1. The captioned appeal was initially filed as a Revision Application before the Central Government which, under Section 35-P of the Central Excises & Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.
2. The facts of the case, briefly stated, are that the appellants (to be referred to as 'KIRAN' for brevity's sake) are manufacturers of "T.D. Waxed Paper, one side coated with Sodium Benzoate and other side waxed". For this, KIRAN buy duty-paid "M.G. White Poster Paper of substance 40 grams per square metre (G.S.M.) with T.D. (Titanium Dioxide) loading" from Andhra Pradesh Paper Mills, Rajamundry. A solution of Sodium Benzoate is applied to one side of the paper by means of a gravure printing process, for getting anti-rust properties.
The resultant paper is waxed on the other side, the grammage consequently going upto 52-55 G.S.M. It is used for packing and wrapping.
(c) Paper coated one side with Sodium Benzoate and the other side waxed.
The sample is in the form of white sheet of paper. It is free from laid lines and watermarks. One side is more smooth than the other one. It has good mechanical strength e.g. folding and tearing strength. It is composed of chemical wood pulp. Ash gives tests for titanium dioxide. It has grammage of 41 - 10 gm/sq. metre.
The sample is in the form of dull white sheet of paper. It is said to have been c,oated on one side with Sodium Benzoate, the tests of which are not clear. The sheet as such has grammage of 43-80 gm/per sq. metre.
The sample is in the form of white sheet of paper. It is said to have been coated on one with Sodium Benzoate and on other side it is waxed. It has grammage of 55.30 gm/per sq. metre as such the coating on one side to tests for waxy matter".
The Chemical Examiner apparently had advised the Department to ascertain the marketability of the product before its assessment.
4. KIRAN filed classification lists claiming the benefit of Central Excise Notification No. 71/76 dated 16th March, 1976 and assessment at 12.5% ad valorem. The Asstt. Collector of Central Excise, Bombay, held that the paper was a "Coated paper" as it had anti-rust properties and not "waxed paper" and that since the duty concession was for waxed paper and not coated paper, the benefit of notification No. 71/76 was not admissible. He "ordered assessment of the goods at 30% ad vol.
5. Aggrieved with the Asstt. Collector's order, KIRAN preferred an appeal before the Appellate Collector, Bombay, who rejected the appeal negativing the contention that the paper was only waxed paper and used as waxed paper. He held that since the subject paper had anti-rust property which ordinary waxed paper did not have, it was coated paper, as held by the Assistant Collector. It is this order that is now under challenge before us.
6. The appeal was initially posted for hearing on 5th April, 1983 on which date none appeared on behalf of KIRAN. The Bench, therefore, dismissed the appeal for default. However, KIRAN later made a prayer for restoration of the appeal. The restoration application was heard on 22nd December, 1983 and, on being satisfied with the explanation for default on the earlier hearing date, we ordered restoration of the appeal to file and decided to hear it on merits.
7. We have heard Shri C.S. Lodha, the learned Counsel for KIRAN and Shri V. Lakshmikunpran, the learned SDR, for the Respondent.
(i) The Department was wrong in saying that because the non-waxed side of the paper was taken through a solution of sodium benzoate, it ceased to be waxed paper but became coated paper.
(ii) Mere application of wax on one side of the paper was not "manufacture" for the purpose of levy of excise duty. Waxed paper and unwaxed paper both were classifiable under item 17 (2) of the CET. Therefore, there was no question of levy of duty on waxed paper made out of duty paid base paper. Reliance was placed in this context on the Tribunal decision in the Golden Paper Udyog case reported in 1983 ELT 1123. The ratio of this decision applied to the facts of the present case.
