G.K. Govinda Bhat, J.
1. This writ petition preferred by West Coast Paper Mills Limited, Dandeli, is directed against the demand notices issued by Respondent No. 1 assessing offset printing paper over 85 grams for the period between November, 1963 and December, 1965 at the rate applicable to cartridge paper and also the order of adjudication made by the Assistant Collector of Central Excise, Bellary (Respondent No. 2) which was confirmed by the Collector of Central Excise, Bangalore (Respondent No. 3) on appeal and by the Government of India (Respondent No. 4) in revision.
2. In order to appreciate the contentions urged by the petitioner, it is necessary to briefly set out the facts leading to this writ petition. West Coast Paper Mills Limited., Dandeli manufactures paper in its factory at Dandeli. Paper manufactured in India is chargeable to excise duty under Section 3 read with Item No. 17 of the First Schedule of the Central Excises and Salt Act, 1944, hereinafter called the 'Act'. The rate of duty on paper manufactured is not uniform. It depends on the classification made under Item No. 17 of the First Schedule. The petitioner manufactures, among other varieties, a variety of paper known as offset printing paper of different grammages. The petitioner claimed that such paper was assessable as printing and writing paper falling under Item No. 17(3) of the First Schedule of the Act. On 7-4-1962 the third respondent issued a notice to the petitioner to show cause as to why offset paper of grammages varying from 95 to 136 declared as offset printing paper should not be assessed to duty as cartridge paper under Item No. 17 (1). The petitioner in its reply contended that the paper in question is used only for printing purposes on modern offset printing technique, that the manufacturing process for cartridge paper is different and that the use is also different.
After making his own enquiries, the third respondent upheld the contention of the petitioner and directed that the variety of paper produced in the petitioner's factory and declared as offset printing paper may be assessed under Item No. 17(3) of the First Schedule irrespective of the grammage. The relevant portion of the said order marked as Annexure. 'E' to the writ petition reads thus ;
'Office of the Collector of Central Excise, Central Revenue Building, Queens Road, P.B. 126, Bangalore-1.
Order No. VI/v/3/4/61-B1, dated 30-5-62
9th Jyaistha 1884
Name of the party : Messrs West Coast Paper Mills, Dandeli.
Messrs West Coast Paper Mills, Dandeli manufactures offset paper of grammages varying from 95 to 136 and claimed assessment as printing and writing paper under Item 17 (3) of the Central Excise Tariff. As the variety was akin to cartridge paper, a notice was issued in this office letter of even number dated 7-4-1962 directing the party to show cause as to why the offset paper of grammages varying from 95 to 136 declared by them as offset printing paper should not be assessed to duty as cartridge paper under Item 17 (1) of the tariff.
2. In their reply the firm have stated that this paper is used only for printing purposes on modern offset printing technique. They also contended that cartridge paper is different and is used only for drawing. Manufacturing process for cartridge paper is different and it is manufactured in a size which is different from that of printing paper.
3. Trade enquiries revealed that this variety of paper is mainly used for offset printing purposes. Under the circumstances I accept the contention of M/s. West Coast Paper Mills, Dandeli that this variety of paper is printing paper assessable under Item 17 (3) of the Central Excise Tariff. The assessment of offset printing paper manufactured by M/s. West Coast Paper Mills, Dandeli under Item 17 (3.) of the Tariff as printing and writing paper is therefore confirmed.
Sd/- N. Mookherjee
3. Consequent on the above order, the offset printing paper manufactured by the petitioner irrespective of its grammage was assessed under Item No. 17 (3) of the First Schedule.
4. On 21-8-1963 the Central Board of Revenue issued a circular No. 1 (Paper) 63 regarding the classification of Creamwove and Map Litho Paper. Copy of that circular which is Annexure 'F' to the writ petition reads as follows:
'Circular Letter No. 1 (PAPER/63 F. No. 8/3/63-CX.VI)
Central Board of Revenue
New Delhi, the 21st August, 1963.
Shri Y.N. Chopra,
Central Board of Revenue.
All Collectors of Central Excise
The Collector of Customs and Central Excise, Pondicherry
The Deputy Collector of Central Excise, Jaipur/Amritsar/Tiruchirapally
The Customs Adviser, Goa, Panjim.
