Excise duty on bitumenised waterproof paper fails where bitumen treatment does not create a new product and avoids double taxation.

Treating kraft paper with bitumen did not create a new excisable product because the essential character, name, character and use of the paper remained unchanged. On that basis, bitumenised waterproof paper was not regarded as manufacture of a new kind of paper for entry 17(2) of the First Schedule to the Central Excises and Salt Act, 1944. The proposed levy was also considered unsustainable because kraft paper and bitumen had already suffered excise duty, and a further levy would amount to double taxation. The notification dated 27-5-1976 was therefore held invalid as applied to the product.

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Issues: Whether bitumenised waterproof paper is liable to excise duty under entry 17(2) of the First Schedule to the Central Excises and Salt Act, 1944, and whether the notification dated 27-5-1976 could validly impose such duty.

Analysis: Treating kraft paper with bitumen did not change its essential character or bring into existence a new product with a distinct name, character or use. The process was held not to amount to manufacture of a new kind of paper within entry 17(2). Since both kraft paper and bitumen had already suffered excise duty, a further levy on bitumenised waterproof paper would amount to double taxation. The notification issued to levy duty on the product was therefore not sustainable.

Conclusion: Bitumenised waterproof paper was not exigible to excise duty under entry 17(2), and the notification dated 27-5-1976 was quashed in favour of the assessee.

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