PETITIONER:
MODERN INDUSTRIAL CORPORATION
Vs.
RESPONDENT:
COLLECTOR OF CENTRAL EXCISE & ORS.
DATE OF JUDGMENT25/08/1987
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
DUTT, M.M. (J)
CITATION:
1987 AIR 2174 1987 SCR (3)1068
1987 SCC Supl. 374 JT 1987 (3) 394
1987 SCALE (2)424
ACT:
Central Excise and Salt Act, 1944: ss. 35-L &
36(2)/Excise Tariff, Item No. 17(2)--Excise duty--Effect of
Notification No.68/76 dated 16.3.1976---Manufacture of flock
paper--Process of screen printing carried on--Benefit of
Notification----Whether available.
HEADNOTE:
The Notification No. 68/76 dated March 16, 1976 issued
by the Central Government exempted converted types of papers
commonly known as imitation flint papers obtained by one
side of paper being subjected to printing of colour irre-
spective of the fact whether or not such paper is subse-
quently varnished or glazed by chemicals or embossed, and
failing under item 17(2) of Excise Tarrif, if it was proved
that the appropriate duty of excise has already been paid in
respect of the paper used in their manufacture.
The appellant registered as small scale industry, which
buys white paper on which duty had already been paid and
manufactures flock paper out of it by a manual process,
sought exemption from payment of duty under the aforesaid
notification. His claim was rejected by the Assistant Col-
lector. That order was set aside by the Appellate Collector
who took the view that the wording of the notification
showed that as long as the one side of the paper has been
printed with the colour whatever other process is undertaken
of further polishing or glazing etc. is immaterial, and that
in this case the first operation of printing of one side of
the paper with colour has been established. Thereafter the
matter went before the Customs, Excise and Gold (Control)
Appellate Tribunal under s. 36(2) of the Salt Act, 1944,
which found that printing is not only word printing, it
extends to numerous other processes whereby a surface is
coated or coloured or is given an imprint, to represent,
reproduce, cover, decorate etc. and it is not just ink that
is used for printing. Since in its opinion in the instant
case, there was no colour printing it set aside the Appel-
late order.
Allowing the appeal under s. 35-L of the Central Excise
and Salt Act, 1942, the Court,
1069
HELD: The process carried on by the appellant is covered
by the Notification No. 68/76 dated March 16, 1976 and it
is, therefore, not liable to pay any duty. [1074G]
The purpose of the notification is that the paper which
would have otherwise fallen under Item 17(2) of Excise
Tariff would, if covered by the notification, become exempt
from duty. The words used therein make it clear that irre-
spective of the fact whether or not such paper is subse-
quently varnished or glazed by chemicals or embossed, it
would be entitled to the benefit of the notification. The
word 'subsequently' makes it clear that the process need not
be simultaneous. The Tribunal failed to notice this aspect.
[1073FG, 1074F]
The Tribunal rightly indicated that printing did not
require ink and many other processes would also be covered
by the term printing. The appellant has been pleading from
the very beginning that the process carried on by it con-
sists of a colour printing on one side of the paper. The
Tribunal has further recorded a finding that the appellant's
process is to paste one side of the paper with adhesive
material. Whether adhesive material is mixed to colour or
colour is mixed with adhesive does not make any difference
so long as a process of screen printing is carried on to
colour the paper on one side. The fact of screen printing is
accepted by respondents and that has been the case of the
appellant. The Appellate Collector was, therefore, right in
holding that the appellant was entitled to the benefit of
the notification. [1074DE, 1071D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No.4534 of
1984.
From the Order No. C-496 dated 23.7. 1984 of the Cus-
toms, Excise and Gold (Control) Appellate Tribunal, New
Delhi in Appeal No.1117 of 1980—(C).
Harish N. Salve, Ravinder Narain, P.K. Ram and D.N.
Mishra for the Appellant.
Govind Das, Mrs. Sushma Suri and R.P. Srivastava for the
Respondents.
The Judgment of the Court was delivered by
RANGANATH MISRA, J. This appeal under Section 35-L of the
1070
Central Excise and Salt Act, 1944 (hereafter referred to as
the ‘Act ) is directed against the Appellate order of the
Customs, Excise and Gold (Control) Appellate Tribunal. The
appellant buys white paper from the market on which duty has
already been paid and manufactures flock paper out of it.
