ORDER
1. The petitioner is a Company incorporated under the Companies Act and is engaged, inter alia, in the manufacture of carbon paper. In the writ petitions, the petitioner has prayed for quashing the order of the Assistant Collector Annexure ‘D’ and that of the Appellate Collector Annexure ‘G’ and the notice of demand, Annexure ‘H’. The two writ petitions relate to the demand made to pay difference of excise duty for the period 16-10-1978 to 18-4-1979 and the demand made for the further period 16-4-1979 to 22-2-1980 as per Annexure ‘H’.
2. A show cause notice was issued to the petitioner Company on 16-4-1979 proposing to demand difference of duty on the carbon paper cleared during 16-10-1978 to 15-4-1979. This item had been subjected to duty under item 68 as per the classification list approved by the proper Officer. What was proposed to be done under the show cause notice was to demand difference of duty payable under item 17(2) of the Central Excise Tariff which was amended with effect from 27-5-1976.
3. The petitioner replied to the show cause notice contending that the carbon paper manufactured by the petitioner Company was being rightly subjected to duty under Item 68 and that was in conformity with the Collector’s trade notice 56/76 dated 2-3-1976. The trade notice is reproduced below :
“CENTRAL EXCISE TRADE NOTICE NO. 56/76, DATED 2-3-1976 (3/76 Paper)
Sub : Paper – carbon paper and stencil paper – Whether excisable under item No. 17 of CET.
A doubt has been raised whether carbon paper/stencil paper, produced by conversion of duty paid base paper, should be treated paper falling under Tariff Item 17(4) of Central Excise Tariff, or as an item of stationery, outside the scope of Item 17 of Central Excise Tariff.
2. The matter has been examined and it is clarified for the information of the trade, that the carbon paper/stencil paper, are articles of stationery, and therefore, outside the purview of Item 17 of Central Excise Tariff.”
It was clarified in the said trade notice by the Collector that carbon paper/stencil paper are articles of stationery and, therefore, are outside the purview of Item 17 of the Central Excise Act. It is relevant to notice that this trade notice was issued consequent to the tariff advice 5/76 by the Central Board of Central Excise.
‘Tariff Advice No. 5/76.
Subject : Paper – Carbon paper and Stencil Paper – whether Excisable under Item No. 17 of C.E. Tariff.
A doubt had been raised whether carbon paper/stencil paper produced by conversion of duty paid base paper, should be treated as paper falling under tariff item 17(4) of Central Excise Tariff or as an item of stationery, outside the scope of Item 17 of Central Excise Tariff.
2. The matter was considered in the Central Excise Tariff Conference held at Cochin on the 13th to 15th November, 1975. It was reported that carbon paper/stencil paper is sold in the market mostly cut to size by retail stationers. The Indian Customs Tariff Guide has also treated Carbon paper as an item of stationery and not as paper. The Conference was therefore, of the view that carbon paper/stencil paper, were commercially recognised only as articles of stationery.
3. The Board is accordingly advised that carbon paper and stencil paper should be treated as articles of stationery, and therefore outside the purview of item 17 of Central Excise Tariff.’
4. The Assistant Collector, in his original order, did not agree with the contention of the petitioner and treated the carbon paper as falling under tariff item 17(2), which read thus, during the relevant period :
————————————————————————
Item No. Description of goods Rate of duty
------------------------------------------------------------------------
(1) (2) (3)
------------------------------------------------------------------------
17. Paper and paper boards,
all sorts (including
pasteboard, millboard,
strawboard, cardboard and
corrugated board), in or
in relation to the
manufacuture of which any
process is ordinarily
carried on with the aid of
power
(1) Uncoated and coated Twenty-five per cent
promting and writing paper ad valorem
other than poster paper)
(2) Paper board and all other 1 (Forty per cent
kinds of paper (including ad valorem)
paper or paper boards,
which have been subjected to
various treatments, such
as coating, impregnating,
corrugation, creping and
design printing) not
elsewhere specified
------------------------------------------------------------------------
5. The Assistant Collector was of the view that carbon paper should be treated as coated paper falling under tariff item 17(2). Against the order of the Assistant Collector, the petitioner filed an appeal before the Appellate Collector of Central Excise, Madras.
