ORDER
T.K. Jayaraman Member (T)
1. This appeal has been filed against the OIA No. 156/2001 dated 18.04.2001 passed by the Commissioner of Customs & Central Excise (Appeals), Cochin.
2. The appellants manufacture Newsprint out of Pulp produced by them in their unit at Newsprint Nagar, Kottayam District. The main issue in this appeal is the entitlement of the appellants to the benefit of exemption Notification No. 163/67 dated 21.07.1967, as amended, in respect of the Newsprint manufactured by them. The period involved is from 9/87 to 2/88. The amount involved is Rs. 4,02,54,977.30. According to the above mentioned Notification, paper containing mechanical wood pulp amounting to not less than 50% of fibre content were exempted from the whole of duty of excise. The case of the department is that the appellants do not fulfill the condition that the paper manufactured by them contained mechanical wood pulp amounting to not less than 50% of fibre content. Hence, they would not be entitled for the benefit of the Notification. On the other hand, it is the contention of the appellants that they are manufacturing Newsprint from out of 70% chemic-mechanical wood pulp and 30% sulphate chemical pulp. According to the appellants, chemi-mechanical wood pulp is just another variation of mechanical wood pulp. If this is accepted, the appellants would be fulfilling the conditions of the Notification. While denying the benefit of the Notification, the Commissioner (Appeals) has relied on the order of CEGAT in the party’s own case for an earlier period in Final Order No. 970/99(C) dated 30.09.1999. The appellants challenged the above mentioned Final Order of the CEGAT before the Apex Court and the Apex Court in Civil Appeal No. 2245/2000 dated 17.03.2005 passed the following order:
ORDER
Mr. Joseph Vellapally, learned senior counsel appearing for the Appellants states that if the question of law regarding applicability of the Notification No. 163/67-CE dated 21st July, 1967, as amended from time to time, is left open to be taken up in future matters, he will not press this Appeal. The Appeal is accordingly dismissed. The question of applicability of the Notification is left open. The appellants would be at liberty to urge this question in future matters.
It is clear from the Supreme Court’s order that the question of applicability of Notification No. 163/67-CE dated 21st July 1967, as amended, is left open. Therefore, the finding of the CEGAT in para 13 of the above mentioned order is not binding on this Bench and further it is incumbent on us to decide this question in view of the appellants challenging the impugned OIA which relied on the CEGAT’s order.
3. S/Shri G. Sampath and S. Raghu, the learned Advocates, appeared for the appellants and Shri Ganesh Havanur, the learned SDR, for the Revenue.
4. The learned Advocates urged the following points:
(i) The samples of Newsprint manufactured by the appellant were tested by the Chemical Examiner and Deputy Chief Chemists. As per the test reports, the Newsprint has been manufactured out of fibre containing not less than 50% of mechanical wood pulp. In such circumstances, one cannot make a distinction between Chemi-Mechanical Wood Pulp and Mechanical Wood Pulp in order to deny the benefit of the Notification No. 163/67.
(ii) The Technical Literature on the subject does not make a distinction between Chemi-Mechanical Wood Pulp and Mechanical Wood Pulp.
(iii) The important question whether the Chemi-Mechanical Wood Pulp which was held to be same as Mechanical Wood Pulp prior to 28.2.1986 by the CBEC and held eligible for exemption under Notification 163/67-CE, as amended overnight, cease to be mechanical pulp subsequent to 28.02.1986 and be denied the exemption on the basis of the explanatory notes to the Harmonized system of Nomenclauture (sic).
(iv) The learned Advocates took us through the following documents:
(a) Chemical Examiner’s Report dated 15.12.1987
(b) The party’s reply dated 13.05.1989 to the notice issued by the department.
(c) Monogrph dated March 1997 titled “Pulp & Paper Industry in India” published by Government of India.
(d) Certificate dated 07.04.1988 given by the Central Pulp & Paper Research Institute, Dehradun.
(e) Photocopy of pages 87 to 91 and 108 from hand book “Casey’s reports on Pulp and Paper Industry” by Mr. James P. Casey, a leading authority in Pulp and Paper Making in the world.
(f) Copy of pages No. 195 and 196 from the Hand Book on Pulp and Paper Technology by Mr. Kenneth W. Britt.
(g) Mechanical wood pulp is of various kinds. Chemi Mechanical pulp is also mechanical Wood pulp vide hand book for Pulp & Paper Technologists (by G.A. Smook).
