1. These two appeals Were to be heard on 26-2-1985 but M/s. Bengal Paper Mill, the appellants did not appear. There is a letter from them dated 19-2-1985 saying that the paper mill, as well as the head office were still under closure and that there was complete dislocation of work. They requested adjournment for 3 months. We reject the request for adjournment. The case is to be heard and we call upon the department to present its case. Shri S.N. Khanna rises to argue in defence of the department's action.
2. The appeal by M/s. Bengal Paper Mill Ex. 400, dated 30-3-1981 directed against Order-in-Appeal No. 288 to 289 WB/1980, dated 15-9-1980 passed by the Appellate Collector of Central Excise, Calcutta. This order of the Appellate Collector was against the Asstt.
Collector of Central Excise, Asansol's Order No. 86-Paper/Paper Board/ASN/79 and No. 87-Paper/Paper Board/ ASN/79, both dated 22-9-1979. The orders of the Asstt. Collector arose from 2 show cause notice dated 16-1-1978 and 16-1-1 980 demanding duty said to have been short-levied on angle cut azure laid ivory shape envelope paper removed from their factory in the period 1-7-1976 to 31-7-1977 and from 1-8-1977 to 31-12-1977. The factory was charged with paying duty at the incorrect rate of duty of 25% instead of the correct rate of 30%.
According to the notices differential duty of Rs. 287,979.87 and Rs. 58,970.36 was required to be recovered. The Asstt. Collector adjudicated the notices and held that the paper cleared were liable to pay duty under sub-item 2 of Item 17 CET and not sub-item 1 of Item 17 as cleared by the factory.
3. The Appellate Collector who heard the appeal agreed with the Assistant Collector but said that some parts of the demands were time barred. He held that whenever the period covered by the demand was before 6-8-1977 when the time-limit under Rule 10 was brought down from one year to 6 months, the time-limit should be one year, and if the period was after the amendment, the time-limit should be 6 months. As a result, the Appellate Collector said demand for the period 1-7-1976 to 16-1-1977 was invalidated while duty would be payable under the demands for the period 17-1-1977 to 31-7-1977 and for the period 1-8-1977 to 5-8-1977, under the old Rule 10, and for the period 6-8-1977 to 31-12-1977 under the new Rule 10.
4. M/s. Bengal Paper Mill argued in their petition against the Appellate Collector's order that the Assistant Collector revised the order of approval on Form 1, without the authority of law and in excess of jurisdiction and in usurpation of jurisdiction. This was totally illegal since the classification of the angle cut azure laid ivory shade envelope paper had once previously been approved by the Assistant Collector and he cannot revise or alter it in this way. They submitted that angle cut azure laid Ivory shade envelope paper is a sort of printing and writing paper and can be used for printing and writing.
Once the character of a paper is decided mere cutting into angle shape for the purpose of making envelopes cannot alter the character of the printing and writing paper. Most of the periods of the impugned demand were time-barred. The Appellate Collector did not deal with the issue of the revision of the classification list which the Assistant Collector made arbitrarily. The demand of duty on the paper by classifying it under 17(2) of the CET is arbitrary and has no justification. \ 5. The learned counsel for the department Shri Khanna argued before us that the action of the Appellate Collector was correct and does not require any modification. The paper had undergone modification by being cut to size to enable it to be formed into envelopes. Item 17(2) of the CET at the relevant time would require assessment of the angle cut azure laid paper under Item 17(2). He called for the rejection of the appeal pending before this Tribunal as being without any merit.
6. First of all, the Appellate Collector was totally mistaken when he took the period in which the short-levy occurred as the period that would govern the length of the time-limit for the demand. The time-limit for demands would be governed only by the date on which the demand notice under Rule 10 was issued. Since the notices were issued in January 1978 when the time-limit under Rule 10 was 6 months, the time-limit would also be 6 months and nothing short-levied before the period of 6 months counted backward from 16-1-1978 will be within time.
Neither the Asstt. Collector nor the Appellate Collector say that there had been any fraud or mis-statement although the show cause notice says that there had been a deliberate attempt to evade duty by paying it at the lower rate ; but this half hearted attempt to establish fraud was not followed in the adjudication order nor in the appellate order. Had there been any fraud or misrepresentation, the Asstt. Collector should have imposed a penalty. Since he did not, we take it that he found no fraud. Therefore the time-limit of 6 months govern all these demands and all demands in excess of these 6 months are annulled.
7. The main dispute however, is about assessment of the angle cut paper. The demands say that cutting amount to a treatment which would attract the paper. The Asstt. Collector thought that the paper had been subjected to treatment.
8. The Bengal Paper reasoned that from the description of sub-item 17(2) CET it was evident that under this item the paper or the paper board "which are subjected to various treatment of coating impregnating etc. are covered and not merely a cutting of a paper tentamount conversion from T.C. 17(1) to 17(2) and in fact azure laid paper is manufactured for printing and writing purpose (SIC)". Evidently they infer that cutting in envelope shape and angles will not disqualify the envelope paper from continued assessment upon sub-item (1). The Asstt.
