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TMI Blog2015 (7) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... and authenticated dictionary for the purpose of the present case as what is in vogue and understood in paper industry is contained in such a dictionary. Thus, almost all the books on the subject uniformly define 'rag' or 'rag pulp' as one which is made from cotton waste or cotton textile material. On the other hand, the learned counsel appearing for the Revenue could not point out to a single dictionary or could take us through any technical literature which even remotely suggests that jute gunny bags come under the category of 'rags' in the context of paper technology. - Tribunal has simply brushed aside the aforesaid material with a mere observation that it is not relevant and this approach of the Tribunal cannot be justified. - impugned decision of the Tribunal does not stand judicial scrutiny and warrants to be set aside - Decided in favour of assessee. - Civil Appeal No. 4908 of 2005 - - - Dated:- 21-7-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Petitioner : Mr. M. P. Devanath For the Respondent : Mr. B. Krishna Prasad JUDGMENT A. K. Sikri, J. The appellant (hereinafter referred to as the assessee ) is a paper mill which is engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication, particularly, disentitles the benefit thereof if the pulp is made from rags, the assessee is not covered by the said Notification. The question, therefore, that falls for consideration is as to whether pulp of waste gunny bags/jute waste is to be treated as the pulp made from the material 'rags'. Before we answer this question, it is deemed necessary to take note of the other related Notifications touching upon the subject matter as well as history of the present litigation which has lauded the matter to this Court. 4) Notification No. 22/94-CE dated 01.03.1994, with which we are concerned, is not the first Notification which permitted concessional rate of excise duty in case of manufacture of paper or paper products by using non-conventional raw material. First Notification, in this behalf, was issued on 01.03.1973, i.e. Notification No. 42/73-CE wherein such kind of lesser rate of duties was prescribed in respect of all sorts of paper other than newsprint and all varieties of boards, containing not less than 40% by weight of bagasse, jute stalks or cereals straw in the form of pulp. This Notification was replaced by another Notification No. 128/77-CE dated 18- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal rate of duty in terms of the said Notification. The materials mentioned in this list, for the sake of convenience, can be classified as 'Negative List'. Now the requirement was to show that paper is not manufactured from the pulp of any of the enlisted material. Thus, according to Notification No. 22/94-CE, the exemption is available if the paper is made from pulp which contains not less than 75% by weight made from non-conventional materials. The prohibited material which disqualifies from said concessional rate is bamboo or hardwood or softwood or reed or rags. 5) There have been some amendments in the Notification No. 22/94-CE in the subsequent years. During the financial years 1995-96, 1997-98 and 1999-2000 (till October 1999), the concessional rate of duty is provided for paper made of pulp containing not less than 75% by weight of pulp made from materials other than bamboo, hard wood, soft wood, reeds or rags. But in respect of the year 1996-97, the concession was given to paper made of pulp containing not less than 50% by weight of pulp made from materials other than bamboo, hard wood, soft wood, reeds or rags. 6) Reverting to the case of the assessee, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t' was prescribed by excluding only the set of raw materials, use of which did not qualify for the benefit of the Notification. The Commissioner also referred to the speech of the Finance Minister to emphasize that the Notification has evolved in a eco-friendly manner with more and more encouragement for use of non-conventional materials. Going by the aforesaid spirit of the Notification, when it is found that jute and gunny bags were included in the 'Positive List' and waste therefrom is widely known as non-conventional method of producing paper and paper products, these materials should not be treated as 'rags', inasmuch as while including rags in the 'Negative List' intention could not be to encompass waste of gunny bags and jute bags within said expression. In the Order-in-Original passed by the Commissioner, he pointed out that there is no definition of 'rags' in the Notification and, similarly, there is no definition of jute pulp in any Notification which could help in tracing any description of gunny bags waste. The Commissioner opined that for this reason, it was prudent to fall back upon the definition or standard text or other notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the order of the Commissioner before the Customs, Excise and Service Tax Appellate Tribunal (for short, 'CESTAT'). The CESTAT has, vide impugned order dated 04.02.2005, upset the decision of the Commissioner on merits, holding that the waste of jute/gunny bags amounts to 'rags' and, therefore, pulp made out of it and use for manufacture of paper would not be covered by the said Notification. 9) While arriving at this conclusion, the Tribunal remarked that inferences drawn by the Commissioner from the Finance Minister's Budget speech or Board's circular do not appear to be flowing either from the said speech or from Board's clarification and the reasoning of the Commissioner in this respect was false. It also rejected the contention of the assessee predicated on HSN Chapter Headings. According to the Tribunal, pulp out of rags was specifically excluded from the Notification. 'Rag' is understood to be worn out, soiled and torn of a textile material. In view thereof, it was not necessary to refer to any dictionary, Glossary of Terms used in Paper and Paper Industry or words and phrases to find out the meaning of 'rags'. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, dictionary meaning could be relied upon as was held by the Supreme Court in the case of Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise, Baroda (1990) 3 SCC 447. 