Customs, Excise and Gold Tribunal - Delhi
Sai Giridhara Supply Co. vs Collector Of Central Excise on 12 February, 1987
Equivalent citations: 1987(12)ECR140(TRI.-DELHI), 1987(28)ELT438(TRI-DEL)
ORDER
S.D. Jha, V.P. (J)
1. The question for decision in these appeals is proper classification of the appellants products carbon paper and carbonised adding machine rolls before amendment of Tariff item 17 in 1982 - whether the two products or any of them fell under item 17(2) of Central Excise Tariff as claimed by the Revenue or Tariff item 68 as claimed by the appellants and the allied question is that if the products or any of them be held classifiable under T.I. 17(2), the period for which demands should be raised.
2. It might be stated that after the classification of the products had been decided by the lower authorities under T.I. 17(2) and not T.I.68 as originally approved and claimed by the appellants, leading to Appeal No. 1346/83-C to the Tribunal by the appellants, the demand consequent to this order of classification was quantified against the appellants. As respects this quantification another appeal No. 1284/84-C was filed by the appellants to the Tribunal. This appeal was not originally cause listed but on request of the appellants, to which the respondent had no objection, the two appeals were listed for hearing together along with connected Cross Objection No. 113/83-C and heard together.
3. Facts material for decision of these appeals are that the appellants classification list 5/79-80 dated 1.4.1979 classifying Carbon Paper and Carbonised Adding Machine Rolls under Item 68 of CET was approved by the Assistant Collector on 4.9.1979. The appellants till December 1979 continued to clear these products under this Tariff Item. The Superintendent of Central Excise by notice dated 29.12.1979 rescinded this approval and called upon the appellants to show cause why the products be not classified under T.I. 17(2) on the ground that the products were coated papers classifiable under item ibid from 16.3.1976 due to change in definition of T.I. 17. The notice called upon the appellants to furnish written explanation against the proposed action and also opportunity of hearing was to be given to them. The Appellants filed reply to the show cause notice through their letters dated 1.1.1980 and 17.1.1980 and contended that there was no statutory change in definition of T.I. 17(2) justifying inclusion of their products under this sub-item. They also availed of personal hearing and submitted written submissions. After following the usual procedure the Assistant Collector of Central Excise, Bombay, Division 'K' by order dated 1.7.1980 held the products classifiable under T.I. 17(2) and called upon the appellants to pay central excise duty for six months prior to issue of show cause notice dated 29.12.1979 under Rule 10 (as it then existed) of Central Excise Rules, 1944. The appellants challenged this order in appeal before the Collector of Central Excise (Appeals) Bombay and urged several grounds. The Collector (Appeals) by order dated 23.12.1983 substantially upheld the order of the Assistant Collector of Central Excise though in para 7 of his order after saying the demand for differential duty has to be restricted for six months prior to the date of show cause notice dated 29.12.1979 further observed that as the show cause notice for recovery of duty in pursuance of the order had been issued after the filing of the appeal before him and the notices did not form the subject matter of the appeal before him, he was not passing any order on the said notices and the appellants were free to agitate against the notices before the lower authority and if need arose by approaching his office. With this modification he rejected the appeal. Demands of differential duty against the appellants are for the period 29.6.1979 to 31.12.1979 and 1.1.1980 to 18.6.1980 respectively amounting to Rs. 2,01,625.75 and Rs. 1,96,395.78 (Total : Rs. 3,98,021.53).
4. At the hearing of the appeal Shri K.R. Mehta, Consultant representing the appellants explained the process of manufacture of carbon paper and carbonised adding machine rolls. About first product he submitted that duty paid paper is coated with the solution of carbon black or lamp-block in greasy oil media on a coating roller and on equalising rod and the same process is adopted about carbonised adding machine rolls which are obtained from printing and writing paper interleaved with carbon paper. Relying on Supreme Court decision in State of Uttar Pradesh and Anr. v. Kores (India) Ltd. (1977 Vol. 39 STC 8) he submitted that for the purpose of a notification issued under the U.P. Sales Tax Act, 1948, the Supreme Court had held that in absence of a definition the word "paper" had to be understood in common parlance or commercial sense. "The word in the common parlance or in the commercial sense means paper which is used for printing, writing or packing purposes." He submitted that the two products are not paper in proper sense but articles of paper. In particular, he drew attention of the Bench to amendment of Item 17 of the Tariff by the Finance Act, 1980 by which under the heading of the Tariff 'Articles of Paper' specified therein were included in the item and sub item 3 added to include carbon and other writing papers. He submitted that but for this amendment and inclusion carbon paper and carbonised adding machine rolls would not have been classi-fiable before the amendment under T.I.17(2) otherwise there was absolutely no necessity to amend the heading as also add sub item 3 therein. Shri Mehta, in particular, relied on a Karnataka High Court decision in Khoday Industries v. Union of India 1986 (23) ELT 337 in support of his argument that prior to change of tariff description of Item 17 by Finance Act, 1982 carbon paper would be an article of stationery falling under Item 68.
