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Kores (India) Limited Vs. Union of India and Others - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Application No. 2401 of 1977
Judge
Reported in1982(10)ELT253(Bom)
AppellantKores (India) Limited
RespondentUnion of India and Others
Excerpt:
- - 1. this special civil application raises two interesting points of considerable importance, viz., (1) whether any excise duty is at all leviable on teleprinter rolls made by the petitioners, and (2) assuming that such excise duty was leviable on such teleprinter rolls, whether the petitioners are entitled to the facility of proforma credit under rule 56a of the central excise rules, 1944 for the excise duty paid on the tissue paper which was used by the petitioners making two-ply or three or more ply teleprinter rolls.2. in order to appreciate the contentions raised by the petitioners, it is necessary to refer to the facts of this petition which lie within a narrow compass :the petitioners are a company carrying on the business of manufacturing and supplying diverse kinds of stationery.....
Judgment:
1. This Special Civil Application raises two interesting points of considerable importance, viz., (1) Whether any excise duty is at all leviable on teleprinter rolls made by the petitioners, and (2) Assuming that such excise duty was leviable on such teleprinter rolls, whether the petitioners are entitled to the facility of proforma credit under Rule 56A of the Central Excise Rules, 1944 for the excise duty paid on the tissue paper which was used by the petitioners making two-ply or three or more ply teleprinter rolls.

2. In order to appreciate the contentions raised by the petitioners, it is necessary to refer to the facts of this petition which lie within a narrow compass :

The petitioners are a Company carrying on the business of manufacturing and supplying diverse kinds of stationery articles including, inter alia, carbon papers, typewriter ribbons and teleprinter rolls at their factory at 1, Pokhran Road, Thane (West). The teleprinter rolls which are the subject-matter of this controversy are made by the use of various components including tissue paper. These teleprinter rolls are used on teleprinter machines on which messages received on the teleprinter machines are printed. The process of making teleprinter rolls, as stated in the petition, is really not complicated. The petitioners purchase from paper manufacturers and/or paper dealers paper which is described as Jumbo (or large) rolls of writing or printing paper. This paper is an ordinary printing or writing paper and the manufacturers of such printing or writing paper pay excise duty thereon in accordance with the appropriate rates in the Central Excise Tariff. After purchasing Jumbo (or large) printing or writing paper rolls, the petitioners cut the same to a size suitable for use on a teleprinter machine and roll such cut paper to a specification suitable for slitting such rolls on a teleprinter machine. The writing or printing paper cut to a specified size and rolled to a specified dimension is known in the trade as single-ply teleprinter roll. Some of the customers of the petitioners desire to take out copies of messages printed on the teleprinter machine and depending on the number of copies required the petitioners inter-leaf the writing paper cut by them to the specified size with one or two sheets of carbon paper(s) and roll the same to the specified dimension and such teleprinter rolls are known in the trade as two-ply or three or more ply teleprinter rolls. According to the petitioners, all such teleprinter rolls, whether ordinary teleprinter rolls or two-ply of three or more ply teleprinter rolls, are merely ordinary writing or printing paper cut to a specified dimension with or without inter-leafed carbon paper sheets. It is the contention of the petitioners that for making of teleprinter rolls, the petitioners do not carry out any process of manufacturing paper whatsoever as the manufacturing of paper is already complete before the petitioners purchased such writing or printing paper from the paper manufacturers and/or paper dealers. Therefore, the petitioners contend that all that is done by them is to cut large or Jumbo size paper into a specified size and roll the same to a specified dimension and no change whatsoever takes place to the Jumbo or large size rolls of writing or printing paper purchased by the petitioners and the paper in the teleprinter rolls is identical in every respect to the writing or printing paper purchased by them. According to the petitioners, the process of manufacturing of paper is already complete at the time of the purchase of the writing or printing paper and cutting fully manufactured writing or printing paper to the specified size and rolling the same to a specified dimension as such do not constitute any process of manufacturing of paper within the meaning of section 2(f) of the Central Excise & Salt Act, 1944, and, at any rate, this activity cannot be described as activity of manufacturing paper. It is further contended by the petitioners that the activity carried on by them cannot be regarded as an activity pertaining to manufacturing of paper or an activity incidental or ancillary to the completion of paper as a manufacturing product. The petitioners having averred that making of teleprinter rolls does not constitute manufacturing of paper, they further contend that such teleprinter rolls are not liable to excise duty under Item No. 17(2) mentioned in the First Schedule to the Central Excise Tariff.

3. The petitioners further state that they have been making teleprinter rolls since the year 1974. Sometime in the year 1968 the Central Board of Revenue of the Government of India decided inter alia that teleprinter rolls 'converted' out of duty paid paper should not be subjected to excise duty again. In consequence of the said decision no excise duty was sought to be collected or recovered thereon by the respondents or any of their officers until sometimes in March 1973. On or about 17th March, 1973 the petitioners were informed by the Superintendent of Central Excise, Division 'IX' Range II, that excise duty was liable to be paid on teleprinter rolls. As the petitioners were of the opinion that such teleprinter rolls did not bear any excise duty, they by their letter dated 20th March, 1973 addressed to the Superintendent of Central Excise asked for clarification. On 22nd March, 1973 the Superintendent of Central Excise informed the petitioners that the teleprinter rolls made by them were liable to excise duty with effect from 7th February, 1973 and that the petitioners should obtain the requisite licence and comply with the other formalities relating to such teleprinter rolls prescribed under the Central Excises & Salt Act, 1944 and/or the Rules made thereunder.

4. On 18th April, 1973 the petitioners submitted under protest to the Assistant Collector of Central Excise for classification of all the goods manufactured by the petitioners as required under the provisions of Rule 173B of the Central Excise Rules, 1944. The petitioners included teleprinter rolls even though, in their opinion, the same were not excisable. The petitioners received a communication dated 15th/18th May, 1973 purporting to amend the form submitted by them on the ground that teleprinter rolls were assessable to Central Excise duty and did not come within the category of paper entitled to a concessional rate of duty.

