1988 (9) TMI 50 - SC - Central Excise

Whether carbon paper before the introduction of Central Excise Budget in 1982 and consequential amendment in tariff, fell under Item 68 of the First Schedule to the Act, as held by the Tribunal or under Item 17(2) of the Tariff Item, which was claimed by the Collector of Central Excise? Held that - In the light of the evidence referred to by the Tribunal in Kores (India) Ltd., Thane v. Collector of Central Excise, Thane (1985 (8) TMI 211 - CEGAT, NEW DELHI) and in the light of the definition of paper in C.E.T. Item 17(2) as it stood at the relevant time, it is sufficient to hold that it was covered by Item 17(2) of C.E.T. and would not fall into the residuary entry. Appeal allowed.

Summary

Issues Involved:
1. Classification of carbon paper under the Central Excise Tariff prior to the 1982 amendment.
2. Applicability of limitation under Section 11A of the Central Excises and Salt Act, 1944.
3. Interpretation of fiscal entries in the context of trade and common parlance.

Detailed Analysis:

1. Classification of Carbon Paper Under the Central Excise Tariff Prior to the 1982 Amendment:

The primary issue was whether carbon paper, before the 1982 amendment, fell under Item 68 of the First Schedule to the Act, as held by the Tribunal, or under Item 17(2) of the Tariff Item, as claimed by the Collector of Central Excise. The Tribunal, following its previous decision in Sai Giridhara Supply Co. v. Collector of Central Excise, Bombay, held that carbon paper fell under Tariff Item 68 and not under Tariff Item 17(2) before the amendment of the Central Excise Budget in 1982. The Tribunal did not address the question of limitation under Section 11A of the Act.

The Supreme Court reviewed the position of Tariff Item 17 at different phases: in 1975, after the amendment in 1976, and after the further amendment by the Finance Act of 1982. It was noted that the 1982 amendment added specific entries (3) and (4) to Item 17. The Court examined whether carbon papers could be included in "all kinds of paper including the paper which have been subjected to coating" under sub-item (2) of Item 17.

The Court referred to various definitions and trade meanings of paper and carbon paper, emphasizing that the correct guide is the context and the trade meaning. It was highlighted that where no definition is provided in the statute, the meaning should be understood in the context of the particular trade dealing with those goods. The Court concluded that carbon paper, being a type of coated paper, would fall under Item 17(2) as it stood in 1976, based on the trade understanding and the specifications of the Indian Standard Institute.

2. Applicability of Limitation Under Section 11A of the Central Excises and Salt Act, 1944:

The Tribunal did not decide on the limitation issue under Section 11A of the Act. The respondent argued that the claim was barred by the lapse of time under Section 11A. The Supreme Court noted that if the revenue's contention is rejected, the matter must be remanded back to the Tribunal to decide the limitation issue, as there was no decision on this aspect.

3. Interpretation of Fiscal Entries in the Context of Trade and Common Parlance:

The Court reiterated that fiscal entries should be construed in their popular sense, meaning the sense in which people conversant with the subject matter would attribute to them. The Court emphasized that the trade meaning should be considered, especially when dealing with special types of goods. The Court referred to various precedents, including the Canadian case King v. Planters Nut and Chocolate Company Limited and the Indian case Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd., to support the principle that the trade meaning should prevail in the absence of a statutory definition.

The Court also addressed the respondent's reliance on the Karnataka High Court decision in Khoday Industries Ltd. v. Union of India, which held that carbon paper was an article of stationery classifiable under Item 68. The Supreme Court noted that trade notices and tariff advice are not relevant in construing items in the Tariff Schedule, as established in Orient Paper Mills Ltd. v. Union of India.

The Court concluded that carbon paper, as defined in the context of the 1976 amendment, would fall under Item 17(2) of the Tariff Items, based on the trade understanding and the specifications of the Indian Standard Institute. The subsequent amendment in 1982 was seen as a clarification rather than a substantive change.

Conclusion:

The Supreme Court allowed the appeal, holding that carbon paper fell under Item 17(2) of the Central Excise Tariff before the 1982 amendment. The case was remanded back to the Tribunal to decide the issue of limitation under Section 11A of the Act. The appeal was disposed of with each party bearing its own costs.