ORDER
S.L. Peeran, Member (J)
1. The appeals in reference relate to the grant of exemption of duty, with reference to interpretation and applicability of Notification No. 142/81, dated 8-7-1981 to the appellant, who are manufacturers of a variety of paper known as mill wrapper. Their contention is that mill wrapper is nothing but Kraft Paper, which is an unbleached variety of paper containing not less than 75% by weight of the pulp made from Bagasse. They contend that they have fulfilled the terms of the said Notification and are entitled for full exemption from the payment of the duty. Alternatively, they have contended that mill wrapper is always consumed captively and is not liable to duty under Notification No. 187/83-C.E., dated 9-7-1983 subject to the conditions set out therein. Yet if this plea is also not accepted, even so, mill wrapper manufactured and captively consumed inside the factory should be, charged to duty only at the rate of Rs. 900/- per MT + 5% SED which was the rate approved by the Department in respect of mill wrapper in the Classification List effective from 2-4-1983.
2. Appeal No. 161/87 deals with the dispute pertaining to the non-approval of classification list No. 13/83 effective from 21-6-1983 and grant of exemption under the above said Notification, while Appeal No. 162/87 is directed against the confirmation of demand raised by Superintendent as short levy for Rs. 1,82,889.53 in terms of the disallowance of the claim of the benefit of the Notification in reference.
3. The Assistant Collector in his order dated 19-3-1984, while rejecting the grant of the benefit of Notification has observed that the classification list refers to “Mill Wrapper”. The Notification No. 142/81, dated 8-7-1983 applies to “Unbleached Variety of Paper (Kraft Paper)” and restricts to only Kraft Paper and not to Mill Wrapper.
4. The Collector (Appeals) has disposed of both the question of grant of exemption under the said Notification and the confirmation of demand of short levy by a common order. The learned Collector has agreed with the reasoning of the Assistant Collector and has held that “Mill Wrapper” is not Kraft Paper and the Notification in operation restricts to Kraft Paper alone. The appellants have contended that the Notification exempt unbleached varieties of papers (kraft paper). Thus, unbleached varieties of paper as such are exempted. There is no further requirement that the unbleached varieties of paper must be a Kraft Paper. Technically, there is no kraft paper which is bleached. All Kraft Paper is unbleached. Consequently, unbleached varieties of paper is a term of wider import. Unbleached varieties of paper is the genus of which a Kraft paper is its species. If the reasoning of the lower authorities is to be accepted then the use of expression unbleached varieties of papers would become redundant and nugatory. They contended that an interpretation which would render any statutory provision redundant and nugatory should be avoided. They further contended that on the other hand, if the construction suggested by them is accepted, then no part of the notification becomes redundant, including the expression ‘Kraft Paper’. Consequently, the only possible conclusion is that any unbleached varieties of paper satisfying the further conditions set out in the Notification regarding use of not less than 75% by weight of pulp made from Bagasse, would be exempt under the Notification.
5. The appellants have further submitted that the use of the expression ‘varieties’ is most significant. The expression employed is not unbleached variety of paper but unbleached varieties of paper. Consequently, full significance and emphasis has to be given to the deliberate use of plural in the notification by the Central Government. They contended that the lower authorities have totally failed to apply their mind to this aspect of the Notification.
6. They further contend that the lower authorities have been carried away by the name given to the Kraft Paper by the appellant. They described this Kraft Paper as Mill Wrapper essentially for convenience in day-to-day affairs. That does not and cannot take out the Mill Wrapper from the category of Kraft Paper. As the name suggests, this is a paper which is used in the mill for wrapping other varieties of papers. Kraft paper does not cease to be so by giving of the name “Mill Wrapper”.
7. Shri Swaminathan, learned Consultant arguing for the appellants reiterated the grounds of appeal and submitted that the product in question satisfying the second portion of the Notification in question of containing not less than 75% of bagasse is not disputed by the Department, but the lower authorities had decided against them only on the basis of the Test result, furnished by Inspector by letter dated 21-2-1985 which states that “As per IS: 4661 -1986 (Glossary) terms used in paper Trade and Industry the sample does not satisfy the definition of ‘Kraft Paper’. By their letter dated 27-2-1985 they sought for full text of the letter written by Inspector to the Test Lab. containing the queries and also full text of the reply/report received by them from Chemical Examiner. Sh. Swaminathan pointed out that the Deptt. did not choose to give the details sought for by them. The Assistant Collector by his letter dated 13-12-1985 instead furnished the tour note of Shri L.C. Malik, Chief Chemical Examiner Grade I which is noted below :-
“Ellora Paper Mills, Tumsar Road was visited on 28-6-1985 and manufacture of unbleached Paper (Kraft Paper) from bagasse and waste paper was studied. It was pointed out to the factory manager that there is an error in the statement made under Sr. No. 5 of the test memo dated 23-4-1984. It was also explained to the party that the paper cannot be accepted as kraft paper. The sample has been reported in the test report issued on 18-7-1985.”