Subject :-Paper-Classification of Creamwove and Map Litho Paper.
I am directed to refer to Board's letter No. 21 /40/61-CX, dated the 1st November, 1961, on the above subject and to say that while Creamwove and Map Litho varieties of paper weighing below 85 grammes per square metre are classifiable as printing and writing paper covered by item 17 (3) of the Central Excise Tariff, the heavier varieties of these paper are not distinguishable from offset and cartridge paper of higher weights per square metre which have been considered as drawing paper according to the definition given by the Tariff Commission, as under :
'Offset and Cartridge Paper :
This type of paper is suitable for the offset printing process. It is normally made from bamboo or grass stock and may contain some amount of rag and wood pulp. It may be white or coloured. For purposes of printing it is normally below 85 grammes while for drawing it is above 85 grms. and may also be tub sized. It includes ordinary litho paper.'
2. In view of this the Board has decided that Creamwove and Map Litho varieties of paper weighing 85 grammes per square metre and above should not be classified as printing and writing paper but should be classified as cartridge paper under Item 17(1) of the Central Excise Tariff.
Sd/ V.N. Chopra,
Central Board of Revenue.'
The third respondent apparently guided by the above circular issued what is called Trade Notice No. 131/63, dated 27th August, 1963. That notice reads thus :
'Trade Notice No. 131/63, dated 27th August, 1963.
Sub :-Paper-Classification of Creamwove and Map Litho offset printing and offset cartridge paper regarding.
The Trade is hereby informed that varieties of paper known as Creamwove, Map litho, Offset printing and off-set cartridge weighing 85 grammes per square metre and above are classifiable as cartridge paper and therefore will fall for assessment under Item 17(1) of the Central Excise Tariff.
2. The contents of this Trade notice may please be brought to the notice of the constituent members of the Chambers and Associations.
(Issued from file VI/v/3/3/63 N. 1) S.V. Vaidyanathan, Sd/-N. Mookherjee, Superintendent Collector.'(Tech.)
5. Pursuant to the said Trade Notice the Deputy Superintendent of Central Excise issued a notice dated 5-9-1963 to the petitioner stating that as per the decision of the Central Board of Revenue communicated to him by the Collector of Central Excise, the offset printing and offset cartridge papers which were so far being assesssed under Item 17(3) irrespective of their grammage shall henceforth be classified under Item 17(1) with effect from 21-8-1963 if they are of 85 grams per square metre and above. The petitioner was directed to offer the offset printing paper of 85 grams per square metre and above for assessment under Item No. 17(1). The petitioner objected to the proposal. Despite the said objection, the Deputy Superintendent of Central Excise assessed the offset printing paper of 85 grams and above produced and manufactured by the Mills after 3-9-1963 at the higher rate of duty provided under its No. 17(1). In respect of the paper manufactured and cleared during the period from 21-8-1963 to 3-9-1963, a notice of demand for payment of differential duty under Rule 10 of the Central Excise Rules, 1944 for the amount of Rs. 51,878.28 was issued.
6. The petitioner being aggrieved by the action of the Deputy Superintendent of Central Excise demanding higher rate of duty made its representation to the second respondent. The second respondent issued a show cause notice dated 22-6-1966 copy of which is marked as Annexure 5. That notice reads as follows :
'Office of the Assistant Collector of Central Excise, Bellary.
C. No. V/17 (3)56/66 D/-22-2-66.
SHOW CAUSE NOTICE (BY Rg. AD).
M/s. West Coast Paper Mills Ltd., Dandeli.