(iii) Reference was made to Central Excise Tariff items I-C, 12 and 14-C. With reference to Item 1-C, it was submitted that biscuits even when a layer of cream was sand witched between 2 pieces, continued to remain biscuits within the tariff entry. With reference to Item No. 12, it was submitted that vegetable non-essential oil, whether deodorised or not, continued to remain vegetable non-essential oil under the entry. With reference to Item I4-C, it was submitted that glycerine, whether crude or refined, continued to be glycerine within the meaning of the entry till the tariff item was amended so as to specifically and separately provide for crude glycerine and refined glycerine. The point urged was that the products mentioned in these tariff entries were liable to duty only once and not a second time after they were subjected to some processing or the other. Likewise, it was urged, the subject paper, though coated with sodium benzoate on one side and with wax on the other, remained paper within the meaning of the tariff item No. 17 and a second-time levy was not envisaged.
(iv) Reference was also made to the Bombay High Court judgment in the case of New Shakti Dye Works-1983 ELT, 1736. The Court had held, with reference to the amendments effected to tariff items No. 19 and 22 and to the definition of "manufacture" in Section 2 (f) of the Central Excises & Salt Act, that grey cotton fabrics as well as bleached, dyed and printed fabrics both were taken in by the amended entries and were separately liable to duty. This judgment supported the appellants' case.
(v) Reference was also made to the Bombay High Court judgment in the case of Empire Dyeing and Manufacturing Co.-1977 ELT J 34-in support of the contention that unless the processed product hopped from the parent item or sub-item to another item or sub-item of the tariff, it would not be liable to duty a second time.
(vi) Without prejudice to the aforesaid contention, it was submitted that if it was held that waxing amounted to "manufacture", then, the benefit of Notification No.7l/76,was admissible to KIRAN-KIRAN was neither availing themselves of the Rule 56A procedure in respect of the duty paid on the base paper nor the exemption contained in Notification No. 67/76 dated 16th March, 1976.
9. Shri Lakshmi Kumaran made the following submissions on behalf of the Respondent: (i) He adopted the arguments adduced by the lower authorities in support of the Department's stand in so far as the applicability of the exemption Notification No. 71/76 was concerned. He had no other argument in this behalf.
(ii) He, however, vehemently contended that the subject product was excisable under item 17 (2) CET. The basic question, according to him, was whether there was, in the facts and circumstances of the present case, "manufacture" -as understood commonly-, as envisaged in Section 2 (f) and as laid down by the Supreme Court in its judgment in the DCM case-1977 ELT 199 and in the South Bihar Sugar Mills case-1978 ELT 336. The ratio laid down by the Supreme Court in these cases was that the starting material and the finished product should be different-in name, character or use. The processing should not be such as brought about a mere change in the starting material but should be such as resulted in a product which is known differently in trade by name, has characteristics or uses different from the starting product. If, these tests were applied, Shri Lakshmi Kumaran urged, there could be no doubt that, in the present case, there was "manufacture". The finished product was certainly different from the starting product. In this context, he placed strong reliance en the Bombay High Court judgment in the New Shakti Dye case- 1983 ELT 1736-in which the Court held that bleaching, dyeing, printings, etc. of grey cotton fabrics resulted in a new product known as bleached, dyed or printed fabrics, which, while still being cotton fabrics, were different from grey fabric. The Court came to this conclusion on considerations from first principles before it proceeded to consider the amendments effected to tariff items 19 and 22 and Section 2 (f) of the Act. While it was true that if a product was specifically mentioned in the tariff entry, no question as to whether the process or processes resulting in the product amounted to 'manufacture' was permissible (according to judicial pronouncements), it was not correct to invoke a tariff entry to come to the conclusion that there was no "manufacture'' despite the position that, in fact, there was "manufacture" conforming to the tests laid down by the Supreme Court.
(iii) If there was "manufacture", it was not essential that the product which was the result of "manufacture" should hop from one sub-item to another sub-item of the tariff entry or to another tariff entry in order to attract excise levy. In this context, he relied on- (a) The Andhra Pradesh High Court decision in the case of Standard Packagings-1983 ELT. 786 (A.P.); (b) The Bombay High Court in the case of Kores (India) Ltd.-1982 ELT 253; (c) The Madras High Court decision in the case of Brakes India Ltd.-1980 ELT 775.
He submitted that there was no Supreme Court judgment in support of the proposition that there should be such "hopping" for the finished product to attract excise levy.
