1984 (1) TMI 317 - AT - Central Excise

Issues Involved:
1. Classification of the product as "waxed paper" or "coated paper."
2. Applicability of Central Excise Notification No. 71/76.
3. Determination of whether the process of waxing and coating constitutes "manufacture" for excise duty purposes.
4. Interpretation of Tariff Item 17(2) and its applicability.

Detailed Analysis:

1. Classification of the Product:
The primary issue was whether the product manufactured by KIRAN, which is "T.D. Waxed Paper, one side coated with Sodium Benzoate and other side waxed," should be classified as "waxed paper" or "coated paper." The Assistant Collector and the Appellate Collector classified it as "coated paper" due to its anti-rust properties, thus denying the benefit of Notification No. 71/76.

2. Applicability of Central Excise Notification No. 71/76:
KIRAN claimed the benefit of Notification No. 71/76, which provides a duty concession for waxed paper. The Tribunal noted that the Notification does not distinguish between paper waxed on one side or both sides. The Tribunal referred to the Indian Standard IS: 4661-1968, defining coated paper as "paper which has undergone a coating process on one or both sides." The Tribunal concluded that the product could be described as either sodium benzoate coated paper or waxed paper. Since the product was described in invoices as wax paper and there was no evidence to the contrary from the Department, the Tribunal held that the benefit of Notification No. 71/76 should be extended to KIRAN.

3. Determination of Manufacture:
The Tribunal examined whether the treatments applied to the base paper constituted "manufacture" under Section 2(f) of the Central Excises & Salt Act, 1944. The Tribunal referenced the Supreme Court judgments in the DCM case and South Bihar Sugar Mills case, which state that the starting material and the finished product should be different in name, character, or use. The Tribunal found that the base paper and the treated paper were different products with different uses, thus constituting "manufacture."

4. Interpretation of Tariff Item 17(2):
Tariff Item 17(2) includes "Paper board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified." The Tribunal noted that the inclusion of treated papers in the tariff entry indicated a legislative intent to tax such papers. The Tribunal also referred to contemporaneous exposition, citing the Supreme Court judgment in K.P. Verghese v. I.T.O., which supports interpreting a statute by the exposition it has received from contemporary authority.

The Tribunal concluded that the treated paper falls under Item 17(2) and is subject to excise duty. However, the duty concession under Notification No. 71/76 should be extended to KIRAN, as the product qualifies as waxed paper.

Minority Judgment:
Member H.R. Syiem agreed with the majority that the paper should be treated as waxed paper and should enjoy the concession under Notification No. 71/76. He emphasized that the treatment with sodium benzoate does not change the fundamental nature of the paper as waxed paper.

Conclusion:
The appeal was allowed, and it was directed that KIRAN should be extended the consequential relief within four months from the date of communication of the order. The product was classified as waxed paper eligible for the duty concession under Notification No. 71/76. The Tribunal also held that the process applied to the base paper amounted to "manufacture" and that treated paper falls under Tariff Item 17(2).

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