Common parlance product classification governed exemption, and notice cancelling recognition was without jurisdiction for packing material

Waterproof packing rolls and sheets made from craft paper, bitumen, hessian or polythene were assessed on common parlance and commercial understanding, and were treated as packing material rather than ordinary paper. On that classification, the exclusion for paper units did not apply, so the assessee remained within the exempted category. The notice seeking cancellation of the recognition certificate was based on a wrong premise and was therefore without jurisdiction. The existence of an alternative remedy did not prevent relief where the impugned action itself lacked jurisdiction.

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Issues: Whether the assessee's product, being waterproof packing rolls and sheets, was "paper" within the exclusionary clause of the notification or "packing materials" within the exempted category, and whether the notice seeking cancellation of the recognition certificate was without jurisdiction.

Analysis: The product was examined in its actual form and in the commercial sense in which it is understood in trade. It consisted of craft paper combined with bitumen and hessian or polythene, and was used only for waterproof packing. On the common parlance and commercial parlance tests, it could not be treated as ordinary paper. Since the assessee was engaged in manufacturing packing materials covered by the exempted entry, clause 3 excluding paper units did not apply. The notice proposing cancellation of the recognition certificate was therefore founded on an premise and the taxing authority lacked jurisdiction to proceed against the assessee on that basis. The existence of an alternative remedy did not bar relief where the impugned action was without jurisdiction.

Conclusion: The product was packing material and not paper, the assessee remained entitled to the exemption, and the notice and proposed cancellation were without jurisdiction.

Ratio Decidendi: In tax exemption matters, classification must be determined by common parlance and commercial understanding of the product, and where the product does not answer the description of the excluded commodity, the authority cannot deny the exemption or act on a notice issued without jurisdiction.

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