Surendra Sehgal And Anr. vs Union Of India And Ors.
1992 Latest Caselaw 256 Del

JUDGMENT

Arun B. Saharya, J.

(1) The main question for consideration in these writ petitions is whether paper converted by subjecting it to printing of colour and subsequently waxed by the petitioners, sold to M/s Modern Food Industries (Ltd.) for wrapping bread, is eligible to full exemption of duty of excise by virtue of notification No. 68 of 1976, or to partial exemption under notification No. 71 of 1976 (hereinafter referred to as the first and the second notification respectively) both dated 16th of March 1976. These two writ petitions, involving the same question, were heard one after the other. The same are, therefore, being disposed of by a common judgment.

(2) The goods produced by the petitioners, covered by Item No. 17 of the Tariff set out in the first Schedule to the Central Excise and Salt Act, 1944 (hereinafter referred to as the Tariff and the Act), were initially declared and assessed as 'waxed paper' eligible to partial exemption under the second notification. The petitioners are now claiming benefit of full exemption under the first notification.

(3) The present controversy arose when Surender Sehgal and M/s. Sehgal Puri Pvt. Ltd. petitioners in the first writ petition, disputed the assessment and claimed refund of duty paid in respect of the period 1st of March. 1976 to 23rd of August, 1977 and from 1st of September 1972 to 31st of January 1978. The Assistant Collector, by his order in original dated 24th of March 1979, rejected the claim. In appeal, the Appellate Collector confirmed the order. The Central Government rejected the petitioners' revision application by the impugned order dated 28th of October 1980 holding that converted paper subjected to printing with colour and waxed paper are two distinct products; that the paper in question is printed with colour and subsequently waxed; and that waxed paper so produced by the petitioners will get only partial exemption under the second notification. Technical literature and expert opinions were relied upon to support these conclusions.

(4) M/S Sarawati Offset Printers, petitioners in the second writ petition, did not lodge any claim for refund. They have come to this Court directly on the plea that resort to the ordinary remedy under the Act was futile in view of the orders passed by various authorities in the similar case of Surender Sehgal; that they have paid duty every time under protest; and that duty has been recovered from them without authority of law.

(5) For a proper appreciation of the controversy, it is necessary to refer to Tariff Item No. 17 as well as to the two exemption notifications. The relevant extracts are set out below:- Surendra Sehgal & Another Vs. Union of India and Others 227 A. Extract from the Tariff _______________________________________________________________________________________________ Item No. Description of goods Rate of Duty ________________________________________________________________________________________________ 17. Paper And Paper Board All Sorts (Including pasteboard, millboard, strawboard, 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- (i) Uncoated and coated print Twenty-five ting and writing paper percent (other than poster paper), ad valorem. (2) Paper board and all other Forty per cent kinds of paper (including ad valorem. paper or paperboards which have been subjected to various treatments such as coating, impregnating; corrugationn, creping and design printing), not else where specified. B. Notification No. 68/76-CE dated 16-3-1976 ________________________________________________________________________________________________ Item No. Description Duty Condition ________________________________________________________________________________________________ 3. Following varieties of paper namely:- (i) * * * (ii) Converted types of paper Nil If it is proved commonly known as imitation to the satisfaction paper or leather tree cetin of the paper, or plastic coated proper officer paper, or by any other name, that the appro- obtained by one side of approriate duty of being subjected to printing of excise or additional colour, with or without design, duty leviable under irrespective of the fact that section 2A of the whether or not such paper Indian Tariff Act, is subsequently varnished 1934 (32 of 1934) as or glazed by Chemicals or the case may be has embossed, and falling under already been paid sub-items (2) of the afore- in respect of the said Item No. 17. paper used in their manufacture. (iii) * * * * (iv) * * * * * * C. Notification No. 71/76-CE dated 16.3.1976 G.S.R. No. In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts polyethylene coated paper, polyethylene coated board waxed paper and waxed board, falling under Item No. 17 of the First Schedule to the Central Excise and Salt Act, 1944 (I of 1944) from so much of the duty of excise leviable thereon as is in excess of 12.5 percent 'ad valorem' subject to the condition that the appropriate duty of excise or additional duty leviable under Section 2-A of the Indian Tariff Act, 1934 (32 of 1934) as the case may be, has already been paid in respect of the base paper.... * * * * * * * * * * * *