According to the appellant it is registered as a Small Scale
Industry with the Directorate of Industry, Government of
Maharashtra and employs nine workers in all. The process of
conversion of paper into flock paper is said to be as fol-
low:-
“Solution of P.V.A. Emulsion thickened with
c.m.c. and coloured with dyes is applied on
one side of paper manually with the help of
hand-made screen; then flock is sprinkled by
hand with the help of man-made sheeves. There-
after paper is put on dryers for drying and
finally when the paper is dried extra flock is
removed manually by tapping with fingers and
the paper becomes ready.”
The appellant had made it clear to the Assistant Collec-
tor that it had no coating or laminating machine and the
process was essentially manual. It claimed the benefit of
Notification No. 68/76-CE issued by the Central Government.
The Assistant Collector issued a show cause notice and
rejected the claim of the appellant after cause was shown
and by order dated 27th of July 1979, held that the appel-
lant should take out the requisite excise licence and start
paying central excise duty on flock paper under Tariff Item
No. 17(2) of the Central Excise Tariff. He also directed the
appellant to pay the duty for a period of five years preced-
ing the date of issue of the show cause notice. A small
penalty was also imposed. The appellant carried an appeal to
the Appellate Collector against the aforesaid order who by
his order dated 4th of October. 1979, held:-
“At the time of hearing they (appellants)
produced a piece of flock paper manufactured
by them, and submitted that if this flock
paper was put into the glass of water, the
flocking material would disappear and thereaf-
ter it would be seen that the paper which has
been used for this purpose is only printed
with the colour on one side. The experiment
was performed in my office and it was seen
that the paper was printed with colour on one
side and the other side remained as it is
after the flock material has been fixed to it.
The appellants submitted that their appeal may
be decided without a personal hearing as any
delay in personal hearing would cause them a
great hardship and that they
1071
being a small scale manufacturer their activi-
ties have come to virtual halt because of this
order of the Assistant Collector.
I have gone through the appeal petition and I
find that the Assistant Collector has agreed
that one side of the paper is coloured by
printing with colour, but since the flocking
material had been stuck to this paper, the
Assistant Collector has held it to be flock
paper and demanded the duty on it. The wording
of the Notification No. 68/76 as amended under
Sr. No. 3A(ii) clearly show that as long as
the one side of the paper has been printed
with the colour whatever other process is
undertaken of further polishing or glazing
etc. is immaterial. In this case the first
operation is that of printing one side of the
paper with colour which has been established
beyond doubt by the appellants. What further
process is done on this paper is immaterial as
glazing and embossing etc. have been allowed
under this notification to be done to the
coloured side of the paper. In view of this,
the order of the Assistant Collector is set
aside so far as the classification of this
material is concerned ….. ”
On 5.9.1980, a show cause notice purport-
ing to be under Section 36(2) of the Act was
issued by the Central Government to the appel-
lant which inter alia stated:
“On examination of the records of the case the
Central Government are tentatively of the view
that the order of the Appellate Collector is
not proper, legal and correct. The process of
manufacture of flocked proper cannot prima
facie be considered to be equivalent to print-
ing of colour inasmuch as use of ink appears
to be inevitably linked up with a printing
process as understood and no ink was used in
the particular process. Hence it would appear
that the flocked paper manufactured by the
assessee would be perhaps not eligible for the
benefit of notification No. 68/76.”
“The Central Government, therefore, in exer-
cise of the powers vested in them under sec-
tion 36(2) of the Central Excise and Salt Act,
1944, propose to set aside the order of the
Appellate Collector of Central Excise, Bombay,
or to pass such order as is deemed fit after
consideration of the submissions of the asses-
see ……. “
1072
The appellant showed cause and with the change in the
scheme of the Act, the matter came before the Tribunal for
disposal. Before the Tribunal, on behalf of the appellant,
two contentions were raised: firstly, the Collector was
right in holding that the benefit of the Central Government
Notification was available to the appellant and secondly the
proceeding was barred by limitation. The Tribunal found,
with reference to the opinion indicated in the show cause
notice, as follows:
“The Government of India was wrong to speak of
ink as inevitably linked up with a printing
process. This is only the character printing
or word printing. But printing is not only
word printing; it extends to numerous other
processes whereby a surface is coated or
coloured or is given an imprint, to represent,
reproduce, cover, decorate etc. etc. and it is
not just ink that is used for printing.”
