1. This is an appeal against the order of the Appellate Collector of Central Excise, Bombay No. V(I")2-8/72/2040 dt. 12th Feb., 1975 and has been filed by Jayant Paper Mills Ltd., Surat. The order of the Appellate Collector arose from an order of the Assistant Collector of Central Excise, Surat dt. 15-4-72. The subject is the assessment of a product which the factory called "packing kraft hardsized". This product was considered by the Assistant Collector as liable to assessment under Item 17(4) of the Central Excise Tariff, whereas the factory claimed assessment under item 17(3). A show cause memo dated 12-8-71 was issued and this was followed by the adjudication order dated 15-4-72 in which the Assistant Collector held that the show-cause notice of 12-8-71 was correct "inasmuch as" packing kraft hardsized paper manufactured by M/s. Jayant Paper Mills Ltd. of Utran were correctly classified and assessed to duty under Tariff Item 17(4) of Central Excise Tariff as N.O.S. and hence, he confirmed the said show cause notice. In an appeal to the Appellate Collector, the order-in-appeal dated 12-2-75 was issued. In his order, the Appellate Collector came to the conclusion that the Assistant Collector's assessment of the packing kraft hardsized under sub-item (4) of Item 17 was correct and he accordingly rejected the appeal.
2. The appeal was heard by this Tribunal on 26-12-83. The learned counsel for the appellants said that the Appellate Collector came to his decision on grounds that were totally different from the grounds on which the Assistant Collector based his order. He explained that the product was a board of three layers of the same material or furnish as these are known in paper technology. The middle layer has received a sizing with about 2.9% of bitumen. Apart from this, no other material has gone into the manufacture of the board. There has not been sufficient xpl nation in the Assistant Collector's order why their product could no be Sussed under 17(3). They have been denied access to the full chemical reports and this was a serious handicap in the defence of their case. The Assistant Collector avoided discussing the merits of the case nor did he analyse the nature of the product to see whether sub-item (3) or sub-item (4) was the appropriate item- He only refers to the result of the test of the sample and proceeds to say that in view of these facts the product in question was correctly classified under Item 17(4). He also said that the price of the paper was Rs. 2.38 per kg. and this was high. A price was high only relatively. It implies that other goods of similar variety were priced lower. To say that the price of Rs. 2.38 per kg. was high was meaningless, unless the price of similar goods is also indicated and this has not been done. Nor does the Assistant Collector report what should be the correct price or the appropriate price.
3. The Appellate Collector launched into a discussion totally different from that of the Assistant Collector. He says in one part of his order that the appellants had refrained either deliberately or otherwise from mentioning their, product, namely, packing kraft hardsized as board or paper. Furthermoren upto the stage of the Assistant Collector's order the appellants' contentio was that their product was kraft papei which was a sort of packing and wrapping paper, but at the appeal stage fully knowing that their product would not qualify for the definition of paper, the appellants for the first time came forward with a new argument that their product was pulp board. He proceeds to say that the appellants did not market their product as pulp board but as packing kraft hardsized (which was one sort of packing and wrapping material).
Therefore he appears to have held that the claim that their product was pulp board was not substantiated even by their own trade practice. He also held that the product in question was neither kraft paper nor pulp board so as to qualify for assessment under 17(3) The Appellate Collector referred to a case decided by the Government of India, of M/s. Gujarat Paper Mills Ltd., Barejadi in which it was held that product fell within the scope of pulp board, notwithstanding the presence of bitumen "to the extent much more than percentage of bitumen found in packing kraft hardsized manufactured by the appellants". The Appellate Collector rejected the contention, as he said that the product of Gujarat Paper Mills was marketed as pulp board. The only dispute in that case was whether due to addition of bitumen the pulp board fell within sub-item (3) or sub-item (4) He therefore found that the facts were quite different and that the decision in the revision application has no relevance with this case of M/s Jayant Paper Mills, He ended by saying that in view of the definition of 'pulp board' given in the Indian Standards Institution specification 4661 of 19 8 and in view of the fact that the product manufactured by the appellants is not marketed as pulp board, the product does not fall within the scope of pulp board so as to qualify for assessment under sub-item (3). The counsel said that the goods are used as packing and the only suitable assessment would be under sub-item (3) where it would be seen that packing and wrapping paper are also assessed. It is a packing material which should find a place with a similar product like packing paper, instead of being put in the orphange of sub-item (4) which is really a residuary item for papers.
4. The learned counsel for the department said that the goods are not paper and the appellants wanted them to be assessed as a pulp board, although it is used for packing and wrapping. The appellants' contention was that the product is a sort of pulp board, but this is meaningless. A board cannot be a sort of pulp board because it is either a pulp board or it is not a pulp board. The goods cannot even fall under the category of "other sorts" in sub-item (3) because these words qualify only the portion between the words 'including' and the words 'triplex board'. To be a grey board, a corrupted board, a duplex board or a triplex board, it must first be a pulp board, but as he had said, it is not a pulp board but only a sort of pulp board which, to repeat, is a meaningless claim.
