1. This is an appeal by M/s East India Industries (Madras) Pvt. Ltd., Madras, against the order in appeal No. 1444/80 dated 30.5.1980 passed by the Appellate Collector of Customs & Central Excise, Madras. The appellants manufacture a product that they call two sides paper lined hessian (bitumenised). This product is obtained by hessian being bonded on both sides with layers of paper, using bitumen as the bonder. The Assistant Collector said that the product should be classified under Item 17(2) of CET at 30% duty for the period 27-5-1976 to 4-4-1978 and proceeded to demand differential duty of Rs. 29,707.84.
2. The Appellate Collector in his order dated 30th May, 1980 said that the demand should be restricted in period to one year prior to 6-8-1977, and to six months for the period after 6-8-1977. He also decided that the product would fall under Item 17(2) CET and that Item 22A and Item 68 were not appropriate for it. He further ruled that notification No. 184/76 which the factory claimed was not available because in the manufacture of the product, hessian had also been used and the notification allowed exemption only to bitumenised waterproof paper or paper board obtained by bonding a layer of paper or paper board to another layer or paper or paper board with bitumen.
3. The learned counsel for M/s East India Industries began his address by saying that the Appellate Collector was mistaken in respect of the time-bar since the demand was issued on 17-4-1978 and the time limit was only six months; therefore, the period before November, 1977 was time-barred.
4. He further argued that their product was assessable under Item 22A or Item 68. If these items are not accepted, their goods should be assessed under Item 17(2) and in that case Notification No. 184/76-CE should be extended to them.
5. He referred to the notification and said that there was nothing in the notification that said that the bitumenised waterproof paper or paper board exempted by it should be made exclusively with paper or paper board and bitumen. In a judgment in Mis Mahakali Plastic Weave Pvt Ltd v. Collector of Central Excise, Bombay Order No. 567/1983-D dated 6-9-1983; 1983 E.L.T. 2064 (CEGAT), the Tribunal held that a laminated product composed of bitumen bonded layers of paper and jute is classifiable under Item 22A as jute manufacture as jute predominated in weight and not as paper/board under Item 17(2). In an order in revision No. 925 of 1980 dated 17-9-1980 M/s Board and Paper Converters, Bangalore 1980 E.L.T. 788 (G.O.I.), the Government of India ruled that a manufacture of hessian sandwiched between two layers of kraft paper and bonded by bitumen and containing 70% hessian by weight would be classifiable under Item 22A. In M/s Basant Pran Electric Co., Calcutta v. Collector of Central Excise, Calcutta 1984 (17) E.L.T. 499 (Tribunal), he said that the Tribunal held that to assess under Item 17 of CET the article must belong to the family of paper or paper board.
It held that an electrical insulating varnished paper was not classifiable under the paper item. He, however, said that in their products hessian accounted for only 30% and, therefore, cannot be said to predominate. In that case, he would say that the product was assessable under Item 68.
6. However, the department has assessed it under 17(2). If the assessment is under this heading, it should get the exemption that they had claimed under Notification 184/76-C.E. He argued that the central excise was wrong in demanding that no other material except paper, paper board and bitumen should be used. He referred to a judgment of the Supreme Court inAluminium Corporation of India v. Union of India Civil Appeal No. 677 of 1968 decided on 22-8-1975; 1978 E.L.T. (J 452).
He read out paragraph 11 of the judgment to emphasise that if a notification does not exclude from exemption a manufacture which includes even non-specified raw material, the manufacture cannot be denied concession on the ground that the finished product had not been manufactured solely and wholly out of the raw materials specified. The manufacturers used non-duty paid as well as duty paid crude aluminium in the manufacture of the finished sheets and the central excise authorities held that this fact would disentitle the goods from the exemption, because the exemption was only on finished sheets made out of duty paid crude aluminium. The Court ruled that the use of a little non-duty paid crude mixed with the rest should not mean loss of the exemption. The learned counsel for M/s East India Industries said that it would be seen that the Court held that if the notification does not expressly exclude anything, it is enough that the finished product had the specified raw materials in its manufacture. It should not make any difference if raw materials not specified by the notification are also used in addition. It is enough that paper and bitumen have been used.
7. He also quoted a judgment of the Madras High Court in Indian Organic Chemicals Ltd. v. Union of India writ petition No. 179 of 1980 decided on 27-7-1982 [1983 (12) E.L.T. 34 (Mad.)]. He read out paragraph 13 of the judgment and stated that the Court ruled clearly that a manufacture of the finished product even if it includes goods not specified in the notification would earn the exemption if the raw materials required by the notification to be used have been used. The Court noted that the words manufactured exclusively were not present in the notification (it was considering Notification No. 38/78). The manufacturers used monoethylene glycol to manufacture fibres/tops and this substance is not mentioned in the notification. The central excise held that this disentitled the fibre from the exemption. The High Court disagreed with this. The learned counsel said that the use of the hessian was necessary to achieve the best result as it imparted strength to the finished product which was used for packing/wrapping, and therefore, required sufficient strength. The Court rulings that he has cited will demonstrate that it would not be correct to deny an exemption simply because an additional substance had gone into the manufacture of the finished product.