(iv) The legislative intent to tax treated paper (which was the product under consideration here) under Item 17 (2) was very much there. Otherwise there was no reason to refer to various treatments such as coating, etc. in the tariff entry. Notification No. 71/76 was also referred to in this connection. The legislative intent could also be inferred from the fact that Central Excise Rule 56A, which was designed to mitigate the rigour of multi-stage levies was applicable to Item 17. If multi-stage levy was not contemplated, there was no need for Rule 56-A. It was permissible to look into contemporaneous exposition of the tariff entiy as it was understood and interpreted at the relevant time by authorities charged with the task of enforcement of the law-doctrine of 'contemporanea expositio'. In this connection reliance was placed on the Supreme Court judgment in K.P. Verghese V. I.T.O-19%2 (1) SCR 629.
(v) There was no Supreme Court judgment in support of the proposition that when there was in fact "manufacture", and the product of manufacture conformed to a tariff description, no excise levy would be attracted on it if it was not enumerated specifically and differently from the starting product also falling under the same tariff description.
10. In reply, Shri Lodha submitted that Section 2 (d) defined excisable goods as goods liable to a duty of excise specified in the Ist Schedule to the Act, The present product was not specified in the tariff schedule and, therefore, would not attract excise duty. He also submitted that Rule 56A could not be invoked to interpret the tariff entry.
11. We have carefully considered the submissions of both sides. For a proper understanding of the issues, involved, it is considered expedient to set out tariff item 17 as it stood at the relevant time : "17. PAPER AND PAPER BOARD, ALL SORTS (including pasteboard, mill board, strawboard, 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 printing and writing paper (other than poster paper).
(2) Paper board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified." It will be seen that sub-item (2) has an inclusive clause whereby paper or paperboards which have been subjected to various treatments such as coating, etc. are specifically brought within the purview of the entry.
The question is whether an untreated paper, which falls under item 17 (2) would, after being subjected to one or more of the treatments alluded to in the inclusion clause, continue to fall in the said entry and attract excise levy or whether even if it continue to remain within the tariff entry, it would not be liable to excise levy once again.
12. Notification No. 71/76 dated 16-3-1976, with which we are concerned, reads as follows :- "In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts polyethylene coated paper, polyethylene coated board, waxed paper and waxed board, falling under Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty of excise leviable thereon as is in excess of 12.5 per cent ad valorem, subject to the condition that the appropriate duty of excise or additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), as the case may be, has already been paid in respect of the base paper or board used in their manufacture : Provided that nothing contained in this notification shall apply to a manufacturer who avails of - (i) the special procedure prescribed under rule 56A of the aforesaid Rules in respect of the duty paid on base paper or board; or (ii) the exemption granted under the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 67/76- Central Excises, dated the 16th March, 1976.
Explanation:- For the purposes of this notification, the base paper or board used in the manufacture of polyethylene coated paper, polyethylene coated board, waxed paper or waxed board shall be deemed to have paid the appropriate duty of excise or the additional duty leviable under Section 2A of the said Indian Tariff Act, 1934, if it is purchased from the market." It will be seen that the above statutory notification exempted certain specified varieties of treated paper, including waxed paper falling under item 17 (2) from excise duty leviable theron in excess of 12.5% ad. val. subject to certain specified conditions, one of them being that the appropriate excise duty or additional duty of Customs, as the case may be, had already been paid in respect of the base (untreated) paper used in the manufacture of the specified treated paper. The product under consideration in these proceedings is a paper, one side of which is coated with sodium benzoate the other side being waxed. We shall first deal with the question whether such a paper would be coated paper or waxed paper for the purpose of the above Notification. The Notification itself does not make a distinction between paper which is waxed on one side and the paper which is waxed on both sides. However, it is seen from the Indian Standard IS: 4661-1968 ("Glossory of terms used in paper trade and industry"), that coated paper has been defined as "paper which has undergone a coating process on one or both sides".
Applying this definition, the paper under consideration could be described either as sodium benzoate coated paper or waxed coated paper.