6. The adjudication made by the Assistant Collector, was followed by a demand as per Annexure ‘H’ under which the difference of duty for the period from 16-10-1978 to 15-4-1979 was demanded and in addition, the duty payable thereafter for 16-4-1978 to 22-2-1980 was also demanded. Before the appellate Collector, only the original order of the Assistant Collector was challenged and the demand for the subsequent period is challenged in these writ petitions.
7. The Appellate Collector of Central Excise, Madras, by his order dated 27-12-1980 dismissed the appeal agreeing with the order of the Assistant Collector and held that the carbon paper was rightly brought to tax under tariff item 17(2) as coated paper. Being aggrieved by this order of the Appellate Collector and the demand made as per Annexure ‘H’ for the subsequent period, these writ petitions are filed challenging them.
8. It is urged by Sri Naganand, the learned Counsel for the petitioner that the show cause notice issued proposing to levy difference of duty for the period 16-10-1978 to 15-4-1979 is illegal. His first contention is, that for this period as per the trade notice 56/76 issued by the Collector, the carbon paper was subjected to levy as article of stationery in conformity with the said trade notice and was subjected to levy under item 68, the residuary item in the Act. It is, therefore, his contention that there was no reason to take a different view by the Assistant Collector and the order made pursuant to the show cause notice should be quashed.
9. There is force in the contention of the learned Counsel. The carbon paper cleared by the petitioner company during this period was rightly subjected to levy under item 68 as per Trade Advice issued by the Board, and there was no reason to take a different view and review the levy made earlier.
10. The demand made for the subsequent period 16-4-1979 to 22-2-1980 is also questioned on the same ground. It is the contention of the learned Counsel that even for this period the trade notice 56/76 applies to the petitioner’s case and the department was not right in treated it was coated paper falling under item 17(2) after its amendment with effect from 27-5-1976. In this connection, the learned Counsel also challenges the jurisdiction of the Collector of Karnataka in issuing Trade advice. It is only from that date the Collector of Karnataka understood and issued the trade notice that carbon paper will be liable for classification under 17(2).
————————————————————————
Item No. Description of goods Rate of duty
------------------------------------------------------------------------
17. Paper and paper boards,
all sorts (including
pasteboard, millboard,
strawboard, cardboard and
corrugated board), in or
in relation to the
manufacuture of which any
process is ordinarily
carried on with the aid of
power -
(1) Uncoated and coated Twenty-five per cent
printing and writing paper ad valorem
(other than poster paper).
(2) Paper board and all other 1 (Forty per cent
kinds of paper (including ad valorem)
paper or paper boards,
which have been subjected to
various treatments, such
as coating, impregnating,
corrugation, creping and
design printing) not
elsewhere specified
------------------------------------------------------------------------
11. There was further amendment to item No. 17 by the Finance Act of 1982. Item 17 was amended with effect from 27-2-1982, and two specific entries were added. They are (3) and (4) which are re-produced below :
————————————————————————
Item No. Description of goods Rate of duty
------------------------------------------------------------------------
17. XX XX
(3) Carbon and other copying 32 1/2% ad valorem
papers (including
duplicator stencils)
and transfer papers,
whether or not cut to
size and whether or
not cut to size and
whether or not put to
in boxes.
(4) Boxes, cartons, bags and 32 1/2% ad valorem
other packing containers
(including flattened or
folded boxes and flattened
or folded cartons),
whether or not printed
and whether in assembled
or unassembled condition.
------------------------------------------------------------------------
12. Relying upon this amendment which was brought into force with effect from 27-2-1982, the learned Counsel for the petitioner contends that till the carbon paper was specifically added in item 17 with effect from 27-2-1982, the goods in question should be subjected to levy only under tariff item 68 and not under 17(2). He has referred to the statement of object of reasons and the Budget speech of the Finance Minister while introducing the Finance Bill of 1982 which according to him, throws light on the object of adding a specific description of carbon paper as an independent item in item 17 and the purpose of the amendment. Relevant portion of Paragraph 123 of the Budget speech of the Finance Minister is extracted and reads thus :-
“……. However, certain converted papers of high value-added categories are proposed to be subject to basic excise duty at 32 1/2% ad valorem.