8. The learned counsel for the department argued that she has nothing to say on the subject of time-bar because the Tribunal has ruled that the time-bar is to be governed by the day on which the demand was issued. When the demand in this case was issued, the time limit was only six months, and therefore, the demands for the period before this would be barred.
9. She argued that Item 17(2) speaks of "paper and paper board all sorts". The Tariff was wide enough to cover these present goods. It was not necessary to consider if the product fell under Item 68. As for Item 22A, the product cannot fall there as jute does not predominate.
10. She referred to the judgment of the Supreme Court,Aluminium Corporation of India [1978 (2) E.L.T. (J 452)] referred to by the learned counsel/She said that this judgment does not support the case of the manufacturers because notification 184/76-C.E., under which the appellants seek exemption for their product actually describes the method of manufacture. This notification prescribed that the exempted product should be "obtained by bonding a layer of paper or paper board and another layer of paper and paper board with bitumen". A very definite and unmistakable identity had been imparted to the finished product so that no other product can, even by mistake, be given the exemption. The Supreme Court ruled in Hemraj Gordhandas v. Assistant Collector of Central Excise, Surat, that there was no room for intendment in the statute but that regard must be had to the clear meaning of the words. If the taxpayer was within the plain terms of the exemption, he cannot be denied its benefit by calling in aid any supposed intention of the exemption authority. Only the express words written into the law can form the basis for interpretation said the learned counsel. She referred to the other judgments cited by the learned counsel for the appellants Mahakali Plastic Weave Pvt. Ltd. v.Collector of Central Excise, Bombay(Cegat) and the Basant Pran Electric Co. v. Collector of Central Excise, Calcutta 1984 (17) ELT 499 (Tribunal) and said that they have no relevance as the goods here have different processes of manufacture. She referred to the judgment of the Supreme Court AIR 1977 SC 597-1983 (13) M/s Dunlop and said that the Supreme Court had ruled that it is the trade parlance that should determine the terminology of goods in taxation. These goods are known in trade as hessian sandwich paper. They fall under item 17(2) and not under item 68.
11. In reply, the learned counsel for the appellants said that in the Indian Organic Chemicals judgment, the High Court dealt with a notification that did not specify its process but even so it gave the ruling he has referred to.
12. The question of item 22A does not arise at all because the jute will have to predominate in the product before this item can cover it.
Item 68 might be suitable if there are no other items which can accommodate this. We will, therefore, have to see if the other competing item, 17(2), can accommodate this bitumenised product, with bitumen as the bonding agent. The product is said to contain 30% hessain, 53% bitumen, and 17% kraft paper, and is said to be used for packing and wrapping. The hessian gives the paper strength and increases its burst factor, while the bitumen performs the role of only a bonding agent. It is not too difficult to say that the role of the hessain and the bitumen are only to increase or to improve the wrapping and packing properties of the paper. The paper becomes a stronger wrapping/packing paper than it was before it received the aid of the hessain and the bitumen. The three sheets, namely, paper hessian paper are held together by the bitumen which acts as the adhesive. The bitumen appears to have no other role than this, that is, to make it possible for the three layers to hold together. The hessian and the bitumen need not have been there, but the paper or papers would still have been wrapping and packing papers, though their quality and strength would have been less than desired. It is well known that in certain utilities, wrapping and packing paper well above the strength and durability of ordinary wrapping and packing paper is required. This enhancement of the strength and durability of the paper is imparted to the unstrengthened paper by the hessian and to a lesser extent, the bitumen. It, therefore, appears to us that taking everything into account, the substance, the function, the role of the product is as a paper, and therefore, it must be assessed as paper. Furthermore, it is know also in trade as a hessian sandwiched paper.
13. We now come to the main contention, that is, the exemption to the notification 184/76. The notification exempts "bitumenised waterproof paper and paper board obtained by bonding a layer of paper or paper board and another layer of paper or paper board with bitumen." The question that arises "Is the product obtained by bonding a paper or paper board and another layer of paper or paper board with bitumen? The answer immediately leaps out before us, because this is not a paper or paper board which has bonded to it another layer of paper and paper board with bitumen but two layers of paper which have been bonded to a sheet of hessian with bitumen. There are two such sheets of paper bonded to one sheet of hessian, but the papers are not bonded to each other - they are bonded to the hessian. The judgment relied upon by the learned counsel for the appellants is a judgment in which the final products are nothing but aluminium sheet and fibre/top, the exempted products. But in this case, we cannot say that the finished product for which exemption is demanded remains a paper/paper board bonded to another paper/paper board with bitumen. The product exempted is different from the product manufactured. We do not think that the judgments relied upon by the appellants can help them in obtaining the assessment under the notification. We agree with the learned counsel for the department that these goods cannot enjoy the exemption, and therefore, we rule that the action of the lower authorities was correct. We dismiss the appeal.
14. The demands shall be recovered only for the six months preceding the demand because on the date of its issue, the time-limit for demand under Rule 10 was six months.