The Dept. has not placed before us any evidence as to how the goods are known in the market. However, Kiran has produced invoices describing the goods as wax paper. Since waxed paper is specifically enumerated in Notification No. 71/76, we do not see any reason why the benefit of the said Notification should not be extended to the subject paper, as claimed by KIRAN in the classification list submitted by them claiming benefit of the Notification. The Notification further stipulates that it shall not apply to a manufacturer who avails of the special procedure prescribed under Central Excise Rule 56A or the exemption granted under Notification No. 67/76 dated 16-3-1976. Kiran's submission that they were neither availing themselves of the Rule 56A procedure nor the exemption in Notification No. 67/76 has not been disputed by the Respondent. The subject paper would, therefore, in our view, be eligible for the duty concession contained in Notification No.71/76.
13. Considerable arguments have been addressed by both sides on the question whether the treatments applied to the base paper in the present case would amount to "manufacture" for the purpose of levy of excise duty. The learned Counsel for Kiran placed reliance on the Tribunal decision in the Golden Paper Udyog case-1983 ELT 1123. He also sought to derive support from tariff items I-C, 12 and 14-C. In so far as the Tribunal's decision in 1983 ELT 1123 is concerned, it does not appear that the Bench had occasion to consider the principle of contemporaneous exposition. The Supreme Court in K.P. Verghese V.I.T.O.- 1982 (1) SCR 629-stated as follows: "The rule of construction by reference to contemporaneous exposition is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction (1940 Ed.) where it is stated in paragraph 219 that 'administrative construction (i.e.
contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overtuned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight; it is highly persuasive.' The validity of this rule was also recognised in Baleshwar Bagarti V. Bhagirathi Doss whereby Mookerjee, J. stated, the rule in these terms : It is a well settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it." 14. Applying the above principle to the facts of the present case, we see that along with the re-casting of the terminology of Item 17 relating to paper and paperboard in the Ist Schedule to the Central Excises & Salt Act by the Finance Bill, 1976, which was introduced in the Parliament on 16-3-1976, and was later enacted as the Finance Act of 1976, the Central Government, acting in exercise of the powers conferred on it by Rule 8 (1) of the Central Excise Rules, 1944, issued Notification No. 71/76 on the same date, i.e. 16-3-1976 (which we have set out in para 12 above) exempting specified varieties of treated paper from excise duty in excess of 12.5% ad. val. when such papers were made out of excise duty or additional Customs duty-paid base papers. The inclusion of treated papers by express words in the tariff entry 17 (2), read with the Notification No. 71/76, is clear evidence of the manner in which the tariff entry has been understood by the authority charged with the task of executing the statute. And it is not as if this understanding is without any basis. The tariff entry, as we have noted, specifically includes treated papers. If the untreated paper and the treated paper were to be charged to duty at the same rate, that would amount to a considerable burden and it is clear that the Notification has bean issued in order to mitigate the rigour of the 2nd stage levy. While double taxation may be a vice, multi-stage taxation is not and Rule 56A of the Central Excise Rules is specifically designed to mitigate the rigours of malti-stage levies.
The present is not a case of double levy inasmuch as it is not the same product which is being subjected to duty at two stages. At the first stage, it was untreated paper and at the second stage, it was treated paper.
15. We would also like to consider whether the process of treatment of paper, as in the present case, amounts to "manufacture" for the purpose of excise levy. In the first place, we think that, strictly speaking, the question should not arise, for the tariff entry itself refers to treatments and the inclusion clause specifically brings treated paper within the ambit of the tariff entry. Even so, the ratio of the Bombay High Court judgment in the case of New Shakti Day Works--1933 ELT 1736-squarely applies to the facts of the present case. In that case the Court, on consideration of first principle, came to the conclusion with reference to Item 19 (and 22) of the Central Excise Tariff Schedule that, though the tariff entry did not spell out processed fabrics separately from grey fabrics, grey fabrics on the one hand and bleached, dyed and printed fabrics on the other, were different varieties of cotton fabrics, and not the same thing, that the process of bleaching, dyeing and printing amounted to "manufacture" and that the bleached, dyed and printed fabric would attract a second stage levy under Item 19. The situation in the present case is, if anything, somewhat stronger for holding that treated papers are excisable with a second-stage levy since, as we have seen, the tariff entry specifically includes treated paper: 16. The question whether "manufacture" is involved can also be looked iat From the point of view of the principles laid down by the Supreme Court in ts judgment in the DCM case-1977 ELT 199 and in the South Bihar Sugar Mills case-1978 ELT 336. The ratio of these decisions is that the starting product and the finished product should be known differently and should have different characteristics' or uses.
