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Paper Packaging Pvt. Ltd. and Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(18)ELT512TriDel
AppellantPaper Packaging Pvt. Ltd. and
RespondentCollector of Central Excise
Excerpt:
.....had been paid on the kraft paper used in their factory in the manufacture of corrugated board had paid duty at rates which would not exceed 30% ad valorem by virtuue of notification no. 127/77-c.e., dated 18-6-77. this 30% duty was further reduced by amounts ranging from 50% to 75% by notification no. 128/77-c.e. if the installed capacity was higher than 10,000 tonnes, the exemption was determined under notification no.129/77-c.e., that is the duty was reduced by a percentage of about 66.in no case would the kraft paper used by the appellants have paid duty of more than 20%. because of the exemptions under notification no.46/71-c.e., the corrugated board was liable to duty of 5% ad valorem.with effect from 24th january, 1978, notification no. 14/78-c.e. was introduced and on the same.....
Judgment:
1. An appeal was filed by M/s. Paper Packaging Pvt. Ltd., Bangalore against order-in-appeal No. 1489 to 1505/80 dated 30th June, 1980 passed by the Appellate Collector of Central Excise, Madras.

2. The appellants manufacture corrugated boards and clear them on payment of nil duty by virtue of notification No. 14/78-C.E. dated 24-1-78 (which amended notification No. 46/71-C.E.). The dispute is for the period 24-1-78 to 25-8-78, and started on the day that notification No. 14/78-C.E. came into operation. This notification 14/78-C.E.inserted a proviso in notification No. 46/71-C.E. of 24-4-71 and goes as follows :- "Provided further that if it is proved to the satisfaction of the proper officer that such corrugated board has been produced out of kraft paper or out of paper and paper board of the type known as kraft liner or corrugating medium of a substance equal to or exceeding 65 grammes per sq. metre, in each case, and on which the duty of excise has been paid at the rate of thirty-seven and half per cent ad volarem, then such corrugated board shall be exempted from the whole of the duty of excise leviable thereon." On the same day another notification No. 15/78-C.E. was promulgated exempting- "All sorts of paper commonly known as kraft paper, including paper and paper board of the type known as kraft liner or corrugating medium of a substance equal to or exceeding 65 grammes per sq. metre in each case from duty in excess of 37.5% ad valorem." 4. The appellants, however, point out that the duty that had been paid on the kraft paper used in their factory in the manufacture of corrugated board had paid duty at rates which would not exceed 30% ad valorem by virtuue of notification No. 127/77-C.E., dated 18-6-77. This 30% duty was further reduced by amounts ranging from 50% to 75% by notification No. 128/77-C.E. If the installed capacity was higher than 10,000 tonnes, the exemption was determined under notification No.129/77-C.E., that is the duty was reduced by a percentage of about 66.

In no case would the kraft paper used by the appellants have paid duty of more than 20%. Because of the exemptions under notification No.46/71-C.E., the corrugated board was liable to duty of 5% ad valorem.

With effect from 24th January, 1978, notification No. 14/78-C.E. was introduced and on the same day notification No. 15/78-C.E. was also introduced. All the while, notifications 127/77-C.E. and 129/77-C.E.continued to be in force.

5. It was further argued by the appellants that the government issued a clarification in these words- "It may be noted that the stipulated full duty exemption on corrugated board is available subject to the condition that the proper Officer is satisfied that such corrugated board has been produced out of kraft paper or out of paper and paper board of the type known as kraft liner or corrugating medium of a substance equal to or exceeding 65 gsm, in each case, which has paid duty at the enhanced rate of 37.5% ad valorem in terms of notification 15/78-C.E. In other words, the existing stock of corrugated boards as also corrugated board manufactured from kraft paper (including kraft liner or corrugating medium) cleared from the paper mills prior to the 24th January, 1978 at 30% duty, will continue to be leviable to duty at 5% ad valorem." 6. The appellants say that this explanation was circulated to the trade and a notice was issued by the Nagpur Collectorate in Trade Notice No.9/78 dated 7-2-78. Not satisfied with this, the Western India Corrugated Box Manufacturers' Association, Bombay, took up the matter further and were informed by the Collector of Central Excise, Bombay in his letter dated 31st of May, 1978- "That even though gate passes under which the factories manufacturing corrugated board receive kraft paper from the paper mills indicate deductions in the duty payable by them, by virtue of notification 128/77 dt 18-6-77 in the effective rate on such paper cleared from the paper mills mentioned in notification 15/78 dt.