5. Pulp boards are used for printing cards, ice cream cups, etc. They are not meant for packing and wrapping. The product contains bitumen and, therefore, cannot be a triplex board which according to IS : 4661 of 1968 must contain no adhesive. This product contains adhesive in the form of bitumen which binds the three layers together.
6. In reply the learned counsel for the appellants said that in substance alone their product qualifies to be classed as a board because it weighs 226 gsm. The bitumen is present only as a sizing material in the middle layer; it is not as an adhesive. The adhesion is produced by the three layers being pressed together. The bitumen imparts only impermeability to liquids. There is, therefore, no reason why it cannot be assessed as a triplex pulp board.
7. We agree with the submission of the learned counsel for the appellants that not enough reasons have been given by either the Assistant Collector or the Appellate Collector for assessing the product under 17(4) instead of under 17(3) We think that 17(3) is the correct assessment and direct that the product described as packing kraft hardsized should be assessed under this sub-item. The appeal is accordingly allowed.
8. Before we begin the discussion of why we have allowed the appeal we should reproduce the Tariff Item 17 as it stood at the relevant time.
9. "Paper, all sorts (including paste board, mill board, straw board and card board) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.
(2) Blotting, toilet, tissue other than cigarette tissue, teleprinter, typewriter, manifold, bank, bond paper, chrome paper, tub sized paper, cheque paper, stamp paper, cartridge paper, parchment and coated paper (including art board, chrome board and board for playing cards) ; (3) Printing and writing paper, packing and wrapping paper, straw board and pulp board including grey board, corrugated board, duplex and triplex board, other sorts ; (4) All other kinds of paper and paper boards, not otherwise specified." 10. The two sub-items that interest us are (3) and (4) The other two sub-items do not enter into this discussion, except for a passing reference which we think would be in order and this is to point out that the Appellate Collector calls cartridge paper a cardiologist's paper.
11. The appellants claim that their product is a sort of pulp board. A pulp board is described by the Indian Standard (IS: 4661-1968'as a board manufactured in one layer or by bringing two or more plies of the same furnish into a single structure in the wet state without adhesive.
The counsel for the appellants says that this is how their product 'packing kraft hardsized' was manufactured. The Government of India was in error when it said in its order dated 22-11-76 that the three layers could not be taken to have the same furnish to make the board qualify as a pulp board and that the product was not known as pulp board in the trade. The test report of the Dy Chief Chemist of the Bombay Custom House dated 1-5-69 went like this : "It consists of three layers-front, middle and back layers. Bitumen is present in the middle layer. Each of the three layers is composed of chemical wood pulp and straw pulp." 12. The chenmt also reported in the same report that the middle layer contains bitumen and that the bitumen coating had not been done after the formation of the paper. This would mean that the bitumen was added to the stock and that the sizing was an engine sizing. This fact has not been disputed by anybody. Bitumen sizing is a well-known process and is widely used to water-proof paper and boards, usually the latter.
The percentage here is quite small and is only about 2.9%. The Chief Chemist in a note dated 20-3-70, however, says that if the bitumen was added to impart some special properties such as stiffness and moisture-proof quality, the product would be attracted to Item 17(4).
In saying so, he appears to contradict himself because sizing is always to impart strength and impermeability to liquids such as ink, water etc., to the treated paper product. The chemist himself admits earlier in the note that the product would be classifiable as a board, other sorts under Item 17(3), as the percentage of bitumen/asphalt was quite small and that petroleum asphalt can be used for sizing purposes. In his report dated 20-3-70 the Chief Chemist said that "the fibre furnish is mainly of chemical wood pulp of bamboo and straw with traces of mechanical wood pulp. A few cotton fibres are also seen. The sample does not contain any added colouring matter".
13. Erom all the foregoing reports of the two chemists who tested the sample, there appears to be a strong case for assessing the hardsized packing kraft of M/s. Jayant Paper Mill, as triplex board/pulp board ; but there is an impediment to this. The Indian Standard describes pulp board as a board manufactured in one layer or by bringing two or more plies of the same furnish into a single structure in the wet state without adhesive. The same standard describes a triplex board as a board consisting of three layers felted toeether duly manufactured by pressure while still moist without the use of adhesive. And furnish is described as the nature and proportions of the compounded constituents of the stuff or stock A stuff or stock is an aqueous suspension of pulp and other materials that go into the formation of the paper or the board. Therefore when we speak of two or more layers being made of the same furnish, we think of the layers having the same components/constituents/ contents. This would include the adhesive, colouring matter, sizing material and any other component that form the stock or the stuff prior to the formation of the finished sheet of paper or board. The product manufactured by Jayant Paper Mills has three layers of chemical wood pulp of bamboo and straw with traces of mechanical wood pulp and cotton fibres. But the middle layer having undergone bitumen sizing, it will involve presence of bitumen size in the furnish and therefore render it (furnish) different from the furnish of the two outer layers. But for this difference in the middle furnish, there would be no objection to assessing the product as a pulp board or a triplex board because the bitumen content of 2.6% or thereabouts in the middle layer as a sizing material will not add to the adhesion properties of that layer. By all accounts, the adhesion of the three layers was produced in the wet state when they were pressed together to form one structure. The chemist of Bombay Custom House reports that the bitumen coating had not been done after the formation of the paper ; to act as an adhesive the bitumen should not only be applied after the formation of the paper but also in substantially higher quandties than 2 or 3 per cent to perform satisfactorily as an adhesive, which, of course, it can under suitable conditions and application.
