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TMI Blog1988 (10) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... r bracket and consequently pay higher rate of excise duty, as is the case now. Including the question about broke, 4 issues arise for determination in this appeal. These are as follows:- 1. Whether the quantity of Broke consumed within the factory should be included for computing the total quantity of various types of paper and paper boards cleared from the factory of the appellants? 2. Whether Art paper and chromo paper would be eligible for the exemption granted under Notification No. 25/84? 3. Whether Ledger Paper (above 85 GSM) will attract excise duty as writing and printing paper? 4. Whether art board or chromo board would be eligible for the exemption under Notification No. 25/84? 3. Shri Lakshmikumaran, the learned Advocate for the appellants submitted that broke cannot be considered to be paper and its weight cannot be included in the quantity of paper and paper board cleared by the factory. He submitted that the appellants are entitled to the exemption under the slab No. 3 in Notification No. 25/84-CE. In support of his plea the learned Advocate put forward the following arguments : (i) Broke is not goods, much less excisable goods and even to a lesser extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces it would mean that the broke is reckoned again and again continuously as broke is recycled. (iv) The learned Advocate also submitted that the words cleared from the factory have different meaning from removal from the place of production/manufacture as referred in Rules 9 and 49 CE Rules. (v) Shri Lakshmikumaran also argued that assuming without admitting that broke is a variety of paper, since it is admittedly used in the manufacture of paper within the factory and not for manufacturing any other commodity, no removal within the meaning Rule 9 CE Rules has taken place. To support this argument the learned Advocate relied on a judgment of CEGAT in Collector of Central Excise v. Orissa Weavers Co-operative Spinning Mills reported in 1985 (21) E.L.T. 348. The learned Advocate referring to the impugned orders submitted that comparison of the wordings in Notification No. 80/80 or 83/83 with Notification No. 25/84 is not proper since the explanation added to Notification No. 80/80 etc. was only as an abundant precaution. In this context the learned Advocate referred to a judgment in Union of India v. Modi Rubber Ltd. reported in 1986 (25) E.L.T. 849. He also referred to the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that broke was neither goods nor excisable or dutiable goods the learned representative submitted that the notification does not refer to excisable goods or dutiable goods. Neither dutiability nor excisability is the question. He submitted that the proviso to the notification referred to all varieties of paper and paper board..... . He submitted that they are goods in every sense of the word and referred to a judgment of the Tribunal in Aruna Industries v. Collector of Central Excise, Guntur reported in 1986 (25) E.L.T. 580. He further argued that broke comes out of rejected paper and, therefore, it comes out of paper unlike ammonia paper or carbon paper. Therefore, according to the learned representative, it is paper. In this context Shri Doiphode submitted that fents and rags which emanate from textiles enjoy duty exemption but do not cease to be textiles. On this analogy broke also is paper. 7. Shri Doiphode referred to a judgment of the Madras High Court in Sheshasayee Paper and Boards v. Collector of Central Excise [reported in 1987 (28) E.L.T. 258 Mad.] and submitted that this judgment which referred also to the Supreme Court s judgment in Khandelwal Metal and Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer to end-use. 13. Answering the appellants arguments that the affidavits (filed by the appellants) were not rebutted by the Collector (Appeals) Shri Doiphode submitted that affidavits and letters though filed before the Collector were not specifically permitted by the said authority. Therefore, their admission is not permissible at this stage under Rule 215 of Central Excise Rules. 14. Answering the arguments of the appellants with regard to separate classification of broke and paper Shri Doiphode referred to the appellants reliance on the judgment in Modi Rubber Ltd. and observed that if two notifications cannot be compared there cannot be any comparison between two tariffs either. 15. Reacting to the submissions of the appellants that in no other Collectorate except Pune, broke is considered as paper, Shri Doiphode submitted that even if it is so it is immaterial as it is upto the Tribunal to decide the correct position and this position has to be followed all over the country. 16. With regard to chromo and art paper Shri Doiphode submitted that the doctrines of NOCITERASOCIIS applies only if the meaning is doubtful. There is no doubt about the meaning of coated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. He further submitted that the amendment to these Rules was only for the purposes of levying duty on captively consumed goods and not for any other purpose. To support his argument the learned Advocate cited the judgment in Salco Extrusions Private Ltd., Bombay v. Collector of Central Excise, Bombay - II reported in 1984 (16) E.L.T. 356. 22. In this context the learned Advocate referred to the judgment in Shri R. Subbiah Gounder v. Collector of Central Excise, Coimbatore reported in 1985 (21) E.L.T. 618. 23. We have recorded the arguments of both sides rather extensively. The detailed arguments of both sides indicated the thoroughness and depth with which both the learned Advocate and the learned SDR prepared the matter and presented it before us. This is admirable. 