'Whereas M/s. West Coast Paper Mills Ltd., Dandeli have manufactured offset printing paper of grammage 85 per square metre and above and the same was assessed under Item 17(3) of the Central Excise Tariff and whereas the Trade was informed by Central Excise Trade Notice No. 131/63, dated 27-8-1963 issued by the Collector of Central Excise, Bangalore to the effect that offset printing paper weighing 85 grams per square metre and above will fall for assessment under Item No. 17 (1) of the Central Excise Tariff. M/s. West Coast Paper Mills Ltd., Dandeli are hereby required to show cause to the Assistant Collector of Central Excise, Bellary why the offset printing paper of 85 grammage per square metre and above manufactured and cleared by them under AR-1 Nos. 602/28-2-63, 605/29-8-63, 608/30-8-63, 612/31-8-63, 615/2-9-63 and 623/9-9-63 during the period from 28-8-63 to 9-9-63 should not be assessed to duty under Item 17 (1) of the Central Excise Tariff and why the demand for duty issued by the Deputy Superintendent of C. Excise, Dandeli for collection of the differential duty on said clearance should not be confirmed.
2. M/s. West Coast Paper Mills, Daudeli are further directed to produce at the time of showing cause, all the evidence upon which they intend to rely in support of their defence.
3. M/s. West Coast Paper Mills Ltd., Dandeli should also indicate in the written explanation whether they wish to be heard in person before the case is adjudicated.
4. If no cause is shown against the action proposed to be taken within ten days of the receipt of this notice or they do not appear before the adjudicating officer when the case is posted for hearing, the case will be decided exparte.
7. The petitioner submitted its objections in writing and oral hearing was also given. By his order dated 17-8-1966 copy of which is marked Annexure 'B' the second respondent held that the offset printing paper of 85 grams and above is chargeable to duty at the rate applicable to cartridge paper under Item 17 (1). Against the said order, the petitioner preferred an appeal to the third respondent who dismissed the same by his order dated 28-3-1967, copy of which is Annexure 'C' in this writ petition. He held that offset printing paper is cartridge paper. Against the order of the 3rd respondent the petitioner preferred a revision petition before the Union of India (Respondent No. 4) who by order dated 6-6-1968 rejected the revision petition without assigning reasons.
8. Aggrieved by the orders of Respondents 2 to 4 and the demand notices for payment of duty on offset printing paper at the rate applicable to cartridge paper under Item 17(1), the petitioner has approached this court for relief under Articles 226 and 227 of the Constitution of India.
9. At the hearing, Sri V. Krishna Murthy the learned counsel for the petitioner urged the following six grounds in support of his petition :
I. That the adjudication made by the third respondent by his order dated 30-5-62 precludes the Central Excise Department from reopening the same question.
II. The prior adjudication dated 30-5-62 by the third respondent is a relevant material which ought to have been taken into consideration and the failure to take into consideration of the same has vitiated the adjudication by the second respondent.
III. That the decision of the second respondent is based on grounds not relevant under the Act.
IV. That the order of the third respondent made in the appeal rests entirely on his personal opinion and subjective satisfaction.
V. That the order of the 4th respondent gives no reasons, not being a speaking order, the same is liable to be quashed and
VI. That the decisions of Respondents 2 to 4 are vitiated since they were influenced by the circular issued by the Central Board of Revenue in the matter.
10. Re : Ground No. I. The learned counsel for the petitioner has not placed before us any decision or authority for his proposition that a prior decision concerning the classification of goods for purposes of taxation under the Act binds the Department for all times. The adjudication under the Act is not by a court of law but by officers who have to adjudicate in a quasi-judicial manner. The principle of res judicata, therefore, cannot apply for adjudications made by Revenue authorities though they have to exercise their powers in a quasi-judicial manner. It is well-settled that in cases of assessment under the Income-tax Act, any decision made in one assessment year does not preclude the Income-tax Officer from arriving at a different conclusion in a subsequent year. But the decision reached in one year would be a cogent factor in the determination of a similar question in a following year (Vide Udayan Chinubhai v. Commr. of Income-tax, : 63ITR416(SC) ). In our opinion the same principle ought to govern the assessments under the Act also. Therefore, the first ground urged by the learned counsel for the petitioner has to be rejected.
11. Re: Ground Nos. II and III. In the orders made by Respondents 2 to 4, there is no reference whatever to the earlier decision of the third respondent upholding the contention of the petitioner. That decision being a relevant factor in the determination of the same question at a subsequent period, the failure to take into consideration the earlier decision has clearly vitiated the orders made by Respondents 2 to 4. When the order dated 30-5-1962 held that offset printing paper manufactured by the petitioner irrespective of its grammage was assessable under Item 17 (3), the burden was on the Department to show that that decision is erroneous when the question was sought to be reopened.