(v) The CEGAT, in its order, gave no specific findings with regard to the above mentioned documents but only relied on the Board’s Circular dated 12.09.1990.
(vi) The CEGAT has also not considered the process of manufacture.
(vii) The learned Advocates strenuously argued that Chemi Mechanical Wood Pulp should also be treated as Mechanical Wood Pulp and the benefit of the exemption Notification should be given to the appellants.
5. The learned SDR urged the following submissions:
(i) Prior to 01.03.1986, all Wood Pulps were classifiable under Tariff Entry No. 17(3) of. the old tariff. The CE Tariff 1985 was effective from 01.03.1986. The new tariff provided for different classification of wood pulps falling under Chapter 47. Chapter 4701 covered Mechanical Wood Pulp; CH 4702 – Chemical Wood Pulp, dissolving grades; CH 4703 -Chemical Wood Pulp, Soda or Sulphate, other than dissolving grades – Unbleached; and CH 4705 – Semi – Chemical Wood Pulp. Further, HSN Notes cover “Wood Pulp obtained by a combination of mechanical and chemical pulping process under CH 4705. It is very clear from the above that Mechanical Wood Pulp is different from Chemical and Chemi-mechanical Wood Pulps.
(ii) The Apex Court, in the case of CCE, Hyderabad v. Bakelite Hylam Ltd. held that “Explanatory Notes to HSN are a safe guide for ascertaining the true meaning of any expression used in the Act in case of any doubt”. Further the Supreme Court in the case of CCE, Shillong v. Wood Craft Products Ltd. has held that “HSN Explanatory Notes vis-a-vis ISI Glossary of Terms… HSN preferable….
(iii) The Notification provides exemption to paper manufactured out of at least 50% mechanical wood pulp. The appellants have not used mechanical wood pulp at all. They have used only chemical and chemi-mechanical pulps in the ratio of 30% and 70%.
(iv) In view of the above, the decision of the Tribunal in para 13 is correct.
(v) It is not disputed by the appellant that they are manufacturing Newsprint using chemical and chemi-mechanical pulps in the ratio of 30% and 70%. However, the test report by the Chemical Examiner is contrary. These reports need not be relied on as held by the Tribunal in the case of CCE, Hyderabad v. Priyadarshini Spinning Mills affirmed by the Supreme Court as reported in 1997 (94) ELT 287(SC). The Tribunal’s observations are as follows:- “The above facts clearly establish that the raw materials used in the disputed yarn were not synthetic staple fibre. Still the Chemical examiner, vide his test reports to the authorization, has reported that the yarn contained synthetic staple fibre. Obviously, therefore, his reports are based on misconception of the definition of “staple fibre”, and consequently these reports cannot be reliable basis for determining the classification. The Revenue’s appeal is based on these test reports. The Revenue has not placed any material, except these test reports, to prove that the yam in dispute contained synthetic staple fibre.
(vi) The Apex Court’s order in Appeal No. 2245/2000 dated 17.3.2005 in the party’s own case was consequent to the withdrawal of the appeal by the appellant since there was no duty demand sustainable in terms of the Tribunal’s judgment appealed against. The Tribunal found that there was no suppression of facts to invoke the extended period of limitation. This order of the Apex Court is to be construed as a case of dismissal without going into the merits and not as a dismissal of the Tribunal’s decision as urged by the learned Counsel for the appellant during the hearing on 22.6.2006 before the Bench.
(vii) The test report which is specific to a consignment or batch cannot be made applicable to past or future consignments. In this regard, he relied on the following judgments:
a. CCE, Mumbai-I v. Fibrotex 2000 (124) ELT 702(T) affirmed by Supreme Court as
b. Prakash Cotton Mills Pvt. Ltd. v. CCE
c. Punjab Fibres Ltd. v. CCE, Delhi
6. The main issue before us is whether the benefit of exemption Notification No. 163/67 dated 21.07.1967, as amended, can be extended to the paper manufactured by the appellant. For a proper understanding of the issue, we are reproducing the Notification No. 163/67-CE dated 21.07.1967 as amended by Notification No. 69/86-CE dated 10.2.86 below:
In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944, and in supersession of the Notification of the Government of India in the M.F (D.R.) No. 137/62-CE dated 13.6.62, the Central Government hereby exempts all paper containing mechanical wood pulp amounting to not less than 50% of the fibre content, falling under 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:
Provided that it is proved to the satisfaction of the proper Officer, as defined in the Central Excise Rules, 1944 that such paper is intended for use in the printing of newspapers, text books or other books of general interest.
