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TMI Blog1997 (12) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the petitioner was engaged in manufacture of packing material and, therefore, was entitled for purchase of raw material and packing material without payment of tax and for purchase of machinery on concessional rate of tax. 2.. When the petitioner was carrying on business in manufacture and sale of craft paper by purchasing materials for manufacture of craft paper without payment of tax by issuing form III-B in respect of such purchases to its selling dealers, he received a show cause notice dated August 5, 1994 (vide annexure 2) under section 4-B(4) of the U.P. Trade Tax Act (hereinafter referred to as "the Act "), issued by the Assistant Commissioner (Assessment), Trade Tax, Firozabad, respondent No. 3, requiring it to show cause why the recognition certificate should not be amended by deleting "craft paper" which was a type of "paper" and not "packing material" as held by the High Court. Thereafter the petitioner filed the writ petition on August 17, 1994 praying, inter alia, to issue a writ of certiorari to quash the proceedings initiated under section 4-B(4) of the Act in pursuance of the notice dated August 5, 1994 (annexure 2) and also to quash the circular date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated May 20, 1976 (annexure CA-1 to the counter-affidavit) the list of notified goods referred to in clause (2) are enumerated. Item No. 4 thereof is to the effect "all kinds of packing materials including cases and container". The respondents further contend that it is obvious that all kinds of papers, whether meant for writing, printing or packing have been excluded for grant of recognition under section 4-B of the Act. The respondents placed reliance on the division Bench decision of this Court in the case of Manish Paper and Boards Mills Ltd., Sahibabad, Ghaziabad v. State of U.P. reported in 1994 UPTC 164, in which it has been specifically held that craft paper, which according to the petitioner is mainly used for packing, is also paper. Therefore, the petitioner cannot contend that it is not engaged in the manufacture of paper. 5.. When the case came up for hearing before a division Bench of this Court, the Bench was confronted with the conflict in judicial opinion expressed by two division Benches of this Court in the cases of Ashoka Paper Mills v. Commissioner of Sales Tax 1991 UPTC 603 and Manish Paper and Boards Mills Ltd., Sahibabad, Ghaziabad v. State of U.P. 1994 UPT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified by the State Government in that behalf. .......................... (4)(i) Where the assessing authority is satisfied that the dealer in whose favour the recognition certificate in respect of any goods was granted under sub-section (2)- (a) has discontinued the manufacturing business for the purpose whereof the recognition certificate was granted; or (b) has made a breach of any condition of the recognition certificate; or (c) has failed to pay tax, penalty or other dues payable under this Act within a period of three months from the date such tax, penalty or other dues became payable; or (d) has failed to furnish the security required under section 8-C, or (e) is a firm, association of joint Hindu family which, within the meaning of the explanation to sub-section (1) of section 18, is deemed to have discontinued its business, such authority may, either of its own motion or on the application of the dealer, cancel the recognition certificate with effect from such date as it may specify. (ii) The assessing authority may amend a recognition certificate granted under sub-section (2) either of its own motion or on the application of the dealer, where the dealer has cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw materials, accessories and component parts required for use in the manufacture by him of the notified goods mentioned in column (2) of annexure I or of any goods required for use in the packing of such notified goods manufactured by him; (2) no tax shall be payable in respect of the sale to or, as the case may be, purchase by a dealer, holding a recognition certificate as aforesaid, of goods mentioned in column (3) of annexure II required for use as raw material in the manufacture by him of the notified goods mentioned in column (2) of the said annexure; (3) in respect of the sale to or, as the case may be, purchase by a dealer, holding a recognition certificate as aforesaid, of goods mentioned in column (3) of annexure III required for use as raw materials, accessories or component parts in the manufacture by him of the notified goods mentioned in column (2) of the said annexure, or of goods required for use by him in the packing of such notified goods manufactured by him, tax shall be payable at the rates specified in column (4) of the annexure; …… (5) in respect of the sale to or, as the case may be, purchase by any dealer, holding a recognition certificate as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous materials, as linen and cotton rags, straw, wood, certain grasses, etc., which are macerated into a pulp, dried, and pressed (and subjected to various other processes, as bleaching, colouring, sizing, etc., according to the intended use), it is used (in various forms and qualities) for writing, printing, or drawing on, for wrapping things in, for covering the interior of walls, and for other purposes. 