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Judgment
The prayer in the writ petition runs in the following lines :-
For the reasons stated in the accompanying affidavit, it is humbly prayed that this Honourable Court may be pleased to issue a Writ of
Certiorarified Mandamus or any other Writ, Order or direction in the nature of certiorarified Mandamus calling for the records relating to the
Notification in M.F. (D.R.B.) No. 71/77-C.E., dated 28.4.1977, as amended by Notification No. 25/79-CE, dated 1.3.1979 and Notification
No. 109/80-CE, dated 19.6.1980 on the file of the 1st respondent and quash the same insofar as it relates to the petitioner and restrain the
respondents herein from collecting Excise Duty again from the petitioner herein under the same Tariff Item No. 17(2) of the Central Excises and
Salt Act, 1944 insofar as it relates to the petitioner and pass such further or other orders as it may deem fit.
The petitioner is licenced to produce bituminised polythene lined kraft paper, waxed kraft paper and other similar products. The petitioner is
producing polythene lined kraft paper and waxed kraft paper for the last 10 years as per the conditions of the licence. The petitioner is purchasing
the main raw material required for its production viz., MG Kraft Paper, Wax Bituman, etc. At the time of purchase the petitioner is paying excise
duty for the Kraft Paper, Wax and Bituman. Duty for the Kraft Paper is paid at 30% under Central Excise Tariff Item No. 17(2) of Schedule 1 to
the Central Excises and Salt Act, 1944. The Kraft Paper as well as the finished product are used for the same purpose, namely packing and
wrapping.
The raw material, namely, Kraft Paper as well as final products are used for the same purpose, namely, as packing and wrapping paper. In the
final products Kraft Paper content is more than 80% and the other contents like polythene constitute the remaining 20%. The petitioner pays duty
at 30% for the Kraft Paper and 45% for the polythene and all the materials used by the petitioner for manufacturing the products suffer excise duty
before they reach the petitioner. The final products are utilised for the same packing and wrapping purpose like the basic materials purchased by
the petitioner. The first respondent herein issued a notification in M.F. (D.R.B.) No. 71/77-C.E., dated 28.4.1977 and under this notification the
first respondent has fixed a duty of 12-1/2% for the polythene coated paper, polythene coated waxed paper, waxed kraft paper under item No.
17(2) and exempted any further duty over and above 12-1/2% on these products. This was amended and the duty was increased to 15% by
Notification No. 25/79-C.E., dated 1.3.1979. This notification was further amended by Notification No. 109/80-C.E., dated 19.6.1980.
The production of polythene coated paper, polythene coated waxed paper, waxed kraft paper is not a manufacture as contemplated under the
provisions of the Central Excises and Salt Act, 1944. This is the contention raised on behalf of the petitioner. According to the petitioner it is only
bonding of a layer of duty paid kraft paper with already duty paid polythene film and coating kraft paper with already duty paid wax, etc.
According to the petitioner the raw material, namely, paper which forms part of above 70% of the finished product had already suffered excise
duty at 30% at the hands of suppliers under Tariff Item No. 17(2) and the polythene, wax, etc., which constitute below 30% of the finished
product also suffered excise duty. So according to the petitioner the respondent are not justified in once again demanding excise duty at 15% on
the finished product under Tariff Item No. 17(2) since it already suffered the excise duty at 30% under the same Tariff Item No. 17(2). Under the
circumstances it is submitted on behalf of the petitioner that the collection of excise duty from the petitioner on polythylene lined paper and waxed
kraft paper under Tariff Item No. 17(2) of Schedule 1 of the Central Excises and Salt Act, 1944 in pursuance of the notification M.F. (D.R.B.)
No. 71/77-C.E., dated 28.4.1977 as amended by Notification No. 25/79-CE, dt. 1.3.1979 and Notification No. 109/80-CE, dated 19.6.1980,
on the file of the first respondent, has to be quashed insofar as it relates to the petitioner.
The point for consideration is whether the relief prayed for by the petitioner can be granted under the circumstances.
Mr. T. Somasundaram, learned Additional Central Government Standing Counsel, submits that M/s. Standard Paper Industries Corporation,
Madras, the petitioner herein, are manufacturers of polythene linked kraft paper and waxed kraft paper falling under T.I. 17(2) out of duty paid
inputs viz., M.G. Kraft Paper, Wax, bitumen, polythene, etc. and that however during the material time they were manufacturing only waxed kraft
paper. The Government of India in its Notification 71/77, dated 28.4.1977 fixed a duty of 12-1/2% for the polythene coated paper, polythene
coated board, waxed board, polythene sandwiched paper and polythene waxed paper and sandwiched board falling under T.I. 17(2). This
notification, according to the petitioner, shall not apply to a manufacturer who availed of (i) special procedure prescribed under Rule 56-A of the
aforesaid Rules in respect of the duty paid on base paper or board; (ii) the exemption granted under the notification of the Government of India in
the Department of Revenue and Banking No. 67/71-CE, dated 16.3.1976. Notification No. 71/77 was further amended by Notification No.
25/79-CE, dated 1.3.1979 which substituted 15% ad valorem for 12.5% ad valorem. It is in this writ petition the petitioner challenges the said
notification of the Government of India on the grounds that the production of polythelene coated paper, polythelene coated waxed paper, waxed
kraft paper, is not a manufacture as contemplated under the provisions of the Central Excises and Salt Act, 1944 and that the raw materials,
namely, paper which forms part of the above 70% of the finished products had already suffered excise duty at 30% at the hand of supplier under
Tariff Item 17(2), which contention we have already incorporated at the earlier portion of this order. According to the respondents, the contention
of the petitioner cannot be accepted in the light of the judgment of this Court in M/s. East Coast Papers. Madras v. Union of India [W.P. No.