Provided further that the waste arising in the process of printing of newspapers, text books or other books of general interest, may be used for any other purpose without payment of any duty if the proper officer is satisfied that the waste is genuine and cannot be used again in the printing of the aforesaid articles.
Explanation – For the purpose of this notification ‘newspaper’ means any periodical work, containing public news or comments on public news, which is printed at regular intervals of not more than one month and the printer and publisher of which have before the District Magistrate, Presidency or Sub-Divisional Magistrate concerned, made and subscribed to a declaration under the Press and Registration of Books Act, 1867 (25 of 1867).
6.1 Prior to 28.02.1986, the appellant was extended the benefit of the exemption Notification because the chemical test indicated that the paper manufactured by the appellant satisfied the condition stipulated in the Notification. In other words, the Paper manufactured by the appellant was found to contain mechanical wood pulp of not less than 50% of the fibre content. Even after 28.02.1986, the appellant is using the same process of manufacture of pulp and paper. The question arises as to why the benefit should be denied after 28.02.1986. The main reason, according to the Revenue, is the change in the Tariff with regard to classification of pulp. Prior to 28.02.1986, there was no separate classification of pulp. The Revenue contends that as per the old Tariff, the appellant satisfied the condition of the Notification. But, in terms of the new Tariff, they do not satisfy the condition of the same Notification. Is there any change in the Notification itself? No change, excepting in the amended Notification, there is a reference to Chapter 48 of the New Tariff because Paper falls under that Chapter.
6.2 In order to decide the entitlement to the benefit of the Notification, the approach of the Revenue is to go by the Tariff classification. Revenue’s logic is as follows:
6.3 The appellant produced Pulp by chemi-mechanical process. Chemi-mechanical process is only a variation of mechanical process. In the old tariff, there was no mention of the different variations of mechanical pulp. Therefore, the benefit was extended even to chemi-mechanical pulp. However, in the new Tariff, after 28.02.1986, there is specific mention of mechanical wood pulp, chemical wood pulp and semi-chemical wood pulp, all classifiable under CSH 4701.00. In these circumstances, Revenue contends that the expression mechanical wood pulp in the Notification should not be extended to chemi-mechanical wood pulp for the reason that HSN Explanatory Notes indicate that chemi-mechanical wood pulp would be classified under semi-chemical wood pulp. This is the thrust of the Circular No. 38/90 dated 12.09.1990 issued by CBEC. The said Circular is reproduced below:
CIRCULAR NO
38/1990, Dated: September 12, 1990
Subject: Eligibility of exemption under Notification No. 163/67-C.E., dated 21-7-1967 Newsprint produced out of Chemi-mechanical Pulp.
Reference Board’s F. No. 61/20/88-CX.4, dated 16th September, 1988 addressed to Collectors of Central Excise, Belgaum and Cochin clarifying that benefit of Notification No. 163/67-C.E. is not available for chemi-mechanical pulp or semi-chemical wood pulp or any pulp other than mechanical pulp to say that the matter has been re-examined in consultation with Chief Chemist, Central Revenue Control Laboratory, in the Board’s Office on representations from the trade. It has been represented that apart from the classical mechanical and chemical pulping processes, new processes of pulping have recently been developed. Some of these processes which utilise chemical treatment of raw materials, are regarded as variations of mechanical wood pulp. Accordingly, it is claimed that benefit of exemtpion Notification No. 163/67-C.E. can not be denied by treating pulp obtained by such processes as other than mechanical wood pulp particularly since on testing of samples the Chemical Examiner had certified that the paper contained more than 50% of mechanical wood pulp by fibre content. The processes claimed to be variations of mechanical pulping as per certificate dated 7th April, 1988 of the Central Pulp and Paper Research Institute are:
(a) Stone Ground Wood Process (SGW);
(b) Pressurised Ground Wood Process (PGW);
(c) Chemi Ground Wood Process (CGW);
(d) Fine Ground Wood Process (FGW));
(e) Refiner Mechanical Pulping (RMP);
(f) Chemi Refiner Mechanical Pulping (CRMP);
(g) Semi Chemical Pulping (SCP);
(h) Chemi Mechanical Pulping (CMP);
(i) Thermo Mechanical Pulping (TMP);
(j) Chemi Thermo Mechanical Pulping (CTMP).
