1994 (9) TMI 67 - SC - Central Excise

Melamine faced particle boards excluded from unveneered particle boards exemption; exemptions strictly construed, claimant liable for duty arrears

NOVOPAN INDIA LTD. Versus COLLECTOR OF C. EX. AND CUSTOMS, HYDERABAD

SC dismissed the appeal, holding that melamine-faced particle boards are not covered by the exemption for 'unveneered particle boards' in the ... Classification of Melamine Faced Particle Boards (MFPBs) - Notification exempted 'plywood and boards specified in column (2) of the table hereto annexed and falling under Item No. 16B of the First Schedule - Whether the particle boards manufactured by appellant are `unveneered particle boards' within the meaning of Item No. 6 of the table appended to the Notification No. 55 of 1979, and therefore, totally exempt from duty? Held that:- We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals [1991 (8) TMI 83 - SUPREME COURT] and in Union of India v. Wood Papers [1990 (4) TMI 55 - SUPREME COURT] - represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. The words `unveneered particle boards' in Item-6 of the table appended to the Exemption Notification cannot and do not take in melamine faced particle boards. Indeed, the learned counsel for the Revenue contends, and in our opinion rightly, that the said entry does not admit of any doubt, that it is clear and specific and that it covers only unveneered particle boards and nothing else. Appeal dismissed.The appellant has to pay the arrears of duty due according to law. Issues Involved:1. Classification of Melamine Faced Particle Boards (MFPBs) under the relevant Tariff Item.2. Applicability of Exemption Notification No. 55 of 1979 to MFPBs.3. Interpretation of the term 'unveneered particle boards' in the context of the Exemption Notification.4. Reliance on commercial parlance for classification.5. Validity of expert affidavits submitted by the appellant.6. Principle of strict construction of exemption provisions.Detailed Analysis:1. Classification of Melamine Faced Particle Boards (MFPBs) under the relevant Tariff Item:The appellant contended that MFPBs should be classified as 'unveneered particle boards' under Item 6 of the Exemption Notification No. 55 of 1979, thus exempting them from duty. The authorities, however, classified MFPBs under Tariff Item 68, which was upheld by the Tribunal. The Tribunal noted that MFPBs are not the same as unveneered particle boards due to the melamine facing process, which creates a different product.2. Applicability of Exemption Notification No. 55 of 1979 to MFPBs:The appellant argued that MFPBs should benefit from the Exemption Notification, which exempts unveneered particle boards from duty. However, the Tribunal and the Supreme Court found that MFPBs, due to their melamine facing, do not qualify as unveneered particle boards and thus do not fall under the exemption provided by Notification No. 55 of 1979.3. Interpretation of the term 'unveneered particle boards' in the context of the Exemption Notification:The Court emphasized that the term 'unveneered particle boards' refers to raw particle boards without any additional facing. The melamine facing process changes the nature of the particle boards, making them a different product altogether. The Court stated, 'It is thus difficult to say that the melamine faced particle boards can be described as `unveneered particle boards'.'4. Reliance on commercial parlance for classification:The Court reiterated the principle that goods should be classified based on their popular meaning or commercial sense. It cited previous judgments, stating, 'It is an accepted principle of classification that the goods should be classified according to their popular meaning or as they are understood in their commercial sense and not as per the scientific or technical meaning.' The Court concluded that in commercial circles, MFPBs and unveneered particle boards are considered different products.5. Validity of expert affidavits submitted by the appellant:The appellant submitted affidavits from experts claiming that MFPBs and unveneered particle boards are the same. The Tribunal rejected these affidavits, noting that the experts were associated with the appellant and did not witness the manufacturing process. The Court upheld this rejection, stating, 'The said affidavits, therefore, do not advance the appellant's case in any manner.'6. Principle of strict construction of exemption provisions:The appellant argued that any ambiguity in the Exemption Notification should be resolved in favor of the assessee. The Court disagreed, stating that exemption provisions should be construed strictly. It cited previous judgments, emphasizing that 'a person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision.' The Court concluded that the term 'unveneered particle boards' does not include MFPBs.Conclusion:The Supreme Court dismissed the appeal, holding that MFPBs cannot be classified as unveneered particle boards under Item 6 of the Exemption Notification No. 55 of 1979. The Court emphasized the need for strict interpretation of exemption provisions and reliance on commercial parlance for classification. The appellant was ordered to pay the arrears of duty as per the law, and the interim order for stay of recovery was vacated.