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TMI Blog1986 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... come, under the orders of the President, to be heard along with appeal No. 513/80. 2.At the hearing of these two appeals, M/s. Eastern Box Industries (Appeal No. 111/82-C) and M/s. National Laminators (Appeal No. 941/82) were, on their application, heard as interveners. 3.We have heard Shri Bhaskar Gupta, Bar-at-law, for M/s. Guardian Plasticote Ltd. ; Shri H.P. Arora, Advocate for M/s. United Paper Products ; Shri M. Chandrasekharan, Advocate, for M/s. Eastern Box Industries ; and Shri M.G. Ramachandran, Advocate for M/s. National Laminators and also Shri A.S. Sunder Rajan, JDR for the department. 4.The product manufactured by M/s. Guardian Plasticote Ltd., consists of two layers of kraft paper joined together by a layer of polythene. The product manufactured by M/s. United Paper Products is bituminized laminated paper, consisting of two layers of kraft paper joined together by bitumin as adhesive. The period in dispute in the case of M/s. Guardian Plasticote Ltd. is 1-4-1970 to 28-2-1974. The period in dispute in the case of M/s. United Paper Products is 16-3-1976 to 26-5-1976. It may, therefore, be noted that, so far as the period in dispute in the case of M/s. Guardian Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corrugated board, duplex and triplex boards, other sorts 90 paise per kg. (4) All other kinds of paper and paper board, not otherwise specified Re. 1 and 20 paise per kg. Position in 1976 : Item No. Tariff description Rate of Duty 17. Paper and Paper Board, All sorts (including pasteboard, mill-board straw-board, cardboard and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power- (1) Uncoated and coated printing and writing paper (other than poster paper) Twenty-five per cent ad valorem (2) Paper board and all kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, inpregnating corrugation, creeping and design printing), not elsewhere specified. Thirty per cent ad valorem 6. In respect of the product of M/s. Guardian Plasticote Ltd., they had been referring to the same in their correspondence as coated paper and had been claiming that in respect of such coated paper they were entitled to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e laminated between two layers of paper. Therefore, this contention of Shri Gupta is not acceptable as a basis for rejecting the classification in 1974. 9.He next pointed out that T.I. 17(2) dealt with coated board even as the item stood in 1974, but that there was no such provision for coated paper under any of the four sub-divisions of T.I. 17. He, therefore, contended, that this itself should suffice to establish that coated paper was not considered under the Tariff to be an excisable product. In this connection, as well as in connection with several other arguments of the two appellants, the contention of Shri Sundar Rajan is that in the Tariff as it stood in 1974, 1975 and even later, the main heading was Paper, all sorts. He, therefore, contended that each type of paper, whether specially enumerated or not, fell within the Tariff description and, therefore, the question of duty would have to be resolved on the consideration whether the resultant product was the result of manufacture, as defined in the Central Excises and Salt Act, and not on the basis whether the said product is specifically enumerated in the item or not. This argument appears to us to be quite proper and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression that the process of bleaching, dyeing and printing etymologically also means manufacturing process". In paragraph 30, they had observed- "the moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, "manufacture" takes place and liability to duty is attracted." In paragraph 31, they had further observed- "Whatever may be the operation it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of manufacture. Any process or processes creating something else having a distinctive name, character and use would be "manufacture." In paragraph 38, they observed- "in that view of the matter etymologically the word "manufacture" properly construed would doubtless cover the transformation". 12.In the light of the above observations of the Supreme Court it would not be proper to hold that unless a particular process is enumerated in the definition section it would not amount to a process of manufacture, as would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the judgment dealt with the question of manufacture under the deeming provisions introduced by way of amendments to the Act and on that basis only held that treated fabrics were to be held as falling under T.I. 19. He contended that in the absence of any such deeming provisions so far as T.I. 17 is concerned, the same result would not follow with reference to the processes carried out by M/s. Guardian Plasticote Ltd., on kraft paper received by them for conversion into laminated paper. 16.Sri Chandrasekharan, for M/s. Eastern Box Industries also raised a similar contention. He stated that three rules would have to be applied in interpreting provisions in statutes and also in following the judgments with reference to such statutory provisions. According to him, they were (i) when an Act is amended the intention is deliberate to change pre-existing law, (ii) when a constitutional issue is not necessary to be decided the Court would not do so and (iii) every judgment has to be read in the light of the facts proved in that case and the Court cannot be said to have decided a question which was not required to be decided. He stated that, applying the said principles, the amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and Calico Mills [1985 (21) E.L.T. 633, S. C.]