5. The petitioners, being aggrieved by the said order of the Assistant Collector of Central Excise that all teleprinter rolls would attract excise duty, filed an appeal therefrom on or about 17th August, 1973 before the Appellate Collector of Central Excise. The Appellate Collector by his order dated 20th June, 1975 dismissed the said appeal along with other similar appeals filed by other parties holding that such teleprinter rolls were assessable under sub-item (2) of Tariff Item No. 17 as, according to him, they were specially made and were distinct from ordinary printing or writing paper. The petitioners further filed a revision application against the aforesaid order of the Appellate Collector to the Government of India. The Government of India by its order dated 14th April, 1977 rejected the said revision application. It is the petitioner's contention that in the meanwhile they were compelled to pay excise duty under protest on such teleprinter rolls cleared between 7th February, 1973 and 15th March, 1976. The aggregate amount of excise duty payable thereon came to Rs. 2,48,954.32. The petitioners further under protest availed themselves of proforma credit for the excise duty paid on writing and printing paper amounting to Rs. 1,05,499.78. The petitioners also from time to time submitted to the Department refund claims for the balance i.e., the amount of excise duty wrongfully collected from the petitioners on such teleprinter rolls. These claims for refund were filed on 27th February, 1976 in respect of two amounts, one of Rs. 13,239.24 for the period between 1-1-75 and 28-2-75 and for Rs. 76,485.82 for the period between 1-1-75 and 31-1-76. The Assistant Collector by his order dated 18-6-1976 rejected the claims. The appeal filed before the Appellate Collector of Central Excise and Customs came to be rejected on 5-10-1976. The reasoning adopted by the Appellate Collector was that since the appeal against classification had been dismissed, the petitioners were not entitled to any refund. The petitioners presented a revision petition to the Central Government on 28-2-1977. However, the said revision petition came to be dismissed on 30-10-1978.

6. The petitioners in the meanwhile, as a matter of abundant caution, and without prejudice to their contention that the excise duty was not payable on such teleprinter rolls applied for permission on or about 30th August, 1973 to avail of proforma credit under Rule 56A of the Central Excise Rules, 1944 on the excise duty paid on tissue paper used in making carbon paper which was in turn used in the said two-ply or three-ply or more piles teleprinter rolls. The petitioners fairly conceded in their petition that at the relevant time no excise duty was payable on carbon paper. This petition to the Assistant Collector of Central Excise for proforma credit under Rule 56A of the Central Excise Rules, 1944 came to be rejected on 4th July, 1974 on the ground that excise duty was being payable on teleprinter rolls and not on carbon paper and as such proforma credit could not be granted. This decision was confirmed by the Appellate Collector of Central Excise on 30th September, 1974 and the further revision petition to the Government of India came to be submitted on 10th April, 1975 by the petitioners and the Government of India rejected the same by an order dated 14th April, 1977. It was the contention of the petitioners that if the petitioners had been permitted to avail themselves of such proforma credit they would have been entitled to do so to the extent of Rs. 1,23,051.26 in respect of teleprinter rolls cleared between 7-2-1973 and 15-3-1976 as per the particulars furnished in the petition.

7. As against these contentions of the petitioners, the respondents have adopted a two-fold stand. Firstly, it was contended by the respondents in the proceedings before the Central Excise authorities that teleprinter rolls were not identical to printing or writing paper. Printing or writing paper as mentioned in sub-item (3) of Tariff Item No. 17 of the Central Excise Tariff was a broad and general term for all papers particularly intended to be printed or written upon. Printing or writing paper was covered under sub-item (3) Tariff Item No. 17 of the Central Excise Tariff as it existed prior to 16th March, 1976 whereas teleprinter paper or as the petitioners described it as teleprinter rolls fell under sub-item (2) of Tariff Item No. 17 of the Central Excise Tariff. Central varieties of each printing or writing paper were specially mentioned in sub-item (2) of Tariff Item No. 17 of the Central Excise Tariff for the purpose of levy of duty depending upon their properties and usages. According to the respondents, teleprinter paper has got special characteristics in terms of size, shape and finish. The respondents relied on the submissions of the petitioners themselves that petitioners used to purchase duty paid printing or writing paper (Jambo) rolls from the paper manufacturers and/or paper dealers and bring such rolls to their factory for making teleprinter paper rolls with the aid of power driven machines cutting large (or Jumbo) rolls of paper to specified dimensions and required sizes and roll such cut papers in such a way as to make them fit on teleprinter machines. Such teleprinter rolls are manufactured in one-ply, two-ply or even more plies depending upon the demand of the teleprinter users. To make two-ply or more plies of teleprinter rolls, the petitioner have to inter-leaf such cut papers with one or more carbon sheets and then roll them to specific dimensions so as to fulfil the requirements of the customers who desire to have more copies of messages received by them. Further a warning mark is printed at the end of the roll for cautioning the teleprinter operator that the roll is coming to an end; and after that a slogan is printed on the roll itself indicating the name of the customer. The process of cutting large rolls of paper into specific sizes and dimensions and to roll them into teleprinter rolls interleaved with carbon papers with the aid of power driven machines amounts to manufacture of paper within the meaning of Section 2(f) of the Central Excises & Salt Act, 1944. It was also contended on their behalf that if such large rolls of paper are not subjected to the above manufacturing process, they cannot be used as teleprinter paper and, hence, cannot be called as teleprinter rolls. According to the respondents, though printing or writing paper on which duty is already paid is used in the manufacture of teleprinter paper rolls, it does not remain as printing or writing paper classifiable under sub-item (3) of Tariff Item No. 17 of the Central Excise Tariff but entirely a new product having a distinctive name, characteristics, shapes and dimensions emerges and the same clearly falls under sub-item (2) of Item No. 17 of the Central Excise Tariff after undergoing the above process. The respondents, therefore, have taken the stand that the process was one of manufacturing teleprinter paper.

8. As far as the second contention of the petitioners was concerned, that they were entitled to the proforma credit under Rule 56A of the Central Excise Rules, 1944 in respect of the tissue paper used in manufacturing the carbon paper which in turn is used to manufacture teleprinter paper rolls, the respondents firstly stated that the petitioners were allowed proforma credit under Rule 56A of the said Rules in respect of the base paper, that is to say, writing or printing paper which was purchased in large (Jumbo) rolls. However, the respondents contended that as the tissue paper had lost its original identity when it was converted into carbon paper by carbonsing the base paper, the same was not covered by the provisions of Rule 56A of the Rules inasmuch as what was used in teleprinter paper rolls was the converted carbon paper and not the original tissue paper which was the base paper.