24-1-78 for all purposes the paper so received will be deemed to have discharged the duty liability at the full effective rate indicated in the gate passes, for the purposes of notification 14/78 dt. 24-1-78 since the concessional rate of duty on such paper manufactured by the paper mills is entitled to the concession granted by virtue of notification No. 128/77." 7. However, the department took the view that since the kraft paper had not paid duty of 37.5%, the benefit of exemption under Notfication No.14/78-C.E. was not available and this was how the proceedings started leading upto the order-in-appeal, which resulted in the rejection of the appellants case. The appellants claim in their appeal that the kraft paper used by the petitioner should be deemed to have already borne duty at the enhanced rate laid down in notification 15/78-C.E., and, therefore, their corrugated board was entitled to the exemption under notification 14/78-C.E.8. We are not able to follow this argument because it is known, and there seems to be no dispute about this, that the kraft paper had not paid the duty of 37.5%. The appellants seem to merely rely on the clarifications given by the government and by the Collectorate and what they call the intention underlying this scheme and duty exemptions given on 24-1-1978.

A look at the trade notice dated 7-2-78 issued by the Nagpur Collectorate show that the words reproduced below were taken from the clarification received from the government- "The existing stock of corrugated board lying with the manufacturers of corrugated boards as also corrugated board manufactured from kraft paper (including kraft liner or corrugating medium) cleared from the paper mills prior to the 24th January, 1978 at 30% duty, will continue to be leviable to duty at 5% ad valorem." 9. There is not a word in this notice that the total exemption that they wanted to enjoy under notification 14/78-C.E. would be available even if the raw material had not paid the duty of 37.5%. It needs to be noted that the notice informs the trade that the corrugated board would continue to be leviable to duty at 5% ad valorem and not that it would be exempted totally as provided under notification 14/78-C.E. It may not be the best clarification in the world, but it does not say what the appellants think it says.

10. The letter dated 31st May, 1978 of the Collector of Central Excise, Bombay is almost unintelligible. But it does say "for all purposes, the paper so received will be deemed to have discharged the duty liability at the full effective rate indicated in the gate passes for purposes of notification No. 14/78-C.E., dated 24-1-78, since the concessional rate of duty on such paper manufactured by the paper mills is entitled to the concession granted by virtue of notification No. 128/77-C.E." 11. The paper would be deemed to have discharged duty liability at the full effective rate indicated in the gate passes, not that it would be deemed to have paid full duty of 37.5% as per notification No.I5/78-C.E. This letter cannot mean that where the gate passes show a duty of 7% or 20%, after deductions under notification 128/77-C.E. or 129/77-C.E., the paper would still be deemed to have paid duty at 37.5%. We can find no sanction in the trade notice or the circular for the appellants' belief that the rate of duty would be deemed to be 37.5% when the gate passes show a lower rate of duty had been paid.

12. The appellants counsel quoted the decision of AIR 1968 S.C. 718 Union of India v. Anglo Afgan Agencies in which the Supreme Court held that even if a trade notice did not amount to more than an executive instruction, it would be binding on the department and the department was estopped from contending that what was mentioned in the trade notice need not be adhered to; and that "the Union Government and its officers are not entitled at their mere whim to ignore the promises made by the Government". But we can see no promise made by the Government or by its officers, and we, therefore, cannot see that this decision will give them much aid and comfort.

13. The counsel also quoted the Gujarat High Court decision in Navgujarat Paper Industries v. Superintendent of Central Excise and Ors. 1978 CENCUS/750 which followed the above decision in Anglo Afgan Agencies of the Supreme Court. But for reasons, we have mentioned above, this decision will not help the appellants much either.

14. Another case quoted in support by the appellants is 1980 E.L.T. 6 (Bom.) Guest Keen Williams Ltd. v. Union of India and Ors. A notice had been issued by the Collector specifying that die-cast rotors were only at the intermediate stage of production and that they were not fit for use as rotors, and therefore, they should not be classified as rotors under Item 30(4) of the Central Excise Tariff. The Court said that the Government is estopped from contending to the contrary. But nobody here has contended contrary to any notice. i 15. Another case cited was Star Chemicals {Bombay) Limited v. Union of India and Ors. 1980 E.L.T.I33 in which the Bombay High Court decided that the trade notice regarding classification of a product was binding and that the department was estopped from contending otherwise. Here too the department made no contention otherwise than as in the notice.

