TMI Blog1972 (9) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... used as textile wrappers. It is the petitioner s contention that at their factory at Barejadi they do not manufacture paper at all. The petitioners contended that for the purpose of producing paper gummed tapes and also print wrappers on white paper, they purchase duty paid paper from the manufacturers of paper and the textile wrappers are printed in accordance with the orders placed by their customers as per their requirements and according to the designs and specifications given by such customers. The Excise Authorities have been contending that the paper produced by the petitioners as an intermediate product is gummed paper; that the petitioners manufacture gummed paper as an intermediate product in the process of manufacturing paper gummed tapes and they contend that such gummed paper means paper obtained by applying gum to one side of paper. The contention of the Excise authorities regarding the textile wrappers produced by the petitioners by printing designs etc. on white papers is that such textile wrappers are converted types of paper. The excise authorities contend that ordinarily gummed paper and converted types of paper would be liable to duty by virtue of Section 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forcing the demands contained in the letters of December 29, 1970, February 18, 1971, March 15, 1971 all the three of them from the Superintendent of Central Excise and letter dated July 19, 1971 of the Inspector of Central Excise Barejadi and letter dated July 21, 1971 of the Superintendent of Central Excise, I.O.C. Range, Div. II, Ahmedabad. They have also sought for orders seeking to restrain the respondents from taking any steps or proceedings against the petitioners either under the Act or under the Rules in respect of the said two products of the petitioners, namely, paper gummed tapes and textile wrappers. 3. In order to appreciate the rival contentions of the parties, it is necessary to refer to certain provisions of the Act and the rules made thereunder. Under Section 2(f) of the Act the word manufacture includes any process incidental or ancillary to the completion of a manufactured product. Under Section 3 of the Act, which is a charging section under the Act, there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India. We are not concerned with the duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-items (1), (2) and (3), different types of paper specifically named therein are subjected to different rates of excise duty specified in the 3rd column of the First Schedule and sub-item (4) of Item 17 deals with all other kinds of paper and paper board not otherwise specified. Thus, sub item (4) of Item 17 is the residuary category for levying excise duty at a particular rate in respect of kinds of paper not specifically set out or mentioned in any of the three other sub-items (1), (2) and (3) of Item No. 17 of the entry. It is clear from reading of the Item 17 that if any manufacturer or any person manufactures any kind of paper and the product which he manufactures can be called Paper of any type, he will be liable to pay excise duty under sub-item (4) of Item 17. On September 5, 1970, the Central Government issued a notification bearing No. 165/70-C.E. F. No. 8/45-CX. 6/2. The notification is in the following terms :- In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts. - (i) converted types of paper, commonly known as imitation flint or leatheratte paper or plastic-coated paper or by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se paper purchased by the manufacturers of coverted paper purchased by the manufacturers treated as duty paid unless there is evidence to the contrary. 6. In the instant case the affidavit-in-reply on behalf of the respondents has been made by Mr. Chinmay Ghose, Assistant Collector of Central Excise, Division I, Ahmedabad, being affidavit dated February 16, 1972. In paragraph 25 of the affidavit in reply it has been stated that although the trade notice No. 105/71 of 8th June, 1971, refers to base paper purchased from the market to be regarded as duty paid, this trade notice is not valid and binding and has no effect within the jurisdiction of the Central Excise Collectorate, Ahmedabad as it has been issued by another Collectorate, then the affidavit proceeds, However, I state that the office of the Assistant Collector, Central Excise, Ahmedabad, has received instructions from C.B.R. dated 15th May, 1971, received under Collector, Central Excise, Baroda s letter No. V (17) 8-1/71, dated 17th June, 1971 for regarding the base paper purchased from the Market as duty paid. 7. These are the different provisions of the Act, the Rules and the different notification, which arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Government pleader were advanced before the Supreme Court in Union of India v. Delhi Cloth and General Mills (AIR 1963 S.C. 791). It was argued before us by the learned Assistant Government pleader that if any process incidental or ancillary to the completion of a manufactured product as defined in Section 2(f) of the Act is carried on, it amounts to manufacture and, therefore, in the instant case it would be held that the petitioners were manufacturing gummed paper at the relevant time. At page 795 of the report Dass Gupta J., delivering the judgment of the Supreme Court has pointed out in paragraph 18 that - This consideration of the meaning of the word `goods provides strong support for the view that `manufacture which is liable to excise duty under the Central Excises and Salt Act, 1944, must be the bringing into existence of a new substance known to the market . `But says the learned Counsel look at the definition of `manufacture in the definition clause of the Act and you will find that `manufacture is defined thus - `Manufacture includes any process incidental or ancillary to the completion of a manufactured product [S. 2 (f)]. We are unable to agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the manufacturers and against the revenue, the contention of the revenue being rejected in that case. 9. The second decision, of the Supreme Court which has a bearing on this question is in South Bihar Sugar Mills Ltd. and Another v. Union of India and Another, (AIR 1968 S.C. 922). In this case the controversy before the Supreme Court was, whether kilng as produced as an intermediate product of the manufacture for the purpose of refining sugar in one case and manufacture of soda ash in another, can be considered to be carbon dioxide gas on which excise duty could have been levied. At page 928 of the report in Paragraph 14, Shelat J. delivering the judgment of the Supreme Court has pointed out - The Act charges duty on manufacture of goods. The word `manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different articles must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hank occurring in the relevant notifications. Hegde J. pointed out that the rule making authority makes it further clear by the Government s notification dated September 28, 1963, which explains the word hank to mean a circular coils which did not contain more than 