Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Jayant Paper Box Factory on 22 September, 1987
Equivalent citations: 1987(14)ECC365, 1988ECR40(TRI.-DELHI), 1987(32)ELT611(TRI-DEL)
ORDER V.P. Gulati, Member (T)
1. The Captioned appeal is against the order of Collector of Central Excise (Appeals) Bombay.
2. Brief facts of the case are that' the respondents manufactured corrugated cardboard cartons using duty paid kraft paper. The corrugated board manufactured by them for the purpose was out of fluted gummed layers of kraft paper with a layer of bituminised kraft paper fixed on one side and kraft paper layer on the other side. The appellants claimed the benefit of Notification No. 142/82, dated 22.4.1982 under which corrugated board cartons made out of duty paid kraft paper were exempted from duty. The lower authorities approved the classification list filed in the above terms but later demanded duty for the reason that the appellants had produced cartons using bituminised kraft paper whereas the notification covered only the use of kraft paper as such. His findings in this regard are as under :-
"It is very clear that Notification 144/82 was not available to the assessee as the corrugated Paper Boxes manufactured by M/s. Jayant Paper Box Factory are made from bituminised water proof papers. This Notification has superseded by Notification No. 279/82-C.E., dated 22.11.1982 incorporating the words 'including bituminised water proof kraft paper' which clearly shows that prior to issue of this Notification exemption under Notification No. 144/82 was not available to bituminised water proof kraft paper."
The Collector (Appeals) allowed the respondents' appeal against the above findings holding that following the ratio of this Tribunal in the case of Golden Paper Udyog v. Collector of Central Excise, Delhi (1983 ELT 1123) (CEGAT) that duty paid bituminised kraft paper continued to be kraft paper for the purpose of Item 17 CET and that exemption under Notification No. 142/82 would be available to bituminised corrugated board cartons/boxes manufactured by the respondents. The findings of the Tribunal relied upon by him are as under :-
"Bituminising duty paid kraft paper is neither a process incidental or auxiliary to the completion of manufacture of paper or paper board nor it is manufacture as the resultant bituminised kraft paper continues to be paper on paper board in terms of the inclusive definition in residuary sub-item (2) of Tariff Item 17 and is not liable as such to duty again thereunder."
3. The JDR of the appellant collector made the following pleas :-
(1) The bituminised paper is not kraft paper but converted type of paper.
(2) The Notification No. 144/82 covered only such corrugated board cartons as were made out of kraft paper alone.
(3) The very fact that a successor Notification No. 279/82 was issued specifically providing for exemption for cartons in the making of which bituminised paper was used, showed the Notification No. 144/82 did not cover the same earlier.
(4) The Tribunal in their decision in the case of M/s. Guardian Plasticote Ltd., Calcutta v. Collector of Central Excise, Calcutta and Ors. [1986 (24) E.L.T. 542 (Tribunal)] has held that converted paper was a new product having distinct name, character and use and therefore bituminised paper on the same logic was not the same as kraft paper for the purposes of the notification. The Tribunal, he pointed out, has held as under :-
The product manufactured by M/s. United Paper Products is bituminised laminated paper, consisting of two layers of kraft paper, joined together by bitumin as adhesive. Judged by the tests laid down by the Supreme Court in Empire Industries case, i.e. emergence of a new commodity commercially known as a distinct and separate commodity having its own character use and name, the process of bituminised paper, the process of bituminisation being carried out in order to impart additional qualities, such as strength and impermeability to water. [1985 (20) E.L.T. 179 (S.C.) rel. on 1980 E.L.T. 579 (Mad.) and 1985 (20) E.L.T. 314 (A.P.) ignored]
4. The learned consultant for the respondents pleaded that the bituminised paper constituted the outer layer of cartons and was manufactured out of duty paid kraft paper. He submitted :-
(1) Bituminised kraft paper was kraft paper and its use was covered by the wording of the Notification No. 144/82.
(2) Bituminised kraft paper being a variety of kraft paper was not different from the kraft paper processed to make the same. His plea is that the decision of the Tribunal in the case of Plasticote referred Jo supra in view of the above does not militate against their claim under Notification No. 144/82.
(3) The end-product, the carton was the result of lamination of kraft paper. The kraft paper had to be bonded by gum and in the case of bituminised paper by bitumen. He pleaded if lamination and bonding of the paper was held to be excluding the end-product from the benefit of notification, then the notification was not workable as the cartons could not be produced without the process of laminations and bonding of the layers of kraft paper.
(4) In terms of the notifications, 1/3rd of other materials for making the cartons was permissible and bitumen used was not in excess of 1/3rd of the weight of the carton.
5. Shri Chakrabarti pleaded in reply that bituminised paper was not the same as kraft paper as ISI specification for kraft paper did not cover bituminised paper. He also pleaded that the plea of the respondents that other materials to the extent of 1/3rd of the weight of the ... could be used ... in the terms of the proviso to the notification for the 'strawboard and corrugated board out of which cartons were produced. The following issues have been raised for our determinations :-
(1) Whether kraft paper after bituminisation continued to be covered by the expression kraft paper.
