1. The Appellate Collector of Central Excise, Calcutta passed three orders in Appeal Nos. 126/WB of J980, dated 24-3-80; 127/WB of 1980, dated 24-3-80 and Nos. 128-129/WB of 1980, dated 24-3-80. The orders were in respect of the action of the lower authorities, who after approving a classification list dated 29-11-.1977 for mil) board filed by M/s. Nayek Associates Dist. Burd wan and extending concession to the mill board under Notification No. 70/ 76-C.E., dated 16-3-76, wanted to modify that approval. The Assistant Collect or of Central Excise, Burdwan approved the concession on 17-2-78. The Central Excise noticed later that caustic soda had been used in the manufacture of the mill board and that this fact had not been disclosed in the classification list. Furthermore, the factory used jute stalk and paddy straw in the manufacture. The Central Excise felt that the mill board was not eligible to the concession under the notification, and therefore proceedings were initiated to modify the classification. By one order dated 11-4-79, the Assistant Collector ordered that the assessment of the mill board should be at 30% ad valore an instead of the concessional rate, after issuing a show cause notice for the proposed modification. A demand was also issued on 15-2-79 for differential duty for the period 29-11-77 to 14-12-78. For the months of April 1979, and May, 1979, the Superintendent of Central Excise, Burdwan Range demanded duty in the F.T. 12. It was these orders that Jed. to the three appellate orders.
2. In Order No. 126/WB of 1980, the Appellate Collector saw no ground in the charge of suppression levelled against the factory by the Assistant collector. He said that it was not correct for the Assistant Collector to review his earlier order in which he had approved the concessional assessment for the mill board. The failure to mention the word chemical would not amount to suppression as it was commonly known that chemicals are necessary ingredients in the manufacture of paper.
He cited a judgment of the Supreme Court in the case of Anglo Afgan Agencies v. Union of India which ruled that if a promise is made it cannot be changed by the same person the Appellate Collector accordingly allowed the appeal. In Order No 127/ WB of 1980, the Appellate Collector agreed with the appellants M/s. Navek Paper & Board Mills that the Assistant Collector did not have the authority to review his own order. He also found the argument of the appellants on the question of time-bar as far as determination of additional duty by reclassification sustainable. He ordered by setting aside the order in original adding however that the classification approved by the Assistant Collector on 12-2-78 would remain valid till 18-5-79 when the order of the Assistant Collector on reclassilication was received by the factory. The last Order Nos. 128-129/WB of 1980 was with respect to the demands raised in the R.T. 12s for the months of April, 1979 and May, 1979. The appellants had claimed that the goods should be classified at the concessional rate as approved by the Assistant Collector on 17-2-78. The Appellate Collector concurred with the submissions of the appellants and' allowed the two appeals.
3 The Appellate Collector said that the Assistant Collector could not review his own order of approving the classification list filed on 29-11-79 by revising the approval to deny the concession under Notification No 70/76 C.E. He set aside the revision of the classification in the first order saying also that the failure to mention the word chemical did not amount to a suppression and that the adjudicating officer was not correct to review his earlier order In the second Order No. 127 and the third Order Nos. 128-129. he set aside the demands because he said the Central Excise authorities could not make these demands since they have no power to review the approval of the classification initially made by the Assistant Collector on 17-2-78.
The order of review was received by the factory or, 18-5-79 and apparently the Appellate Collector thought that till this date, the approval originally given by the Assistant Collector would remain valid. Strangely enough (in the Order No 127) he prescribed that the classification list as originally approved by the Assistant Collector on 17-2-78 would remain valid till 18-5-78 when it was received by the factory and thereafter the revised approval would take effect 4. Reviews under Section 36(2) of the Central Excises and Salt Act, 1944 were sought by the department against all these three orders of the Appellate Collector, while on on behalf of M/s. Nayek Paper & Board Mills an appeal has been filed by M/s. Nayek Associates agaisnt the order of the Appellate Collector No. 127/WB of 1980 because he said that the approval to the classification list given on 17-2-78 would remain valid till 18-5-79 meaning that from 19-5-79, the classification list would operate as modified by the order of the Assistatant Collector No. 1/Classification/VU/BDN/79, dated 11-4-79 communicated under C.No. III(10)II/VU/BDN/77/5714, dated 4-5-79. [The figure 79 in the number of the order in original is also quoted as 77; we have not been able to determine whether 77 or 79 is the correct figure].
5. Mr. Bandopadhyay, the learned Counsel for M/s. Nayek Associates argued that the Appellate Collector had condicted himself of saying first that the Assistant Collector had no authority to review and change his own Order, and proceeding to do just that by ordering that the classification list would stand modified from 19-5-79. Since the Assistant Collector had no authority to review his order, the originally approved classification list, the Appellate Collector should have continued it and should have passed an order to that effect.