Shri Swaminathan submitted that despite requests, the Test Report dated 18-7-1985 referred in this tour Note has not been furnished to the appellant. Shri Swaminathan further submitted that mill wrapper manufactured by them is also a Kraft Paper and having identical uses as that of Kraft paper. The Notification No. 142/81 (amended) granted exemption to unbleached varieties of Paper (Kraft Paper). The mention of Kraft Paper in the bracket was only an illustration and not restricted. The mill wrapper paper being a species of the generic Kraft Paper and having qualified as an unbleached variety of paper, with not less than 75% of bagasse, the benefit cannot be denied to them. He relied on the following technical literature in support of his claim :-
(a) Definition of Kraft Paper and Mill Wrapper at Page 21 and 24 respectively as stated in IS: 4661 - 1986 Indian Standard Glossary of terms used in Paper Trade and Industry :- "Kraft Paper - Paper of high mechanical strength. Mill Wrapper - A general term to designate grades of paper used by Paper Mills for wrapping finished paper and boards." (b) Definition of Kraft Paper at pages 140,141 and Mill Wrapper at page 1.64 as given in "Dictionary and Encyclopaedia of Paper and Paper Making by E.J. Labarre (published by Swets & Zeitlinger, Amsterdam 1952), which is noted below :-
“Kraft, a very strong paper originally made from ropes (hence the name from Ger. Kraft = strength), but now made from unbleached sulphate wood pulp by prolonged boiling under low pressure, thus preserving strength because the stock has received less drastic chemical treatment. It is smooth, either MILL FINISH or M.G. (PK2/142), of a characteristic light brown colour, but can also be dyed any colour, though never bright, owing to colour of pulp, strong and flexible and highly resistant to sudden strains, and now also imitated in various ways. May be plain, MACHINE-GLAZED, or FELT-MARKED by Marking of RIBBING FELTS. The word is also used in many combinations such as kraft; BROWNS, i.e. brown wrapping paper made according to this process, which in fact is usually understood by the term ‘kraft’ paper; kraft PULP, the variety of sulphate wood pulp made from spruce and other confiers, or even from SODA PULP, for the production of kraft wrapping paper, kraft ‘Union’, occasionally termed ‘Duokraft’, (Sw. Oceanpaper), a waterproof packing consisting of two or more (HPB 82) sheets of draft paper conjoined by a coating of tar, (sometimes called ‘pitch paper’) or even latex (SH), kraft waterproof, paper treated with paraffin (see Waxed) asphalt or other material to render it water proof. Kraft waterleaf a lightweight absorbent paper made of sulphate pulp, unsized, used principally for Towelling (CDP). Kraft is also much used for strong Gummed tape and cable papers. See also coils and spinning. See Brown, insulating blankets, imitation kraft and semi-kraft. HM, (1933) II, 164 describes a good Kraft as follows : “Pure Sulphate pulp with occasionally a small percentage of Kraft broke. No loading. Well-beaten, leaving fibres long. Good sizing, though the too sudden drying of the cylinders is liable to affect this. Great strength, which is the essential characteristic. Good rattle, very opaque, wild or cloudy lookthrough. High bulking qualities, colour natural brown of basic materials, sometimes corrected with aniline dyes. Mostly machine glazed, i.e. by the single cylinder machine, but can be supplied machine-finished for bag-making. Breaking length 10,000 metres and higher. Folding Resistance 1,200 double folds. Normally supplied in 50 to 100 sq. mtr. gr. (14 to 28 lb. Demy) but heavier substances obtainable.” (Folding resistance of Kraft papers is now much higher, viz. 8000 double folds in the ling direction and 5000 in the cross direction, while 30,000 fold shave been recorded. Bekk).
Mill wrappers or wrappings, a general term for coarse grade or wrapping paper used by mills to wrap up (a) rolls or reels and bundles and (b) reams, (see ream wrappers).”
Shri Swaminathan emphasised that the reading of the literature disclosed that mill wrapper is a variety of unbleached kraft paper, having same use as that of Kraft Paper. He submitted that the Notification cannot be read in a restricted sense in a way as to defeat the purpose of grant of exemption to unbleached variety of paper and he relied on the following rulings in support of his contention, that restricted meaning should not be given to the Notification :-
(1) J.B.A. Printing Inks Ltd. v. Union of India and Ors. as reported in 1980 (6) ELT 121 para 17 Bombay High Court.
(2) Deccan Sales Corporation v. R. Parthasarthy as reported in 1982 (10) ELT 885 – Bombay High Court.
He further contended that the lower authorities have also not considered the applicability of Notification No. 46/83, dated 1-3-1983 and also Notification No. 62/82-C.E., dated 28-2-1982 as amended by Notification No. 48/83-C.E., dated 1-3-1983.
8. As regards appeal No. 162/87, Shri Swaminathan submitted that classification list was approved on 10-3-1984 and the duty demanded is on 28-7-1984 for the period 26-6-1983 to 31-3-1984 and in absence of invocation of proviso to Section 11A of the Act, part of the demand gets time-barred.
