TMI Blog1984 (2) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... t and are being disposed of as if it were an appeal filed by the Central Government before the Tribunal. 2. Uma Laminated are manufacturers of Polyethylene Coated Paper and Polyethylene Sandwiched Paper using duty-paid kraft paper and duty-paid polyethylene granules as the main raw materials. Excise duty was being charged en these goods under Item No. 17(2) of the Central Excise Tariff Schedule (C.E.T.). On 13-7-1979, Uma Laminated filed an application before the Assistant Collector of Central Excise, Hyderabad claiming refund of the duty-paid on Polycoated Paper during the preceding 3 years amounting to ₹ 31,87,078.75 on the ground that manufacture of polyethylene coated papers using duty-paid papers and duty-paid polyethylene does not come under Item 17(2) C.E.T. as it is only a processing of the duty-paid raw materials. That being the case at best the products we are manufacturing can be classified as a paper product which is not covered under any item of the C.E.T . 3. On 30-5-1980, Uma Laminated filed another claim before the Assistant Collector on the same ground for an amount of ₹ 13,89,381.24 paid as duty on polylethylene coated paper during the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Rule 11 read with Rule 173-J was applicable in cases like the present one. The Government, therefore, took the tentative view that the Order-in-Appeal was not proper, legal and correct and proposed to set it aside and restore the Asstt. Collector s Orders-in-Original. Uma Laminated was asked to show cause against the proposed action. In the notice, it was also stated that the operation of the Order-in-Appeal shall remain stayed till the review proceedings were finalised. On 27-7-1982, the Central Government issued a corrigendum to the Show Cause Notice dated 21-7-1981. 8. By letters dated 20-8-1981 and 20-9-1982, Uma Laminated replied to the said show cause notice and its corrigendum dated 27-7-1982. On the setting up of this Tribunal the proceedings came to be transferred to it under Section 35-P(2) of the Act. 9. We have heard with considerable interest Shri V. Lakshmi Kumaran, the learned Departmental Representative for the appellants and Shri K. Narasimhan, the learned Counsel for the Respondents. We have also carefully perused the records. 10. Shri Lakshmi Kumaran framed the following issues for our consideration : (i) Whether the show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) after the expiration of a period of one year from the date of such decision or order : Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 11 A . 13. Shri Narasimhan has vehemently contended that the Appellate Collector s file had not been called for by the Government of India and that the file was not before the Additional Secretary at the time he issued the show cause notice. Section 36 (2) required the Central Government to call for and examine the record relating to the order sought to be reviewed. Since the Appellate Collector s record was not examined by the Government of India, the requirement of the Section was not complied with. Further, that part of the show cause notice which stayed the operation of the Order-in-Appeal without a notice to Uma Laminated was ab-initio void. The fact that the notice was, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it relates to calling for and examining of records. If the assessment order is plainly inconsistent with the specific and clear provisions of the statute, it must be held that there is a mistake apparent from the record. Reliance was placed in this connection on the Supreme Court decision in Karam Chand Thapar v. State of U.P. - (1976) 38 S.T.C. 593 (S.C.). The record of the appellate authority includes also the record of the original authority - Mahendra Mills v. Appellate Asstt. Commissioner of Income-tax - (1975) 4 S.C.R. 846. It would suffice if the records of the original authority were available before the reviewing authority. In the present case, the Asstt. Collector s record and his orders, together with the Order-in-Appeal, were before the Reviewing Authority. There was substantial compliance with the requirements of law. The second proviso to Section 36(2) requires the proceedings to be commenced within one year from the date of the order. In the present case, the show cause notice, having been issued on 21-7-1981, was well within the permissible time. The fact that the address of the Respondent was wrongly shown in the first notice would not militate against the valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly speaking, means a prescribed course of action for enforcing a legal right and hence it necessarily embraces the requisite steps by which a judicial action is invoked. The meaning to be given to the word proceeding would depend on the scope of the enactment in which it occurred and the context in which the word was used. It is clear that the issue of the show cause notice alone would be the starting point for the purpose of considering whether the proceedings have been initiated. We