Case: M/S. Coastal Paper Ltd Vs. Commnr. Of Central Excise, Visakhapatnam

(38) E.L.T. 741 (S.C.) = (1989-1 S.C.C. 345 at p.357) and Tata Oil Mills Co. Ltd. v. C.C.E., 1989 (43) E.L.T. 183 (S.C.) = (1989-4 SCC 541 at p. 545-6) in interpreting the scope of any notification, the Court has first to keep in mind the object and purpose of the notification. All parts of it should be read harmoniously in aid of, and not in derogation, of that purpose. In this case, the aim and object of the notification is to grant a concession to small scale factories which manufacture paper with unconventional raw materials. The question naturally arises: Could there have been any particular object intended to be achieved by introducing the exceptions set out in the proviso? Instead of proceeding on the premise that it is not necessary to look for any reason in a taxing statute, it is necessary to have a closer look at the wording of the proviso. If the proviso had referred only to coated paper, no special object or purpose would have been discernible and perhaps there would have been no justification to look beyond it and enter into a speculation as to why the notification should have thought of exempting only coated paper manufactured by these factories from the purview of the exemption. But the notification excepts not one but a group of items. If the items mentioned in the group were totally dissimilar and it were impossible to see any common thread running through them again, it may be permissible to give the exceptions their widest latitude. But when four of them-undoubtedly, at least three of them-can be brought under an intelligible classification and it is also conceivable that the Government might well have thought that these small scale factories should not be eligible for the concession contemplated by the notification where they manufacture paper catering to industrial purposes, there is a purpose in the limitation prescribed and there is no reason why the rationally logical restriction should not be placed on the proviso based on this classification. In our view, the only reasonable way of interpreting the proviso is by understanding the words coated paper in a narrower sense consistent with the other expressions used therein.” 22) The aforesaid discussion would be sufficient to hold that pulp from the waste of jute bags or gunny bags would not be covered by the term rags appearing in Notification dated 01-03-1994 as it could never be the intention to exclude non-conventional material from the benefit of the aforesaid Notification when that was precisely the purpose for which this Notification was issued to encourage use of non-conventional material for the purposes of manufacturing paper or paper products. Still, we would now like to take note of the dictionary meaning that is assigned to the aforesaid terms, that too from the Dictionary of Paper by American Paper and Pulp Association, which obviously is the most relevant and authenticated dictionary for the purpose of the present case as what is in vogue and understood in paper industry is contained in such a dictionary. 23) The Dictionary of Paper by American Paper and Pulp Association clearly makes a distinction between rag pulp and jute. Relevant portion of the book (contained at pages 22 and 26) is reproduced below: “Cotton fibre or rag pulps are used principally in the manufacture of fine and technical papers as listed below, and in the manufacture of roofing papers..”Jute Pulp is used in the manufacture of wrapping paper and tag stock. It is also used to some extent in buff drawing paper. The major supply of jute comes from old sacking, burlap and string...”Jute … Old gunny and sacking are used as raw materials in papermaking” 24) The book Pulp and Paper Chemistry and Chemical Technology by James P. Casey again distinguishes between rags and jute in the following manner: “Use of Rags for PapermakingHigh-grade cotton and, to some extent, linen rags are used to make the best grades of bond, writing and technical papers, where permanence, high strength, and distinctive quality are of interest.Pulping of JuteWhole jute is rarely used for pulp and papermaking. Salvaged products, such as old jute sacks and burlap, are the materials available to the paper mills. Waste jute is cut into small pieces and dusted before cooking.. Jute pulps are used for the manufacture of high-strength bags, wrappings, drawing papers, and tags.” 25) Dictionary of Paper by TAPPI defines rag pulps as under: “Papermaking fibers made from new or old cotton textile cuttings. The term may also apply to cotton linters, i.e., the short fibers which adhere to the cotton seed after the ginning process. Rag pulps are used in papers where permanence and durability are needed, e.g., ledger, blueprint, map, currency papers etc.” 26) Indian Standard Glossary of Terms used in Paper Trade and Industry – IS 4661 : 1999 defines jute and rag pulp as under: “Jute : (a) An Indian bast fibre, white jute (Corchorus Capsularis) and tossa jute (C. Olitorius) which is used for the manufacture of coarse sacking and bags (gunny sack). Old gunny and sacking are used as raw materials in papermaking...Rag Pulps: Papermaking fibres of cotton made from materials like new or old cotton textile cuttings or cotton linters, mill run, fly cotton, cotton waste etc. Rag pulps are used in papers where permanence and durability are needed, for example, ledger, blueprint, map, currency papers etc." 27) Thus, almost all the books on the subject uniformly define rag or rag pulp as one which is made from cotton waste or cotton textile material. On the other hand, the learned counsel appearing for the Revenue could not point out to a single dictionary or could take us through any technical literature which even remotely suggests that jute gunny bags come under the category of rags in the context of paper technology.28) The Tribunal has simply brushed aside the aforesaid material with a mere observation that it is not relevant and this approach of the Tribunal cannot be justified.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]We are of the view that the expression rags appearing in the Notification has to be construed having regard to the attendant circumstances, the context in which the same is used in the said Notification as well as the purpose for which this term has appeared in the Notification. At the same time, it is also necessary to go behind the objective for which Notification itself is issued thereby giving it a purposive interpretation, which has become cardinal rule of interpretation. In our opinion, it is only after examining all these factors that the final decision should be arrivedThe tenor and language of various Notifications issued in this behalf from time to time also reflect the experience which was gained over a period of time. Whereas in the beginning, Notification(s) prescribed the Positive List of the materials that had to be used to get the benefit of concessional rate of duty, the thrust underwent a conceptual transformation and changed to the Negative List, i.e. mentioning only those materials use whereof will not entail the benefit, thereby making the benefit available to all other forms ofmaterials. This was because of the reason that experience has shown that it was not proper to mention thematerial by putting them in a straitjacket and to provide that all kinds ofmaterials used for the manufacture of paper should qualify for concessional rate excepting only those which need not be given such a benefit. This thrust, therefore, from Positive List to Negative List is of great significance and has to be kept inNo doubt, such exemption Notifications call for strict interpretation. However, at the same time when the expression rags is not defined in the Notification, it has to be assigned a particular meaning which defines the purpose for which such a Notification was issued giving by plain meaning, even when there is a total disconnect between the said meaning and the Notification, may lead to absurd results as it would exclude thematerial in the form of waste from jute bags or gunny bags even when this very material was there in the Positive List and qualified for exemption.Thus, almost all the books on the subject uniformly define rag or rag pulp as one which is made from cotton waste or cotton textile material. On the other hand, the learned counsel appearing for the Revenue could not point out to a single dictionary or could take us through any technical literature which even remotely suggests that jute gunny bags come under the category of rags in the context of paper technology.28) The Tribunal has simply brushed aside the aforesaid material with a mere observation that it is not relevant and this approach of the Tribunal cannot be justified.