TMI Blog1990 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner firm also uses straw and jute stalk in the manufacture of the said mill board which has a thickness exceeding 0.50 mm. It is stated that no colouring material is added in the said mill board manufactured by the petitioner firm. 3. The petitioner had challenged the show cause notice and the order of assessment as well as order passed by the Customs, Excise and Gold (Control) Appellate Tribunal, wherein it was held that the petitioner was not entitled to the benefit of the Notification No. 70/76-C.E., dated 16th March, 1976 issued by the Central Government in exercise of the power conferred under Rule 8 of the Central Excise Rules, 1944 granting exemption in respect of the mill board and straw board by providing for payment at concessional rate on the quantity of the goods specified in the said notification. 4. The moot question that is raised in this writ application is whether by not using mechanical pulp and on the contrary by using straw and jute stalk the petitioner , firm had contravened the provision of the notification in question for which the petitioner is disentitled to have the benefit of the said notification. 5. For proper understanding of the matter i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not be specially compressed and shall not have any paper pasted on either surface: Provided also that for the financial year beginning with first day of April, 1975 and ending on the 31st day of March, 1976, for determining the rate of duty applicable, under this notification, for straw board and mill board cleared on or after the 16th day of March, 1976, the quantity of the said straw board and mill board already cleared prior to the said date under the provisions of Notification No. 24/74-Central Excise, dated the 1st March, 1974, shall also be taken into account." 6. But the petitioner firm started manufacturing the mill board out of the mixed waste paper since 18th November, 1977. The petitioner also used the straw and jute stalk in the manufacture of the said mill board which had a thickness exceeding 0.50 mm and no colouring matter was added to the said mill board manufactured by the petitioner. The petitioner claimed that the said mill board manufactured by the petitioner firm conformed with the definition of the mill board as provided in the notification referred to above. On 29th November, 1977 the petitioner submitted the classification list in respect of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using straw and jute stalk in the manufacture of the said mill board, the petitioner had disqualified themselves from availing of the exemption under the said notification. On 12th February, 1979 the petitioner duly replied to the said show cause notice issued by the Assistant Collector of Central Excise denying each and every allegation contained there under. The stand that was taken by the petitioner, was that the said mill board conformed to the definition contained in the said notification and that the classification list had been correctly approved. The petitioner also replied to the show cause notice issued by the Superintendent of Central Excise by which the additional duty was demanded. In the said reply it was stated that the said purported demand was also barred by limitation under the provisions of the said Act. It was also contended in the said reply that the approval of the classification list had been made after full investigation and chemical test. It was further pointed out that the said mill board fully conformed to the definition provided under the said notification which did not debar the use of any other materials with mixed waste paper. On 11th April, 1979 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 6,992.90 for the months of April 1979 and May 1979. Being aggrieved by the said order dated 11th April, 1979 and 3rd May, 1979 passed by the Assistant Collector of Central Excise and the Assistant Collector made RT-12 returns for the months of April and May, 1979, the petitioner preferred four appeals before the Appellate Collector of Central Excise, Calcutta. The said appeals were heard by the Appellate Collector of Central Excise and by the order dated 24th March, 1980 the Appellate Collector passed an order bearing No. 127/WB of 1980 and the said appeal dated 11th April, 1979 modified the classification list. In the said order the Appellate Collector of Central Excise without going into the merits of the petitioner's claim for exemption under the said notification held that the earlier classification would remain valid till May 18, 1979 when the said order dated 11th April, 1979 was received by the petitioner. Being aggrieved by the said order passed by the Appellate Collector of Central Excise the petitioner preferred a provisional application before the Central Government. On 24th March 1980 by another order bearing No. 127/WB of 1980 the Appellate Collector of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waste paper only or from waste paper with screening and mechanical pulp, but without any colouring matter. 9. On 14th April, 1981 the petitioner duly submitted a reply to the said show cause notice contained that the petitioner was eligible to get the benefit of the said notification given reasons therefore. By the order dated 11th October, 1982 the said provisional application, preferred by the petitioner as well as the proceeding initiated by the Central Government under Section 36(2) of the said Act was transferred to Tribunal under the provision of Section 35(P) of the said Act. The Tribunal by the order dated 28th March, 1988 held that the said mill board produced by the petitioner was not the mill board that qualified for exemption under the said notification. The Tribunal held that the use of the mechanical pulp was essential in order to avail the said exemption. The Tribunal held that the Assistant Collector rightly reviewed his earlier order dated 17th February, 1978 and disapproved the classification list. The Tribunal further held that there would not be any suppression of fact on the part of the petitioner since the Excise Authorities had accepted the fact that causti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the view that mechanical pulp was not essential ingredients of the mill board and if the show cause notice proceeds in that line, the Tribunal cannot turn round suo motu and on the basis of the state of affairs it was submitted that the Tribunal should have confined itself to the appeal before it and should not have traversed beyond the grounds urged before it. It may be mentioned that in appeal No. 127/WB of 1980 the Tribunal had inter alia held that — "There was no room for intendment which is implied when the department said that the exemption was available only when the mill board should be made out of only the two ingredients viz. mixed waste paper and mechanical pulp." 15. The Tribunal was of the view that the absence of mechanical pulp and the use of jute stalk and paddy straw makes the board a different one from one exempted. 