Case: Collector of Central Excise, Kanpur Vs. Krishna Carbon Paper Co

1. The Collector of Central Excise, Kanpur, is the Appellant in this appeal under Section 35L(b) of the Central Excises and Salt Act, 1944 (hereinafter called the Act). The period involved in this appeal is the assessment period from 25th March, 1979 to 24th September, 1979, a period of about six months. The Respondent M/s. Krishna Carbon Paper Company was engaged in the manufacture of carbon papers. During the period from 25th March, 1979 to 24th September, 1979 the Respondent manufactured and cleared from its factory a quantity of 5601 boxes, 20,288 reams and 45 packets of carbon papers for a total value of Rs. 7,67,498.40 without payment of any duty under the Act. The Superintendent of Central Excise, Lakhimpur Kheri, issued notice to the Respondent demanding Central Excise Duty on carbon paper cleared during the aforesaid period under Section 11A of the Act, The Respondent submitted a written reply stating that the notice was without jurisdiction because the Respondent had taken out the central excise licence immediately on the direction of the department and it was only after February 28, 1982 that the product was subjected to duty under sub-item (3) of item 17 by the Central Excise Budget of 1982. In support of this contention, the Respondent relied on Notifications Nos. 107/82 and 69/82, both dated 28th February, 1982. It was contended that the carbon paper was a new item which was specified under sub-item (3) of item 17 of C.E.T. According to the revenue, however, that the recasting of Tariff Item 17 in 1976 was irrelevant and that the carbon being akin to coated paper (one side or both side) was covered under sub-item (2) of item 17 of the C.E.T. since 1976. The submission of the Respondent was that sub-item (3) of item 17 of the C.E.T. covering the carbon paper including copy paper was inserted by the Central Excise Budget 1982, but it does not make any retrospective changer It was, according to the Appellant, an introduction of specific name or variety of paper for being subjected to a different rate of duty. The carbon paper remained a coated paper already covered under sub-item (2) of item 17 of C.E.T. The Assistant Collector of Central Excise, Sitapur, by his order dated 27/30th April, 1983, confirmed the demand for basic excise duty amounting to Rs. 1,15,124,76 and special excise duty of Rs. 5,756.23 on carbon paper cleared during the period from 25th March, 1979 to 24th September, 1979. The Appellate Collector, however, set aside the order of the Assistant Collector and was of the view that the carbon paper could not be classified under Tariff Item 17(2) of the Act. as it was before 1982. The Collector (Appeals) accepted the Respondents contention that the carbon paper was brought under the purview of Tariff Item 17 for the first time in 1982 when it was introduced as sub-item (3) of Item 17 of the First Schedule to the Act with effect from 1st March, 1982. Being aggrieved thereby the Appellant preferred an appeal before the Appellate Tribunal. The Appellate Tribunal dismissed the appeal. Hence, this appeal.