9. In view of these rival contentions, the petitioners have filed this Special Civil Application under Article 226 of the Constitution of India challenging the stand taken by the respondents treating the making of teleprinter rolls as manufacturing of teleprinter paper and further challenging their refusal to allow the petitioners proforma credit for the excise duty paid on the tissue paper converted into carbon paper which was in turn used in manufacturing single-ply, two-ply or three-ply or even more plies teleprinter rolls. The petitioners have prayed for a Writ of Mandamus or a writ, direction or order in the nature of Mandamus or any other appropriate writ, direction or order under Article 226 of the Constitution of India to be issued against the respondents ordering and directing the respondents viz., the Union of India, Assistant Collector of Central Excise and the two Appellate Collectors of Central Excise, Respondents Nos. 1 to 4 to withdraw and/or cancel the impugned orders dated 15th may, 1973, 20th June, 1975, 16th April, 1977 and also directing them to refund to the petitioners the amount of Rs. 1,43,454.54 P. The petitioners have further sought for direction to be issued to respondents to withdraw the orders passed by the respondents dated 4th July, 1974, 18th October, 1975 and 19th April, 1977 refusing the proforma credit on tissue paper used by the petitioners in manufacturing carbon paper which in turn was used for making teleprinter paper rolls and the petitioners also pray for a writ of Mandamus or any other appropriate writ, direction or order under Article 226 of the Constitution of India directing the respondents to refund the amount of Rs. 1,23,051.26 P. in respect of the proforma credit under the provisions of Rule 56A of the Central Excise Rules, 1944.

10. Before these rival submissions and contentions are examined to find out whether teleprinter rolls attract the levy of excise duty under sub-item (2) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff, it is necessary to refer to a few relevant Notifications to show that paper was included in the Central Excise Tariff at Rule 21 by virtue of the provisions of the Finance Act, 1955, Act XV of 1955 with effect from 1st March, 1955 for the first time. However, by virtue of Notification No. 118/60 dated 24/9/1960 the said item was renumbered and was brought under a newly created tariff item, that is, Item No. 17 of Central Excise Tariff with effect from 1-10-1960. It is the contention of the respondents that many paper manufacturers were manufacturing teleprinter rolls and teleprinter tapes directly from pulp. While there were others who were manufacturing the teleprinter rolls/tapes by converting duty paid paper and clearing such teleprinter rolls/tapes on payment of duty. While the manufacturers manufacturing teleprinter rolls/tapes directly from pulp were paying duty on the teleprinter rolls/tapes at one stage only, that is, at the time of removal from their factory, the other manufacturers who were manufacturing teleprinter rolls/tapes out of duty paid paper had to pay the double incidence of duty, one on the writing or printing paper which was purchased and brought in their factory for the manufacture of teleprinter rolls/tapes and again at the time of clearing such teleprinter rolls/tapes from their factory. According to the respondents, as the extra revenue involved was negligible, the Central Excise & Revenue Department had issued executive instructions under their letter No. 21/25/27-CX dated 7/4/1958 that teleprinter rolls/tapes converted out of duty paid paper should not be subject to duty again. However, subsequently a new rule that is Rule 56A of the Central Excise Rules, 1944 was inserted in the Central Excise Rules, 1944 and by virtue of Notification No. 225/62-CE dated 29-2-1962 a statutory provision of law to allow credit on duty paid on raw materials, component parts and finished goods brought from outside the factory for use in the further manufacture of assessable goods was made applicable to the product 'paper' falling under Item No. 17 of the Central Excise Tariff. As a result of the insertion of this rule 56A, the corollary of the same was to withdraw the abovesaid extra-legal concession granted by their letter No. F. 21/25/52/CD dated 7/4/1973 vide their F. No. 61/4/73-CX-2 dated 5-4-1973 with effect from 7/2/1973 on account of the revenue implication.

11. The petitioners by their letter dated 20th March, 1973 addressed to the Superintendent of Central Excise, Division IX, Range II, Thane, inquired with him whether teleprinter rolls attracted central excise duty and maintained that, in their opinion, no central excise duty was applicable to the teleprinter rolls. The petitioners requested the Superintendent to visit their factory and inform them the correct position in the matter. The Superintendent of Central Excise, Division IX, Range II, Thane replied to the said letter and informed the petitioners that he had visited their factory on 20/3/1973 and saw the product 'teleprinter rolls/tapes' and the process concerning them. He found that the product was liable to excise duty under tariff Item No. 17(2) of the Central Excise Tariff. The petitioners were therefore, informed to apply for L. 4 Licence for paper and carry out all the excise formalities in that connection. The petitioners were also informed that duty was leviable on this product, that is, 'teleprinter rolls' with effect from 7-2-1973. The petitioners were also informed to supply the details of production and clearance from that time to enable him to recover duty on the past clearance.

12. The Petitioners, thereafter, on 18th April 1972, as stated above, submitted under protest the classification of all the goods manufactured by them as required under the provisions of Rule 173B of the Central Excise Rules, 1944. By letter dated 15th May, 1973 the petitioners were informed by the Assistant Collector of Central Excise, Division IX, Bombay, that according to Notification No. 24/65 dated 28/2/1965 as amended by Notification No. 49/72 dated 17/3/1972, the concessional rates of 45 P. per kg. was not available to teleprinter rolls/tapes and they were assessable to Central Excise duty.

13. The controversy between the parties, therefore, centres on the answer to the question whether by making of teleprinter rolls/tapes, the petitioners can be said to be carrying on the activity pertaining to the manufacture of paper or activity incidental or ancillary to the completion of paper as a manufactured product; because if the petitioners manufactured paper then they are liable to pay Central Excise duty at the rate mentioned in sub-item (2) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff. If, on the contrary, it is held that the petitioners are not manufacturing teleprinter rolls/tapes, it is evident that they will not be liable to pay Central Excise duty. Item No. 17 in the First Schedule of the Central Excise Tariff reads as follows :-

------------------------------------------------------------------------ "17. PAPER, all sorts (including paste board, millboard, strawboard and cardboard), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power -

(1) Cigarette tissue Three Rupees per kilogram.

(2) Bloting, toilet, target, tissue other One Rupee and than cigarette tissue, teleprinter, twenty paise per typewriting, manifold, bank, bond, art kilogram. paper, chrome paper, tubsized paper,

cheque paper, stamp paper, cartridge

paper, waxed paper, polyethelene coated

paper, parchment paper and coated board

(including art board, chrome board and

board for playing cards).