9. Shri L.N. Murthy, learned SDR, while reiterating the findings submitted that there is no finding given in Test report about the paper being an unbleached variety of papers and also having not less than 75% of bagasse. He submitted that the Notification in question restricts to Kraft paper only and the exemption of Notification cannot be enlarged. He relied on the ruling of the Supreme Court as rendered in the case of Hemraj Gordhandas v. H.H. Dave as reported in AIR 1970 SC 755. He sought for remand of the matter, as the lower authorities had also not considered the question of set off, which may be available to the appellants in other Notification referred to by them.
10. We have considered the rival submissions and perused the records. The question that arises for our consideration is (i) as to whether the mill wrapper is a variety of ubleached variety of paper; (ii) Does the Kraft Paper in bracket (Parenthesis) restrict only to this unbleached variety of paper; (iii) whether the appellants are entitled to any other relief; (iv) Whether the demand confirmed in Appeal No. E/162/87 is barred by time; (v) What relief?
Point 1. The test result as furnished by the Inspector vide his letter dated 21-2-1985 with reference to test report dated 11-4-1984 does-not disclose the nature of the paper or the content of the bagasse. What is to be considered for grant of concession is nature of paper being unbleached or having not less than 75% of bagasse. The test report merely says that :-
“As per IS : 4661:1986 (Glossary terms) used in paper trade and industry the sample does not satisfy the definition of Kraft Paper.”
The Assistant Collector’s letter dated 13-12-1985 which gives the extract of Chemical Examiner’s (Grade I) report of personal visit to the appellate factory also does not speak of any test having been conducted with regard to the sample said to be tested and report issued on 18-7-1985. The said report has also not been placed before us for consideration by the Revenue. The appellants request for the copy of the report and their queries as per the letter dated 27-2-1985 has not been answered by the Department. The lower authorities in their orders have not considered the main ingredients of the Notification of the paper being a variety of unbleached paper and of its bagasse content, which is of primary nature. The authorities have proceeded on the opinion given in the test report, of sample not being Kraft Paper.
Point 2. It has to be considered now as to whether the unbleached variety of paper restricts only to Kraft paper. The Notification No. 142/81-C.E. (as amended) reads as follows :-
“Exemption to unbleached varieties of paper (Kraft paper) –
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts unbleached varieties of paper (kraft paper), falling under sub-item (1) of Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) and containing not less than seventy-five per cent by weight of pulp made from bagasse from the whole of the duty of excise leviable thereon.
2. This notification shall be in force upto and inclusive of the 31st Dec., 1986.”
The main emphasis of the Notification in reference is for “exemption to unbleached varieties of Paper (Kraft Paper). The word “Varieties” in plural does not restrict to one type of Paper namely Kraft Paper alone. The definition of ‘Kraft Paper’ as extracted from ISI:IS: 4661 – 1986
read with ‘mill wrapper’ alongwith dictionary meaning of both the words as occurring in “Dictionary and Encyclopaedia of Paper and Paper Making” referred to above indicates the uses of both the papers as same. Kraft paper is a paper of high mechanical strength, while mill wrapper is a general term for course grades of wrapping paper. So long as the mill wrapper satisfying the condition of being unbleached variety of paper with not less than 75% of bagasse content, the paper is said to have satisfied the condition of the Notification. The mention of Kraft paper in parenthesis in the Notification is an illustrative one. If the Notification was to restrict only to paper of high mechanical strength than the wording should have been “unbleached variety of Kraft Paper”. Moreover, Kraft Paper in bleached quality is also available. The uses of unbleached variety of Kraft Paper with other unbleached variety of paper being common; therefore, the reading of the Notification in question cannot be done in the strict sense, so as to give a narrow and restricted meaning, as given by lower authorities. It is well settled that the interpretation of the Notification should not be done in such a way as to make the Notification otiose or nugatory. So long as the plain meaning of the words could lead to interpretation to include varieties of unbleached paper and mill wrapper being one such, the benefit cannot be denied to the appellant. The appellants have submitted that the Department has not disputed the bagasse content being not less than 75%. In that event, the benefit of the Notification in question cannot be denied to the appellants. However, there is no evidence placed before us to give our findings thereto. Therefore, the matter is remanded for determining the bagasse content and to grant the relief as per the terms of. the Notification.
Point 3. In the event of the appellants not satisfying to the bagasse content then the Department shall consider the claim for set off as urged by them in terms of Notification No. 62/82-C.E., dated 28-2-1982 as amended by Notification No. 48/83-C.E., dated 1-3-1983 and also Notification No. 46/83-C.E., dated 1-3-1983.
Point 4. The demand of duty may not survive if the appellants were to satisfy the terms of Notification No. 142/81 as amended or on the reconsideration of the other Notification in question. In case of the appellants not satisfying any of the terms of the Notifications in question, then part of the demand for duty beyond 6 months would be time-barred, as proviso to Section 11A having not been invoked and also the classification list having been approved finally as could be noted from records placed before us.
Point 5. The appeal is disposed of on the above terms.