5. About limitation he submitted that appellants classification list dated 1.4.1979 had been approved by the Assistant Collector on 4.9.1979 and Superintendent by notice dated 29.12.1979 being a junior officer could not rescind the same. This act was without jurisdiction and contrary to law. The classification list therefore continued to be in force till it was modified by the successor Assistant Collector by his adjudication order dated 13.5.1930. The modification could take effect only prospectively and not retrospectively and, therefore, the two demands raised by the show cause notice dated 1.9.1980 to the extent they were beyond 1.3.1980 were time barred.
6. Shri Sunder Rajan, JDR representing the respondent, stoutly controverting Shri Mehta's contentions submitted that classification of carbon paper Under T.I.17(2) even before amendment of Tariff in 1982 stands concluded by the following decisions of the Tribunal :
(1) Continental Carbon & Ribbon Manufacturing Co., v. Collector of Central Excise, Calcutta - Order No. 456 & 45784-C dated 16.7.1984 (2) Universal Carbon Ltd. Hyderabad v. Collector of Central Excise, Hyderabad - Order No. 55/85-C dated 23.1.1985.
(3) Collector of Central Excise v. Swapna Paper Industries -Order No. 103/85-C dated 31.1.1985.
(4) Kores India Ltd. v. Collector of Central Excise, Bombay - Order No. 622/85-C dated 8.8.1985 reported at 1985 (6) ETR 570.
(5) Cartybon (P) Ltd. v. Collector of Central Excise, Goa -Order No. 710/85-C dated 15.10.1985.
(6) Killick Coribonum v. Collector of Central Excise, Bombay - Order No. 293/86-C dated 30.5.1986.
About Shri Mehta's reliance on Supreme Court decision in Kores India case he submitted that the Tribunal in the case of Kores India 1985 (6) ETR 570 had distinguished and not followed this decision. He also referred to a 5 Member Bench decision of the Tribunal in Guardian Plasticote Ltd. v. Collector of Central Excise, Calculta and Ors. 1986 (24) ELT 542 and submitted that in this case the Tribunal held - "Therefore, the mere fact that there was no reference to laminated paper (or even coated paper) in T.I. 17 as it stood in 1974 would not render the product non-excisable for that reason". This was to support his argument that T.I. 17 as it originally stood included paper and paper board all sorts and absence of specific mention of the same in the Tariff would not take it out of the Tariff Item and consign it to residuary Tariff item 68. To reinforce this argument Shri Sundar Rajan drew attention of the Bench to para 13 of Karnataka High Court judgment in Khoday Industries case (supra) which is in the following words :
"There is force in the contention of Sri Bhat (appearing for the Union of India) that so far as the process that the ordinary paper undergoes and the treatment that is given to base paper for converting it into carbon paper, it may appropriately fall under the description of "coated paper".
Adding the two portions together in the Guardian Plasticote case of Tribunal and Khoday Industries case of Karnataka High Court he submitted that carbon paper being coated paper would, before amendment of Tariff in 1982, also be classifiable under Item 17(2) of CET. Shri Sundar Rajan submitted that the proper approach, if the Bench was inclined not to follow the earlier six decisions of the Tribunal regarding classification of carbon paper under Tariff Item 17(2) before amendment of Tariff in 1982, would be to refer the matter to a Larger Bench of the Tribunal rather than follow the Karnataka High Court decision. As to approach to be adopted for following precedents and their binding nature, he relied on a Full Bench decision of the Punjab & Haryana High Court in Pritam Kaur v. Surjit Singh AIR 1984 Punjab & Haryana 113 and submitted that regard being had to the principles laid down in this decision the Bench should follow the six decisions of the Tribunal relating to classification of carbon paper and the observations in 5 Member Bench decision in Guardian Plasticote case as to liability of laminated or coated paper to duty. About classification of carbonised adding machine rolls he submitted that the issue stands resolved against the appellants by the Tribunal decision in Ramsay India v. Collector of Central Excise, New Delhi 1985 (19) ELT 193 followed by the Tribunal in Order No. 294/86-C dated 30.5.1986 in the matter of M/s Killick Caribonum Ltd. He also submitted that the ratio of the Division Bench decision of the Karnataka High Court in Business Forms v. Collector of Central Excise, 1985 (5) ECC 118) Karnataka also supports this view.