(3) Printing and writing paper, packing and Ninety paise per wrapping paper, strawboard and pulp-board, kilogram. including grey board, corrugated board,

duplex and triplex boards, other sorts.

(4) All other kinds of paper and paper board One Rupees and not otherwise specified. twenty paise per kilogram."

------------------------------------------------------------------------

14. According to the provisions of this Item, the paper is divided into four types of papers. In sub-item (3) of Item No. 17, "printing and writing paper" is referred to. Whereas, in sub-item (2) of Item No. 17 'paper, teleprinter' is referred to. In order to find out whether, as contended by the petitioners that mere cutting and re-rolling of duty paid printing and writing paper does not amount to a process of manufacture of paper, it will be necessary to refer to the process of manufacture or making of teleprinter rolls as is admitted by the petitioners themselves. It consists of the following stages. Ordinary writing and printing paper undergoes following special operations before becoming teleprinter rolls/tapes described by the words 'teleprinter paper' as it is called by the respondents :-

(1) Jumbo (large) size paper rolls are obtained from the paper manufacturers and/or paper dealers;

(2) These Jumbo (large) size paper rolls are then cut to a specified size and rolled to a specified dimension as some customers want 5" diameter and some 8 1/4" diameter;

(3) This is then inter-leafed with one or more carbon papers as desired by the customers;

(4) Then a warning mark is printed at the end of the teleprinter roll for caution of the teleprinter operator;

(5) After that a slogan is printed on the roll itself indicating the name of the customer. (This specialized service is done for a number of customers).

15. All the above operations are carried out by power driven machines and the question which falls for determination now is whether the finished product which is so produced or manufactured is out of the very base material, that is, the printing and writing paper. The question is whether there is a transformation and a new and different product has emerged having a distinctive name, characteristics and usage. It has been the contention of the petitioners that in the market this product is known as teleprinter rolls and not teleprinter paper. On the other hand, the respondents maintain that the end product whether described as teleprinter rolls or teleprinter paper is in effect teleprinter paper covered by sub-item (2) of Tariff Item No. 17 mentioned in the First Schedule of the Central Excise Tariff and it assumes special form and size and it becomes more expensive and has a special usage and marketability. It is also the contention of the respondents that in the trade it is also differently known, that is, teleprinter rolls or teleprinter papers as the trade name of the product of the petitioners tallies with the physical description of the teleprinter paper as given in sub-item (2) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff. Shri Korde, the learned Counsel appearing for the petitioners has vehemently argued that while what was purchased as duty paid printing and writing paper, the petitioners only made out of it teleprinter rolls and they did not manufacture paper as such. On the other hand, Shri Manjrekar, the learned Counsel for the respondents has challenged the nomenclature used by the petitioners that if what in effect is used as duty paid writing and printing paper called as Jumbo rolls, why have the petitioners felt shy in calling the end product as teleprinter paper instead of teleprinter rolls.

16. It becomes necessary now to examine the main contention of the petitioners that they do not "manufacture" paper in the process of making teleprinter rolls, but they only make an article of paper and not "manufacture" paper. The process of manufacturing teleprinter rolls starts with paper and ends with paper and they in effect do not manufacture paper and, therefore, their end product, teleprinter rolls, do not attract levy of Central Excise duty.

17. In order to appreciate the rival submissions and contentions of the parties, it becomes necessary to examine few provisions of the Central Excises and Salt Act, 1944. The word "manufacture" on which the whole controversy in this petition centres is defined under Section 2(f) of the said Act. It reads as follows :

"2. (f) 'Manufacture' includes any process incidental or ancillary of the completion of a manufactured product."

Item No. 17 is already quoted above and it is clear from the same that "paper of all sorts (including pasteboard, millboard, strawboard and cardboard) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power" refers in sub-item (2) to "teleprinter", that is "teleprinter paper". As per the provisions of section 3 which is the charging section under the Act, "there shall be levied and collected in such manner as may be prescribed the duties of excise on all excisable goods other than sale which are produced or manufactured in India....". It is, therefore, clear that duties under this charging section can be levied on all excisable goods produced or manufactured in India. Excisable goods are defined under section 2(d) of the Act and mean "goods specified in the First Schedule as being subject to a duty of excise". Section 6 of the Act provides, "certain operations to be subject to licence" and the said section empowers the Central Government may, by Notification in the Official Gazette, provide, that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act, engage in : (a) the production or manufacture or any process of the production or manufacture of any specified goods included in the First Schedule...." The Rule making power has been conferred on the Central Government by section 37 of the Act and the Central Government may make rules to carry into effect the purposes of this Act. Under Item No. 17 of the First Schedule of the Central Excise Tariff, "paper, of all sorts in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power" is subject to levy of excise duty at different rates depending upon the type of paper. In sub-items (1), (2) and (3) different types of paper are specifically named and are subject to different rates of excise duty specified in the three columns of the First Schedule and said sub-item (4) of Item No. 17 deals with all other kinds of paper and paper board not otherwise specified. It is clear from the reading of this Item No. 17, that if any manufacture or any person manufactures any kind of paper and the product can be called 'paper' of any type then it will be liable to excise duty according to sub-items of Item No. 17 under which it falls.

18. The petitioner's main contentions have been referred to above in the opening paragraphs and at the cost of repetition it may be stated that their submissions have been that the process of manufacture of paper is already over before the petitioners purchased printing and writing paper from the paper manufactures or paper dealers. All that the petitioners do is to cut the manufactured writing and printing paper to a specified size and/or roll it to a specified dimension and such an activity does not amount to manufacture of paper within the meaning of section 2(f) of the Central excises and Salt Act, 1944 and, therefore, no levy of excise duty is attracted under sub-item (2) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff, as the excise duty was already paid on the writing and printing paper before the petitioners had purchased it. Therefore, the principal submission on behalf of the petitioners is that they did not manufacture paper so as to attract levy of excise duty under sub-item (2) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff and no activity pertaining to the manufacture of paper or activity incidental or ancillary to the completion of paper as a manufactured product was carried on by the petitioners on fully manufactured writing or printing paper to enable the writing or printing paper to be used as teleprinter rolls and, therefore, this activity cannot be regarded as an activity pertaining to the manufacture of paper or activity incidental or ancillary to the completion of paper as a manufactured product.