11) Mr. K. Radhakrishnan, learned senior counsel appearing for the respondent, likewise, did the same exercise but in reverse, i.e., he supported the reasons given by the Tribunal with the submission that it was a blemished decision of the Commissioner based on faulty reasoning which has rightly been reversed by the Tribunal. Apart from relying upon the reasons which persuaded the Tribunal to conclude the matter in favour of the Revenue, he strenuously argued that since the excise duty is leviable on the product, any assessee taking advantage of the exemption notification had to strictly come within the four corners of the said Notification to get the benefit thereof. Adopting this line of argument, he also submitted that the Notification mentions the word 'rags' simplicitor without any qualifications or exceptions. Therefore, wherever it is found that pulp is from the waste material known as 'rags', the said product would come in the excepted category. He emphasized that since it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., not only the said waste is utilised in a useful and constructive manner, it saves environment as well. Such a benevolent purpose for issuing these Notifications has been emphasized by the Finance Ministers themselves from time to time in the budget speeches. 14) The tenor and language of various Notifications issued in this behalf from time to time also reflect the experience which was gained over a period of time. Whereas in the beginning, Notification(s) prescribed the 'Positive List' of the materials that had to be used to get the benefit of concessional rate of duty, the thrust underwent a conceptual transformation and changed to the 'Negative List', i.e. mentioning only those materials use whereof will not entail the benefit, thereby making the benefit available to all other forms of non-conventional materials. This was because of the reason that experience has shown that it was not proper to mention the non-conventional material by putting them in a straitjacket and to provide that all kinds of non-conventional materials used for the manufacture of paper should qualify for concessional rate excepting only those which need not be given such a benefit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied as a non-conventional raw material in the notification itself. However, vide Budget of 1984, the scope of the exemption to paper made from non-conventional raw materials was widened and relevant portion of Notification No. 25/84-CE dated 01-03-1984 reads as under: In exercise of the powers . the Central Government hereby exempts paper and paperboards . manufactured out of pulp containing not less than 50 per cent by weight of pulp made from materials (other than bamboo, hardwoods, softwoods, reeds or rags)... Thus, right from the year 1984, the coverage of the Notification was widened inasmuch as any materials other than the specified ones would be considered as non-conventional raw materials and the paper made therefrom would be eligible for the exemption. This is also evident from the Finance Minister's speech while presenting the Finance Bill, 1984, relevant portion of which reads as under: 108... As a further measure of relief, I proposed to reduce the basic excise duty on printing and writing paper and also kraft paper produced by large paper mills by ₹ 425 per metric tonne, and corresponding concessions are being given on the duty leviable on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o refer to another judgment of this Court in Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise 1990 (47) ELT 491 (SC), wherein the Court held that there would be circumstances where a generic word is to be given limited meaning by reason of its context. We would like to borrow the following discussions therefrom: 10. The principle of statutory interpretation by which a generic word receives a limited interpretation by reason of its context is well established. In the context with which we are concerned, we can legitimately draw upon the noscitur a sociis principle. This expression simply means that the meaning of a word is to be judged by the company it keeps. Gajendragadkar, J. explained the scope of the rule in State v. Hospital Mazdoor Sabha (1960-2 S.C.R. 866) in the following words: This rule, according to Maxwell, means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in Words and Phrases ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it has become non-functional or non-usable . In other words, not the mere age of the machinery, which would be relevant in the wider sense, but the condition of the machinery analogous to that indicated by the words following it, was considered relevant for the purposes of the statute. 11. The maxim of noscitur a sociis has been described by Diplock, C.J. as a treacherous one unless one knows the societas to which the socii belong (vide: Letang v. Coopex, 1965-1 Q.B. 232). The learned Solicitor General also warns that one should not be carried away by labels and Latin maxims when the word to be interpreted is clear and has a wide meaning. We entirely agree that these maxims and precedents are not to be mechanically applied; they are of assistance only in so far as they furnish guidance by compendiously summing up principles based on rules of common sense and logic. As explained in Collector of Central Excise v. Parle Exports (P) Ltd., 1989 (38) E.L.T. 741 (S.C.) = (1989-1 S.C.C. 345 at p.357) and Tata Oil Mills Co. Ltd. v. C.C.E., 1989 (43) E.L.T. 183 (S.C.) = (1989-4 SCC 541 at p. 545-6) in interpreting the scope of any notification, the Court has first to keep in mind th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onventional material for the purposes of manufacturing paper or paper products. Still, we would now like to take note of the dictionary meaning that is assigned to the aforesaid terms, that too from the 'Dictionary of Paper' by American Paper and Pulp Association, which obviously is the most relevant and authenticated dictionary for the purpose of the present case as what is in vogue and understood in paper industry is contained in such a dictionary. 23) The Dictionary of Paper by American Paper and Pulp Association clearly makes a distinction between rag pulp and jute. Relevant portion of the book (contained at pages 22 and 26) is reproduced below: Cotton fibre or rag pulps are used principally in the manufacture of fine and technical papers as listed below, and in the manufacture of roofing papers.. Jute Pulp is used in the manufacture of wrapping paper and tag stock. It is also used to some extent in buff drawing paper. The major supply of jute comes from old sacking, burlap and string... Jute Old gunny and sacking are used as raw materials in papermaking 24) The book 'Pulp and Paper Chemistry and Chemical Technology' by James P. Casey again distin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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