(6) On behalf of the petitioners, it is contended that the converted paper produced by subjecting one side of the paper to printing of colour and design, irrespective of the fact that such paper is subsequently waxed and glazed, sold to M/s. Modern Bakeries for wrapping bread, falls within the first notification. The two notifications, according to them, are ambiguous in their applicability to the said product; such notifications under a fiscal statute ought to be so construed as to avoid double taxation on the same goods as also to give maximum benefit to the assessed. Further, it is urged that Trade Notices subsequently issued by different Collect orates also indicate intention of the excise department to allow full exemption of duty on printed and waxed wrapping paper.

(7) The case of the respondents is based upon opinions contained in a letter dated 4th of August 1978 from the Central Revenue Control Laboratory, Government of India (Annexure 'M'), and another letter dated 10th of August 1978 from Forest Research Institute of Government of India (Annexure 'L'), both addressed to the Assistant Collector, Central Excise, Faridabad. The former explains in detail the kind of material used and the technical aspects involved in the operation of glazing and polishing in contra-distinction to that of wax coating a sheet of paper. It refers to text of authoritative books and papers on the subject. Opinion is also expressed with regard to the specific goods manufactured by the petitioners. Relevant portion of the letter reads as follows.'-

"APPLYING a coating of paraffin wax or other wax on a sheet of paper is known as wax coating a paper sheet. With the literature available with us, it is seen that glazing or polishing a sheet of paper is an operation in which the surface of the paper gets polished or glazed. The glaze being imparted during manufacture or as a subsequent operation. Four methods viz. (i) Flint Glazing (ii) Brush enameling (iii) Friction glazing (iv) Modern Method (i.e. in which a mirror image of the casting surface is obtained of glazing find mention in the literature. In the glazing process, the main function is to obtain good gloss, whereas wax coating is done to impart property of moisture proffing. The process of wax coating by M/s Sehgal Puri (P) Ltd. Faridabad is passing the paper through molten wax and then chilling, finds mention in the book "specially Papers" (Their properties and applications) by Robert H. Mosher (Page 291) and here also the process has been described as wax coating and not glazing by Chemicals. It may also be stated that the main function of the Bread Wrapper is to safeguard the bread from loss of moisture. The little glaze obtained on the wrapper by wax coating is only incidental. High finishing waxed like beeswax or carnauba wax has been mentioned in literature as a component in coating formulation for coating colour of Friction glazing work. About 5 to 9% wax are commonly used as lubricant in addition to pigment, adhesive, dyes etc. In general, the binder ratio is kept to a low value so that the pigments are polished and highest gloss and brightness obtained. The product in question has a coating of wax only (other components as stated above being not used) and the percentage of wax to the base paper is as high as 50% indicating that the sole purpose of the wax in the present case is to give the paper a coating to make it moisture proof and the glaze which is obtained during the process of wax coating is only incidental."

THE opinion contained in letter dated 10th of August 1978 deals with the kind of paper in question in the following terms:- "Waxing & Glazing are two different types of operations. The waxing can be done of the machine, i.e. after paper is made. The main purpose is to impart resistance to the penetration of moisture in the bread. There is no glazing vein to the paper in the true sense. The apparent glaze is due to the inherent quality of the wax."

(8) As against this, the petitioners in the First writ petition have relied upon meaning of the word glaze stated in the Oxford English Dictionary, that is to say: (verb) give glassy surface to: (noun) anything used to produce glazed or lustrous surface: smooth and glossy. They have also placed on record a letter dated 23rd of December 1977 from the Regional Research Laborator, Hyderabad addressed to themselves (Annexure '0'). Full text of the letter is reproduced below:- "KINDLY refer to your letter No.C/1561/77-78 dated 30th November, 1977 enclosing a sample of converted paper glazed with blend of micro crystalline wax and paraffin wax. We have analysed the coating of this paper by Is method 3962. We hereby certify that the sample of the printed paper was glazed with the blend of micro crystalline wax and paraffin wax".

