Jute bags exemption upheld where polyliner did not defeat classification and trade parlance treated the goods as jute bags.

Notification No. 65/87-C.E. was interpreted as not requiring jute sacks or bags to be made wholly of jute. The presence of a polyliner did not, by itself, exclude D.W. tarpaulin bags from the exemption, so the Revenue's objection based solely on composition failed. The Tribunal also accepted binding precedent that the goods were known in trade and market parlance as jute bags, and in the absence of contrary authority for the same product, that commercial understanding governed classification. The exemption therefore remained available, and the Revenue's challenge failed.

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Issues: (i) Whether D.W. tarpaulin bags with polyliner were entitled to the benefit of Notification No. 65/87-C.E. dated 1-3-1987 as sacks and bags of jute on the ground that they were not made entirely of jute. (ii) Whether the goods were known in trade and market parlance as sacks and bags of jute.

Issue (i): Whether D.W. tarpaulin bags with polyliner were entitled to the benefit of Notification No. 65/87-C.E. dated 1-3-1987 as sacks and bags of jute on the ground that they were not made entirely of jute.

Analysis: The exemption notification did not require the bags to be made entirely of jute. The Tribunal accepted the binding High Court ruling that the presence of a polyliner did not by itself take the goods outside the description of sacks and bags of jute, and therefore the Revenue's objection based solely on composition failed.

Conclusion: The denial of exemption on the ground that the goods were not made entirely of jute was not sustainable and the conclusion was in favour of the assessee.

Issue (ii): Whether the goods were known in trade and market parlance as sacks and bags of jute.

Analysis: The Tribunal relied on the direct High Court decision which had already found that the product was known in the market as jute bags. In the absence of any contrary authority on the same product, the commercial parlance objection raised by the Revenue could not be accepted.

Conclusion: The goods were treated as jute bags in trade and market parlance and this issue was decided in favour of the assessee.

Final Conclusion: The exemption under Notification No. 65/87-C.E. remained available to the product and the Revenue's appeal failed.

Ratio Decidendi: For exemption classification, a product need not be made wholly of jute if the notification does not so require, and commercial parlance as established by binding precedent governs whether it is understood as sacks and bags of jute.

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