19. Shri Korde, the learned Counsel for the petitioners in support of his submission relied on a number of decisions of the Supreme Court as well as of the various High Courts in India. He also relied upon the decision of the Appellate Collector of Central Excise, Bombay in Re : Warden and Company (India) Pvt. Ltd., Thana reported in 1978 E.L.T. (J 26) where it was held that, "mere cutting and re-rolling of duty paid paper cannot be called a process of manufacture, therefore, the resultant product is not liable to fresh excise duty." The manufacturers in that case were bringing paper rolls (jumbo rolls) on which Central excise duty was to said to have been paid. Thereafter, those paper rolls were then cut into suitable sizes as per the requirements of the customers. No process as such was involved in this operation inasmuch as the duty paid paper cut into various sizes retained its original characteristics and identity as the original paper. It was, therefore, held that, "mere slitting and re-rolling of such duty paid paper cannot be called a process of manufacture. The resultant product can also not be treated as converted paper as in the case of Bituminised paper, plasticised paper etc. where the identity of the original paper is lost and a new product known to the market is brought into existence. However, in this case, no such process or manufacture is involved in the operation carried out by the appellants and as such the paper cut to sizes and then re-rolled cannot be called as converted paper in the context in which the term "converted paper" has been mentioned in the Central Excise Tariff under Item No. 17(2). Since there is no manufacture of paper taking place attracting duty under Tariff Item No. 17(2), there is no question of taking out a licence under the Central Excise Law under the said Tariff Item, namely, Item 17.

20. The observations would clearly indicate that the facts of that case were entirely different from the facts of the present case. In that case all that was done was to cut large size paper, that is, jumbo rolls into suitable sizes as per the requirements of the customers. No process or operation was carried out by power driven machine and the paper was only cut into suitable sizes and it did not lose its original identity from the base material, that is, printing and writing paper. In this case, however, the end product has not only lost its original identity with the large size or jumbo rolls but apart from being out into different sizes, there is a warning mark printed at the end of the roll for caution of the teleprinter operator. Further, a slogan printing is done on the roll itself indicating the name of the customer and the end product that emerges has as distinctive name, characteristics and usage and also known in the market differently. There is also an additional process of inter-leafing these rolls with carbon paper according to the requirements of the customers. It is, therefore, difficult to see how the learned Counsel for the petitioners can take any assistance of this decision in support of its submission that what was made is teleprinter rolls and not manufacturing of teleprinter paper.

21. The learned Counsel for the petitioners further relied upon a decision of a Division Bench of the Gujarat High Court in the case of Navgujarat Paper Industries v. Superintendent of Central Excise & Ors. reported in 1977 E.L.T. (J 67). The learned Counsel for the petitioners took us through the entire decision and emphasized the distinction made out by the learned Judges of that Division Bench between "articles of paper" and "paper". In that case it was held that, "What the manufacturer was doing was making articles out of paper as distinguished from making any kind of paper. All that was done was "mere application of gum on one side of the paper" and it was hold that, "what they had done did not convert that paper into a new commodity known to the market as such. Mere printing of designs and monograms and other description of goods regarding the quantity and the name of the manufacturers did not convert packing or wrapping paper into any other kind of paper. It still continued to be printing paper or wrapping paper on which something has been printed." Therefore, in that case the contention of the petitioners was that for the purpose of producing gummed tapes and also print wrappers on white paper, they purchased duty paid paper from the manufacturers of paper and the textile wrappers were printed in accordance with the orders placed by their customers as per their requirements and according to the designs and specifications given by such customers. What the petitioners contended was that what they were doing was not manufacturing any paper, either gummed paper or converted types of paper, but they were merely manufacturing gummed tapes and so far as converted paper is concerned, they manufactured labels, cartons, etc., made out of duty paid paper and printed with designs or monograms of the manufacturers or traders, with or without description of particular goods or quality and both these product of theirs are articles of paper and, therefore, outside the purview of this item of excise. The Division Bench of the Gujarat High Court after analysing the decisions of the Supreme Court on the interpretation of the word "manufacture" as defined under section 2(f) of the Act and after examining the further contentions of the petitioners, came to the conclusion that "no material was placed by the Central Excise Department to show that with the process adopted by the petitioners, a new different article emerged having a distinctive character, name or use and, secondly, that it is capable of being sold in the market as such."

22. In the facts of that case, therefore, the Division Bench of Gujarat High Court came to the conclusion that, "the intermediate product of what the revenue calls "gummed paper" is not gummed paper known to the market as such and mere application of gum on one side of paper does not convert that paper into a new commodity known to the market as such. Similarly, mere printing of design and monograms and other description of goods regarding to quantity and the name of manufacturers does not convert packing or wrapping paper into another kind of product. It still continued to be printing or writing paper on which something has been printed." Here again this decision is of little assistance to the petitioners. The Counsel for the petitioners emphasized the distinction drawn by the Gujarat High Court between 'paper' and 'articles of paper' that it wanted us to accept the same distinction between 'writing or printing paper' and 'teleprinter rolls/tapes' as an 'article of paper and not 'manufacturing of teleprinter rolls/tapes. What is important to bear in mind is the clear observation of the Gujarat High Court that, "the end product was not known in the market as such and the process of applying gum did not convert the original paper into a new commodity known to the market". In contradistinction, the process described earlier which leads to the manufacturing or making of teleprinter paper or teleprinter roll is altogether different and the end product, that is, teleprinter paper or teleprinter roll is a separate, distinct and different commodity having a distinctive name, characteristics and usage and is also capable of being sold in the market. This could not be said about the gummed paper produced by the petitioners in that case. This decision, in our view, does not advance the case of the petitioners any further to pursuade us to hold that what is produced by them is not a different and distinct commodity known to the market having a distinctive name, characteristics and usage.