Similarly, specified articles made of paper and paper board are proposed, to be brought within the purview of the tariff item but effectively restricting the levy to printed cartons and printed boxes.”
In the memorandum explaining the bill at paragraph 5 : 17 it is stated thus :
“Paper and paper boards and articles of paper and paper board :
The tariff description is being revised to include specifically articles of paper and paper board.”
Therefore, developing his argument on the basis of the legislative intendment as reflected in the Memoranda to the Finance Minister’s speech, Sri Naganda’s further submission is that carbon paper cannot be treated as coated paper and subjected to levy under 17(2) prior to its addition with effect from 27-2-1982.
13. Sri Shivashankar Bhat, learned Counsel appearing for the respondents, has, on the other hand, argued that carbon paper is rightly classified and treated as coated paper as per the amendment effected in 1976. Therefore, the department was right in demanding the difference of duty and subjecting it to levy under 17(2) with effect from 27-5-1976. In support of his argument he has relied upon paragraph 3 of the statement of objections filed in the case explaining chemical process and treatment that the base paper undergoes and a new commodity comes into existence. It is, therefore, argued by Sri Bhat that carbon paper which was treated hitherto as stationery was rightly brought under 17(2) after its amendment in 1976 and that it cannot be disputed that carbon paper is coated paper and coated paper includes carbon paper. There is force in the contention of Sri Bhat that so far as the process that the ordinary paper undergoes and the treatment that is given to base paper for converting it into carbon paper, it may appropriately fall under the description of ‘coated paper’.
14. Trade notice 56/76 was issued by the Collector on 2-3-1976. This trade notice was based on the instructions issued by the Board that carbon paper should be commercially recognised only as an article of stationery falling under entry 68. Item 17 was amended with effect from 27-5-1976 and sub-clause (2) was amended which among other things, included coated paper. Subsequent to the amendment to item 17 by adding coated paper, it is to be noticed that there was no further clarification or trade notice issued by the Collector or by the Central Government bringing carbon paper specifically within the description of ‘coated paper’ as per the amended item 17(2).
15. It is only on 22-11-1979 that the Collector of Central Excise, Bangalore issued the trade notice clarifying the position regarding classification of carbon paper under item 17. This classification as per the trade notice is challenged by the learned Counsel for the petitioner that such a classification should not be given effect to since the department understood and treated carbon paper only as an article of stationery until it was specifically added as an independent item in 17 with effect from 27-2-1982. Any interpretation of an item in the Central Excise Tariff throughout the country should be uniform and should not be left to each Collector to interpret in a different way. It was also asserted that many other Collectors had continued to treat carbon paper as stationery under item 68 until it was added to Item 17 in the year 1982. The intention of the Legislature to tax it under Item 17(2) with effect from 27-2-1982 should be accepted and no other interpretation is permissible or prejudiced.
16. After carefully considering the arguments of the learned Counsal for the petitioner as well as the respondents and having regard to the legislative amendments effected to Item No. 17 and keeping in view the tariff advice issued by the Board classifying carbon paper as an article of stationery dutiable by entry 68, the contention of the learned Counsel for the petitioner should be accepted. One of the well accepted canons of interpretation so far as taxing statutes are concerned, is the intention of the amendment may be gathered from the memorandum of objects and reasons, which is a part of the Amending Bill to the Finance Minister’s speech. The order of the Appellate Collector confirming the show cause notice and the provisional assessment and the demand made for the subsequent period as indicated in the enclosure to Annexure ‘H’ i.e., for the period from 16-4-1979 to 22-2-1980 are therefore liable to be quashed.
17. In the result, the writ petitions are allowed and the order of the Assistant Collector Annexure ‘D’ which was affirmed by the Appellate Collector as per Annexure ‘G’ and the demand made as per Annexure ‘H’ are set aside.
18. One of the prayers made in the Writ Petitions is for a direction to the respondents to refund to the petitioner a sum of Rs. 4,61,218.18 paid by the petitioner under protest for the period from 4-3-1980 to 26-3-1981 and for the subsequent period. The petitioner is at liberty to make such claim before the department.
19. Rule issued is made absolute.