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2. The Board considered that the matter should be decided separately under the Old Tariff and in the New Tariff. As regards the position under the old stated by the Deputy Chief Chemist [Annexure-I (copy of opinion enclosed for information and guidance)] and the fact that the samples of paper were tested by Chemical Examiners who certified that the paper contained not less than 50% of mechanical wood pulp by fibre content, it was decided that chemi-mechanical pulping and chemi-thermo mechanical pulping are only variations of mechanical pulping and the pulp so obtained would be covered by the expression “Mechanical wood Pulp’ occurring in exemption Notification No. 163/67 dated 21-7-1967. Accordingly, for the period prior to 28-2-1986 wood pulp obtained by the chemi-mechanical and chemi-thermo mechanical pulping processes would be appropriately regarded as mechanical wood pulp and the benefit of exemption Notification No. 163/67 can not be denied by treating the pulp as other than mechanical wood pulp.
3. As regards the position under the new Tariff, it was viewed that since the Tariff specifically mentions mechanical wood pulp, chemical wood pulp and semi-chemical wood pulp, the expression mechanical wood pulp in Notification No. 163/67 should be interpreted in accordance with the Tariff. Therefore, after 28-2-1986 mechanical wood pulp in Notification No. 163/67 would refer to only such mechanical wood pulp as is covered under Heading 4701 HSN. Chemi-mechanical pulp and chemi-thermo mechanical pulp which are obtained by a combination of these two processes can appropriately be regarded as semi-chemical pulp and, therefore, are not covered by the expression mechanical wood pulp. Therefore, the benefit of exemption Notification No. 163/67 would be available on writing and printing paper intended for use in printing of newspapers, text books and other books of general interest when made from pulp containing less than 50% of mechanical wood pulp by fibre content but exceeding 50% aggregate of mechanical wood pulp and chemi-mechanical pulp and thermo mechanical wood pulp.
4. However, as regards recovery of duty short-levied due to irregular availment of exemption Notification No. 163/67 will be considered separately by the Board and further instructions will follow.
5. Field formations may be informed accordingly.
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6.4 The lower authorities have simply followed the Board’s circular. Even in the Final Order No. 970/99 dated 30.03.1999, which was challenged in the Apex Court, the demand was set aside only on account of the finding that there is no suppression of facts. As regards the actual merit of the case, we have only one short paragraph which is reproduced below:
In so far as classification of pulp is concerned, we note that Chapter heading is very clear after 1.3.1986. We note that newsprints manufactured on a twin wire high speed paper machine with a mixture of chemical and chemi-mechanical pulps in the ratio of 30% to 70%. Having regard to this fact, we hold that benefit of Notification No. 163/67 as amended by Notification No. 72/76 dt. 16.3.76 will not be admissible to the newsprint manufactured by the appellant.
6.5 Since the Apex Court, in its order dated, March 17, 2005 has left the question of applicability of the Notification open, we are examining the issue here afresh.
6.6 A discussion of the process of pulp manufacture would be relevant here. Pulp is used for the production of Paper and Newsprint. Pulp is produced from materials like wood, bamboo, grasses and certain agricultural residues, which contain cellulosic materials. The general processes of pulping are (i) Chemical pulping; (ii) Mechanical pulping; (iii) Semi-chemical pulping. Chemical and mechanical pulping are distinctly separate processes and the semi-chemical pulping is the combination of the two.
Mechanical pulp was conventionally made by grinding wood logs. Initially, only softwood was used for producing mechanical pulp. Mechanical pulp is mainly used for the production of Newsprint. The pulp produced just by grinding the logs was very weak, which was not suitable for high speed machines for printing. Hence, improvement in processing became a necessity. The use of hard wood for the production of pulp was also investigated. In due course, the following mechanical pulping processes evolved.
a. Refiner mechanical pulping(RMP)
b. Chemi-refiner mechanical pulping (CRMP)
c. Chemi-mechanical pulping (CMP)
d. Thermo-mechanical pulping(TMP)
e. Chemithermo-mechanical pulping(CTMP)
In mechanical pulping, the use of chemicals is common. Hardwood chips are invariably treated with chemicals like alkali so that the binding material in the wood is softened and the subsequent mechanical treatment will reduce the damage to the fibres. It is seen that acceptable mechanical pulp cannot be produced from hard wood without the use of chemicals.
