1990 (9) TMI 84 - HC - Central Excise

Classification of Tracing Paper for Excise Duty: Key Ruling on Tariff Item No. 17(1)

The High Court held that tracing paper should be classified under Tariff Item No. 17(1) for excise duty purposes, as it is primarily used for writing and ... Paper — Tracing paper — Dictionary meanings — Dutiability Issues:Classification of tracing paper under Tariff Item No. 17(1) or 17(2) of the First Schedule to the Central Excises and Salt Act, 1944.Detailed Analysis:1. Background and Initial Classification:The petitioner, a company manufacturing tracing paper, initially classified the product under Item No. 17(1) of the First Schedule and paid excise duty accordingly. However, the Superintendent of Central Excise later directed the company to reclassify the tracing paper under Item No. 17(2), leading to a dispute regarding the correct classification.2. Orders of Lower Authorities:The Assistant Collector of Central Excise and the Appellate Collector upheld the reclassification under Item No. 17(2), leading to the company's appeal to the Government of India, which was dismissed. This chain of decisions prompted the company to file a petition under Article 226 of the Constitution challenging the classification.3. Arguments and Burden of Proof:The company argued that tracing paper falls under Item No. 17(1) as it is primarily used for writing, drawing, or reproduction. The burden of proof was on the Department to justify the reclassification, especially after initially approving the classification under Item No. 17(1).4. Interpretation of Tariff Entry:The High Court analyzed the Tariff Item No. 17, emphasizing the importance of the paper's use in determining the applicable duty. It concluded that tracing paper, being used for writing, drawing, or reproduction, falls under the ambit of writing paper as per Item No. 17(1).5. Trade Meaning and Affidavits:The Court considered affidavits submitted by traders in the paper industry, affirming that tracing paper is primarily used for writing and reproduction purposes. It criticized the authorities for disregarding this trade understanding and relying on occasional printing use to support reclassification under Item No. 17(2).6. Judgment and Relief Granted:The High Court allowed the petition, setting aside the lower authorities' orders and directing the reapproval of the classification under Item No. 17(1). Additionally, it instructed the refund of excess duty paid under Item No. 17(2. The Court emphasized the intrinsic evidence in the Tariff Entry and the trade understanding of tracing paper as writing paper.In conclusion, the High Court's judgment clarified that tracing paper, due to its primary use for writing and reproduction, should be classified under Tariff Item No. 17(1) for excise duty purposes. The decision highlighted the significance of the paper's intended use in determining the appropriate classification under the Central Excises and Salt Act, 1944.