6. He then began to argue that under Notification No. 70/76-C.E., it was not correct to hold as the Assistant Collector did that the use of the jute stalk and paddy straw would disqualify their mill board from the exemption. He quoted a large number of Court rulings in support of his contention. Their goods had mixed waste of 60%, jute stalk 20% and paddy straw 20%. The actions by the Assistant Collector were devoid of natural justice but the Appellate Collector did not take them into account when he ordered that the modified classification list would take effect from 18-5-79. The paper was made from residues left in fields which are gathered up instead of being allowed to run waste.
This is a service to the country.
7. The department learned Counsel Mr. Khanna argued that the jute-and the paddy straw were not materials permitted in the notification. It is clear from its wordings that primary fibre should not be used. The factory used mixed waste with materials not permitted by the notification. One must abide by the words in the notification. He referred to Delhi High Court decision in 1983 E.L.T. 24 in respect of Modi Rubber. The Counsel argued that by this judgment we see that there is no equity in the taxing statute and the subject is either within it or not. Only the words of the enactment or the rules have relevance.
The factory did not use mechanical pulp. As laid down in 1978 E.L.T. J 350-Hemraj Gordhandas v. Assistant Collector of Central Excise and Customs, there can be no intendment in the taxing statute; only the words used in the law should be given their full effects and meaning, argued the learned Counsel. When we do so, we will see that the factory had not abided by the terms of the notification.
8. Shri Khanna placed before the Bench a book Pulp and Paper Technology by Kenneth W. Britt. He argued that the notification wanted the use of secondary fibre, not primary fibre like virgin jute stalk and paddy straw. Other publication tell us that waste paper is being used widely for conversion to secondary fibre.
9. The learned Counsel for M/s. Nayek Associates presented a written submission of arguments in respect of the two appeals for Appeal No.ED(SB)(T) A. No. 474/81-C and A. No. ED(SB)(T) A. No. 1122/81-C listing the arguments and the authorities with which he supports his arguments.
For the sake of facility, we shall deal with the two matters together since they relate to proceedings that arose from one source, viz. the decision of the Assistant Collector to modify the classification list tiled on 29-11-1977 in respect of mill board manufactured by M/s. Nayek Paper & Board Mills.
10. The dispute arose over the interpretation of the definition given in the Notification No. 70/76-C.E. This definition says that: " 'Mill board' means any unbleached homogeneous board, having a thickness exceeding 0.50 mm and made out of mixed waste papers with or without screenings and mechanical pulp but without any colouring matter being added thereto." 11. The mill board manufactured by M/s. Nayek Paper & Board Mills contained jute stalk and paddy straw but no mechanical pulp. When the Central Excise realised that straw and jute have been used, they came to the conclusion that the concessional assessment given to M/s. Nayek Paper & Board Mills was mistaken and they wanted to withdraw it by means of the orders that we have referred to briefly. The Counsel for M/s. Nayek Paper argued that the use of the jute stalk and the straw did not disentitle them from the concession because the notification did not say that the mill board should be made exclusively out of mixed waste paper and mechanical pulp. As long as they have used these ingredients, it makes no difference if they used other ingredients also. The presence of screenings and mechanical pulp in the mixed waste paper was optional. He then quoted 1982 E.L.T. 87 decided by the Collector of Central Excise, Bombay that the Notification No.199/66-C.E. did not mention that such goods should be manufactured exclusively or entirely of the said scrap or virgin copper.
12. He quoted 1982 E.L.T. 616 to support his contention that the presence of screening and mechanical pulp was optional. In this decision the Government of India decided that the benefit of Notification No. 70/76-C.E. could not be denied on the ground that the mill board manufactured by the petitioners did not contain mechanical pulp and that the presence of screening and mechanical pulp was optional.
13. There was no room for intendment which is implied when the department said that the exemption was available only when the mill board should be made out of only the two ingredients viz. mixed waste paper and mechanical pulp; the denial of the exemption was based only on the intendment that use of straw and jute was not permissible. He quoted Supreme Court's decision in 1978 E.L.T. J 350, and Madras High Court decision in 1983 E.L.T. 34, and Madras High Court decision in 1983 E.L.T. 306 (there is no such case).
14. The error in the argument of the learned Counsel is that there is no intendment when the department says that the paper cannot get the exemption if mechanical pulp had not been used and instead jute stalk and paddy straw were used. An intendment is only an inference drawn from words when such words do not yield such an intention. An intention is inferred from the words used by the law and the interpreter has given to the words of the law meaning they do not have and cannot have.