1,000 metres of yarn in plain (straight) reel and the Supreme Court held that in view of this particular definition and the explanation given by the notification itself, the meaning of the word hank as understood in the market was not to be applied but the meaning as specially set out in the notification was to be applied to the facts of the case before the Supreme Court. In the instant case before us, there is no such clear cut definition of the word gummed paper or converted paper . The revenue authorities seek to bring the petitioners within the framework of the Central Excise Act on the ground that at an intermediate stage of production gummed paper and converted paper at the end product were brought into existence by the petitioners. In our opinion, the decision in Cannanore Spinning and Weaving Mills v. Customs Collector cannot apply to the present case because it was by virtue of special definition set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nything more does not and cannot result in the manufacture or production of a paper known as gummed paper as known and understood in the trade and market. The petitioners have stated that in order that an article or a commodity can be regarded in the trade or market as gummed paper, it is necessary to carry out the following process after applying gum to one side of paper - The paper to which gum is applied on one side will have to be passed through an equipment known as gum breaker which is operated with the aid of power so as to eliminate the curling tendency of the paper, and which tendency is acquired by reason of the application of the gum on one side of the paper. Unless such paper is processed through the gum breaker it will never have the quality of lying flat. The petitioners did not have and do not have the equipment known as gum breaker. 13. The petitioners further contend that after such paper to which gum is applied on one side is processed through gum breaker as aforesaid, the same will have to be out into sheets of standard sizes by the equipment known as cutting machine known as Gross Cutter which is also being operated by the aid of power. In this connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tence no material has been placed so far as the respondent are concerned to show that what the petitioners are in fact manufacturing even at an intermediate stage by applying gum on one side of the paper amounts to what is known to the trade as gummed paper . In South Bihar Sugar Mills Ltd. and another v. Union of India and another - AIR 1968 S.C. 922, in Paragraph 15 at page 928 of the judgment, Shelat J. has pointed that in that particular case the revenue had not produced any affidavit of persons dealing in carbon dioxide to show that kiln gas is known to the market as carbon dioxide. Similarly in the instant case we find that the revenue has not produced before us any affidavits of persons dealing in gummed paper to show that what the petitioners were manufacturing as an intermediate product in the process of manufacturing gummed tapes was known to the market as gummed paper . In view of the record as it stands, it is not possible for us to say that what the petitioners are manufacturing is gummed paper or that what they are manufacturing as an intermediate stage of the product is a new and a different article known to the trade and market as gummed paper. 14. Regarding co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntents of trade notice of September 17, 1970 the product manufactured by the petitioners cannot, according to the description given by the Department itself, be said to be converted type of paper, but merely an article made out of paper. In order to get out of the difficulty posed by the contents of this trade notice No. 250/70 of September 17, 1970, the learned Assistant Government pleader relied upon certain observations of the Supreme Court in Orient Paper Mills Ltd. v. Union of India, in (AIR 1960 S.C. 48). In that case the question before the Supreme Court was, whether machine glazed poster paper manufactured by the appellant was printing and writing paper chargeable under Item 17 (3) of the first Schedule to the Central Excise and Salt Act, 1944. Before the excise authorities, the manufacturer has taken up the contention that machine glazed poster paper known as M.G. Poster Paper was packing and wrapping paper falling within sub-item (4) of Item 17 and not printing paper falling within sub-item (3) of Item 17. If it was held to be falling within sub-item (3) of Item 17, the manufacturer would be required to pay higher excise duty than what he would be bound to pay if the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions relating to the issue of trade notices offering inducement to the prospective exporters are in character executive, the Union Government and its officers are, on the authorities of this Court not entitled at their mere whim to ignore the promises made by the Government. Thus, it is obvious that it is not open to the Department to get out from the stand taken in the trade notice if the manufacturers have acted on those trade notices and entered upon their manufacturing programme on the basis of what has been stated in the trade notices. 15. Even apart from the question of what has been stated in the trade notice, unless the Department is able to show by placing appropriate materials before us that by subjecting raw materials purchased by the petitioners to certain process, the petitioners have brought about such a transformation that a new and different article emerges having a distinctive name, character or use, and that the article which is sought to be subjected to excise even as an intermediate product or as an end product is known as such to the trade and market and can be bought and sold in the market as such. There cannot be any question of levying excise duty on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly mere printing of designs and monograms and other descriptions of goods regarding to quality of the name of manufacturers does not convert packing or wrapping paper into another kind of paper. It still continues to be printing or wrapping paper on which something has been printed. Under these circumstances both the major contentions of the petitioners succeed. We, therefore, allow this Special Civil Application and issue a writ of mandamus, directing the respondents to forbear from applying the provisions of the Central Excise and Salt Act, 1944 to the petitioners factory at Barejadi in respect of gummed paper and textile wrappers and/or enforcing the demand contained in the letters dated December 29, 1970, February 18, 1971, March 15, 1971 all from the Superintendent of Central Excise and the demand contained in the letter of July 19, 1971 of the Inspector of Central Excise Barejadi and the letter of July 21, 1971 of the Superintendent of Central Excise, I.O.C.Range, Division II., Ahmedabad. The respondents are further restrained from taking any steps or proceedings against the petitioners either under the Act or under the rules made there under in respect of the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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