1988 (9) TMI 50 - SC - Central Excise

Carbon paper classified under Item 17(2) of Central Excise Tariff, not residuary Item 68

The SC held that carbon paper fell under Item 17(2) of the Central Excise Tariff rather than Item 68 as determined by the Tribunal. The Court relied on ... Classification of goods under central excise tariff - interpretation of tariff entries by reference to trade meaning and context - popular or commercial sense in construing fiscal entries - use of Indian Standards Institute specifications in tariff construction - residuary tariff entry versus specific tariff entry - limitation under Section 11A of the Central Excises and Salt Act, 1944 - clarificatory or ex abundanti cautela amendment of tariffClassification of goods under central excise tariff - residuary tariff entry versus specific tariff entry - interpretation of tariff entries by reference to trade meaning and context - use of Indian Standards Institute specifications in tariff construction - Whether carbon paper manufactured and cleared during 25th March, 1979 to 24th September, 1979 was classifiable under Item 17(2) of the Central Excise Tariff or under residuary Item 68. - HELD THAT: - The Court examined the text of Item 17 as it stood in 1976 and the technical and trade descriptions of carbon paper, including ISI specifications and authoritative trade literature describing carbon paper as paper coated on one side with a transferable pigmented layer. Applying the established rule that fiscal entries are to be construed in their popular or commercial sense in the relevant trade, the Court held that the phrase in Item 17(2) - covering 'all kinds of paper including paper or paper boards which have been subjected to various treatments such as coating, impregnating' - embraced carbon paper as understood in the paper trade. The Court rejected the conclusion that carbon paper belonged to the residuary Item 68 for the relevant period, noting the absence of contrary market evidence and the supporting ISI definition. The Court further observed that the later insertion of specific sub-items in 1982 (including an explicit entry for carbon papers) did not require a different construction of the tariff as it stood prior to that amendment for the period in question. [Paras 11, 12, 15, 16, 18]Carbon paper for the period 25th March, 1979 to 24th September, 1979 is classifiable under Item 17(2) of the Central Excise Tariff and not under residuary Item 68.Limitation under Section 11A of the Central Excises and Salt Act, 1944 - remand for determination of limitation - Whether the question of limitation under Section 11A, raised by the respondent and not decided by the Tribunal, should be adjudicated. - HELD THAT: - The Tribunal did not decide whether the department's demand was barred by lapse of time under Section 11A. The Supreme Court noted that the Tribunal left this question open; the respondent asserted the claim was in any event time-barred. Given that the Tribunal has not adjudicated the limitation point, the Court held that, if the revenue's challenge to classification is rejected, the question of limitation must be considered afresh by the Tribunal in the light of the facts found in the record and applicable law. Accordingly the matter on limitation is remanded to the Tribunal for decision. [Paras 2, 19]The question of limitation under Section 11A was not decided below and is remanded to the Tribunal for fresh consideration and determination.Final Conclusion: The appeal is allowed on classification: carbon paper for the period 25th March, 1979 to 24th September, 1979 falls under Item 17(2) of the Central Excise Tariff and not under residuary Item 68. The question whether the revenue's demand is barred by limitation under Section 11A is remanded to the Appellate Tribunal for decision. Parties to bear their own costs. Issues Involved:1. Classification of carbon paper under the Central Excise Tariff prior to the 1982 amendment.2. Applicability of limitation under Section 11A of the Central Excises and Salt Act, 1944.3. Interpretation of fiscal entries in the context of trade and common parlance.Detailed Analysis:1. Classification of Carbon Paper Under the Central Excise Tariff Prior to the 1982 Amendment:The primary issue was whether carbon paper, before the 1982 amendment, fell under Item 68 of the First Schedule to the Act, as held by the Tribunal, or under Item 17(2) of the Tariff Item, as claimed by the Collector of Central Excise. The Tribunal, following its previous decision in Sai Giridhara Supply Co. v. Collector of Central Excise, Bombay, held that carbon paper fell under Tariff Item 68 and not under Tariff Item 17(2) before the amendment of the Central Excise Budget in 1982. The Tribunal did not address the question of limitation under Section 11A of the Act.The Supreme Court reviewed the position of Tariff Item 17 at different phases: in 1975, after the amendment in 1976, and after the further amendment by the Finance Act of 1982. It was noted that the 1982 amendment added specific entries (3) and (4) to Item 17. The Court examined whether carbon papers could be included in 'all kinds of paper including the paper which have been subjected to coating' under sub-item (2) of Item 17.The Court referred to various definitions and trade meanings of paper and carbon paper, emphasizing that the correct guide is the context and the trade meaning. It was highlighted that where no definition is provided in the statute, the meaning should be understood in the context of the particular trade dealing with those goods. The Court concluded that carbon paper, being a type of coated paper, would fall under Item 17(2) as it stood in 1976, based on the trade understanding and the specifications of the Indian Standard Institute.2. Applicability of Limitation Under Section 11A of the Central Excises and Salt Act, 1944:The Tribunal did not decide on the limitation issue under Section 11A of the Act. The respondent argued that the claim was barred by the lapse of time under Section 11A. The Supreme Court noted that if the revenue's contention is rejected, the matter must be remanded back to the Tribunal to decide the limitation issue, as there was no decision on this aspect.3. Interpretation of Fiscal Entries in the Context of Trade and Common Parlance:The Court reiterated that fiscal entries should be construed in their popular sense, meaning the sense in which people conversant with the subject matter would attribute to them. The Court emphasized that the trade meaning should be considered, especially when dealing with special types of goods. The Court referred to various precedents, including the Canadian case King v. Planters Nut and Chocolate Company Limited and the Indian case Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd., to support the principle that the trade meaning should prevail in the absence of a statutory definition.The Court also addressed the respondent's reliance on the Karnataka High Court decision in Khoday Industries Ltd. v. Union of India, which held that carbon paper was an article of stationery classifiable under Item 68. The Supreme Court noted that trade notices and tariff advice are not relevant in construing items in the Tariff Schedule, as established in Orient Paper Mills Ltd. v. Union of India.The Court concluded that carbon paper, as defined in the context of the 1976 amendment, would fall under Item 17(2) of the Tariff Items, based on the trade understanding and the specifications of the Indian Standard Institute. The subsequent amendment in 1982 was seen as a clarification rather than a substantive change.Conclusion:The Supreme Court allowed the appeal, holding that carbon paper fell under Item 17(2) of the Central Excise Tariff before the 1982 amendment. The case was remanded back to the Tribunal to decide the issue of limitation under Section 11A of the Act. The appeal was disposed of with each party bearing its own costs.