23. Shri Korde, the learned Counsel for the petitioners further referred to a decision of the Gujarat High Court in the case of Swastic Products, Baroda v. Superintendent of Central Excise reported in 1980 E.L.T. (Guj.). In the facts of that case it was held that colouring of a paper which is already manufactured is not a process in the manufacture of paper nor can that process be said to be one incidental or ancillary to the manufacture of paper. It was further held that no manufacturing process was involved by printing on while paper or by colouring a manufactured product, namely, paper. In that case the Excise authorities had demanded payment of excise duty in accordance with the Tariff Item No. 17(4) as mentioned in the first Schedule of the Central Excise Tariff for the said colouring or printing on one side of the paper purchased by the petitioners from the manufacturers. The argument on behalf of the respondents - Excise authorities - in that case was that colouring and printing on one side of the paper amounted to manufacture of paper and defined under section 2(f) of the Central Excises & Salt Act, 1944 and such colouring process of the paper came within the sweep of "All other kinds of paper and paper boards not otherwise specified" in sub-item (4) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff. The Division bench of the Gujarat High Court did not accept this submission and S. Obul Reddi, C.J. speaking for the bench held that, "All other kinds of paper" referred to in Item No. 17(4) would not take in paper which has been already manufactured and on which printing or colouring is done. It is pertinent to note that in the facts of that case only colouring and printing was done on one side of the paper. Elaborate processes, as in our case, of cutting the paper to various demensions as required by the customers, thereafter, interleafing them with carbon papers and all these processes being carried out with the aid of power driven machines were not undertaken nor did the end product having a distinct and special form and size and also having a special usage and marketability emerge. No processes whatsoever were carried out with the aid of power driven machines and the end product remained paper. Therefore, the Division Bench of the Gujarat High Court held that, "Colouring or printing on one side of the paper did not amount to manufacture of paper."

24. In this case, however, the process are entirely different. The most important distinguishing factor is that these processes are carried out by power driven machines and the end product which emerges is altogether different and has a distinctive characteristics, usage and name and is known in the market as a distinct product altogether. The identity of the original writing or printing paper is wholly lost and it becomes a separate and distinct commodity known in the market. This decision also therefore, does not help the petitioners in any way to support their submission that making of teleprinter rolls does not amount to manufacture of paper. The petitioners further relied upon the decision of the Supreme Court in the case of Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers reported in 1980 E.L.T. 343 (S.C.). The question raised in that case was whether Pineapple fruit - Conversion into pineapple slices for sale in sealed cans amounts to "manufacture" The Supreme Court rejected the case of the petitioners and held that, "When the pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture." The Supreme Court further held that, "Although a degree of processing is involved in preparing pineapple slices from the original pineapple yet the commodity continued to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it or adding sugar to preserve it and cannot be said to be "manufacture". The fact that the pineapple slices have a higher price then the original fruit, is occasioned only because of the labour put into making fruit more readily consumable and because of the earn employed to contain it." The Supreme Court further held that, the manufacture is the end result of one or more more processes through which the original commodity is made to pass. Although the nature and extent of processing may vary from one case to another yet, it is only when the change or a series of changes taken the commodity to the point where commercially it is recognised as a new and distinct article that a manufacture can be said to have taken place." If there is no essential difference in the identity between the original commodity and the processed article, it is not possible to say that one commodity has been consumed in the manufacture of another even though it has undergone a degree of processing. Their Lordships of the Supreme Court in that case referred to a number of authorities and after examining all of them referred to the American decision in Anheuser-Busch Brewing Association v. United States reported in 52 L.Ed. 336-338 which throws more light on the word "manufacture". The word "manufacture" implied a change but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary.......... There must be transformation; a new and different article must emerge, having a distinctive name, character and use."

25. Applying this test is it possible to say that teleprinter paper or roll as described by the petitioners is a different commodity or article from the one used as the base material which is large size or jumbo rolls writing or printing paper The answer would appear to be 'Yes' for the reasons already stated. The commodity or article, that is, teleprinter paper or teleprinter roll is well known in the market and is known as a distinct commodity and as such meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in usual course. There is, however, a basic and initial difficulty in the way of the petitioners which seems to us to be insurmountable. As held by the Supreme Court in the case of Dunlop India Ltd. v. Union of India reported in AIR 1977 S.C. 597 that, "But once an article is classified and put under a distinct entry, the basis of classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance then there is no difficulty for statutory classification under a particular entry." Writing or printing paper has been classified in sub-item (3) of Tariff Item No. 17 of the Central Excise Tariff in the First Schedule. The Legislature in its wisdom, however, treated paper in relation to manufacture of which and process is ordinarily carried on with the aid of power driven machines and specified 'teleprinter paper' in sub-item (2) of Tariff Item No. 17 as a distinct entry and it is difficult to accept all the persuasive arguments and submissions made before us by the learned Counsel for the petitioners to treat teleprinter paper as falling under sub-item (3) of Tariff Item No. 17. Once the Parliament has chosen to place teleprinter paper as a special entry over-riding the general entry in sub-item (3) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff, in our opinion, there is little scope left for us to determine under which item it will fall. It is not the function of this Court to change a legislatives entry unless its constitutionality is successfully challenged. Shri Korde, the learned Counsel for the petitioners fairly conceded before us that there is no averment in the petition challenging the validity of entry 17(2) i.e., teleprinter paper should fall under entry 17(3) and not under entry 17(2). He, therefore, advance no arguments in that behalf. The making of teleprinter rolls, in our opinion, really amounts to "manufacture" of paper and the Parliament has specifically so enacted. It is not possible to accept any of the arguments of the learned Counsel for the petitioners and to hold that in spite of specific classification by the Parliament of teleprinter paper as falling in sub-item (2) of Tariff Item No. 17, it really should fall in sub-item (3) of Tariff Item No.

17. Needless to say that we have come to the conclusion that "teleprinter paper rolls" are only a different name for "teleprinter paper".

26. In view of our finding it is not necessary to refer in details the other decisions referred to us by the learned Counsel for the petitioners. According to the petitioners, the burden is entirely on the department to show how making of teleprinter rolls amounted to "manufacture" of paper. First such decision referred to us is of the Supreme Court in the case of Deputy Commissioner of Agricultural Income-Tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co., reported in The Sales Tax Cases, Vol. XX, 1967, 520 where it was held that the onus of proving that the assessee was carrying on business and was, therefore, a 'dealer' within the meaning of section 2(b) of the Central Sales Tax Act, 1956, was on the department and that the department has discharged that onus." That was a case where the assessee had converted the latex tapped from its rubber trees into sheets and effected a sale of those sheets to its customers and that the conversion of latex into sheets was a process essential for the transport and marketing of the produce. The Counsel for the petitioners wanted to take aid of this decision in support of their contention that the burden was squarely on the respondents and the respondents having failed, their product did not attract levy of excise duty.