have already held that the errors sought to be corrected by the corrigendum did not affect the validity and legality of the original notice. The notice dated 21-7-1981, having been issued within one year from the date of the Order-in-Appeal, was not hit by the limitation under Section 36(2) of the Act. Another objection raised by Shri Narasimhan is that the records of the Appellate Collector had not been called for by, nor were they before, the Central Government when it issued the show cause notice. Shri Narasimhan has also urged that the proceedings transferred under Section 35-P would also be invalid because of this lacuna. We do not consider these objections as tenable. Under Section 36( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as sufficient in law and it must be held that the first essential preliminary of such an opportunity must be a written show cause notice to the assessee. In the case before us, a written show cause notice has been served on the Respondent. The relevance of the cited decision is not clear. In Ganga Properties v. I.T.0., Calcutta, (1979) 118 ITR 447, it has been held with reference to Section 263 of the Income-tax Act, 1961, that materials which were not in existence at the time the assessment was made but came afterwards into existence cannot be taken into consideration by the Commissioner for the purpose of invoking his revisional jurisdiction. Such is not the case in the matter before us. In the State of Gujarat v. Chelabhai Bharabhai Prajapati, 1974 (33) STC 147, the Court considered that the Deputy Commissioner had, for the purpose of initiating revisional proceedings, relied on materials which were not part of the record of the Assistant Commissioner and, therefore, he had acted beyond his jurisdiction. Again, the situation before us is not analogous. In the State of Kerala v. K.M. Cheria Abdulla Co. - 1965 (16) STC 875 (S.C.), the Court held that the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dealt with together Shri Lakshmi Kumaran submitted before us that he relied on the Appellate Collector s finding that treated papers would have to be considered to constitute paper and that the treated papers manufactured by Uma Laminated were classifiable under Item 17 (2) CET. However, the Appellate Collector went wrong in holding that since the treatment of kraft paper did not amount to manufacture , the subject treated papers were not liable to be charged to duty under the said sub-item. In this context, he referred to certain decisions and, in particular, to the decision of the Tribunal in the case of Golden Paper Udyog-1983 E.L.T. 1123 in which it was held that bituminized kraft paper made out of duty-paid kraft paper would not be liable to duty under Item 17(2) of the CET since, even after bituminization, the resultant product continued to be paper falling under the said sub-item. As against this, the decision of the Andhra Pradesh High Court in the Standard Packagings case, 1981 ECR 113-D and that of the Bombay High Court in the case of Kores India-1982 E.L.T. 253 were cited in support of his submission that polyethylene coated/sandwiched paper was liable to duty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text, our attention was drawn to the Finance Minister s speech introducing the Finance Bill of 1976, notes on clauses and other budget papers placed before the Parliament. It was strenuously contended that all these contemporaneous documents would show the clear intent to charge duty on treated papers made out of duty-paid papers under Item 17(2) CET. It was submitted that it was only in 1982 that converted papers, barring some costly varieties, were exempted for the first time, reliance being placed on Budget papers of 1982. 18. Rebutting the contentions on behalf of the appellants, Shri Narasimhan submitted that the 2 decisions of the Tribunal both in the case of Golden Paper Udyog - 1983 E.L.T. 1123 and 19S3 ECR 1349, were in favour of the Respondent. He submitted that prior to the introduction of the 1976 Budget, polyethylene coated paper was specifically enumerated in the tariff entry under Item 17(2) and packing and wrapping paper (kraft paper is packing and wrapping paper) under Item 17(3). The situation changed with the introduction of the 1976 Budget on 16-3-1976 when both packing and wrapping paper and polycoated paper came to be classified under Item 17(2). Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the tariff entries. The 1982 Budget papers relied upon by the Department were also of no help because sub-items (1) and (2) of Item 17 had not undergone any material change. 19. We have given careful consideration to the submissions of both sides. We would first like to deal with the doctrine of contemporaneo expositio. Maxwell on the interpretation of the doctrine states at page 265 that the application of the principle of contemporaneo expositio is not limited to the cases in which questions on title to property or contractual rights are dependent on the previous construction put upon the statute: it extends also, according to Lord Buckmaster in Bourne v. Kene to decisions that affect the general conduct of affairs, so that their alteration would mean that taxes had been unlawfully imposed or exemption unlawfully obtained, payments needlessly made, or position of the public materially affected . 