Or when a hidden meaning is discovered in words and the words do not lend themselves to this meaning, it is an intendment. But it must be remembered that there is nothing wrong in a necessary intendment; that is, when an inference is drawn that can be validly made from the words used by the statute. In this case nobody has employed intendment. Nor has anybody read meanings into the words of the notification. What the Central Excise Department did was only to say that the notification required the use of mixed waste paper and mechanical pulp. The mixed waste paper may or may not have the mixed screenings, but the ingredients must be mixed waste-paper and mechanical pulp. The words of the notification arc that the mill board should be made out of mixed waste paper with or without screening and mechanical pulp.
15. We cannot understand why M/s. Nayek Paper speak of intendment. The exemption is given to mill board made from two strictly identified raw materials and the mill board manufactured by the factory did not have both the ingredients. It lacked mechanical pulp. Instead, it contained matter like jute stalk and paddy straw. We are not able to see how the use of mechanical pulp is optional. We cannot discover this in the notification. Mechanical pulp is one of the two materials, out of which the mill board must be made if it is to qualify for the exemption. To require the presence of mechanical pulp is only to give effect to the notification and its manifest words and therefore, does not involve any intendment, as suggested by M/s. Nayek Paper. Nor is it correct to claim that the use of the jute and the straw will make no difference to the notification, as such use may contribute or add to national wealth by avoiding waste.Union of India v. Tata Iron and Steel Company, the Supreme Court ruled that if the Intention of the Government was to exclude the exemption to duty paid pig iron when mixed with other materials, then the notification would have used the expression 'only' or 'exclusively' or 'entirely' in regard to duty paid pig iron. The object of the notification, said the Court, was to grant relief by exempting duty paid pig iron. The counsel for M/s. Nayek said this supports their case. But in the case before us, it is not the intention of the notification to grant relief by exempting duty paid mixed waste paper, the raw material. The Supreme Court decided a dispute in which scrap obtained from duty paid pig iron is used with non-duty paid material. The intention of the Notification No. 75/62-C.E. was to grant exemption 311 the duty paid pig iron. The manufacturers claimed that the question for consideration was the rate of duty leviable on steel ingots produced from processed moulds and bottom plates which had already borne a duty. They claimed that when ingot moulds and bottom stools become unserviceable, they are broken. This becomes scrap and is melted and used in the manufacture of steel ingots. The Supreme Court agreed that it was duty paid pig iron which was processed into ingot moulds and bottom stools and was again broken into scrap and was melted into steel ingots. Hence, the steel ingots which form the article for which exemption was claimed, fully conformed to the exemption condition of being obtained from duty paid pig iron. Nayek's mill board did not conform to the notification.
17. M/s. Nayek Associates claimed that the High Court of Madras in 1983 E.L.T. 34 ruled that, 'manufactured out of, does not mean that the end-product should be exclusively produced out of the material specified. The benefit of the exemption cannot be denied to a maufacturer who has used some other material in the process of such product as an assisting agent. The jute stalk and paddy straw Can, by no stretch of the imagination, be called an assisting agent. Together, they form 40% of the furnish of the mill board.
18. The High Court of Bombay decided in 1980 E.L.T. 291 that it was not proper to read an exemption notification in a limited sense, but should be construed liberally so that the petitioner may not be deprived of the advantage of the concession. By this, M/s. Nayek Associates appear to suggest that there has been an illiberal construction of the notification. But we can find none. The construction given by the Central Excise is only a construction given on the plain words of the notification. There is nothing illiberal in this. It is not as if the notification, by a liberal construction, can cover the mill board manufactured by M/s. Nayek Associates. This is not a question of a liberal construction, but a question of the mill board not being eligible to the exemption on the terms of the notification. We can see nothing liberal in saying that mechanical pulp need not be used, but that jute stalk and paddy straw can supplant it and take as much as 40% of the weight of the board.
19. M/s. Nayek Associates then argued that the Supreme Court in 1978 E.L.T. J 355, reminded us that if there was any ambiguity of language in a fiscal statute, the benefit of that ambiguity must be given to the assessee. Here is no ambiguity. No construction is possible by which we can say that the mill board made without mechanical pulp and with 20% jute stalk and 20% paddy straw was still qualified for the exemption when the words of the exemption say otherwise. In fact, we see complete clarity in the notification. M/s. Nayek Associates say that the High Court of Bombay decided in 1982 E.L.T. 885 that where a taxing or exempting provision is capable of more than one interpretation that interpretation must be put which would reduce the incidence of tax or enlarge the ambit of the exemption provision. Unfortunately, the notification is not capable of more than one interpretation, M/s. Nayak Associates claim and arguments notwithstanding.