The appellants have stated that in their unit, hard wood like Eucalyptus, Accacia, Wattle, etc. are used. The wood is chipped in chipper. The chips are washed and steamed. The steamed chips are treated with Sodium Hydroxide and other chemicals. The chemicals are squeezed out using high efficiency presses. The chips are then subjected to refining at atmospheric condition in two stages. The unbleached pulp yield is 87 to 88% on raw material. The process used is a chemi-refiner mechanical pulping process.
The term Chemi-Mechanical Pulping(CMP) is extensively used both in mechanical pulping as well as in semi-chemical pulping. In the case of hard wood, when the chemical used is 1 to 7%, it is classified under mechanical pulping and when the chemicals used are 10 -15%, it is classified as semi-chemical pulping. In the case of mechanical pulping, the temperature used is 60 to 120C whereas in the case of semi-chemical pulping, the temperature used is 130 to 160C. It was urged by the appellant that the chemi-mechanical pulp produced at their unit is only a mechanical pulp and not semi-chemical pulp.
The identification of the type of pulp is done by Herzberg Stain. This stain determines the extent of lignin present in the pulp. The chemical pulp, which is almost free from lignin, gives a blue coloration with Herzberg stain. The mechanical pulp, which retains major part of the lignin, gives a brilliant yellow colour with Herzberg stain. The semi-chemical pulp, which retains only a part of the lignin gives a yellowish blue colour with Herzberg stain.
6.7 We have also perused an opinion given by the Director and the Officer in charge of Central Pulp & Paper Research Institute, an autonomous organization registered under the Societies Act under the Administrative control of the Ministry of Industry, Government of India. This opinion of the Central Pulp & Paper Research Institute is very relevant in deciding the issue. Therefore, the document dated April 7, 1988 is reproduced below:
To whomsoever it may concern
Mechanical pulp was conventionally made by grinding wood logs. The manufacture of mechanical pulp was developed first by F.G. Keller of Germany in 1843. Considerable developments have taken place since then and more particularly during the last two decades in the process technology for manufacture of mechanical pulp. There has been a proliferation in the terminology of mechanical pulping processes. Some of them are as follows:
– Stone Ground Wood Process (SWG);
– Pressurised Ground Wood Process (PWG);
– Chemi Ground Wood Process (CGW);
– Fine Ground Wood Process (FGW);
– Refiner Mechanical Pulping (RMP)
– Chemi Refiner Mechanical Pulping (CRMP);
– Chemi Mechanical Pulping (CMP);
– Semi Chemical Pulping(SCP);
– Thermo Mechanical Pulping (TMP);
– Chemi Themo Mechanical Pulping (CTMP).
All these processes are variations of mechanical pulping. They yield pulps which exhibit properties of conventional mechanical pulp and are, therefore used for manufacture of newsprint and magazine grades. They all come under the general term “Mechanical Pulp.
Thus the “CMP Pulp” of Hindustan Newsprint Ltd. (HNL) is a mechanical pulp (emphasis supplied) as it is manufactured by grinding in refiners (mechanical process).
6.8 We are also reproducing the test result of the sample of the paper done by the Chemical Examiner.
The sample contains mechanical wood pulp amounting to not less than 50% by weight of the total fibre content.
6.9 In view of the above discussion, taking into account the expert opinion as well as the test results, we are convinced that the pulp produced by the appellant is a mechanical pulp.
6.10 Entry 4701.00 of the Central Excise Tariff mentions Mechanical wood pulp, chemical wood pulp, semi-chemical wood pulp and pulps of other fibrous cellulosic materials. It is the contention of the Revenue that the pulp produced by the appellant cannot be considered as Mechanical Wood Pulp after 28.02.1986 for the reason that the appellants have admitted that they use to the extent of 70% chemi-mechanical pulp. In the new Tariff, the variations of mechanical pulp are not given at all. Since, chemi-mechanical pulp is only a pulp obtained by a variation of the mechanical processes, even according to the new Tariff, the pulp used by the appellant to the extent of 70% would be classifiable as Mechanical Wood Pulp only. There is no reason to hold that chemi-mechanical pulp would go outside the purview of mechanical pulp under the new Tariff. Moreover, Revenue has not made a case that the Chemi-Mechanical Pulp produced by the appellants would fall under the category of either Chemical Wood Pulp or Semi Chemical Wood Pulp.