27. The petitioners also relied upon a decision of this court in the case of Sandoz (India) Ltd. v. Union of India reported in 1980 Tax. L.R. 2332 = 1980 E.L.T. 696 (Bomb.) (D.B.), where the word 'manufacture' occurring in section 2(f) come for interpretation. Chandurkar, J. delivering the judgment for the Court held that, "Merely change in the form of substance or a commodity would not be itself lead to the conclusion that a new article has been manufactured. Before a charge of excise duty is attracted, it must be established that the Foron liquid was an entirely new substance and merely because the pigment from its solid state has been converted into a liquid state by the use of the solvent and made properly usable with the aid of the dispersing agent, an inference that a new product or commodity has been manufactured cannot be drawn." In the facts of that case, the Division Bench of this Court held that, "the Department was, therefore, not justified in making a demand for excise duty on the basis that Foron liquid was a changed form of the pigment at the time of its removal from the factory." In view of that judgment, reference was made to the two well known cases on the interpretation of the word 'manufacture' viz. Union of India v. Delhi Cloth and General Mills Co. Ltd., reported in AIR 1968 S.C. 791 = 1977 E.L.T. (J 199), as also the observations in the case of Monical v. Pinch (1906) 2 KB 353. That judgment was again on a different point and is of no assistance to the petitioners. There is no difficulty in accepting the proposition that the burden is on the department of proving that the petitioners were manufacturing paper when preparing or making teleprinter rolls or paper. In view of these observations, we are unable to pursuade ourselves that what the petitioners are manufacturing is not teleprinter paper and that the product which emerges after applying the processes with the aid of power driven machines is not a separate commodity or article or product having a distinctive name, characteristic and usage and that it is not separately and commercially known in the market. We, therefore, reject the arguments of the petitioners and hold that teleprinter paper and/or teleprinter rolls is covered by sub-item (2) of Tariff Item No. 17 as mentioned in the First Schedule of the Central Excise Tariff.

28. As far as the second contention of the petitioners is concerned that petitioners are entitled to proforma credit under Rule 56A of the Central Excise Rules, 1944 and they must get the benefit of refund of the excise duty paid on the tissue paper which was first converted into carbon paper and which is turn was used in preparing or making the teleprinter paper rolls.

29. Rule 56A lays down the special procedure for movement of duty paid materials or component parts for use in the manufacture of finished excisable goods. The proviso to Rule 56A provides that "no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods - (i) if such finished excisable goods produced by the manufacturer are exempt from the whole of the duty of excise leviable thereon, or are chargeable to nil rate of duty, and (ii) unless - (a) duty has been paid for such material or component parts under the same item (******) as the finished excisable goods, or (b) remission or adjustment of duty paid for such material or component parts has been specifically sanctioned by the Central Government". The rest of the Rule lays down procedure for the manufacture to comply and receive such deductions in payment of excise duty. What is pertinent and important to note, as far as this submission of the Counsel for the petitioners is concerned, is that there was no duty leviable on carbon paper itself. The case of the petitioners is that it is not necessary that there should have been duty levied on carbon paper itself. According to the submission there is nothing in Rule 56A to warrant the proposition that raw material or component parts must be directly used and the raw material or component parts cannot be converted into an intermediary product before being used in the finished product. The submission is that first tissue paper is purchased by the petitioners and then it is converted into carbon paper which is ultimately used in the finished product that is teleprinter paper/rolls. According to the petitioners, excise duty having been paid on the tissue paper, they should be entitled to proforma credit under Rule 56A on that excise duty on tissue paper. Shri Manjrekar, the learned Counsel for the respondents replied to this submission of the petitioners first by stating that carbon paper is not paper at all as held by the Supreme Court inState of U.P. v. M/s. Kores (India) Ltd. . It has also been held

in that case that "Carbon paper is not paper covered by expression "paper other than hand paper" in Item 2 of the Notification and cannot be taxed thereunder. The mere fact that "Paper" forms part of the denomination of a specialised article is not decisive of the question whether the article is paper as generally understood. The word "paper" in the common parlance or in the commercial sense means "paper" which is used for printing, writing or packing purposes.

30. Mr. Manjrekar, the learned Counsel for the respondents then submitted that carbon paper in any case was not a necessary or essential ingredient for the manufacture of teleprinter paper/rolls. It is an independent product which was exempted at the relevant time from the levy of excise duty. As no duty was paid on carbon paper, the petitioners were not entitled to any deductions whatsoever. The carbon paper was no more than an amenity supplied by the petitioners to certain customers while manufacturing teleprinter paper/rolls. Making of teleprinter paper or roll was already over whether any carbon paper was at all interleafed and, therefore, even without carbon paper, teleprinter paper or roll can be manufactured. The Counsel for the petitioners relied on the clarification given in the book "The Central Excise Tariff of India" by R.K. Jain at page 305 which reads as follows :-

"Teleprinter rolls tapes - Assessment regarding. - Since Teleprinter rolls tapes are a variety of printing and writing paper they will be classifiable under Item No. 17(1) of CET. Such teleprinter rolls/tapes if made from duty paid parchment paper grease proof paper falling under Item No. 17(2) will be liable to pay duty again under Item No. 17(1) CET with the facility of proforma credit or set off under Notification No. 67/76-C.E., dated 16-3-76 in respect of duty paid on grease proof paper/parchment paper used in the manufacture of teleprinter rolls/tapes.

C.B.E. & C. Letter No. 61/39/77-CX. 2, dated 13-4-1978."

Since teleprinter rolls tapes are a variety of printing and writing paper, they will be classifiable under Item No. 17(1) of the Central excise Tariff, and will be liable to duty under Item No. 17(1) with the facility of proforma credit or subject to the Notification No. 67/76-CE, dated 16-3-1976 in respect of duty paid on grease proof/parchment paper used in the manufacture of teleprinter rolls/tapes.

31. This obviously relates to the later amendment of Item No. 17 of the Central Excise Tariff. Item No. 17 now consists of only two classifications which are as follows :-

Item No. 17 - PAPER AND PAPER BOARD

------------------------------------------------------------------------ Item No. Rate of Duty ------------------------------------------------------------------------

17. Paper and paper board, all sorts

(including paste board, mill board,

straw board, card board 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 Twenty-five per writing paper (other than poster cent ad valorem. paper)

(2) Paper board and all other kinds Forty per cent of paper (including paper or ad valorem

paper boards which have been

subjected to various treatments such

as coating, impregnating, corrugation,

creping and design printing), not

elsewhere specified.