20. The Supreme Court in K.P. Verghese v. I.T.O - 1982 (1) S.C.R. 629 stated as follows :- The rule of construction by reference to contemporanea expositio is a well established rule for interpreting a statute by reference to the exposition it has received from contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccentuated after price decontrol. I, therefore, propose to replace the present specific duties on paper and paper board by ad valorem duties, printing and writing paper will be subject to a duty of 25 per cent ad valorem and all other paper and paper board to a duty of 30 per cent ad valorem. I would, however, like to make it clear that the concessional duty now available to white printing paper which is supplied by paper mills at the agreed price for various educational purposes, such as production of text-books and exercise books, and for Government use, will continue practically unchanged. Unbleached and Badami printing and writing paper of substance not exceeding 65 gms, will also be subject to a concessional rate of 16 per cent duty, while existing concessions for newsprint will be continued. The additional yield from this measure will be ₹ 13 crores. This extract does not directly throw light on the present dispute. However, simultaneously with the presentation of the Finance Bill, the Central Government, in exercise of its powers under Rule 8(1) of the Central Excise Rules issued a Notification No. 71/76, dated 16-3-1976 exempting polyethylene coated paper, waxed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and paper board, not otherwise specified. With effect from 16-3-1976 : (As altered in the 1976 Budget) : 17. Paper and paper board, all sorts (including paste-board, millboard, strawboara, cardboard and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power- (1) Uncoated and coated printing and writing paper (other than poster paper). (2) Paper board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified. 25. It will be seen from the above that in the place of the pre-existing 4 sub-items, the entry was re-written by the 1976 Budget into 2 sub-items. Before 16-3-1976, there were 3 sub-items which set out, in detail, certain specific varieties of paper and board; the 4th sub-item was a residuary entry, with effect from 16-3-1976, the item was re-cast into 2 sub-items, the first one covering printing and writing paper (other than poster paper) and the other, paper board and all other kinds of paper including treated paper or paper boards. Sub-it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimination besides opening up of loopholes for tax avoidance. We also note that Central Excise Rule 56A framed by the Central Government in pursuance inter alia, of Section 37 of the Act, provides for a special procedure for movement of duty-paid materials or component parts for use in the manufacture of finished excisable goods. One of the provisions is that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods unless duty has been paid for such material or component parts under the same item as the finished excisable goods. (There is also a provision for remission or adjustment of duty paid for such material or component parts if it has been specifically sanctioned by the Central Government. Apparently, this provision is to take care of situations where the finished product falls under a tariff item different from that in which the duty paid materials or component parts fall). Now, in the list of goods to which Rule 56A applies, we find the entry Paper and paper boards . We do not find anything in Rule 56A to suggest that in a situation where the duty paid materials and component parts fall under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification exempted certain specified varieties, of treated paper, including polyethylene coated paper falling under Item 17(2) from excise duty leviable thereon in excess of 12.5% ad valorem subject to certain specified conditions, one of them being that the base untreated paper should have borne the appropriate excise duty or additional duty of customs. 27. Considerable arguments have been addressed by both sides on the question whether the treatment applied to the base paper in the present case would amount to manufacture for the purpose of levy of excise duty. The learned Counsel for Uma Laminated placed reliance on the Tribunal decision in the Golden Paper Udyog cases-1983 E.L.T. 1123 and 1983 ECR 1349-D. He also sought to derive support from some of the other tariff items such as Tobacco (Item 4). Patent or Proprietary Medicines (14-E) and cotton yarn (18A). In so far as the Tribunal decisions are concerned, it does not appear that the Bench had occasion to consider the principle of contemporaneous exposition or that material bearing on legislative intent had been placed before (them. We have already set out