The show cause notice issued to the petitioner by the second respondent gives no notice of the material relied on by him coming to a different conclusion. The show cause notice issued by the second respondent which we have set out earlier relies on the Trade Notice issued by the third respondent on 27-8-1963. The said Trade Notice also does not give any reasons as to why offset printing paper of 85 grams and above should be classified as cartridge paper. It is relevant to state that the classification for purposes of rate of duty can be made only by the legislature and not by the taxing authorities. It is not open to the Central Board of Revenue or any of the Central Excise authorities to classify under Item 17 (l) the varieties of paper which do not fall under the said classification. The following varieties of paper fall under Item 17(1):
'blotting, toilet, target, tissue other than cigarette tissue, teleprinter, type writing, manifold, bank bond, art paper, chrome paper, tub sized paper, cheque paper, stamp paper, cartridge paper and parchment.'
(Underlining is ours)
Printing and writing papers fall under Item 17 (3). The Act does not define the several varieties of paper classified under different sub-heads under Item 17. In the absence of any definition of the several varieties of paper, they have to be understood in the manner understood by the paper trade and industry.
12. From books published regarding paper manufacture it is seen that paper is generally classified according to the process of manufacture, materials used in its making and the use to which the particular variety is put.
13. In the publication entitled Paper Trade ., Calcutta relied on by the second respondent, it is stated at page 42 that paper is generally classified according to the use to which the particular variety is put and sometimes according to the process of manufacture or materials used in its making. It further states that according to the practice prevailing in the Indian market, paper has been broadly classified into six different categories, viz.
Writing, Printing, Wrapping, Paper other sorts, News printing and Board.
Each class has been further sub-divided and cartridge paper falls under the category of 'Paper other sorts'. The following description of cartridge paper is given at page 51 of the said book :
'Cartridge Paper : Cartridge papers are strong and tough papers made from long fibred chemical pulp with or without rags. They are used as substitutes for machine-made drawings for ordinary works and for covers of books. The smooth finished ones are used for offset printing.'
Offset paper has been classified under printing paper'. At page 47, this is what is stated with regard to offset paper :
'Offset Paper : Paper required for offset printing must be firm and free from curling or stretching tendency like lithographic paper. The paper is generally fully sized and the surface may be smooth or granular finish. The paper should be non-fluffing and free from dust. Like litho papers the fibre directions are to be maintained on the long way of the sheets. The paper should be well matured in air before using on the printing machine.'
The second respondent while he refers to the definition of cartridge paper and offset paper in the glossary of paper terms in Raghunath Dutt's publication, he has ignored the classification of papers referred to at pages 42 to 58 and the description of offset paper occurring at page 47 and of cartridge paper occurring at page 51. The learned counsel for the petitioner has invited our attention to a number of publications on the manufacture of paper. It is not necessary to refer to all of them. It is sufficient if we refer to few of the publications.
14. In the book entitled 'The Manufacture of Pulp and Paper' (Vol. No. V.) published by Mc Graw Hill Book Company, the details of paper making are given in Section 6. It is seen therefrom that the manufacturing process of offset paper and cartridge paper is different.
15. In the book 'Paper' by S. Carter Gilmore (2nd Edition) published by the National Association of Paper Merchants, London, at page 327, the definition of offset paper is given as follows : -
'Offset: A form of lithographic printing whereby matt finish papers and boards can be satisfactorily printed in colour to register. Also a name given to papers specially made for this purpose ; e.g. offset cartridge, offset printings. The principal characteristics an stability and freedom from fluff.'
16. A booklet called Paper Trade Terms compiled by William Bond Wheel-wright and published by Silton Brothers Callaway Inc. Boston contains a glossary of the paper trade terms. This is what is stated in this booklet with regard to offset paper :
'Offset paper : The prefix 'offset' to book paper, coated book paper, or bristles etc., denotes generally a paper amenable to the requirements of offset lithography.'