------------------------------------------------------------------------

The petitioners are claiming proforma credit for the amount of Rs. 1,23,051.26 in respect of teleprinter rolls cleared between 7-2-1973 and 15-3-1976 that is before Item No. 17 was amended in the present form and that clarification of the department is applicable only from 16-3-1976 and not to the earlier period.

32. The principal submission of the Counsel for the petitioners in this behalf was based on a decision of the Allahabad High Court in Nagrat Paints v. Union of India reported in 1978 E.L.T. (J 39). In that case the petitioners were a private limited company carrying on the business of manufacture and sale of paints and varnishes at Kanpur. The petitioners were using processed vegetable non-essential linseed oil (hereinafter referred to as V.N.E. Oil). This oil was first converted into Alkyd Resin (Synthetic Resin) which, in its turn, was utilised for manufacturing paints and varnishes. This Alkyd Resin was also an excisable article. Under Rule 56A of the Central Excise Rules if duty paid material or component parts are brought in for the manufacture of finished excisable goods, a proforma credit was granted to the extent the duty has already been paid on such material or component parts and it was adjusted against the excise duty leviable on the finished product. Obviously this Rule has been inserted to avoid double taxation, once on the material and component parts and then again on the finished products. In order to avail of this concession, an application has to be made to the Collector of Central Excise. The petitioner-company made such an application in respect of the duty paid V.N.E. Oil to the Collector, Central Excise, Kanpur, who by his order communicated to the petitioner in the following words :-

"Please be advised that the Collector of Central Excise, Kanpur has been pleased to accord his permission to avail of the concession permitted under Rule 56A of Central Excise Rules, 1944, to you."

Since then the petitioner has been availing of the concession in respect of V.N.E. Oil used in the manufacture of paints and varnishes. Suddenly without any warning or notice the petitioner-company was served with two notices demanding the various amounts which were refunded to the petitioners in that case. The authorities in that case were of the view that though the petitioners had availed of proforma credit on quantities of processed V.N.E. Oil used in the manufacture of synthetic resin, they did not possess any proper permission from the competent authority. The petitioners were permitted to avail of proforma credit on materials used in the manufacture of pains and varnishes, but they did not possess any such permission for synthetic resin for the manufacture of which the party held a separate licence. The party, therefore, had no right to avail of proforma credit on the processed V.N.E. Oil used in the manufacture of synthetic resin. It was held by the Allahabad High Court that, though in the view of the department in the manufacture or production of paints and varnishes, V.N.E. oil gets converted into Alkyd resin as an intermediary the petitioners were not entitled to avail of the credit unless they obtained permission for the use of V.N.E. Oil. Resin is an excisable article and under Rule 9 a duty is leviable only if the excisable article is removed from the place where it is manufactured or produced for consumption, export or manufacture of any other commodity. In that case, there was no finding that Alkyd Resin was removed from the place where it was produced for consumption, export of manufacture of any other commodity. On the other hand, it was admitted that the conversion of V.N.E. oil into Alkyd Resin was only an intermediary stage in the manufacture of paints and varnishes. As such no duty was leviable on Alkyd Resin and the credit allowed for the use of V.N.E. Oil in the manufacture of paints and varnishes was properly available to the petitioners. Relying on this decision of the Allahabad High Court, it was sought to be argued that the facts of the present case were within all fours with those in that case. Duty is paid first on the tissue paper and then it is converted into an intermediary product and afterwards the intermediary product 'carbon paper' is used in the manufacture of teleprinter rolls or teleprinter paper and thereafter the petitioners are entitled to proforma credit on duty paid on tissue paper. The only difference between that case and our case is that Alkyd Resin was itself an excisable commodity. As pointed out earlier, for preparation of teleprinter paper roll, carbon paper is not an essential or necessary ingredient. The manufacture of teleprinter roll paper is complete without the use of carbon paper itself. If this is so, it cannot be said that the facts of Nagrat Paints's case are the same as in our case. The use of carbon paper in two-ply or three-ply or even more plies teleprinter rolls paper can only be said to be an amenity. The conversion of V.N.E. Oil in the manufacture of synthetic resin was an essential ingredient for the manufacture of paints and varnishes. The conversion of tissue paper into carbon paper and its subsequent use was not an essential ingredient for the manufacture of teleprinter paper rolls and, therefore, this case is of no assistance to the petitioners. The carbon paper, therefore, in our view is not an intermediary product. The observations of the Allahabad High Court in Nagrat Paints's case that, "the fact, therefore, that the substance produced by the manufacturer at the intermediary stage is not put in the market would not make any difference to the chargeability of the substance to excise duty, if it is covered by any item in Schedule I of the Act" has no application to the facts of the present case. In our opinion, the carbon paper is an intermediary product but not an essential ingredient for the manufacture of teleprinter paper rolls. It was also not an excisable product at the relevant period. Hence, the petitioners are not entitled to proforma credit on the duty paid on the tissue paper under Rule 56A of the Central Excise Rules, 1944. We, therefore, do not see any merit in this contention of the petitioners and hold that the respondent have rightly refused to give any proforma credit to the tune of Rs. 1,23,051.26 in respect of teleprinter rolls cleared between 7-2-1973 and 15-3-1976. We do not see anything wrong in the reasoning given by either of the lower authorities including the decision of the Government of India dated 19-4-1977 at Ex.O.

33. It has been held the Government of India; Department of Revenue that "Tissue Paper is first converted by the petitioners into carbon paper, an excisable commodity, before it is used in the manufacture of teleprinter rolls. The credit of duty paid on tissue paper could be availed only for the payment of duty on carbon paper, if it was otherwise admissible under Rule 56A. The petitioner's contention that the duty paid on the tissue paper should be granted to them against the duty payable in the teleprinter rolls is, therefore, not tenable." A mistake has crept in the above order in as much as period. At the relevant period carbon paper was not an excisable commodity and no duty having been paid by the petitioners on carbon paper, they are not entitled to proforma credit on carbon paper under section 56A of the Central Excise Rules, 1944.

34. In the view we have taken, both the contentions of the petitioners fail and, therefore, the petition is dismissed with costs.


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