13.. In P. Ramanatha Aiyar's Law Lexicon, 1997 Edition, at page 1402, it is stated that the word "paper" in the common parlance or in commercial sense means "paper" which is used for printing, writing or packing purposes. 14.. The Supreme Court in the case of State of Uttar Pradesh v. Kores (India) Ltd. reported in [1977] 39 STC 8; 1977 UPTC 46 (SC); AIR 1977 SC 132, considering the question whether carbon paper is paper as envisaged by entry 2 of Notification No. St-3124/ S-1012(4)-1964, dated July 1, 1966 issued under section 3-A of the U.P. Sales Tax Act, 1948 ruled that a word which is not defined in an enactment has to be understood in its popular and commercial sense with reference to the context in which it occurs. The word "paper" not having been defined either in the U. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this product is shown, can call it a paper and if there were a demand of paper, then whether the supply of such a product will satisfy the demand of paper. This Court further observed that neither in common parlance nor in the commercial sense the product in question can be regarded as paper. The court concluded that the petitioner was not engaged in the manufacture of paper within the meaning of clause (3) of the notification and it was engaged in the manufacture of packing materials as envisaged by item 4, annexure III, as referred in clause (2) of the notification. This decision, in our considered view, is clearly distinguishable. In that case the petitioner was not manufacturing craft paper. The process of manufacture demonstrated that craft paper was only one of the components of the product, the other two being bitumen at hessian or polythene. The product in question was completely different from craft paper and was meant to be used exclusively as packing material. 16.. In the case of Ashoka Paper Mills, Kanpur v. Commissioner of Sales Tax 1991 UPTC 603 the division Bench placed reliance on the decision of Mahabir Industries, Saharanpur v. State of U.P. [1985] 65 STC 251 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly used for packing, is also paper. Therefore, the petitioner cannot contend that it is not engaged in the manufacture of paper. The argument of Shri Bharatji, however, was that the petitioner may be a manufacturer of paper, but still, however, it is fully covered by the words (packing materials) falling under item 4 of annexure III read with clause (2) of the notification. It is argued by him that when a particular product falls under two clauses, one allowing the exemption and the other not, then the clause which is more favourable to the petitioner, should be chosen. We do not agree with this submission of Shri Bharatji. In our view, the controversy arising from this case has to be approached slightly from a different angle. Whereas, clause (2) grants full tax exemption to a unit in respect of raw materials required by it for the use in the manufacture of the goods mentioned in annexure 'III' or for the packing of the said goods manufactured by it, clause (3) of the notification precludes the units engaged in the manufacture of paper, inter alia from the benefit of clause (2). So this is not a case where the activity of manufacture falls under the clause in the sense, one allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here that the petitioner has not laid any basis in the pleadings to show the manufacturing process of the craft paper manufactured by it nor has made any averment that the product is so adopted that it is meant to be used exclusively as packing material and cannot be used as paper. The word "paper" in the exclusory clause of the notification dated December 31, 1976 is used in its generic sense and the term as understood in the common parlance and commercial sense includes craft paper manufactured by the petitioner. Paper as understood in common parlance and commercial sense can be used for writing, printing, packing and wrapping purposes. Therefore, craft paper does not cease to be paper merely because it is also used for packing purposes. Indeed, any type of paper can be used for the purpose of packing. "Packing material" as used in the notifications in question is such a product which by its manufacturing process or adaptation is meant to be used only as packing material. 21.. Our answer to the question formulated earlier is the craft paper manufactured by the petitioner is paper and not packing material as the terms are used in the notification dated December 31, 1976. 22.. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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