Reasoning:
Following its previous decision in the case of Sai Giridhara Supply Co. v. Collector of Central Excise, Bombay (1987) 28 ELT 438 (Tri), the Tribunal upheld the contention of the Respondent and held that for the period before the amendment of Central Excise Budget, in 1982, carbon paper fell under Tariff Item 68 and not under Tariff Item 17(2), as it then was. The Tribunal did not go into the question of the limitation, namely, whether the claim was barred in any event by the lapse of time in view of Section 11A of the Act. The Tribunal came to the finding that the carbon paper in question fell under Tariff Item 68 of the Central Excise Tariff.5. The Tribunal followed a previous decision in Sai Giridhara Supply Co. v. Collector of Central Excise Bombay, (1987 (28) ELT 438) (supra). There, the Tribunal had discussed the various aspects of the matter and felt itself bound by the decision of the Karnataka High Court to which reference will be made later. The Tribunal has referred to the observations of Buckley L.J. where the Lord Justice observed that once a precedent was held to be a binding one, then no deviation therefrom was permissible within the judicial polity except in the well accepted categories of cases enumerated in the judgment. Those contingencies, the Tribunal found, were not applicable to the facts of this case.6. It is well settled that in order to ascertain the correct meaning of a fiscal entry reference to a dictionary is apt to be a somewhat delusive guide, as it gives all the different shades of meaning.9. It is well settled, as mentioned before, that where no definition is provided in the statute itself, as in this case, for ascertaining the correct meaning of a fiscal entry reference to a dictionary is not always safe. The correct guide, it appears in such a case, is the context and the trade meaning. In this connection reference may be made to the observations of this Court in Commr. of Sales Tax, U.P. v. M/s. S.N. Brothers, Kanpur. AIR 1973 SC 78 at page 80, para 5.10. The trade meaning is one which is prevalent in that particular trade where that goods is known or traded. If special type of goods is subject matter of a fiscal entry then that entry must be understood in the context of that particular trade, bearing in mind that particular word. Where, however, there is no evidence either way then the definition given and the meaning following from particular statute at particular time would be the decisive test.It must be emphasised in view of the arguments advanced in this case that the meaning should be as understood in the particular trade. In this case, we are construing not paper as such but a particular brand of paper with a meaning attributed to it. Sub-item (2) of item 17 as was the position in 1976 paper referred to all kinds of paper including paper or paper boards which have been subjected to various treatments such as coating, impregnating. So, therefore, if all kinds of paper including coated paper is the goods, we have to find out the meaning attributed to those goods in the trade of those kinds of paper where transactions of those goods take place.12. It is a well settled principle of construction, as mentioned before, that where the word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by the legislature.This principle is well settled by a long line of decisions of Canadian, American, Australian and Indian cases. Pollock J. pointed out in Grenfell v. I.R.C., (1876) 1 Ex D 242 at P. 248, that if a statute contains language which is capable of being construed in a popular sense, such a statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning, of course, by the words Popular sense that which people conversant with the subject matter with which the statute is dealing would attribute to it. The ordinary words in every day use are, therefore, to be construed according to their popular sense. The same view was reiterated by Story, J. in 200 Chests of Tea, (1824) 9 Wheaton US 435 at 438, where he observed that the legislature does not suppose our merchants to be naturalists, or geologists, or botanists. See the observations of Bhagwati, J. as the learned Chief Justice then was, in Porritts and Spencer (Asia) Ltd. v. State of Haryana (1979) 1 SCC 82 : AIR 1979 SC 300 . But there is a word of caution that has to be borne in mind in this connection, the words must be understood in popular sense, that is to say, these must be confined to the words used in a particular Statute and then if in respect of that particular items, an artificial definition is given in the sense that a special meaning is attached to particular words in the Statute then the ordinary sense or dictionary meaning would not be applicable but the meaning of that type of goods dealt with by that type of goods in that type of market, should be searched. In the instant case, we have all kinds of papers including papers subjected to coating, impregnating etc.. If there is a market meaning or trade meaning of that kind of a paper that should be adhered to. In this case, there is no direct evidence how these peculiar goods are dealt with in the particular market dealing with those goods. But there is evidence how these are to be understood in the light of the specifications of the Indian Standard Institute which we have mentioned before. It is instructive to refer in this connection a passage of the Tribunals decision in Kores (India) Ltd., Thane v. Collector of Central Excise Thane (1987) 29 ELT 627, where the Tribunal observed that on the point whether carbon paper is understood as a coated paper in trade, there is authority of the Indian Standards Institutes publication Glossary of Terms used in Paper Trade and: 4661. Therefore, understood in the