It further found that the Appellate Collector was wrong
in holding that the appellant was entitled to the benefit of
the notification in question and concluded that there was no
colour printing; it did not deal with the question of limi-
tation and set aside the Appellate order.
Both the aspects raised before the Tribunal are reiter-
ated before us in this appeal, namely,–
(1) The Appellate Collector was right and the Tribunal
is wrong in holding that the appellant was not entitled to
the benefit of the notification; and
(2) The show cause notice was issued after the expiry of
the period of limitation and, therefore, the Tribunal had no
jurisdiction to reverse the order of the Collector.
The Notification No. 68/76 dated 16.3. 1976, as far as
relevant. reads thus:
Table
Sl. No. Description Rate of Duty Condition
(1) (2) (3) (4)
1. …………………..
2. …………………..
3. …………………..
1073
4. Following varieties of paper, namely:–
(i) ……………………
(ii) Converted types of Nil If it is proved to the
paper commonly known satisfaction of proper
as imitation flint officer that the app-
paper or leatherette ropriate duty of
paper or plastic coated excise or additional
paper, or by any other duty leviable under
name, obtained by one section 2A of the
side of paper being subjec- Indian Tariff Act,
ted to printing of colour, 1934 (32 of 1934), as
with or without design, the case may be, has
irrespective of the fact already been paid in
whether or not such paper respect of the paper
is subsequently varnished used in their manu-
or glazed by chemicals or facture.
embossed, and falling
under sub-item (2) of the
aforesaid Item No. 17.
(iii) ........................
(underlining by us)
The appellant has throughout claimed that it buys duty paid
paper from the market and subjects one side thereof to
colour printing without design and while so printing adhe-
sive material is added to hold the spread of flocking done
by hand. The extra flocking material is removed manually and
the paper is ready. The notification is in wide terms; paper
by any name is intended to be covered by it. After the
process referred to is undertaken, irrespective of the fact
whether or not such paper is subsequently treated in the
manner indicated therein, the benefit appears to have been
intended to be made available. The purpose of the notifica-
tion is that the paper which would have otherwise fallen
under Item 17(2) of Excise Tariff would, if covered by the
notification, becomes exempt from duty. In an affidavit
filed in this Court, the respondent-department has stated:-
“It is further submitted that the
product does not merit classification as a
paper ‘obtained by one side of paper subjected
to printing of colour’ under notification No.
68/76-CE. It is also submitted that in the
manufacture
1074
of flocked paper the process of application of
adhesive, coloured or otherwise to the surface
of the base paper through a silk screen is
printing of adhesive only and not one of
imparting colour. The paper obtained immedi-
ately after printing with adhesive coloured or
otherwise is not a finished product itself as
in the case of papers envisaged in the notifi-
cation.”
The learned counsel for the appellant produced a sheet
of flocked paper in court during hearing of the appeal. We
carried the experiment as indicated in the order of the
Appellate Collector and found that the adhesive and flocking
material got washed out and what remained was the base paper
coloured on one side and white on the other. This is exactly
what the Appellate Collector had found.
The Tribunal rightly indicated that printing did not
require ink and many other processes would also be covered
by the term printing. The appellant has been pleading from
the very beginning that the process carried on by it con-
sists of a colour printing on one side of the paper. The
Tribunal has recorded a finding that the appellant’s process
is to paste one side of the paper with adhesive material.
Whether adhesive material is mixed to colour or colour is
mixed with adhesive does not make any difference so long as
a process of screen printing is carried on to colour the
paper on one side. The counter-affidavit of the respondents
in this Court accepts the position that there is screen
printing and that has been the case of the appellant.
The words used in the notification make it clear that
irrespective of the fact whether or not such paper is subse-
quently varnished or glazed by chemicals or embossed would
be entitled to the benefit of the notification. The word
‘subsequently’ makes it clear that the process need not be
simultaneous. The Tribunal failed to notice this aspect.
We are of the view that the process carried on by the
appellant is covered by the notification and it is, there-
fore, not liable to pay any duty. We set aside the finding
of the Tribunal and restore that of the Appellate Collector.
The appeal is allowed. There would be no order for costs.
P.S.S. Appeal al-
lowed.
1075