The letter, without stating any reasons, certifies that the petitioners' sample of the printed paper was glazed with the blend of two kinds of wax i.e. micro crystalline wax and paraffin wax. Wax is not a Chemical. The author does not certify that the product was glazed by Chemicals'. This certificate does not in anyway run counter to the earlier mentioned reasoned opinions relied upon by the department

(9) Mr. Jaitley has contended that popular dictionary meaning of expressions should be favored. In support of his plea, he has placed reliance upon Porritts & Spencer (Asia) Ltd. V. State of Haryana. , The Tata Engineering and Locomotive Company Ltd. V. The Gram Panchayat. Pimpri Waqhere. and Dunlop India Ltd. V. Union of India and Others (1976) 2S .C.C.241. The position in law is beyond doubt. In the present case, however, the products are different. Each of them is differently known in the market. The operation of production of the two is entirely different. The predominant purpose of waxing paper, namely, to eliminate penetration of moisture, cannot be achieved by simply glazed paper. If one goes to the market and asks for colour printed paper, for whatever purpose, neither the seller will give nor the purchaser will take waxed paper, a much more expensive product derived from different, specialised and costlier process of manufacture. Likewise, a person in need of waxed paper will not take merely printed paper instead. The test of popular meaning is the sense in which a product in commonly known in the market. Therefore, the meaning of the word 'glaze' given in the Oxford English Dictionary is of no help.

(10) Learned counsel for the petitioners fairly conceded that colour printing must precede the process of waxing paper and that printing of colour is not possible after the paper is waxed.

(11) The petitioners first convert base paper by subjecting it to the process of colour printing. The printed paper is then subjected to a further process of waxing. This changes the basic character and utility of the goods. The wrapper is waxed to make it moisture proof to protect bread from loss or penetration of moisture. As a result of waxing, the wrapper incidentally gets a glazed surface.

(12) As soon as base paper is converted, on being subjected to printing of colour, manufacture of this particular type of paper is complete. The product that comes into existence, at this stage, may not be fit enough for wrapping bread, but, it is a known commodity, it can be used as printed paper for wrapping different kinds of articles of daily used and for various other purposes, and is sellable as such in the market. The fact that it may require further process of waxing to be used for wrapping bread will not affect its character as goods capable of end use.

(13) Ordinary paper, in contra-distinction to converted paper, without being subjected to colour printing, may also be waxed. Printing is not necessary for the manufacture of waxed paper. The process of manufacture, the waxing material, and even the cost of waxing paper, whether printed or not, will be the same. In other words. production of waxed paper can be obtained directly by waxing base paper r indirectly after converting it by printing of colour. What distinguishes waxed paper from the other kinds of paper, printed or otherwise, is its primary use as moisture proof paper, and its demand in the market for wrapping bread or any other commodity requiring moisture resistant wrapping paper. Waxed paper is really a special product of paper different from printed paper.

(14) Base paper, on being converted by subjecting it to printing of colour completes the manufacture of one known commodity. The same may also be used as input for the manufacture of another commodity known as waxed paper. Rich of these different products can be put to end use. Each of them is sellable as a different kind of paper product in the market.

(15) The two exemption notifications were issued by the same authority, on the same date and apply to products manufactured from base paper falling under Tariff Item No. 17. Different words are used for description of products subject matter of the two notifications. Surely, when the Central Government issued the two notifications, it was conscious of the different types of paper products, the difference in the primary use thereof, and it really intended to distinguish one kind of paper product from the other.