6973 of 1980, dated 16.2.1987 - 1987 (30) ELT 248 (Madras) wherein it has been held that the ''base paper'' and ''treated paper'' are known
with different names in commercial parlance, and also due to the fact that the ''use'' of these two papers varies according to the needs of the
customers, and that the ''treated paper'' is manufactured product and is therefore liable to duty under T.I. 17(2). Further, the petitioner has neither
applied for Rule 56-A procedure nor exemption under Notification No. 67/76-CE, dated 16.3.1976. According to the counter affidavit filed, as
per notification No. 71/77 waxed paper and polythelene coated paper and board are subject to concessional rate of 12.5% ad valorem provided
that 56-A. Procedure is not followed and the Notification No. 71/77 was further amended by Notification No. 25/79- CE, dated 1.3.1979 which
substituted 15% ad valorem for Rs. 12.5% ad valorem.
Learned counsel for the petitioner Mr. A. Muthukrishnan, submits that the case is clearly covered by the judgment of this Court in W.A. No.
326 of 1981, dated 2.7.1987, and as such the petitioner should be given an opportunity to put forward his case by remanding it for further
consideration by the authorities concerned. On the other hand Mr. T. Somasundaram, learned Additional Central Government Standing Counsel,
submits that the case is covered by the decision reported in East Coast Papers, Madras Vs. Union of India and Another, , which in turn was
confirmed by a Division Bench in W.A. No. 284 of 1987, on 12.3.1987. Nainar Sundaram J., held in East Coast Papers, Madras Vs. Union of
India and Another, as follows :-
Paper - Polyethelene sandwich paper and board liable to duty under Item 17(2) of the Central Excise Tariff. There are three ingredients which go
to make the ultimate output polyethelene sandwich board viz., board, paper and polyethelene granules. These basic raw materials the petitioner
procures from outside. The process that is being adopted is bonding the paper and the board with polyethelene. The binding agent, namely,
polyethelene granules are melted in the extruded and is fed in a thin sheet in between the paper and the board and the same is immediately passed
through a chill roll. The molten polyethelene is solidified and thereby holds the paper and the board together. There cannot be any ambiguity in
one''s mind that it certainly falls within the definition of manufacture u/s 2(f) of the Central Excises Act. It is only after this process, the ultimate
product is got and that becomes marketable one by that specification. In the circumstances, it cannot be said that the polyethelene sandwich board
will not be classifiable under item 17(2) of the Central Excise Tariff.
Manufacture - Process of bonding of paper for obtaining - Polyethelene sandwich board would fall with the meaning of ''manufacture'' as
envisaged by Section 2(f) of the Central Excises Salt Act, 1944 - The word ''manufacture'' implies a change and 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 it
is the result of one process or several processes ''manufacture'' takes place. In the instant case, the process that is being adopted is binding the
paper and the board with polyethelene. The binding agent, namely, polyethelene granules are melted in the extruded and is fed as a thin sheet in
between the paper and the board and the same is immediately passed through a chill roll, the moulten polyethelene is solidified and thereby hold the
paper and the board together. Therefore, it would certainly fall within the definition of ''manufacture'' as envisaged by Section 2(f) of the Central
Excises and Salt Act, 1944.
Even in the counter filed by the respondents it is stated that the intention of the Government to bring the ''base paper'' and ''treated paper'' under
the dame tariff item, has been found justifiable by this Court in M/s. East Coast papers, Madras v. Union of India [in W.P. No. 6973 of 1980,
dated 16.2.1987 E.L.T. 248 (Madras)] on the basis that the ''base paper'' and ''treated paper'' are known with different names in commercial
parlance and also due to the fact that the use of these two papers varies according to the needs of the customers and held that the ''treated paper''
is manufactured product and is therefore liable to duty under Tariff Item 17(2).
It is relevant in this connection to note that on the petitioner it is contended that the notification No. 71/77-C.E was issued without jurisdiction.
This is not correct since it is seen that the finished paper although falling under the same Tariff Heading 17(2) is quite different in its possible end
uses and therefore duty is correctly chargeable on the same. As against the judgments of this Court in W.P. No. 495 of 1978, dated 27.8.1980
and W.P. No. 165 of 1979, the Department filed appeals in W.A. Nos. 118 and 326 of 1981 and the writ appeals have been allowed by the
Division Bench of this Court on 2.7.1987. It is this judgment that is relied on by Mr. A. Muthukrishnan, learned counsel for the petitioner. I prefer
to follow the decision of Nainar Sundaram J., in East Coast Papers, Madras Vs. Union of India and Another, , because the facts of the instant
case are similar to the facts of the said decision. In view of the judgments of this Court in W.P. No. 6973 of 1980, dt. 16.2.1987 and in W.A.
Nos. 118 and 326 of 1981 - W.A. 118/81. 1. The Government of India rep. by Secretary Ministry of Finance, Department of Revenue and
Banking. 2. The Asst. Collector, Central Excise, I.D.O., Madurai v. Kwality Coated Products rep. by Partner S. Arasakasari, W.A. 326/81.
Government of India rep. by Ministry of Finance, Department of Revenue and Banking and Another v. National Paper Products by its Managing
Partner, Virudhunagar, dt. 2.7.1987, this Court is of the opinion that the present writ petition is liable to be dismissed and is hereby dismissed.
However the petitioner herein is at liberty to put forward his representation to the Departmental authorities who will consider and pass orders on
merits of those representations. There will be no order as to costs.