Bombay High Court
Modern Paper Industries vs Union Of India on 1 January, 1800
Equivalent citations: 1983ECR637D(BOMBAY), 1990(46)ELT201(BOM)
JUDGMENT
1. The petitioners are a partnership firm carrying on business of paper printing and processing. The petitioners purchase paper manufactured in India from traders in the paper trade and the paper purchased is commonly known as printing paper, kraft paper and map paper and the excise duty payable thereon was paid by the manufacturers of such paper. The petitioners, after purchasing such paper, coloured, printed or embossed such paper on one side and thereafter varnished the same. The petitioners thereafter sold such printed paper under the trade description such as plastic paper, marble paper, file paper etc. The paper which the petitioners purchased from the Traders was subject to the levy of excise duty under Item No.17 of the Central Excise Tariff item No.17 is as follows :-
"17. Paper, all sorts (including pasteboard, millboard, strawboard and cardboard) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power -
(1) Cigarette tissue. Rs.1,00 per (2) Blotting, toilet, target, tissue other than 50 paise per. cigarette tissue, teleprinter, typewriting, manifold, bank, bond, art paper, chrome paper, tubsized paper, cheque paper, stamp paper, catridge paper, parchment and coated board (including art board, chrome board and board for playing cards). (3) Printing and writing paper, packing and 35 paise per. wrapping paper, straw board and pulpboard, including grey board, corrugated board, duplex and triplex boards, other sorts. (4) All other kinds of paper and paperboard, 50 paise per. otherwise specified.
2. The Assistant Collector, Central Excise, Bombay, by his letter dated October 18, 1967 informed the petitioners that the paper whether with or without design and varnish would attract excise duty under Tariff Item No.17(4). The petitioners sent a reply dated November 8, 1967 pointing out that the paper which was coatedn on the one side with bright colours, embossed, polished or varnished cannot be treated as "Flint Paper" and cannot be classified as paper not otherwise specified under Item No.17(4). The reply sent by the petitioners and the explanation thereto was not accepted and the Assistant Collector passed an order on December 5, 1967 holding that the paper which was processed by the petitioners with bright colours and polished must be treated as flint paper. It is required to be stated that prior to this date, on June 17,1968, the Collector of Central Excise has issued a Trade Notice dated 17, 1968 inter alia, stating that the paper sold in the market after colouring, polishing and varnishing should be treated as a flint paper and excise duty should be levied under Item No. 17(4) of the CET.
3. The petitioners challenged the order of the Assistant Collector by filing an appeal but the said appeal was dismissed by the Collector of Central Excise by his order dated July 1968. Before the appellate authorities, the petitioners claimed that the process applied by them to the paper did not amount to manufacture and Tariff Item No.17 cannot be applied. It was also urged that the process of printing and polishing would not convert the paper into a flint paper. The appellate authority noticed the submission of the petitioners but without answering it, by a cryptic order dismissed the appeal holding that sucg printed and polished paper stand in a class by themselves and accordingly are correctly classifiable under Item No. 17(4) of the Central Excise Tariff. The petitioners approached the Government of India in revision but the revisional authority with an equality cryptic order dated April 14, 1974/May 25, 1974 dismissed the revisional application. The petitioners have preferred the present petition under Article 226 of the Constitution of India to challenge the legality and validity of the orders passed by the authority below.
4. Mr. Bhabha, the learned counse appearing in support of the petition, contended that the three authorities below have nowhere recorded that the process of printing and polishing the paper amounts to "manufacture" and attracts Item No.17 of the Central Excise Tariff. The submission of the learned counsel is correct and deserves to be upheld. I have perused all the three orders and nowhere it is found by the authorities that the process of printing, and polishing of the paper amounts to manufacture. The learned counsel invited my attention to the appeal Memo filed before the appellate authority and contended that though the question was specifically agitated before the authorities below, it has not been answered. The department must establish before levying the excise duty that the process of polishing and printing amounts to manufacture as contemplated by Section 2(f) of the Central Excises and Salt Act. It is now well-settled that the burden to establish that certain products are liable to excise duty is on the department and in absence of any finding by the three authorities that the process adopted by the petitioners amounts to manufacture, the order of levying excise duty deserves to be quashed. It is not disputed by Mr.Dalal, the learned counsel appearing on behalf of the respondents, that the excise duty was paid on the paper purchased by the petitioners under Item No.17(3) of the Central Excise Tariff. Mr. Dalal wanted to contend that the process of printing and polishing amounts to manufacture but such submission cannot be permitted in absence of any finding by the officers levying excise duty.
5. Mr. Bhabha also contended that on an earlier occasion, the appellate authority while considering the appeal preferred by Mssrs. United Fine Art Lithographers had come to the conclusion that the printing of design and/or colouring with varnished etc. on duty paid paper does not amount to manufacture. The appellate authority had also held that none of these processes amount to manufacture of any other variety of paper attracting further levy of duty on such converted papers. This decision was given earlier on August 11, 1966. Mr. Bhabha is right in his submission that the Excise authorities decided to take contrary view merely because of Trade Notices issued on June 17, 1968. In my judgment, the reliance by the Excise authorities on the Trade Notice to reverse its earlier view was entirely irregular. Mr. Bhabha also submitted that subsequently on Februaru 5, 1969, another Trade Notice was issued where the Collector opined that if specific designs have been printed on duty-paid paper before polishing or glazing, it would be an article of paper and as such non-dutiable. It was further observed that if the paper is simply coloured and polished or varnished with certain general patterns in colour as opposed to specific designs, then it would be liable to duty under Item No. 17(4) of the Central Excise Tariff. From these Trade Notices and from the earlier decision dated August 11, 1966, it is obvious that the Excise authorities are not clear in their mind as to whether the process of printing and polishing amounts to manufacture and whether such converts the paper into a different category inviting excise duty under Tariff Item No. 17(4). If the Excise authorities themselves are not clear, then it is futile to levy excise duty on an assumption that the process converts the paper into a different category. In my judgment, the entire approach of the Excise authorities to the problem was erroneous and has resulted into serious infirmity in the orders passed by them. The orders passed by the authorities below are required to be struck down.
6. In the result, the petition succeeds and the rule is made absolute in terms of prayers (a) and (b) of paragraph 25 of the petition. In the circumstances of the case there will be no order as to costs.