1995 (9) TMI 132 - AT - Customs

Summary

Issues Involved:
1. Whether epoxy dotted kraft paper qualifies for exemption under Notification 20/88.
2. Interpretation of the term "insulation kraft paper (plain or creped)" in the context of Notification 20/88.
3. Validity of the essentiality certificate from the Development Commissioner for exemption purposes.

Issue-wise Detailed Analysis:

1. Whether epoxy dotted kraft paper qualifies for exemption under Notification 20/88:

The respondents imported insulating kraft paper and epoxy dotted kraft paper, claiming exemption under Notification 20/88. The Assistant Commissioner granted exemption for the insulating kraft paper but denied it for the epoxy dotted kraft paper, arguing that the exemption applied only to "plain or creped" insulation kraft paper. The Collector (Appeals) overturned this decision, stating that the epoxy coating did not change the fundamental nature of the paper as insulation kraft paper. However, the Tribunal majority found that the epoxy dotted paper did not meet the specific description of "plain or creped" kraft paper under the notification, thus disqualifying it from the exemption.

2. Interpretation of the term "insulation kraft paper (plain or creped)" in the context of Notification 20/88:

The Assistant Commissioner and the Tribunal majority emphasized a strict interpretation of the notification, stating that only "plain or creped" insulation kraft paper qualified for the exemption. The epoxy dotted kraft paper, despite being an insulating material, did not fit this description. The Collector (Appeals) and the dissenting judge argued that the epoxy coating did not alter the paper's essential insulating characteristics, thus it should still qualify as insulation kraft paper. However, the majority held that the notification's language did not extend to resin-treated materials, thus excluding epoxy dotted paper from the exemption.

3. Validity of the essentiality certificate from the Development Commissioner for exemption purposes:

The respondents produced a certificate from the Development Commissioner, Small Scale Industries, asserting the necessity of the imported goods for manufacturing transformers. The Assistant Commissioner and the Tribunal majority ruled that this certificate alone could not establish the goods' eligibility for exemption under the notification. The primary condition was that the goods must first meet the description specified in the notification. Since the epoxy dotted paper did not qualify as "plain or creped" insulation kraft paper, the certificate was deemed irrelevant for exemption purposes.

Separate Judgments:

- Majority Judgment (K.S. Venkataramani and Lajja Ram): The majority held that the epoxy dotted kraft paper did not fall under the description of "plain or creped" insulation kraft paper in Notification 20/88. They emphasized strict construction of exemption notifications, citing a Supreme Court decision that no extended meaning could be given to the terms of the notification. Consequently, the appeal by the Collector of Customs was allowed, and the exemption for epoxy dotted kraft paper was denied.

- Dissenting Judgment (G.A. Brahma Deva): The dissenting judge argued that the epoxy coating did not alter the paper's identity as insulation kraft paper. He emphasized that the notification's focus was on insulation kraft paper, whether plain or creped, and that the epoxy coating did not change its insulating properties. He proposed dismissing the appeal and upholding the exemption.

Conclusion:

In terms of the majority view, the appeal was allowed, and the exemption for epoxy dotted kraft paper under Notification 20/88 was denied. The majority held that the epoxy dotted paper did not meet the specific description of "plain or creped" insulation kraft paper required for the exemption.