24. However, for deciding the question before us it is not necessary that everything said by both sides need be examined. The main question in this appeal is question No. 1 which we formulated in paragraph 2 supra. This question can be resolved only on deciding whether broke is to be considered as paper or paper board. The notification No. 25/84 has the following preamble and condition in column 4 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of paper. The book further defined dry broke which is produced at the dryers, calender, reel or winder or in the finishing room. There is also winder broke which, the publication records, includes shavings trimmed off edges of the sheet, paper spoiled in starting the winder or mending breaks and defective paper cut from the rolls. Cutter broke consists of trimmings, dirty paper on the outside of rolls, wrinkled paper, etc. Sheet calender broke consists mainly of turned-in corners; and, wrinkles is another variety of broke as also broke in pasting. Another book published by the same company and titled Papermaking and Paperboard Making (Edited by Ranald G. Macdenald, and John N. Franklin, 2nd Edition, Volume III, substantially gives the same information as above about broke. In another book (Pulp and Paper Chemistry and Chemical Technology, Third edition, Volume II by James P. Casey, Editor published by John Wiley and Sons) at page 825/826 (of this publication it is recorded as follows : Recovery of Broke : Broke is the spoiled and damaged paper which may be produced when there are technical or other production difficulties on the papermaking machine, in particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion aims in all paper mills is to reduce broke to a minimum; the actual figure for the amount of broke produced is usually considered as confidential costing information. The amount will vary with the grade of paper being made as well as the whether the stock preparation plant, the approach flow system and the paper machine, itself are operating well on that particular day. Less than 10 per cent of production coming out as broke is often regarded as satisfactory; over 40 per cent is a cause for considerable concern. Measurement of the amount of broke being produced is a difficult problem as it does not appear in the overall input output figures. Small amounts handled manually can be weighed directly into the pulp disintegrator with correction for moisture content. Broke handled by conveyor can best be measured by the volume and consistency drawn from the broke disintegrator or storage nest but this can present problems. Broke should be used so far as possible to produce the same grade of paper as that from which it originated although it is sometimes necessary to use it for a different grade. Even so, the dry paper after disintegration does not produce stock with the same proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame (spent earth) had already paid duty under Tariff Item 68. 29. Another judgment cited by the appellants was delivered by the Hon. Supreme Court in Union Carbide India Ltd. (supra). In this judgment the Supreme Court held that to become goods an article must be something which can ordinarily come to the market to be bought and sold and that articles in crude or elementary form are not dutiable as they are intermediate products and not goods. The Supreme Court were examining a question whether aluminium cans manufactured by the appellants therein were capable of sale/consumption. They took note of the unfinished form of the cans and the need for further process necessary to make them into flash light cases. 30. Before we could decide whether or not broke can be considered as goods and if so whether it is paper or paper board, we examine the other arguments of the learned Advocate that broke is never cleared from the factory, such clearance being one of the conditions laid down in the exemption notification. In Collector of Central Excise, Bhubaneshwar v. Orissa Weavers Co-operative Spinning Mills (supra) the Tribunal held that cotton yarn coning is not dutiable because con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practically relevant to the point here. 33. We, however, note that the learned SDR argued that broke was waste paper and, therefore, paper. We also note his argument that Tariff Item 17 and the exemption granted thereunder should be read together with the notification and not in isolation. We also take note that, as pointed out by Shri Lakshmikumaran, tariff classification was not mentioned in Notification No. 77/74 which exempted broke. Shri Doiphode referred to a judgment of the Supreme Court in the case of J.K. Steels Ltd. (supra). We have respectfully gone through this judgment wherein inter alia the Supreme Court ruled that explanatory notes regarding the working of an Act issued by a Government Department for the assistance of their officials are inadmissible for the purpose of construing the Act, and that it is not safe to presume that subordinate legislation can be made use of in interpreting a provision in the parent Act. Further, the Supreme Court held that for finding out the scope of a particular levy, notifications issued by the Executive Government providing for exemption from that levy can be looked into as they disclose the overall scheme. We take note of this pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 25/84, the broke cannot be considered as a variety of paper or paper board. Its inclusion in the clearances of paper and paper board is not justified. We hold accordingly. 37. That brings us to the second question whether art paper and chromo paper were eligible for the exemption granted under notification No. 25/84. We have carefully considered the arguments of the appellants. We have perused the Notification No. 25/84 as amended and note that the second proviso excludes from the exemption, among others, coated paper (including wax paper). There is no denial that art paper and chromo paper are coated papers. It may be correct that these are not, like other papers mentioned in the second proviso, industrial varieties of papers and are writing and printing varieties. All the same when the proviso, as it is worded, is clear, there is no warrant for us to supply words to the proviso to the notification. We, therefore, find against the appellants in this regard and held that art and chromo paper would not be eligible for exemption under notification No. 25/84. 38. The third question to be decided is whether ledger paper above 85 GSM will attract excise duty as writing and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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