Further, the process of conversion of the starting product to the finished product must not be such as brings about only some slight change in the former, but must be such as results in a product which is new and different and known differently from the former. In the present case, the base paper (Poster paper) and the treated paper (waxed paper) are admittedly different products, known differently and have different uses. From this angle also, there is little doubt that there has been "manufacture" for the purposes of excise levy.
17. There is also another angle to the question. If we were to hold that waxed paper does not fall for a second stage levy under item 17 (2), we would, in effect, be rendering statutory Notification No. 71/76 nugatory. The Noti fication has been issued by the Central Goveramsnt in exercise of its delegated powers. We would be slow to adapt a construction which renders a statutory Notification meaningless.
18. We must also refer to the submissions made on the "hopping" theory.
In its judgment, in the case of Standard Packaging*, 1983 E.L.T. 786 (A.P.), the Andhra Pradesh High Court has clearly held that the proposition that manufactured goods should "hop" into another item (from the parent item) before they are taxed, has no basis either in our fiscal philosophy or in our statutes.
19. Before concluding we must also refer to Shri Lodha's submission with respect to Central Excise tariff items 1-C, 12 and 14-C. Of these, the first and the third items are not analogous to item No. 17 which is under consideration inasmuch as the nomenclatures in items I-C and 14-C do not employ the expression "all sorts" nor do they contain any inclusion clause which enlarges the natural meaning of the items. Item 12 relating to Vegetable Non-essential Oils does contain the qualifying expression "all sorts", but not an inclusion clause. By Notification under Rule 8(1), all sorts of Vegetable Non-essential Oils other than processed Vegetable Non-essential Oils have been exempted from duty.
Effectively, only processed vegetable non-essential oils are chargeable to duty and, for this purpose, the Notification furnishes a definition of the expression "Processed Vegetable Non-essential Oil". This situation, therefore, is also not analogous to the one we have on our hand.
20. In the result, we hold that the subject product was waxed paper eligible to the duty concession contained in Notification No. 71/76, dated 16-3-19/6. We allow the appeal and direct that the appellants shall bs extended consequential relief within four months from the date of communication of this order.
This dispute arose when the Assistant Collector told the appellant M/s Kiran Printing & Packaging that its price list for the paper viz. T.D.Waxed papsr one side coated with sodium benzoate and the other side waxed was correctly approved and classified under Tariff Item 17(2) at 30% ad valorem as the said paper had anti-rust properties and therefore, was to be treated as a coated paper and not waxed paper without the concession under Notification No. 71/76, as the Notification was only for waxed paper. Therefore, this Tribunal can deal only with this problem viz. whether the paper can be treated as a waxed paper so that it would enjoy concession under Notification No.71/76.
2. There has been not enough reasons given by either the Assistant Collector or the Appellate Collector (Appeal Order No. 693/78, dated 28-6-78) why the paper would not qualify to be classed as a waxed paper so as to be entitled to the exemption Simply because the paper was treated to give it anti-rust property would not make it less a waxed paper. The fact that it was waxed is not denied by the Department. In my view the treatment with sodium benzoate will not remove the paper from the category of waxed paper because acquisition of additional properties will not make the article cease to be what it was unless the additional properties change it completely so that it is no longer the article it was or is without the acquired properties.
3. In view of this I agree that the Notification No. 71/76, dated 16-3-76 should be extended to the appellant as in the order written by learned brother Sankaran.