(2) Whether lamination process of corrugated cardboard making by lamination with bituminised paper takes the cardboard out of the scope of cardboard cartons made out of kraft paper;
(3) Whether bitumen used for making bituminised kraft paper could be taken to be other material allowed to be used to the extent of 1/3rd in terms of the notification.
6. For convenience of reference the Notification No. 144/82 is reproduced below :-
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Govt. hereby exempts printed boxes and printed cartons (including flattened or folded boxes and flattened or folded cartons) whether in assembled or unassembled condition of the description specified in column (2) of the Table hereto annexed and falling under sub-item (4) of Item No. 17 of the First Schedule to the Central 'Excises and Salt Act, 1944 (1 of 1944) from the whole of the duty of excise leviable thereon subject to the condition specified in the corresponding entry in column (3) of the said Table.
THE TABLE
--------------------------------------------------------------------------------
S. No. Description of boxes/cartons Condition
--------------------------------------------------------------------------------
1. Mill board boxes and mill board If made wholly out of mill cartons. board.
2. Straw board boxes and straw board If made wholly out of straw cartons. board.
3. Corrugated board boxes and If made wholly out of kraft corrugated board cartons paper or out of paper and paper board of the type known as kraft liner or corrugating medium, whether or not in combination with mill board, or straw board
--------------------------------------------------------------------------------
Explanation :- For the purposes of this notification -
(a) mill board means any unbleached homogenous board, having a thickness exceeding 0.50 millimetre and made out of mixed waste papers with or without screenings and mechanical pulp but without any colouring matter being added thereto;
(b) 'straw board' means a board made wholly or predominantly from partially cooked unbleached straw or bogasse or grasses or other agricultural residues or a mixture of these :
Provided that :-
(i) the quantity of any other material used shall not exceed one third in weight of the total weight of the ingredients, and
(ii) such board shall not be specially compressed and shall not have any paper pasted on either surface."
7. We observe that while the revenue has taken the plea that bituminised kraft paper is a product distinct from kraft paper having a different character and use, they do not appear to have raised any demand for charging duty thereon holding it as a different product. No reason for the same is on record. Notwithstanding this, we proceed to examine issues in the light of the Notification No. 144/82.
8. It is the accepted position that the kraft paper used by the respondents for carton making is duty paid and that for producing corrugated board this paper is required to be bonded, laminated and the corrugated paper bonded together has to have a layer of plain kraft paper on either side. In the case of the appellants outer layer is that of bituminised kraft paper. It is the use of this bituminised layer of paper which has given rise to the dispute before us.
9. We observe that the respondents have utilised duty paid kraft paper in their factory for making the cardboard cartons. This kraft paper was subjected to various processes for preparing the board for making the boxes and it is out of the board manufactured by them that card, board cartons were made. The notification benefit, it is seen was available for the use of specified input and for specified output obtained after subjecting the said input to various processes. For the notification to be workable it cannot be denied that certain processes which are required for the production of the cardboard cartons are permissible. In this view of the matter transformation of the kraft paper by bonding and lamination etc. into a different form by using bonding materials is a technical necessity. It may well be that during the manufacturing process an intermediate product having different characteristics than the input paper may emerge and which by itself be dutiable, but this cannot constitute a reason for disentitling the end-product from the benefit of the notification. In the present case bituminised kraft paper was manufactured by the respondents out of duty paid kraft paper and also lamination of layers of paper by bonding them with gum etc. and finally these products were utilised for the manufacture of cardboard cartons. The processes of gumming the paper and laminating the same are necessary processes as ? part .of the cardboard carton making process .and preparation of bituminised kraft paper is one such process of lamination which the respondents had to carry out for the purpose of producing their desired end-product. While the Revenue is free to demand duty on bituminised paper if the same is found leviable under the law, it cannot be said that the cardboard cartons manufactured by the respondents are not manufactured out of duty paid kraft paper. A notification which exempts a product manufactured out of specified raw materials from payment of duty can be taken to have an inbuilt provision for the processing of the raw material and use of some ingredients which are required for the manufacture of the end products. The Revenue has sought to deny the benefit to the respondents for the reason that out of kraft paper an identifiable new product emerged at the intermediate stage during the manufacturing process of carton and the same is considered dutiable by them. Tribunal in a number of decisions in the context of Notification No. 24/63-C.E. in the case of use of specified petroleum products for the manufacture of fertilizer had that so long as use of the specified input is in relation to the -end-product notwithstanding the fact that the input resulted in the production of identifiable intermediary product, the benefit of the exemption continues to be available (Order No. 182-188-C, dated 11.2.1987 in the case of Collector of Central Excise, Kanpur v. M/s. Indian Oil Corporation). In view of the above, we hold that the cartons manufactured by the respondents are eligible for the benefit of the notification as claimed by respondents and allowed by the Collector (Appeals).
10. The appeal is therefore dismissed.