that it was well
settled law that the proper rule of construction applicable to items and
entries occurring in Excise Schedule should be to construe not in scientific or
technical sense but in the sense as understood by the parties dealing with or
commercially conversant with them. The Government of India relied on the
observations of this Court in Dunlop India Ltd. v. Union of India, A.I.R. 1977
S.C. 597. So far as that principle is concerned, this is applicable. It must be
understood by the persons dealing with this particular type of goods. We are
concerned here not with paper simpliciter or how it is understood in common
parlance but paper with a particular definition at the relevant time, namely,
all kinds of paper (including paper or paper boards which have been subjected
to various treatments such as coating, impregnating) stated in that context. In
that context, it cannot be said that carbon paper cannot be coated paper as
such. Shri Kapil submitted that if carbon paper was there then there was no
purpose for introducing two sub-items by the Finance Act of 1982. The Finance
Minister, however, observed in his speech (extract of para 123 at page 38-39 of
Part 'B' dated 27th February, l982) as follows:
"123.
I also propose to rationalise and restructure the tariff relating to paper and
paper boards, the primary objective being to exempt small scale paper
converters from payment of excise duty and to release them from excise control.
In order to recoup the consequent loss in revenue, I propose to raise the basic
excise duty on industrial varieties of paper and paper boards by a small margin
of 2 1/2 per cent ad valorem. However, certain converted papers of high
value-added categories are proposed to be subject to basic excise duty at 32
1/2 per cent ad valorem. Similarly, specified articles made of paper and paper
board are proposed to be brought within the purview of the tariff item but
effectively restricting the levy to printed cartons and printed boxes.
It
appears that the Finance Minister was adding two items, one was 17(3)-carbon
and other copying papers and the second was 17(4)-boxes, cartons, bags and
other packing containers. He mentioned in his speech that in order to recoup
the consequent loss in revenue, he proposed to raise PG NO 26 the basic excise
duty on industrial varieties of paper and paper boards by a small margin of 2
1i2 per cent ad valorem.
Tariff
Advice No. 5/76 contained the following statement:
"TARIFF
ADVICE No. 5/76- (BOARD'S LETTER F. No. 61/2/73-CX. 2 dated 12.2.76.) Sub:
Paper-Carbon paper and Stencil Paper-Whether excisable under Item No. 17 of.
A
doubt has been raised whether carbon/stencil paper, produced by conversion of
duty paid base paper, should be treated as paper falling under tariff item
17(4) of Central Excise Tariff or as on item of stationery, outside the scope
of item No. 17 of C.E. Tariff.
2. The
matter was considered in the Central Excise Tariff Conference held at Cochin on
the 13th to 15th November, 1975. It was reported that carbon paper/stencil
paper is sold in the market mostly cut to size by retail stationers. The Indian
Customs Tariff Guide has also treated Carbon paper as an item of stationery and
not as paper. The Conference was therefore, of the view that carbon paper/stencil
paper, were commercially recognised only as articles of stationery.
3. The
Board is accordingly advised that carbon paper and stencil paper should he
treated as articles of stationery. and therefore outside the purview of item
No. 17-C.Ex . Tariff.
4 Receipl
of this letter may kindly be acknowledged.
These
are relevant or proper materials to apply to construe the meaning of the Tariff
Item. Moreover. in proper light these do not militate against the view that
carbon paper in 1976, was included in the special type of paper. as defined at
that time.
In the
aforesaid view of the matter, we are of the opinion that as at the relevant
time the definition of paper PG NO 27 being paper board and all kinds of paper
(including paper or paper boards which have been subjected to various
treatments such as coating and impregnating and in the light of the I.S.
specifications as noted hereinbefore and there being no other reliable evidence
as to how coated paper is understood in the market, except the opinion of the
Indian Standard Institute in its specifications, in our opinion, the Tribunal
was not right in the view it took .
The
Tribunal in Kores (India) Ltd., Thane, v. Collector of
Central Excise, thane, (supra) expressed the view that carbon would fall under
item 17(2) of the Tariff Items relying on ISI specifications. There was
authority of the Indian Standards Institute's publication "Glossary of
Terms used in paper Trade and Industry"-Is 4661. In view of the facts as
appeared in paragraph 14 of the Tribunal's judgment in Kores (India) Lid.,Thane,
v. Collector of Central Excise,Thane, (supra), where the basis of the
classifications of ISI in its specifications is explained, we are of the
opinion that the carbon paper fell under item 17(2) as it stood at the relevant
period germane for this appeal, before 1982, and not in residuary item No.68 of
C.E.T.
Learned
Solicitor General submitted that this amendment so tar as item 17(3) was
concerned was mere clarificatory and was introduced ex abundanti cautela. Our
attention was drawn to the decision of this Court in Md. Qasim Larry, Factory Manager,Sasamusa
Sugar Works v. Muhammad Samsuddin and Anr., [1964] 7 S.C.R.419 where the Court
was concerned with the question whether the term "wages" as defined
by section 2(vi) of the Payment of Wages Act, 1936 including wages fixed in an
industrial dispute between the employer and the employee. The question had to
be answered in the light of the definition prescribed by section 2(vi) before
it was amendement in 1958. The subsequent amendment expressly provided by
section 2(vi)(a) that any remuneration payable under any award or settlement
between the parties or order of a Court. would be included in the main
definition under section 2(vi). In the view we have taken on the construction
of the expression as it stood in the relevant time, it is not necessary to rest
our decision on the question whether the amendment was clarificatory or not.
In the
light of the evidence referred to by the Tribunal in Kores (India) Ltd. Thane
v. Collector of Central Excise Thane, (supra) and in the light of the
definition of paper in C.E.T. Item 17( l ) as it stood at the relevant time, it
is sufficient to hold that it was covered by item 17(2) of PG NO 28 C.E.T. and
would not fall into the residuary entry.In that view of the matter, the
decision of the Tribunal cannot be sustained on this point and the appeal must
be allowed.
However,
as the point of limitation has not been decided by the Tribunal, we remand the
case back to the Tribunal to decide that question having regard to the facts
found in this case. The appeal is, therefore, disposed of in the light of what
is stated aforesaid. In the facts of this case, the parties will pay and bear
their own costs.
R.S .S.
Appeal disposed of.
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