7. As to the argument that Superintendent could not rescind the approval of classification list by the Assistant Collector and power of Assistant Collector to review classification, he submitted that both the lower authorities have restricted the demand to a period of six months preceding the date of issue of show cause notice. Therefore, this argument would not help the appellants. In this connection, he drew attention of the Bench to a Karnataka High Court decision in Shyam Sunder U. Nichani v. Assistant Collector of Central Excise 1985 (22) ELT 751 (Karnataka). He submitted that the demand raised against the appellants is not time barred.
8. About cross objection filed by the respondent-Collector of Central Excise he agreed that the findings of the lower authorities had not been challenged in this so-called cross objection and the cross objection is not maintainable. It is only in the nature of comments on the Memo. of Appeal rather than being an exercise of statutory right to challenge the findings adverse to the respondent in the impugned order.
9. We have carefully considered the arguments advanced by the parties. Taking up first the issue of classification of carbon paper while the Learned JDR for the respondent has relied on six decisions of the Tribunal classifying the same under T.I. 17(2), Shri Mehta has relied on a Single Judge later decision of Karnataka High Court in Khoday Industries Ltd. v. Union of India and Ors. 1986 (23) ELT 337 - decided on 30.10.19851 The question is whether Tribunal decisions should be followed or the decision of Karnataka High Court. This is the only High Court decision on the point and the period involved and the product is identical is not in dispute. Shri Sundar Rajan has made an attempt to piece together certain observations of the High Court in para 13 of the decision already reproduced above and observations of the 5 Member Bench decision of the Tribunal in Plasticote case (supra) already referred to above for the argument that in view of these observations carbon paper be held classifiable under T.I. 17(2) even before amendment of the Tariff on 27.2.1982 also. We do not think that this would be the correct or proper approach or an excuse for not following the decision of the High Court in preference to decisions of the Tribunal. As already stated this is the only decision on the point and it is fairly well-settled that in absence of any contrary decision of any other High Courts on a Central Law the lower authorities should follow the interpretation given by the High Court. Even Shri Sundar Rajan did not dispute that if the Karnataka High Court decision which is later in point of time to all the decisions of the Tribunal and has not been noticed in any of the decisions of the Tribunal were followed, the classification for the product carbon paper for the relevant period would be under T.I. 68 as article of stationery.
9A. As for Shri Sundar Rajan's reliance on Full Bench decision of Punjab & Haryana High Court in Pritam Kaur's case (supra) relating to approach to be adopted to precedents, though the decision mainly concerned itself with binding force of precedents of Benches in High Courts, and not a decision of the Tribunal qua the High Court, there are certain observations in the decision which would not support the argument of the Revenue. A High Court is a constitutional judicial institution and can issue Writs, inter alia, to Tribunals subject, of course, to exceptions under Article 323A and 323B of the Constitution of India. It has also powers of superintendence over all Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. Even though the Tribunal may not be within the territorial jurisdiction of Karnataka High Court, we cannot overlook the fact that the Tribunal is not one excepted from the jurisdiction of High Court under Articles 323A & 323B of the Constitution of India. Inspite of all the arguments of the Learned JDR that we should differ from a decision of Karnataka High Court, later in point of time, in view of the decisions of the Tribunal, we cannot lay claim to same status as that of a High Court. In this background, having regard to the true approach to a binding precedent in words of Buckley L.J. reproduced in para 7 of the decision in the following words and the Court's own conclusion in para 9 extracted below:
"7...
"I am unable to adduce any reason to show that the decision which I am about to pronounce is right. On the contrary, if I were free to follow my own opinion, my own powers of reasoning such as they are, I should say that it is wrong. But I am bound by authority - which, of course, it is my duty to follow - and, following authority. I feel bound to pronounce the judgment which I am about to deliver."
"Para 9. It would thus follow that once a precedent is held to be a binding one, then no deviation therefrom is permissible within the judicial polity except in the well accepted categories of cases enumerated hereafter in para 12 of this judgment".