(16) From the point of view of incidence of excise duty or eligibility for exemption on the manufacture of the said goods, it will really make no difference whether one person manufactures the two products at one factory or at different factories, or whether different persons produce each kind of goods separately at different places. For example, one person may be manufacturing only printed paper. He would be entitled to exemption under the first notification and thus be liable to nil duty. Another person may be producing waxed paper. Whether waxed paper is derived directly from ordinary paper or after it is printed and converted, makes no difference. The end product being waxed paper, he will be eligible for partial exemption under the second notification. If one and the same person chooses to manufacture both the kinds of products under the same roof, the incidence of duty will still be the same. In such a case, the process of manufacture may be cut off at the first stage. The product so obtained is itself a marketable commodity. The first notification will come into play at this stage. The manufacturer may choose to further change the character of the printed paper already produced by subjecting it to additional process of waxing resulting in the production of waxed paper. At this stage, the second notification will come into operation resulting in partial exemption of duty in respect of a different product.

(17) In whatever way we look at it, whether base paper is first converted by colour printing and then waxed or it is straightaway waxed without colour printing: or whether colour printing and waxing operations are carried on by one or different persons, or at one or different places: or whether the two operations are separate or combined together under the same roof the result from the point of view of excise duty will be the same. Each of the notifications will still be applicable at different stages, in respect of the different paper products. Ultimately, on waxed paper only partial exemption will be admissible.

(18) Since colour printing of base paper must precede the process of waxing paper, provisions made in respect of the former by the first notification and in respect of the latter by the second notification, especially when both the notifications were issued on the same day by the Central Government, stands to reason.

(19) Thus, it is clear that each of the notifications operates in different fields and applies to different kinds of paper products. There is neither any ambiguity nor any conflict in the incidence and exemption of duty on the separate or conjoined applicability of the two notifications. Here, the concept of double taxation is wholly inapplicable.

(20) The petitioners manufacture bread wrappers. A particular colour, design and the make of Modern Bakeries is printed on the wrappers, apparently, on order from that customer. Likewise, they may print different colours, designs, marks or names for others also. The printing of any particular colour, pattern, mark or name of M/s Modern Bakeries or any other person, cannot be said to control the end use of the product.

(21) When the question is whether a subject falls in the notification or in the exemption clause, it has been explained by the Supreme Court in Union of India V. Wood Papers Ltd., 1990(47) E.L.T.500, that the same being in the nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification, then full play has to be given to it and it calls for a wider and liberal construction which results in inequitable results and is incongruous is to be avoided. This is the principle of interpretation of the exemption notification in this case.

(22) Mr. Asthana, learned counsel appearing in CWP. 58/81, has contended that the benefit of exemption from the whole of the duty should be given to the petitioners in view of trade notices issued by different Collect orates regarding printed waxed wrapping paper published in 1989 (41) E.L.T. T-13. The text of the trade notices is reproduced below:-

"PAPER- Printed waxed Wrapping Paper (Sub-Heading No. 4811.90) Doubts have been raised on the appropriate classification of printed waxed mapping paper as product of printing industry falling under Tl-68 exempted under notification No.234l82 under the old Tariff and under Chapter 49 of Central Excise Tariff- 85, or as converted types of paper covered by Tl- 17 (2) of the erstwhile Tariff and under sub-heading4811.90 Ceta exempted under Notification No .49187. 2. The matter has been examined and it is viewed that printed waxed wrapping paper is not covered under Chapter 49 as a product of printing industry since printing is merely incidental to the primary use of the product, and that it is more appropriately classified as converted paper under sub-heading 4811.90 and exempt by Notification 49187." (Madurai Collectorate Trade Notice No. 35/89, dated 10-3-1989. Parallel Calcutta- Ii No.48/(CH-48)2/CAL-ll/89/CE, dated 10-3-1989, Bombay-11 No. 27 (MP)/Paper and Paperboard (1)/1989, dated 14-3- 1989, Bombay-111 No. 30/BOMBAY-lll-PaperProducts (1)/1989, dated 16-3-1989, Chandigarh No. 29-CE/1989. Dated 16-3-1989).