. In that judgment the Supreme Court, referring to the amendment of Section 2(f) in 1980, observed- "This amendment has only attempted to explain the obvious and to put the question beyond dispute." This observation by the Supreme Court itself would support our finding that the absence of amendment to section 2(f) with reference to T.I. 17 need not rule out our conclusion as to the process adopted by the appellants amounting to manufacture as defined in the Act. 19.Therefore, what remains to be considered at this stage is the further argument of Shri Gupta (as also one of the submissions of Shri Chandrasekharan) that even if the process carried out resulted in the emergence of a new distinct commercial commodity, whether duty liability would fasten on the same in the nature of the tariff entry as it was worded at the relevant time. The tariff entry, as it stood in the period relevant for the case of M/s. Guardian Plasticote, has been already extracted. The tariff entry at that time did not in terms refer to laminated paper. Shri Gupta pointed out that coating or lamination were known as processes even earlier, and were, in suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the processed product was also cotton fabrics. The Supreme Court held that even though there was no jump from one tariff entry to another, or even from one sub-heading to another in the same entry, yet duty liability would arise so long as (i) the process engaged in amounted to manufacture and (ii) the resultant product was a commercially distinct marketable commodity. 21. As earlier seen, M/s. Guardian Plasticote themselves admitted in their own writ petition that the laminated product manufactured by them was commercially distinct from kraft paper received by them or the polythene used in the process of lamination. This process of lamination made the two layers of kraft paper impervious to water and oil and the resultant product was, therefore, specially suited for packing ammunition. That was why the same was being exclusively supplied to the Defence Department. Since therefore, the process of lamination, which amounted to manufacture, led to the emergence of a new and distinct commercial product, marketable as such, the conclusion is inevitable that this new product would invite imposition of duty, though there may not be any move away from tariff item 17 or even from one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the two in order to manufacture a new commodity, known differently under a distinct name, and meant for distinct use, would amount to manufacture of a new distinct excisable commodity. Judged by the said test, the process of bituminisation carried out by M/s. United Paper Products would also amount to manufacture of a new excisable commodity i.e., bituminised paper, the process of bituminisation being carried out in order to impart additional qualities, such as strength and impermeability to water. Therefore, though the two decisions relied on by Sri Arora may have been with reference to bituminised paper, the conclusion in the said judgments cannot hold good subsequent to the decision of the Supreme Court cited supra, for the reasons more fully stated even earlier. 24.Other submissions relating to the case of United Paper Products have to be now looked into. These relate to eligibility under certain notifications, as also the bar of limitation in respect of the demand. So far as Notification No. 45/73 concerned, the Collector as well as the Board have found in favour of the appellants. So far as Notification No. 67/76 is concerned (relating to set-off of duty) there is no disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it is only Rule 9 that would be applicable. 26.As mentioned earlier, the appellants bad not disclosed in their classification list the bituminised kraft paper as an item manufactured by them but not excisable. They had not disclosed the same at all in their classification list., In the circumstances we hold following the above noted authorities that the demand under Rule 9 was justified and the plea of bar of limitation cannot be upheld. 27.In the light of the above discussion we hold that neither appellant is entitled to any relief in these appeals. Both the appeals are accordingly dismissed. 28. [Contra per : H.R. Syiem, Member (T)]. - Once a duty has been paid on an article, that duty cannot be recovered again on that article whatever form or shape it changes into. This, in my opinion, is a fundamental rule of taxation. If duty A is leviable on articles X, Y, Z grouped in an item/sub-item, and X has paid it, X will never have to pay this duty again, whether it changes into Y or Z or even into any other thing. Similarly, if Z has once paid duty A, it will never need to pay this duty again whether it changes into Y or X or into anything else. However, if duty A is leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had been purified. Disputes frequently arise when an artificial resin that had paid duty as a solid was charged duty again when it was reduced, to a powder state. By this reasoning, when this powder is then formed into a paste, the same resin duty must be paid for the third time. Can there be a more irrational taxation project ? The argument perhaps goes something like this : this solid resin by being turned to powder has become resin a second time and when it is reduced to a paste, it becomes resin for the third time. 32.The decision of the Supreme Court in the Empire Industries v. Union of India, 1985 (20) E.L.T. 179 has been read and understood as not merely a validation of the retrospective amendment of Item 19 I of the Central Excise Tariff, among other things, but also as an approval of levy of duty on processed/ printed cotton fabric even without the amendment. In other words, the judgment is said to consider that the retrospectivity was unnecessary since charging of duty on printed fabric which has already paid duty as grey fabric was completely lawful. I have found nothing in the judgment that would encourage such a perception. At paragraph 20, the Court lists three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he "small repairs" (paragraph 15) and approved them. It did not say the repairs were unnecessary, which it would have done, had it seen them so. A phrase that appears in paragraph 17 of the Bombay High Court judgment has been quoted by some to reinforce their interpretation that the Court thought the amendment unnecessary. This phrase runs "......it was not necessary to make any separate amendment in the substantive Item No. 19". This phrase does not substantiate duty on printed fabric even under the unamended item, but refers to the argument put forward by the factories that the Item No. 19 description "cotton fabrics" remained unamended and hence the amendment had not had the desired effect. The Court rejected the arguments saying that as the item had been amended by substituting a new 19-I, the amendment of the description under 19 cotton fabrics, was not necessary. 