17. On a perusal of the publications relating to the manufacture of. paper and paper trade terms, it is seen that both printing paper as well as cartridge paper are used for offset printing. But printing paper used for offset printing is not cartridge paper nor cartridge paper used for offset printing is printing paper. The two varieties of papers are different and their classification depends on the process of manufacture and materials used in the manufacture. None of the books on the manufacture of paper classify offset printing paper of 85 grams and above as cartridge paper. It is seen from the order of the second respondent that the petitioner has contended that the manufacturing process of the paper in question is different from that of cartridge paper. The order of the second respondent does not state as to what according to the Department is the manufacturing process of cartridge paper and what are the materials used for its making.
The decision of the second respondent is largely based on the use of the paper which is not the proper criterion for the purpose of classification. It is quite obvious that the classification made by the Respondents is not based on the process of manufacture and the materials used for the manufacture of paper. The decision of the second respondent is vitiated by the failure to take into consideration the prior decision dated 30-5-1962 of the third respondent and also for non-consideration of the relevant material viz. the basis of classification according to the process of manufacture, the materials used for manufacture etc.
18. Ground No. IV. The order of the third respondent cannot be considered as an order of adjudication. It rests entirely on his subjective satisfaction. The relevant portion of the order reads thus:
'I have seen samples of paper placed on record. It is clear that when the paper is of 85 grams per square metre and above it is undistinguishable from cartridge paper-in other words, it is cartridge paper. So assessment of paper referred to by the party as offset printing paper of higher than 85 grams as cartridge paper under Item 17(1) is in order.'
There is no doubt that the adjudicating authorities are entitled to examine the samples of paper but if the decision is based on the result of such examination, the order must state clearly the reasons for the conclusion. Merely stating that the paper in question is indistinguishable from cartridge paper amounts only to a subjective satisfaction of the third respondent. The order of the third respondent has not said anything about the process of manufacture and the materials used for manufacture of the paper in question.
19. Ground No. V. The order of the fourth respondent rejecting the revision application of the petitioner reads thus :
'The Government of India have carefully considered all the points made by the applicants, but see no justification for interfering with the order in appeal. The revision application is accordingly rejected.'
20. In Travancore Rayons Ltd. v. Union of India, 1969 (2) SCWR 814 the Supreme Court has laid down that even where the order of the Central Government affirms the order of the authorities below, the reasons for the decision must be given and where the order gives no reasons the same is void. In view of the said decision the order of the fourth respondent is clearly void.
21. Ground No. VI. The second respondent has not made any reference to the circular issued by the Central Board of Revenue nor has he relied on the same. Therefore, there is no substance in this ground of objection. The decision of the third respondent rests as stated earlier entirely on his personal examination of the paper in question and not on any other material. The fourth respondent has rejected the revision application without assigning any reasons. Therefore, it cannot be said that the decisions of Respondents 2 to 4 have been vitiated by the circular issued by the Central Board of Revenue.
22. In the light of the above discussion, we have come to the conclusion that the order of the second respondent dated 17-8-1966 is vitiated on the ground that he has failed to take into consideration the prior order of the third respondent dated 30-5-1962 and that he has also failed to take into consideration the relevant basis for classification of paper for the purpose of levy of duty under Item 17 of the First Schedule of the Act and that the orders of Respondents 3 and 4 are void for giving no reasons for the decision.
23. In the result, allowing this writ petition we quash the orders of Respondents 2 to 4 impugned in this writ petition viz., Annexures B, C and D and direct the second respondent to make a fresh adjudication in the light of this decision.
24. The petitioner has prayed for quashing the demands as per Exhibits A, A-l, A-2, A-3 and A-4. The said demands are subject to the adjudication to be made by the second respondent as per our direction. If the demands are quashed there may be difficulty of issuing fresh demands.
25. The petitioner has already paid a sum of Rs. 51,7 88.28 as per demands Exhibits A, A-l and A-2. In respect of the demands Exhibits A-3 and A-4 for Rs. 1,07,422.80, the petitioner has furnished security. Since the prior decision is in favour of the petitioner, the recovery of the amounts as per the demands made under Exhibits A-3 and A-4 shall be kept in abeyance until proper adjudication is made by the second respondent in accordance with law. We order accordingly.
26. In the circumstance, there will be no order as to costs.