It would not appear reasonable for the Tribunal to differ from the decision of the High Court. It might be stated that the present case does not come under one of the exceptions set out in para 12 of the High Court Judgment. For the same reason High Court being a superior constitutional judicial body there would appear no justification for referring the matter to a Larger Bench.
10. High Court of Karnataka after noticing Item 17 before its amendment on 27.2.1982 and after its amendment on this date, taking note of the tariff advice issued by the Board of Excise & Customs in this regard classifying carbon paper as an article of stationery dutiable Under T.I.68, intention of amendment gathered from the memorandum of objects and reasons accompanying the Amending Bill to the Finance Minister's speech held carbon paper during the relevant period classifiable under T.I. 68. Following this decision carbon paper is held classifiable under T.I. 68 as claimed by the appellants and not T.I.17(2) as claimed by the Revenue.
11. From Shri Sundar Rajan's argument it appears that for classification different treatment could be given to carbonised adding machine rolls and carbon paper. For the purpose he has referred to decision of the Tribunal in Ramsay India (Pvt.) Ltd. New Delhi, v. Collector of Central Excise, New Delhi 1985 (19) ELT 193 and Karnataka High Court decision in Business Forms Ltd. v. Commissioner of Commercial Taxes - 1985 (5) ECC 118 (Karnataka). The first decision pertains to Teleprinter tapes/rolls. On going through the decision (para 15) it appears to us that this decision related to a period after amendment of the Tariff in 1982 and hence the observation that the item is specifically included in Central Excise Tariff Item 17(2). We do not think that this decision could apply to a case of carbonised adding machine rolls which according to the appellants is in substance similar to carbon paper. Karnataka High Court decision related to teleprinter rolls, adding machine rolls and computer output papers for the purpose of entry 125 of the Second Schedule to the Karnataka Sales Tax Act, 19.57. Besides the goods being different, the High Court itself said that the classification of goods for the purpose of levy under the Central Excise Act, 1944 furnishes no guidance for determining the rate of levy under the State Sales Tax Act. We do not think that this decision will help the Revenue. We, however, observe that carbonised adding machine rolls are different in character and use from the carbon paper. The carbonised roll has one side blank and the other side coated with material to get an impression on the next blank side of the carbonised paper for a duplicate copy. By carbonising the paper on one side, the need for inserting carbon paper between two layers of blank sheets on which original data and the copies thereof are required to be obtained is obviated. It cannot be denied that so far the application of coating with material on one side is concerned, it brings the paper within the ambit of the category coated paper. From use and also marketability point of view it continues to remain in the category of paper. In this background, therefore, the ratio of Hon'ble Karnataka High Court judgment in the case of carbon paper will not be applicable to the assessment of carbonised adding rolls. We hold therefore that so far as the carbonised adding rolls are concerned these will be classifiable under T.1.17(2).Classification of carbon paper having been found under Tariff Item 68, the question of limitation about this product does not require any consideration. It is material only for the other product carbonised adding machine rolls which has been found classifiable by us under T.I. 17(2).
12. We have already pointed out above the appellants classification list 5/79-80 dated 1.4.1979 was approved for the two products under T.I. 68 by the Assistant Collector on 4.9.1979 and appellants were clearing these products under the tariff item. The Superintendent of Central Excise by what is called show cause notice dated 29.12.1979, inter alia, informed the appellants that approval granted to classification list 5/79-80 filed by the appellants for the two products be treated as rescinded. We fail to understand how the Superintendent of Central Excise could have rescinded the approval made by his official superior, the Assistant Collector of Central Excise and how this rescinding could have been done without following the proper procedure for doing so. As for Shri Sundar Rajan's reliance on the Karnataka High Court decision in Shyam Sunder U. Nichani's case 1985 (22) ELT 751 for the argument that withdrawal of approval is not review by the same officer, this decision does not help the Revenue because as already observed approval was by the Assistant Collector and rescinding of approval is by the Superintendent and there is nothing on record to show that this was done by or at the behest of the Assistant Collector. By adjudication order dated 13.5.1980 the Assistant Collector modified the earlier classification and approval and it is only thereafter that demands were raised by show cause notices dated 1.9.1980. In the background of the above, Shri Mehta's contention that the demand preceding six months from this show cause notice i.e., beyond 1.3.1980 should be held time barred deserves acceptance. About carbonised adding machine rolls demand of duty beyond 1.3.1980 applying six months limitation preceding the show cause notice dated 1.9.1980 is held barred by limitation.
13. The appeals are thus partly allowed in the foregoing terms.