36.The Bombay High Court judgment has also been understood to approve duty on processed fabric under the unamended item 19 because it quotes and approves another judgment of the same court in Kores (India) Limited 1982 E.L.T. 253 which said that a teleprinter roll out from large jumbo rolls writing printing paper a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Schedule to the Central Excises and Salt Act, 1944, certain processes like bleaching, dyeing etc. amounted to manufacture within the meaning of the Act as it stood prior to passing of Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980-whether these various processes carried out by the petitioner in that case amounted to bringing into existence different and distinct goods, commercially known as such, to attract levy of duty under Section 4 of the Central Excises and Salt Act, 1944 and whether after the amendment of the Act the levy is valid and whether the amendment of the Act could be said to be infra vires under Entry 84 of List I of the Seventh Schedule to the Constitution or if not it could be said to be valid under Entry 97 of List I of the Seventh Schedule to the Constitution and whether the impugned Act violated Article 14 or Article 19(l)(g) of the-Constitution. In Para 21 (as reproduced in Excise Law Times of June 85 part) the Hon'ble Supreme Court set out the question for examination in the following words : "It is, therefore, necessary to examine the amendment of the definition of 'manufacture' in Section 2(f) of the Central Excises and Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covering such 'cloth', 'cotton cloth', or 'cotton fabrics' subjected to any such process or any two or more such processes and the rate or duty specified in such Act with respect to such cloth, cotton cloth, or 'cotton fabrics' had been specified separately with respect to each of the aforementioned sub-items thereof". Similar provision was also made in clause (iii) of sub-section (1) of Section 5 in respect of "rayon or artificial silk fabrics" or "man-made fabrics." The decision nowhere says that even without these amendments duty would have been collectable separately deeming that the products mentioned therein had been specified separately with respect to each of the sub-items mentioned therein. In my view, there has been no such amendment with respect to other sub-items of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter called Central Excise Tariff) and in absence of such amendment the conservative Central Excise understanding reflected in Brother Syiem's order with respect to Central Excise duty should continue. I might, at this stage, state that Section 3(1) of the Act inter alia provides for duties of excise being levied and collected on all excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per to tax the item mentioned in the sub-item again. In fact, in June part of E.L.T. 1985 itself there is another Supreme Court decision in Collector of Customs and Central Excise and Another v. Oriental Timber Industries - 1985 (20) E.L.T. 202 (S.C.), dealing with plywood and plywood circle falling under Item 16B of the Central Excise Tariff. The question formulated by the Supreme Court in first part of the decision is whether the plywood manufactured by the respondent and utilised in manufacturing plywood circles to be used as component parts of packing material for wires and cables is exigible to excise duty. In Para 16 of the decision after stating whether cutting of plywood blocks or panels into circles constitute a manufacturing process and whether circles made out of plywood blocks or panels constituted a different product from the plywood may be debatable, the Hon'ble Supreme Court at later part in the same para observed "No question of double taxation arises as duty is leviable only once on the plywood as it comes out of the press in the panel or block stage and no further duty is to be levied on the circles which are made out of the 'plywood blocks or panels". 40.In All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of an admission made during arguments to score a point. I would, however, say that the taxable description of the newly emerged product had not changed and regard being had to the 4 Member Bench decision of the Supreme Court above, the product would not attract duty again. If the alternative argument of this appellant be accepted that the product remained the same as it was earlier before lamination then also no case for levying duty twice would be made out. 43.As for the other appellant M/s. United Paper Products, reliance has been placed on two High Court decisions in Kwality Coated Products (1980 E.L.T. 579 Madras) and Standard Packaging v. Union of India [1985 (20) E.L.T. 314 (A.P.)= 1984 E.C.R. 2635 (A.P.)]. The two decisions hold that there is no transformation into bonding together of the bitumen and kraft paper. The two decisions are directly applicable to the product in question before us. For the reasons set out above I am of the view that the decision of the Supreme Court has not the effect of overruling these two decisions. Relying on these two decisions I would allow the appeal of this appellant. With these observations I am generally in agreement with the views ..... X X X X Extracts X X X X X X X X Extracts X X X X
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