16. Reference was made to the decision of this court in the case of R. L. Rajgharia v. Income Tax Officer reported in 107 ITR 347 which was confirmed in the case of I. T. 0. v. R. L. Rajgharia reported in 119 ITR 872 DB. In this case Calcutta High Court held that the subject matter of the appeal was the controversy as to whether the loss cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid various authorities that mechanical pulp is only an optional raw material and is not an essential ingredients of the mill board exempted under the said notification. It was further submitted that in way event, the Assistant Collector found that the petitioner used mechanical pulp which was contained in mixed waste paper used by them. It was submitted that the notification contemplated only use of mechanical pulp which is contained in the waste paper. The waste paper is waste of paper made, inter alia, from mechanical pulp. The Tribunal had no jurisdiction to go into the question whether mechanical pulp was used or not since the r Assistant Collector himself had accepted such fact in his order. It was further submitted that on proper construction of the said notification it would be seen that in order to avail the exemption there under user of any other material along with mixed waste papers in the manufacture of mill board is not prohibited. User of mixed waste papers in the making of mill board is essential and undisputedly the petitioners have used mixed waste papers in making the said mill board. It was further submitted that on plain meaning of the notification in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r materials, which were not specified in the notification, to the specified materials disentitled the assessee to the exemption. The Tribunal held in that case - "Adjudicating authority's observation that the circular cannot override the provisions of the notification is no doubt correct but ignores the predominant character of the admixture used for the final product. Notification 208/83 does not stipulate that the final product must be manufactured wholly or entirely or exclusively out of the raw materials mentioned in column 2 of the corresponding entry of the table to the said notification. In the absence of these words finding of the adjudicating authority is not tenable in law. We are fortified in this view by Supreme Court in the case of Union of India and Ors. v. Tata Iron Steel Co. Ltd., Jamshedpur-1977 (1) E.L.T. (J 61) (SC)." 22. Relying upon the said decision it was pointed out that the Tribunal had taken an erroneous view in the matter. It was further submitted that while interpreting the provision of statute if it transpires that two interpretations are possible, the one which is more beneficial to the subject should be adopted. In this connection reliance was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame fact, merely by change of the opinion the decision could not be unsettled by the authorities concerned. On behalf of the respondents it was submitted that the mill board has been defined and within the definition of the mill board, the mill board prepared by the petitioner do not qualify for exemption. In order to avail of exemption they have to manufacture the mill board strictly in accordance with the definition provided in the said notification. It was submitted that the writ petitioner used straw and jute stalk as well as caustic soda. This makes it chemical pulp and not mechanical pulp as required under the notification. It was further submitted that two essential ingredients of the mill board as defined in the said notification are 'mixed waste paper with or without screening' and 'mechanical pulp'. The absence of any one of the two ingredients would not make it a Mill Board within the meaning of Notification No. 70/76. 26. Reference was also made to the provisions of Rule 173(B)(5) of the Central Excise Rules which provides that - "When the dispute about the rate of duty has been finalised or for any other reasons affecting rate or rates of duty, a modification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd important ingredient part along with mixed waste paper. The contention on behalf of the petitioner is that the word 'with or without' qualifies both the screening and mechanical pulp, or in other words, petitioner's case is that both screening and mechanical pulp are optional because of the prefix words "with or without." In order to ascertain what is meant by chemical pulp and mechanical pulp, it is necessary to look at the Dictionary meaning. In Encyclopaedia Britannica, 13th Edition, the paper and paper production has been explained in detail at page 966. At page 969 it appears that - "Mechanical or ground wood pulp is made by subjecting wood to an abrading action, either by pressing the wood against a revolving grinding stone or by passing chips through a mill. The wood fibres are separated and to a considerable degree, fragmented. Chemical wood pulp is made by cooking wood chips with chemical solutions in digesters operated at elevated temperature and pressure. The chemicals used are :- (1) sulfite salts with an excess of sulfur dioxide, and (2) caustic soda and sodium sulfide (the kraft process)." 