20. There is no debar in the notification, argued M/s. Nayek Associates, to the use of other material, and in the absence of such a debarring provision, the exemption cannot be denied to their mill board. This was decided in 1984 ECR 1866 by this Tribunal. The problem here is not absence or presence of a debarring provision, but that the mill board was not made out of the material required for a mill board to be made in order to qualify for the exemption. The absence of mechanical pulp is explained by M/s. Nayek Associates as not necessary as it is only an optional material. We can see nothing optional about it in the notification. This argument can be used to say that even mixed waste is optional. Nor can we agree that mechanical pulp is inherent in mixed waste paper. Mixed waste paper can also result from chemical pulp.
21. The changes sought to be made by the Assistant Collector in the classification list was in order to deny the exemption to the mill board, as it was not made in accordance with the specifications in the notification. M/s. Nayek Associates say that the Assistant Collector cannot review his own order and if such a step was necessary, it should have been done under Section 35A of the Central Excises and Salt Act, 1944. The weakness of this argument is that the Central Excise Department sought to review the classification list after issuing a show cause notice for such modification. Demands were also raised for the past periods. A demand is always proper because it is in consonance with the provisions of the law. It has to be noted that all demands are for past periods and, therefore, retrospective in their action and in their nature. We cannot accept an argument that demands cannot be issued once the Assistant Collector has approved an assessment. If that were so, then we can see no utility for the provisions in the Act which authorise issuing demands, and indeed there would be no need for issuing demands. We must reject this contention as it is devoid of any logic and is not sanctioned by the law. Action to demand is a lawful and correct action unless, of course, it is faulted by failure to follow due process or for other reasons like the time bar etc. The order of the Appellate Collector saying that the revision in the classification list should take effect from the date of receipt of the revision order by the factory is seriously defective. There is no basis for the claim that action of this kind is wrong or that the Assistant Collector cannot change an assessment he has made. If he can issue a demand for past periods, he can also change an assessment if he finds it erroneous. This is not to say that the Assistant Collector can change assessments capriciously or without sufficient reasons. When a mistake is discovered in an assessment, it is necessary, for the assessing officer to take steps not only to rectify the assessment but also to issue demands for duty short recovered in the past. As long as he keeps within the law when taking such actions, we cannot pronounce his actions unlawful or wrongful. We have to judge his actions only against the law and nothing else. The assessees must not forget that they have a contra-positional right when the law authorises them to make claims for duty, recovered in excess by the Central Excise. As long as they proceed in accordance with the law and the claim is substantiated, the Central Excise has a duty to refund the money taken in excess from an assessee. The rights of the assessee and the rights of the Department complement and balance each other and both have their basis in the law and nothing more.
22. The mill board produced by M/s. Nayek is not a mill board that qualified for the exemption. It was not made in the way that the exemption notification required a mill board to be made if it was to gain the exemption. The absence of mechanical pulp and the use of jute stalk and paddy straw make the board a different one from the one exempted. An exemption must be interpreted strictly and the claimant must establish and prove his title to it. M/s. Nayek Associates have not done so. The Assistant Collector was right in the steps he took to recover duty and to change the classification.
23. A factor, however, intrudes itself into these proceedings that we think inappropriate. The Central Excise accuse M/s Nayek Associates of suppression because they did not declare that they used caustic soda in the manufacture of the mill board. We consider this charge frivolous.
Use of caustic soda in paper and board manufacture is normal and we expect the Central Excise to know such elementary facts about excisable commodities. If they do not, they cannot blame the assessees. It would have been a different matter if the factory suppressed the use of jute stalk and rice straw. The use of caustic soda is a normal technological fact in these processes. We consider the charge improper. In these circumstances, the recoveries of duty must be only for a period of six months before the date of the demands and no more.
24. We order accordingly. Duty shall be paid by M/s. Nayek Associates as demanded for the mill board manufactured by them in accordance with the revision made by the Assistant Collector in his order No.1/Classification/VU/BDN/79 dated 11-4-1979 as communicated by letter C.No. III(10)1I/ VU/BDN/77/5714 dated 4-5-1979, subject to the preceding paragraph.
25. A word about the order of the Appellate Collector which is a subject of appeal No. 474 of 1981 of this Tribunal. There is indeed a contradiction in his order to validate the modification of the classification list from 1.9-5-1979 after saying that such revision should not have been done by the Assistant Collector. But we have dealt with all the issues in these proceedings and our order will take care of them all. All orders of the lower authorities which are contrary to what we have ordered above, we countermand. They have no effect.