Collector however, argues that the angle cut is given to the paper for the purpose of envelope making and that this obviously would change the paper into "all other kinds of paper" and falling outside Item 17(1) which covers only uncoated and coated printing and writing paper. The Appellate Collector says nothing about the merits of the assessment of the envelope paper, dismissing the issue by recoarding only that the appeal was against the Asstt. Collector's order and not against the classification order. If, said be, the demand was raised on the basis of an approved classification list, it was in order.
9. Although we agree with the judgment that angle cut paper outlined for envelopes are to be assessed under 17(2), we wish that the Asstt.
Collector had discussed the assessment a little more thoroughly.
Envelope paper is made of different kinds of paper. Ragunath Dutt in his Glossary of Paper Terms says that envelope paper is a general term applied to strong opaque, non-curling paper with good folding endurance and smooth writing surface suitable for making envelope. Manilla, kraft, writing, bond, and ledger paper are used for this purpose.
10. These papers are widely different kinds of paper. For instance, kraft paper is a wrapping packing paper made from unbleached sulphate pulp and used in wrapping and packing for its strength. Manilla paper is also a strong wrapping paper or labelling paper made from manilla hemp. It is tough durable and has good folding strength. On the other hand, bond paper is a writing paper, machine made, of good strength and durability ; a ledger paper is white, buff and azure laid or wove writing paper, medium to heavy, strong, hard sized or tub sized, with good erasing qualities, used in business forms, stock, account and blank books. It is easy to see from this that envelope is made not just from writing paper but from non-writing papers like manilla and kraft paper. Of course, a paper must be sufficiently suitable for writing since an envelope has to take writing on it if it is to serve as an envelope. The easiest example is an envelope in which a letter is enclosed : when the envelope is gummed, the name of the person for whom the letter is meant is written on the envelope. Though printing and writing is done on the envelope, it is not its printing and writing quality that gives the envelope its distinctive character but its enclosing action when it envelopes a letter for another person and when it is carried through the post. We can see that the angle cut azure laid paper though originally a writing paper has been given the function and quality and role which sets it apart and away from its origin as a writing and printing paper.
"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 board which have been subjected to various treatment such as coating impregnating, corrugating, creping and design printing) not elsewhere specified." An envelope paper is not a paper for printing and writing even though it takes writing and printing because of the nature of its function.
But the writing and printing an envelope undergoes is of a rudimentary kind designed only for the limited objective of recording the name and address of the person to whom the contents in the envelope are to go.
When the tariff specifies printing and writing paper, we understand these to mean paper on which the writing and the printing that can be done on it will form reading matter of a type we encounter in books, pamphlets, newspaper, letters and so on. The reading matter may be serious or light or it may be the most arrant nonsense. It may even be unintelligible to the person who may receive it but it would still be printed matter or written matter and would satisfy the technology and science of writing and printing. An envelope can carry writing or printing on its face but there is nothing of reading matter for the receiver of the envelope : it is the contents enclosed in the envelope that he will subject to scrutiny to acquire information. It is this paper the paper that contains the reading matter that can qualify as writing paper.
12. Evidently the angle cut azure laid envelope papers outlined as envelopes will not be used for writing or printing even though they started their life as writing/printing paper. The use they will be put to as can be seen from the shape they have taken or been given, is not that of a writing and printing paper, but of an envelope. Sub-item 2 of Item 17 covers "all other kind of papers", including this and that kind of papers. Since an envelope paper cannot function as printing and writing paper, it must go out of sub-item 1. It can be adequately housed in sub-item 2 because of the embracing character of the definition in which all paper, whatever their kind or character or use, can find place, except those of sub-item 1. This is our ruling. However the recovery of duty shall be only for 6 months preceding the date of the issue of the notices and no longer, whether the short-levy occurred before or after the change in the time-limit of Rule 10 in August, 1977.
13. The Asstt. Collector, the Appellate Collector and Bengal Paper Mill all speak of wrapper paper being included in the weight of the reels/reams. The Asstt. Collector ruled that the wrapper paper should form part of the assessment of the paper wrapped in it and we agree.
But we cannot understand how this matter arises here because the show cause notice that we have been able to read has nothing about wrapper paper. Since there is no material on the subject we cannot make any judgment on this part of the dispute. We read from the Asstt.
Collector's order that there was already a separate demand for payment of duty on wrapper paper used for packing. Let the concerned people pursue the case, and not mix it up with this. M/s. Bengal Paper Mill complain that the Asstt. Collector should not have revised the classification list arbitrarily after approving it himself. To be sure the Asstt. Collector should not do such a thing arbitrarily. But from what we can see of these proceedings, demand notices were issued for duty thought to have been short-levied. There is nothing illegal or wrongful about them. Or do M/s. Bengal Paper Mill think the Asstt.
Collector must never modify or change a classification list once he approves it and short-levies should be allowed to continue If they do, we disagree completely.