accepted notion of construing entries of fiscal Statute not from a technical or scientific point of view but from the point of view of the people in the trade dealing with that particular type of goods and having regard to the evidence of the Indian Standard Institute and in the absence of any other evidence to the contrary, the Tribunal was justified in holding that on the basis of the definition of paper as it was in the year 1976 carbon paper would come within item 17(2) of the Tariff Items.13. Learned counsel for the Respondent placed reliance on the observations of this Court in State of U.P. v. Kores (India) Ltd. (1977) 1 SCR 837 : AIR 1977 SC 132 , where this Court was concerned with a notification under Section 3A of the U.P. Sales Tax Act, 1948.The question fell for consideration before this Court in that case was whether carbon paper was taxable as paper and further whether ribbon was accessory or part of typewriter. This Court reiterated that a word which is not defined in an enactment has to be understood in its popular and commercial sense with reference to the context in which it occurs. The word has to be understood according to the well established canon of construction in the sense in which persons dealing with and using the article understand it. For this principle this Court relied on the observations of Lord Tenterden in Attorney-General v. Winstanley (1831) 6 ER 740 and the observations of Pollock, J. in Grenfell v. Commissioners of Inland Revenue, (1876) 1 Ex D 242 at P. 248. Pollock, J. was construing the Stamp Act, where he correctly emphasised that the words should be construed in popular sense meaning thereby the sense in which people conversant with the subject matter with which the Statute is dealing, would attribute to it. That is the correct test. This Court observed further at page 839 of the report that in popular parlance, the word; paper is understood as meaning a substance which is used for bearing, writing, or printing, or for packing, or for drawing on, or for decorating, or covering the walls. Carbon paper is not commonly understood as paper. This Court thus held that paper simpliciter cannot include carbon paper because that would not be in consonance with the popular understanding of the expression paper. But where paper of a special type defined in the particular statute as one including paper which have been subjected to various treatments such as coating, impregnating, how that paper be understood, there must be evidence of that understanding. In the absence of that evidence, the natural meaning following from the expression used in the statute should be adhered to. In that light, it appears to us that in view of the facts of this case and in the principles of law as prevailing in 1976 papers of all kinds including paper with coating and impregnating and the views of the Indian Standard Institute, would include carbon papers.We are concerned here not with paper simpliciter or how it is understood in common parlance but paper with a particular definition at the relevant time, namely, all kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating) stated in that context. In that context, it cannot be said that carbon paper cannot be coated paper as such.16. It appears that the Finance Minister was adding two items, one was 17(3) carbon and other copying papers and the second was 17(4) boxes, cartons, bags and other packing containers. He mentioned in his speech that in order to recoup the consequent loss in revenue, he proposed to raise the basic excise duty on industrial varieties of paper and paper boards by a small margin of 2 1/2 per cent ad valorem.17. These are relevant or proper materials to apply to construe the meaning of the Tariff Items. Moreover, in proper light these do not militate against the view that carbon paper in 1976, was included in the special type of paper, as defined at that time.18. In the aforesaid view of the matter, we are of the opinion that as at the relevant time the definition of paper being paper board and all kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating and impregnating and in the light of the I.S. specifications as noted hereinbefore and there being no other reliable evidence as to how coated paper is understood in the market, except the opinion of the Indian Standard Institute in its specifications, in our opinion, the Tribunal was not right in the view it took.19. The Tribunal in Kores (India) Ltd., Thane v. Collector of Central Excise. Thane 1987 (29) ELT 627 (supra) expressed the view that carbon would fall under item 17(2) of the Tariff Items relying on ISI specifications. There was authority of the Indian Standards Institutes publication Glossary of Terms used in Paper Trade and IndustryIS 4661. In view of the facts as appeared in paragraph 14 of the Tribunals judgment in Kores (India) Ltd. Thane v. Collector of Central Excise. Thane (supra), where the basis of the classifications of ISI in its specifications is explained, we are of the opinion that the carbon paper fell under item 17(2) as it stood at the relevant period germane for this appeal, before 1982, and not in residuary item No. 68 of C.E.T.In the view we have taken on the construction of the expression as it stood in the relevant time, it is not necessary to rest our decision on the question whether the amendment was clarificatory or not.21. In the light of the evidence referred to by the Tribunal in Kores (India) Ltd., Thane v. Collector of Central Excise. Thane (1987 (29) ELT 627) (supra) and in the light of the definition of paper in C.E.T. Item 17(2) as it stood at the relevant time, it is sufficient to hold that it was covered by item 17(2) of C.E.T. and would not fall into the residuary entry.