6.11 At this stage, we would like to discuss on the interpretation of an exemption notification. A Notification has to be interpreted in terms of its language. When the language of the Notification is plain, clear effect must be given to it. The Hon’ble Apex Court dealt, with the interpretation of Notification No. 29/83-Cus. in the case of Collector of Customs, Bangalore v. Maestro Motors Ltd. . This Notification exempted components, including components of fuel efficient motor cars in semi-knocked down packs and completely knocked down packs. When the appellants imported completely knocked down packs. The Revenue used the weapon of Interpretative Rule 2(a) to hold that the components in a completely knocked down pack would be considered to be Cars. By holding the above view, Revenue sought to deny the benefit of the exemption notification. The Apex Court ruled that, Effect must be given to the wording of the notification. Thus, components in completely knocked down packs would get the exemption under the Notification even though for purposes of classification, they may be considered to be cars.
6.12 The CEGAT Larger Special Bench, New Delhi, in the case of Indian Airlines, Calcutta v. Collector of Customs had occasion to interpret Notifications No. 145/77-Cus dated 9.7.1977 and 99/81-Cus dated 1.4.1981 The first Notification covers, inter alia, ‘rubber tyres and tubes used exclusively for aeroplanes.’ However, the second Notification gives exemption to ‘aeroplane spare parts’, when imported into India for the servicing of aeroplanes, from Customs duty. When aeroplane tyres were imported, Revenue denied the benefit of exemption notification to the aeroplane tyres because it held that the tyres and tubes of aeroplanes would fall under Tariff items different from those of aeroplane spare parts. The CEGAT would not agree. The tyres were given the benefit of the exemption Notification 99/81. In the above decision, the CEGAT made the following observations:
When an article is covered by an exemption notification, it is given the exemption. The words are given a meaning to cover what they can legitimately cover. The distinction must be not between a wide coverage and a narrow coverage but between a coverage that the meaning of the words can yield and one that it does not. If the words yield a meaning, it would be a mistake to say that wide coverage is being given simply because it does not appeal to one. It is not a question of wide coverage so much as the question of proper, appropriate, correct coverage.
6.13 The main reason for denying the exemption in the present case is given in para 3 of Board’s Circular dated 12.09.1990. It is stated that as per HSN, Chemi-mechanical pulp and Chemi-thermo mechanical pulp which are obtained by a combination of these two processes can appropriately be regarded as semi chemical pulp and, therefore, are not covered by the expression mechanical wood pulp. Here, we are confronted with two different opinions. As per HSN, Chemi-mechanical pulp would also be called as Semi chemical wood pulp. Since semi chemical wood pulp are separately given in the Tariff, the Board’s Circular gives a clarification that the Chemi mechanical pulp should not be treated as mechanical pulp. However, as per the Central Pulp & Paper Research Institute’s opinion, even the Chemi mechanical pulp is a variation of mechanical pulp. They have also given the reasons that the said pulp exhibit properties of conventional mechanical pulp and are, therefore, used for manufacture of newsprint and magazine grades. It is also seen that the CMP pulp manufactured by the appellants is produced by grinding in refiners (mechanical process). Reference was made to Herzberg stain. Since the chemical test had employed the above method and the result confirms the claim of the appellants that the paper has been made of pulp containing not less than 50% of mechanical wood pulp, we are of the view that Board’s reliance on HSN explanatory note ignoring the expert opinion of Central Pulp & Paper Research Institute, an autonomous body of the Government of India, is misplaced.
6.14 We have also gone through some of the literature available on Pulp Industry. The Wikipedia, a free Encyclopedia available on the Internet, gives details about the manufacture of Wood Pulp. According to the above source, chemicals can be used to break up the cellulose fibres. The wood is crushed with grinders and then soaked in water to produce Ground Wood(GW). The wood can also be crushed with refiners using steam at high pressures and temperatures to produce Thermo Mechanical Pulp(TMP). TMP differs in quality from GW. In addition to the refiners, chemicals can be used to break up the cellulose fibres. Pulp produced this way is known as Chemi-Thermo Mechanical Pulp(CTMP). GW, TMP and CTMP are all considered as Mechanical Pulps. The Mechanical Pulps tend to turn yellow in kind because of the binding material, lignin, in the pulp. From the above process, we understand that in the Pulp produced by mechanical process, there is always presence of lignin, which is not there in the chemical pulp. It is seen that the effect of heat and chemicals dissolves the lignin that binds the cellulose fibre together without breaking the wood fibres. Chemical Pulp is used for materials that need to be stronger or combined with mechanical Pulps to give a product with different characteristics. The Central Pulp & Paper Research Institute, in their opinion, has categorized the Chemi-Mechanical Pulping(CMP) process employed by the appellants as a variation of Mechanical Pulping. They have also given the reasoning that the CMP of the appellant is manufactured by grinding in refiners (a mechanical process).