30. At page 970 - Mechanical or ground wood pulp - Pulp wood may arrive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard. By this process, not only a large number of poor people can earn their livelihood, but also beneficial to the society in two ways, the streets are cleared from the waste papers and secondly materials are not lost. Unless the manufacturers of mill board are big industries, they cannot get mechanical pulp. Mechanical pulp is obtained through a costly process which requires costly plants and mechanisms which cannot be had by small scale industrial units and the exemption is for the small manufacturers. In the instant case, the petitioners have manufactured the mill board out of mixed waste papers and jute stalk and paddy straw along with caustic soda. 33. The same notification also provides for exemption of 'straw board'. Straw board made wholly or predominantly from partially cooked unbleached straw or bagasses or grasses or other agricultural residues or a mixture of these, is equally being given concessional rate under the selfsame notification. The manufactures of the straw board under the said notification provide certain restriction also. It is also firmly established principle that in order to avail concessional rate, the parties had to strictly follow the notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected by the Assistant Collector of Central Excise and ultimately the Central Government by an order dated 7th July, 1967 rejected the revision petition of the manufacturer. The Government held that the manufacturer was not entitled to an exemption under Notification No. 30/60, dated 1-3-1960 because remelted scrap obtained from unserviceable casting moulds viz. ingots moulds and bottom stools were used in conjunction with other non-duty paid pig iron in the manufacture of steel ingots. The High Court held that the Revenue authorities fell into the error of interpreting Notification No. 30/60 by confining exemption to steel ingots in which 'entirely, exclusively or only' duty paid pig iron is used. The High Court held that the words 'entirely, exclusively or only' were not used in the notification. The notification exempted steel ingot in which duty paid pig iron was used. The High Court also held that the notification would have to be interpreted in a manner that the statute would not cast burden twice over for payment of tax on the tax payer unless the language of this statute is so compellingly certain to that effect. Supreme Court in that case held that the High Court righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible along with mixed waste paper manufactured by mill board exempted under the said notification. The only thing that has been specifically excluded was colouring matter. If the interpretation put forth by the Respondents are accepted, that would result an anomalous and illogical result and further when such notification is issued granting exemption for the purpose of encouraging of small scale industries for the purpose of manufacture of mill board from waste paper, such interpretation as sought to be given by the revenue, would result a disproportionate result. It is well settled that the court seek to avoid construction that cure the mischief which the enactment design to remedy only at the cost of setting up the disproportionate counter mischief. The construction of the notification as given by the Tribunal would defeat the very purpose and object of such notification. It is well settled principles of interpretation that a construction which would advance the object and purpose of the legislation should be followed and a construction which would result in reducing a provision of the Act to a dead letter or to defeat the object and purpose of the statute should be avoided wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'only or exclusively or entirely' in respect of mechanical pulp and under such circumstances, it cannot be held that mechanical pulp has to be used compulsorily along with the mixed waste paper for the purpose of exemption. 38. In my view, the petitioners cannot be made to suffer except under clear provisions. Merely on the basis of difference and dispute, a provision should not be interpreted to settle higher liability or responsibility upon the petitioner. It is a principle of legal policy that a person should not be penalised except under clear law which is called a doubtful penalisation. 39. Accordingly, I hold that the Tribunal was wrong in interpreting the provision of the said notification. The tribunal has wrongly found that the intendment of the notification was that mill board made of mixed waste paper without mechanical pulp was exempted under the notification. The view taken by the Tribunal was wholly erroneous. The concessional rate was introduced to encourage the Small Scale Units to prepare mill board from waste papers. The object of the notification will be frustrated if the same is interpreted in the manner it was done by the Tribunal. The mill board made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sitates reconsideration of the issue, in that event, undoubtedly the department have power to take a different view of the matter. But in the instant case, the classification list was approved after chemical examination of the material and after going through the matters and specifically the change could be made abruptly in view of the fact that there would be a fraud or suppression of material fact on the part of the petitioner and under such circumstances there must be considering attitude of the revenue which had once been taken on consideration of relevant materials. 43. Accordingly, in my view, the subsequent decision of the Assistant Collector taken contrary to the view already taken by his predecessor in the facts and circumstances of the case was not at all proper and cannot be sustained. Such power that was raised on behalf of the revenue was that this petition should not be entertained as alternative remedy. The petitioner is a small scale industrial unit located in a backward and remote area. Further once the petition is entertained and is kept pending since May, 1985 and after hearing in my view, it will not be proper to throw out the writ petition merely on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