(23) For a proper understanding of the above mentioned trade notices, it may be recalled that the Tariff (contained in Schedule I of the Act) was replaced by the Excise Tariff laid down in the Schedule to the Central Excise tariff Act, 1958 (hereinafter referred to as the 1985 Tariff). The structure of the Tariff was altered and a new system of classification of goods was introduced. Reference to the goods has been made in different chapters bearing titles and headings for convenient determination of classification of the goods. Chapter48bearsthetitle"paper and paperboard:articles of paperpulp, of paper or of paper board". Paper of all sorts was earlier covered by Item No. 17 of the Tariff. Chapter 48 of the 1985 Tariff includes the same. Chapter 48, sub-item 48.11 deals, inter alia, with paper, surface-coloured, surface-decorated or printed. Certain articles of paper and paper board are specified under different sub-headings. Sub-heading No. 4811.90 takes care of the residuary articles of paper described as "Other". As against this, Chapter 49 of 1985 Tariff and notification No. 234/82 deal, inter alia, with 'Products of the Printing Industry'.

(24) For proper understanding of the scope, applicability and effect of notification No. 49/87 in relation to printed waxed wrapping paper, it is necessary to refer to the notification. Relevant extract of the same reads:

"CONVERTEDTYPES Of Paper 49.87-CE, dt. 1.3.1987 In exercise of. the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 63/82-Central Excises, dated the 28th Februray, 1982, the Central Government hereby exempts converted types of paper and paperboard falling within Chapter 48 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986),from the whole of the duty of excise leviable thereon which is specified in the said Schedule:'

(25) In this background, it is clear from bare perusal of the contents of the trade notices that doubts had arisen as to the proper classification of printed waxed wrapping paper as Product of Printing Industry under Chapter 49 of 1985 Tariff or as converted types of paper covered by Chapter 48 of 1985 Tariff. Proper determination of the classification dispute involved the further question as to the applicability of exemption notification No. 234/82 or the notification No. 49/87. It was clarified that printed waxed wrapping paper "is not covered under Chapter 49 as a Product of Printing Industry since printing is merely incidental to the primary use of the product' and that it is more appropriately classified as a converted paper under sub-head 4811.90 and exempt by notification No. 49/87".

(26) The clarification was meant to resolve the classification dispute as to applicability of one notification under Chapter 49 or the other under Chapter 48 of the 1985 Tariff. But, in the present case. there is no classification dispute. The real question for decision is not regarding classification of the goods but only of the applicability of the first or the second notification to the goods in question which were admittedly covered under one and the same Item No. 17of the Tariff. The trade notice is, therefore, not even applicable.

(27) Exemption notifications have to be construed on the terms and conditions prescribed therein. Notification No. 49/87 which was subject matter of the above mentioned trade notices covered all types of converted paper falling within Chapter 48 of the 1985 Tariff. As against this, to be eligible for exemption under the First notification base paper, when converted must fulfill certain qualifications prescribed therein. The same should be obtained by one side of paper being subjected to printing of colour. But, on conversion of base paper into waxed paper, the product will fall into the ambit of the second notification. Neither the first nor the second notification apply to all types of converted paper as is sought to be done by the exemption notification No. 49/87 under Chapter 48 of the 1985 Tariff. This notification does not distinguish between printed paper and waxed paper, whereas this distinction has been consciously made in the first and the second notification which is the subject matter of discussion in the present casse.

(28) Trade notices are essentially meant for administrative guidance. The same cannot operate retrospectively. The above mentioned trade notices appear to have been issued by different Collect orates for the future guidance of their subordinate officers. Such instructions cannot be said to constitute an authority to bind and regulate any decision of the Central Government.

(29) For these various reasons, reliance upon the said trade notices is of no avail for the purposes of construing the notifications in hand or for testing the validity of the impugned orders.

(30) In view of the above discussion, we find no substance in the case set up by the petitioners. Consequently, the rule is discharged and the writ petitions are dismissed with costs.