6.15 We have gone through some extracts of the Handbook for Pulp & Paper Technologies prepared under the direction of the Joint Text Book Committee of the Paper Industry. This publication gives the history of various pulping processes. In page 17 of the Publication, the characteristics of major pulping processes are given. In the classification column, the processes given are (i) Mechanical; (ii) Chemi-Mechanical; (iii) Semi-Chemical; and (iv) Chemical. In these different processes, the percentage of yield of the pulp varies. For example, the yield is highest in the mechanical process. It is of the order of 90 to 95%. Generally, soft wood is used. In the Chemi-Mechanical process, the yield is 85 to 90%. Hard wood is used in the Chemi-Mechanical process. However, in the semi-chemical process, the yield varies form 50 to 80%. In the Chemical Process, the yield is only from 45 to 50%. From the above classification given in the Hand Book, we find that Chemi-Mechanical process cannot come under Semi-chemical process. They are in fact distinct processes while considering the percentage of yield. They are more akin to the pulp obtained from mechanical process. This also strengthens the appellant’s contention that the Chemi-Mechanical Pulp used by them should be considered as Mechanical Pulp for the purposes of the Notification.
6.16 As per the Monograph published on ‘Pulp & Paper Industry in India’, by the DGTD, Ministry of Industry, the process adopted by the appellant is a variation of Mechanical Pulping. The appellants have produced a copy of an order dated July 31, 1992 issued by the Ministry of Industry, Department of Industrial Development. This order is called as Newsprint Control (Amendment) Order, 1992. What is of interest to us in the above order is that in Para 2 of the order, there is a listing of all the processes which are used to obtain Mechanical Wood Pulp. In fact 14 variations of Mechanical processes are given.
The Chemi-Mechanical Pulping employed by the appellant is given in Entry No. (g). This strengthens the contention of the appellant that the process employed by them is recognized in the industry and also by Government of India as a Mechanical process.
6.17 The appellants further contended that till 2005, the Central Excise classification was not fully aligned with HSN. Only after the 8 digit classification came into force w.e.f. 28.02.05, the Central Excise Tariff was fully aligned with HSN. Therefore, it was contended that the HSN Explanatory Note should not be used to deny their benefit of the Notification when the same was not aligned with the Tariff. Since it is very clear that the pulp obtained by them as Chemi-Mechanical Pulp is considered as Mechanical Pulp in the Industry, we do not want to go into this question now. The most important point is that the test results revealed that the paper was manufactured from pulp containing not more than 50% of mechanical wood pulp. This also clinches the issue. This position cannot change just because of the change in Tariff.
7. In summing up, we hold that the Chemi-Mechanical Pulp manufactured by the appellant is nothing but a variation of the Mechanical Pulp in the light of the test results and the expert opinion of the Central Pulp & Paper Research Institute. In view of the above, we do not agree with the views expressed in Board’s Circular para 3 to deny the benefit of exemption to the appellant who used more than 70% of chemi mechanical pulp in the manufacture of paper. We hold that the appellants are rightly entitled to the benefit of the exemption Notification. Assuming but not admitting that the Chemi-mechanical pulp manufactured by the appellants would be classified as Semi -chemical mechanical pulp, still we hold that the expression Mechanical Wood Pulp appearing in the Notification should be given a meaning which would cover all the variations of mechanical wood pulp as understood in the paper industry especially, considering the fact that such a benefit was given prior to 28.02.1986. Just a change in Tariff and the view expressed in HSN cannot be a deciding factor to deny the benefit of a Notification enjoyed prior to 28.02.1986. In the result, we allow the appeal with consequential relief.
(Pronounced in open Court on 30 Aug 2006)