14. There are some, of course, who would reject the proposition that the furnish of the middle layer is different from that of the two outer layers because of the presence of bitumen of 2 or 3 per cent. It may be or it may not be so. Our own inclination is to say that any component or constituent that is found in the stock or stuff of one of the layers must differentiate that layer from any other that does not have it. Nor would it be appropriate to ignore the presence of the bitumen because as a sizing material it performs a well-understood and an important function in the construction of paper. Even the presence of a colouring matter which adds nothing to the quality would produce a furnish different from those furnish devoid of the same colouring matter.
15. However the entry in sub-item (3) of Item 17 has the words "other sorts" at the end The learned counsel for the department said that the entry should be read as if the words 'including grey board, corrugated board, duplex board and triplex board, other sorts" were in brackets and, therefore, the words "other sorts" cannot be taken to qualify the other commodities listed in the item such as printing and writing paper, packing and wrapping paper and straw board. But whether we take the words "other sorts" to qualify all or only the last four commodities, the description set up by them becomes very wide because unlike the words "all sorts" which must be understood to mean only of the sort listed, the words "other sorts" mean that even if there are differences, if the products answer to the list nomenclature, they will fit into the column. Thus, "all sorts" of duplex boards must be, first of all, duplex boards, and with the same basic characteristics of furnish, structure, manufacturing process, etc. etc. so long as the variations are not too divergent or too violent. For example, they should not have adhesives, they should have the same furnish and so on, even if perhaps they have colouring matters or similar minor variations. But "other sorts" of duplex or triplex boards would suggest that as long as the board is duplex and triplex i.e., has 2 plies or 3 plies, even though it has different kinds of furnishes in the different plies, or perhaps the plies are bonded with adhesives, so long as we can see that they are duplex (2 plies) or triplex (3 plies), it would be acceptable in the list nomenclature. We can see no other meaning to give to a definition "other sorts'" or duplex board of "other sorts" of triplex board; because when one goes by the strict definition of a duplex and a triplex, everyone knows how they are described, and there can be no duplex or triplex boards except the ones described.
16. In our opinion the debate about the product not being a paper or not being a board is already resolved because the substance being 226 gsm, it has to be a board unless, of course, there are other and better reasons to say that it is a paper. We are dissatisfied by the adjudication of the Assistant Collector who appears to have had only one thought in his mind and who has given no reasoning for his conclusions.
17. The assessment preferred by the department i.e., sub-item (4) of Item 17 is not a satisfactory item for more reasons than one. This is a "not otherwise specified" item, a kind of catch-all, a safety net one sees in circuses to catch a player or performer that may fall out. It catches all kinds of paper and paper board that fall out of the foregoing heads ; but it does so only when "other sorts" of paper have been housed and billeted in sub-item (3). It must be a house of last resort and cannot be employed simply because the Assistant Collector is too lazy to take the trouble of finding out whether the product before him fits into any other item better. An item is assessed in sub-item (4) only when it cannot fit into the first three sub-items ; but from all appearances in this case, sub-item (4) appears to have been the first choice of the lower authority and that they would have tried sub-item (3) only when they could no longer avoid sub-item (4). But the words "other sorts" in sub-item (3) give it a scope that it would not have had without them.
18. If the words "other sorts" are applied to all the entries in sub-item 3, the result would still be the same because those products can then still qualify as, say, pulp board or triplex board, if not as (other sorts of) packing/wrapping paper. We have to remember that the substance (of a paper/board) can never be the sole factor to decide whether the product is a paper or a board.
19. We will close by briefly referring to one last matter. The Appellate Collector said that the product manufactured by Jayant Paper was not marketed as pulp board. We wonder about this. It is doubtful if anybody sells his pulp board as pulp board. Pulp board is a technical definition that helps in segregating or identifying a paper/board from those that are not pulp board. A seller may or may not market his board as pulp board; but if the thing is a pulp board, we do not understand why not marketing it as one will make it less so. To say what has been said is to imply that if a seller sells a straw board as pulp board it becomes pulp board and acceptable as such, an unsatisfactory procedure every way. We cannot go by extraneous details in respect of articles/products that are known and defined in the taxation tariff.
Marketing cannot change a technically defined product. The definition may be exact or it may be loose, but as long as the definition in the law enables identification, we must go by it.