1. The petitioner herein which is a company engaged m the manufacture of paper imported a simplex rotary sheet cutter in 1969 and it was assessed under item 72(b) read with notification No. 18/61 at 10% as paper making machinery. The Customs Revenue Audit raised an objection that the machine under reference is not a part of paper making machinery as it is only used for cutting the paper already manufactured to marketable sizes and therefore assessable under item 72(b) without the benefit of the said notification. On the basis of the said audit objection a demand was raised on 20-6-1969 for Rs. 98,595. Since the petitioner resisted the demand a show cause notice was issued on 20-6-1969, in terms of Section 28(1) of the Customs Act, 1962 to show cause why the said sum of Rs. 98,594.64 being the duty short levied should not be collected. The petitioner submitted its explanation on 28-6-1969. In the explanation the petitioner stated that in paper making industry the manufacturing process is complete only when the paper is rolled out and cut to marketable sizes and that therefore the paper cutting machine should also be treated as a paper making machinery. The Assistant Collector of Customs ultimately passed an order under Section 28(1) determining the amount of duty payable by the petitioner at Rs. 98,594.65.
2. The petitioner took the matter in appeal to the Appellate Collector of Customs but the Appellate Collector dismissed the appeal in limine on 13-7-1971, on the ground that no appeal lay to him as the decision to collect the amount short levied had been taken by the Collector of Customs in the matter. Aggrieved against that order, the petitioner filed an appeal to the Central Board of Excise and Customs. The Board remanded the matter to the Collector of Customs to pass fresh orders after giving an opportunity to the petitioner by its order dated 14-9-1972. Not satisfied with the said order of remand, the petitioner took the matter in revision to the Government of India under Section 131 of the Customs Act. In that revision, the petitioner wanted a decision on merits at the hands of the Government of India. Therefore, the Government passed an order in revision on merits. The main point urged by the petitioner before the Government was that the rotary sheet cutter imported by it is part of the paper making machinery since paper making does not stop at the stage of making the paper but extends to the stage at which it became a marketable commodity, i.e., takes a form recognised and accepted in the market as paper. The Government after considering the representations made by the petitioner took the view that the rotary sheet cutters are used by paper manufacturers for cutting paper sheets into sizes required by them and they cannot be regarded as part of the paper making machinery, and therefore, they are not eligible for concessional assessment under notification 18 of 1961 which applies only to paper making machinery. The validity of the said decision of the Government of India, the first respondent herein, has been challenged by the petitioners in this writ petition.
3. The petitioner's contention is that the process of manufacturing paper continues right upto the stage when it is made marketable and that the paper manufactured by them as coming out of the paper making machinery is not capable of being sold as it is, that it can be sold only after it is cut to sizes, and that therefore, the cutting machinery also should be taken as paper making machinery.
4. Notification No. 18 of 1961 provides for a concessional rate of customs duty for 'Paper making machinery'. Therefore, to claim the benefit of the concessional rate of duty the machinery imported must be a 'Paper making machinery''. The machinery imported here is a paper cutting machinery, The question is whether the paper cutting machinery can be brought within the term 'paper making machinery'. In this case, the machinery imported is not one used for making paper as such. It is used for cutting the paper which has already been made. Though the phrase 'paper making machinery' will not normally include the paper cutting machinery, the learned counsel for the petitioner would say that unless the paper is cut to marketable sizes the paper cannot be sold, and therefore, paper cutting machinery should be taken to be used for the manufacture of paper. To show how the cutting process is closely integrated with the process of manufacture and sale of paper as a marketable commodity, the learned counsel refers to Volume III 'Pulp and Paper . v. Blond, 1950 2 A.E.R. 351, Denning LJ. dealing with the liability of certain transactions of purchase under the Finance Act of 1946 said --
'In order that a process of manufacture should attract purchase tax, it must be 'applied so as to make goods or in the course of the making goods'. There must, therefore, be a making of goods which is, 1 think, different from the repair, alteration, or improvement of goods. If the thing remains in substance the same thing, even though repaired, altered or improved, purchase tax is not payable, but, if the work has made it into a different thing altogether, then purchase tax is payable. The line between these two is very difficult to draw, because it is so much a question of degree'.
5. Thus the phrase 'paper making machinery' appearing in the notification applies only to machinery which brings into being paper. Paper cutting machinery cannot be said to bring into existence paper. It merely alters the sizes of paper already manufactured to suit the market needs. If really the notification is intended to confer the benefit of concessional rate of duty for cutting machines also the notification would have made it clear. As a matter of fact a similar notification dealing with textile machinery falling under item 72(1) of the Indian Customs and Central Excise Tariff clearly refers to the cutting machine as part of the machinery entitled to the concessional rate of duty. Paper cutting machine has not been however enumerated in the notification in. question in a similar manner. Therefore, the intention behind the notification is not to extend the benefit of the concession to paper cutting machines even though cutting is a process necessarily to be employed by the paper manufacturer to make it marketable after cutting it into required sizes. The view taken by the first respondent in the order impugned is, therefore, right. The writ petition therefore fails and it is dismissed. There will be no order as to costs.