the principle as well as the Supreme Court s observations in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation in the present case is, if anything, somewhat stronger for holding that treated papers are excisable with a second-stage levy since, as we have seen, the tariff entry specifically includes treated paper. It is also relevant to note that Item 19 covered Cotton Fabrics, all varieties, manufactured either wholly or partly of cotton and Item 17 covered Paper and Paper boards, all sorts. The two situations are thus similar. Though processed fabric was not spelt out in so many words in Item No. 19 (prior to its amendment), the Bombay High Court held, on first principles, that bleached, printed or dyed cotton fabrics, being a different variety of cotton fabrics from grey fabrics, fell within the scope of the item and attracted duty. On the same basis, it has to be held that a paper obtained as a result of treatment of a base paper must ball within the scope of Item 17(2), if the treated paper is a distinct or different article from the base paper. 29. The question whether manufacture is involved can also be looked at from the point of view of the principles laid down by the Supreme Court in its judgment in the DCM case - 1977 E.L.T. J 199 and in the South Bihar Sugar Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the paper with polyethylene. The end-product is polyethylene laminated/coated/ sandwiched paper. Applying the principles laid down by the Supreme Court in the Delhi Cloth and General Mills case (AIR 1963 S.C. 791) and the South Bihar Sugar Mills case (AIR 1968 S.C.R. 21)-namely, when a change is brought about on an article by treatment, labour and manipulation and when such finished goods are different articles having a distinctive name, character or use , these goods are said to be manufactured - there can be little doubt that in the case before us, there has been manufacture and that polyethylene coated/laminated/sandwiched papers are liable to duty under Item 17(2) C.E.T. We may note here that the Andhra Pradesh High Court, in the Standard Packaging case, 1981 E.C.R. 113-D (A.P.), after considering the Supreme Court s decisions referred to above and the Madras High Court decision in the Kwality Coated Products case, concluded that bituminised kraft paper made out of duty paid kraft paper and duty paid bitumen was liable to duty under Item 17. This decision fortifies our conclusion. 30. We must also refer to the submissions made on the hopping theory. In its judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Item 17(2). We do not think that the above decision has application here. The learned Counsel for the Respondent mainly relied on Kwality Coated Products v. Union of India - 1980 E.L.T. 579 - and following this, National Paper Products v. Union of India - W.P. No. 165/79-Madras. But we are of the opinion that, considering the facts of this case and the process involved in the manufacture of the products in issue, the ratio of the decision in Standard Packagings v. Union of India would be applicable. In the view we are taking on the subject of classification and dutiability of the subject products, we do not deem it necessary to advert to and discuss the several decisions cited before us by the Senior Deptl. Representative. We have discussed at length the Bombay High Court decision in New Shakti Dye Works - 1983 E.C.R. 1142-D. We would only refer to the classic case of Movical v. Pinch (1906) L. King s Bench 352 cited by Shri Narasimhan. In that case, the appellants were, by a chemical process, (the details of which are not readily ascertainable) increasing the sweetness of sachharin from 330 to 550 330 to 500 times as sweet as sugar). The Court held that the substance wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Item 17(2), it would attract duty. Surely, the same article cannot be subjected or not subjected to duty depending upon where it is manufactured. Of course, it may be possible to resolve this problem by taking a view that treated paper, so long as it is produced out of paper which has already come into existence, would not attract duty as a separate article. But, such a view has to be ruled out as it would render the inclusion clause in Item 17(2) virtually nugatory. 31. It is relevant to note that polyethylene coated paper had been treated as a specific product even prior to the 1976 budget. Notification No. 61/57, dated 27-7-1957 specifically exempted polythene (a generic name for polyethylene) coated paper from the excise duty leviable thereon if the paper used in its manufacture had discharged its duty liability. We may also note that Notification No. 67/76, issued along with 1976 Finance Bill exempted paper or paper boards falling under Item No. 17, if made from another article falling under the said item and on which the appropriate amount of duty of excise or the additional duty of Customs under Section 2-A of the Indian Tariff Act, 1934, as the case may be, had be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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