16. The appellants also have quoted the case of M/s. Elphinstone Mills- AIR 1971 S.C. 2039 in which the Supreme Court held that the word paid in Rule 10 of Central Excise Rules should be interpreted as ought to have been paid. It is difficult for us to see the relevance of this judgment to the appellants' case. There is no dispute about the duty that was paid on the raw material nor is there any question about the duty that ought to have been paid. The problem arose because the duty that was known to have been paid on the kraft paper raw material was lower than the one stipulated by the proviso introduced by notification No. 14/78-C.E., before the full exemption desired by the appellants could be given. Nor is there any suggestion that the duty on such raw material ought to have been paid at a different rate. The duty paid was correct; only it did not meet the condition of notification 14/78-C.E.17. The appellants then quoted the case of Sulekh Ram & Sons v. Union of India and Ors. -1978 E.L.T. (J 525) (Del.) decided by the Delhi High Court in respect of notification No. 206/63-C.E. The appellants say that the High Court interpreted the words "on which the appropriate amount of duty has already been paid". The Court held that the scrap from which the goods were manufactured by the petitioner should have been such on which the appropriate amount of the duty of excise ought to have been paid at a stage prior to the use of the rerollable scrap by the petitioner. This case is different from the one we have. The High Court had a case in which the duty paid on the raw materials was not known, and the Central Excise authorities, therefore, did not accept that the appropriate duty had been paid on them. In our case, we know that the duty that had been paid on the kraft paper raw material was less than 37.5%, and payment of the higher duty was a condition for the grant of full exemption. The appellants claim that payment of, say, 20% should be held to be the same as payment of duty of 37.5%-an absurdity. The condition for this exemption is payment of 37.5% duty, not just an indeterminate "appropriate rate of duty". We are asked to repudiate the clear written word of the law and accept only a part as fulfilling the whole.

18. A few decisions of the Tribunal were quoted by the appellants but these all say that a trade notice was binding on the department and that the department was not entitled to reverse the classification or the announcement made in the trade notice. But the case before us is not one where the department had given any promise by which it ought to be estopped. We are not to consider in the case before us whether there has been a promise and whether the law of estopped will operate against the department. We are on a plain case of the department having issued clarifications and notice none of which gave the promise that the appellants sought or hoped for. The notices and clarifications were badly drafted, to be sure, but the meaning that does come through from their uncertain diction is that the duty at 5% was to be paid, and not that nil duty was earned by the paper board even if made from kraft paper on which the duty of 37.5% is not shown to have been paid. The letter of the Collector unambiguously says that the paper, that is, the raw material, would be deemed to have discharged duty liability at the full effective rate indicated in the gate passes- if the gate passes show duty payment of 37.5% then the board would earn the exemption of 14/78-C.E., but otherwise the raw material will be deemed to have paid duty only at the rate indicated in the igate passes. Why we have to "deem" the duty entered on the gate pass is more than we can figure out, but we suppose that if we have to then, of course, we must. We do not see how anybody can read from this that the Collector had promised that the kraft raw material would be deemed to have paid duty at 37.5% even if it had in fact paid a lower duty.

19. It was claimed by the counsel for the appellants that to read the notifications in the way the Assistant Collector did, would be to nullify the exemptions because no kraft paper at least till 24-1-78 would have paid any duty at 37.5%. The learned counsel for the department's answer to this was that if that was the effect of the notification, then that was how exactly it had to be worked. She said that neither the Assistant Collector nor the Appellate Collector nor anybody else can substract from a notification or supply its deficiency. There may be a defect of the various notifications as a result of which the manufacturer may not be able to avail the duty exemption as provided in the notifications. She said that this cannot be remedied now. The authorities who administered and execute the exemption notifications must go by the letter of the notification-at the most they can go by the intendment if such intendment can clearly flow from the words of the published law and legislation. It is not permissible, as suggested by the appellants, to give a so-called harmonious construction and reading to the scheme and the intention of the Government if by doing so we arrive at a result that is not to be found from the written letter of the law. One must take the law as one finds it. She also pointed out that this Tribunal has decided a number of such cases in the past, the most recent one being order No. 51-52/ 84-C dated 28-1-84 in which an exactly similar matter was considered by this Tribunal and the appeal for an identical concession rejected. She saw no merits in this appeal.

20. It is not for nothing that the Government clarification relied upon by the appellants says that- "The stipulated full duty exemption on corrugated board is available subject to the condition that the proper Officer is satisfied that such corrugated board has been produced out of kraft paper or out of paper and paper board of the type known as kraft liner or corrugating medium of a substance equal to or exceeding 65 gsm, in each case, which has paid duty at the enhanced rate of 37.5% ad valorem in terms of notification 15/78-C.E." This is just the contrary of what the appellants say was the Government promise.

21. The appellants had once canvassed the view that because of an amendment on 26-8-78 which substituted the words "on which appropriate duty, if any, has been paid" for the words "duty has been paid at the rate of 37.5% ad valorem" in the notification 14/78-C.E. the concession was intended to be given from the very beginning-that is, from 24-1-78.

This cannot be done except by giving the notification retrospective effect, an action that would, in different circumstances, bring out vehement protests from the assessee. We need not say anything more than that no notification can have retrospective effect whether such effect is for the assessee or against the assessee, unless such retroactivity is decreed by Parliament.

22. We have already discussed the matter in detail in the above paragraphs. We have also decided in two or three cases in the past that the concession sought by the appellants now cannot be given on the strict terms and constructions of the notifications. We rule similarly here and reject this appeal.

23. For the same reasons we reject the appeal filed by M/s. India Packaging Products Pvt. Ltd., Bangalore against the same order of the Appellate Collector of Central Excise, Madras.


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