Full Judgment
2. The learned lower authority has taken note of a Tariff Advice which held the ground till 1-3-1994. The Tariff Advice as abstracted in the learned lower authority's order is reproduced below :- 1. A question has been raised as to whether ECG paper and Barospeedograph paper can be considered as converted papers obtained by one side being subjected to printing of colour, with or without design, attracting nil rate of duty under S. No. 3(ii) of Table annexed to Notification No. 68/76, dated 16-3-1976.
2. According to the information available with the Board, the ECG paper is made from duty paid base paper. All processing on the base paper is done on one side only with the help of an electrically operated machine. A black dye in suitable water proofing medium is applied twice. This side is then given a heat sensitive plastic coating of cellulose acetate. The paper rolls after curing are processed in petrol and cut in proper width. A graph is then printed on the paper. Thereafter the paper is cut into proper marketable length. The process of manufacture is more or less similar for Barospeedograph paper except that the coating mixture of different and no graph is printed on the paper.
3. Samples of these two types of paper were examined by Chemical Examiner, Central Revenues Control Laboratory, New Delhi. In regard to a sample of ECG paper he has stated that it is a strip of paper with graph lines printed on one side, the other side being plain.
The surface on which the graph lines are printed is coated with a thin layer of cellulosic plastic material and the coating is a black varnished surface. In regard to the sample of Barospeedograph paper he has stated that it is a strip of paper one side of which is bluish green colour and the other side white. The grey surface is covered with a thin coating of cellulosic plastic material. In both these cases he has expressed the view that they can be considered as converted types of paper which are known to be used in automatic recording instruments.
4. The chief chemist who was consulted in the matter has also advised that these two types of paper can be considered as "paper obtained by one side of paper subjected to printing of colour, with or without design". The Board has accepted the advice of the Chief Chemist. Accordingly ECG paper and Barospeedograph paper of the nature described above are eligible for assessment at nil rate of duty under Notification No. 68/76".
3. And he has gone on to follow the rationale as given in the Tariff Heading as under: "There is no valid reason to take a different view even in the context of the Central Excise Tariff Act, 1985. However, according to the Assistant Collector this converted paper in jumbo rolls becomes the input which undergoes the process of cutting and slitting to the required length and width meant for ECG machines.
The ECG rolls with definite length and width and specifically designed for ECG machines and are known in the market as ECG paper and therefore should be classified as "other articles of paper".
(The above view cannot be sustained in view of the various CEGAT decisions rightly relied upon by the appellants, according to which process of slitting and cutting of ECG jumbo rolls does not result in any new product emerging, different in character or use). It is therefore to be held that until March, 1994, ECG rolls were entitled to exemption under Notification No. 49/87 as converted type of paper, and are not to be considered as "other articles of paper"." 4. Before the learned lower appellate authority for the period from 1-3-1994 they have sought the classification of the goods under Tariff Heading 48.20. The learned Senior Advocate for the appellants Shri C.Natarajan, however, does not press this plea before us and has pleaded that the issue would be required to be decided in the context of the Tariff Headings 4823.19 as held by the learned lower appellate authority and 4823.90 as now urged by the revenue. Tariff Heading 4823 is reproduced below for convenience of reference:4823 OTHER PAPER, PAPERBOARD, CELLULOSE WADDING AND WEBS OF CELLULOSE FIBRES, CUT TO SIZE OR 5. The learned JDR for the department Shri Rama Rao has reiterated the grounds of appeal and has pleaded that the learned lower authority's reliance on the judgment of the Hontle Madras High Court in the case of Computer Graphics, while arriving at his conclusions reported in 1991 (52) E.L.T. 491 was not proper and has urged that the question to be considered is whether the form in which the ECG paper and the specific use to which it is put in the t machine would bring the item within the ambit of the term articles of paper. He has pleaded that in ground 5, the relevant case laws which would warrant the view that the goods are an article of paper are set out. This ground 5 is reproduced below for convenience of reference : 5. The case laws more relevant to the present situation are as stated below : (ii) M/s Electronic Mechanical Industries, 1995 (76) E.L.T. 301 (Tribunal).
The ratio in these cases is that mere cutting and slitting itself would amount to manufacture provided the resultant article attains marketability. In the instant case, the ECG Rolls was manufactured pursuant to various manufacturing operations at five different stages and ultimately the rolls were cut and slit for use in the ECG machinery. The resultant product is marketable as such and there is no dispute with regard to the processes involved and marketability.
Collector (Appeals) ought to have investigated these aspects and judgments which in the finality prove that cutting and slitting would amount to manufacture and that the resultant manufactured product would be an article of paper.
6. The learned JDR for the department has urged that the goods in question, even though are marketed as ECG paper, could yet be considered as an article of paper for the reason that these are cut to size and the roll in reel form is for fitment into the ECG machine. For that reason, he has pleaded it should be considered as an article and not merely a paper cut to size. He has pleaded that in the case of Dippin Textiles, the Tribunal has clearly held that when jumbo rolls of coated film are cut into pancakes, the pancakes are new articles and are, therefore, liable to duty. Likewise, he has pleaded in the case of Electronics and Mechanical Industries v. CCE, New Delhi, it has been held that the slitting of rolls of audio tapes into tapes with narrow widths not exceeding 6.5 mm amounts to manufacture. His plea is that the forming of the ECG papers into rolls of paper in definite size amounts to manufacture and, therefore, by reason of the manner of its- use, the duty would be leviable on the same as an article of paper. He also in this connection pressed into service the ratio of the decision in the case of Northern Plastics Ltd. v. C.C.E., Meerut reported in 1997 (89) E.L.T. 744 (Tribunal). He has pleaded, in this case of Northern Plastics it has been held that prior to 16-3-1989 while cutting, slitting and preparation of Jumbo rolls could not be considered as manufacture, subsequent to this date these processes could be taken to be giving rise to a new product. The cut-off date of 16-3-1989, he pleaded was adopted in view of the earlier circular of the Board wherein it has been stated that the process of cutting, slitting and perforation of jumbo rolls would not amount to manufacture. He has, therefore, pleaded that the new product having emerged by reason of the Jumbo rolls having been cut into similar rolls, the same, therefore, will have to be classified taking into consideration the specific use to which these are put as an article of plastic.
7. The learned Senior Advocate for the appellants has pleaded that as it is, under Chapter 48 neither under Chapter Notes nor the Section Notes of section under which Chapter 48 falls the process of cutting and slitting are set out as a process of manufacture. He has pleaded that a reading of the Tariff entry 4823.19 itself would show that any paper which is cut to size would fall under Tariff Heading 4823.19 and reason of cutting the paper to size to form ECG rolls, would not in any way change its character as paper. Since the Tariff entry is specific as to paper cut to size also as falling within the category of paper, the question of assessing the goods under this Tariff Heading 2823.90 as an article of paper would not arise. He pleaded that the Tariff entry covers paper cut to size and in shape. He has pleaded the face of this specific entry, the item cannot traverse to the heading of articles of paper & as it is, the product is marketed as ECG paper. He fairly points out that so far as the scope of entry, articles of entry is concerned, the same has not been defined under the Chapter Notes nor it stands amplified by reading of the Tariff entries. He has, therefore, pleaded that the goods should be assessed based on the wording of the Tariff entry itself. He has pleaded a key probably to the scope of the term articles of paper could be from Chapter Note 1-48 whereunder Chapter Note 1G and 1H, certain categories of articles of paper falling under Chapter 42, 46, 64 and 65 stand excluded. He has pleaded these articles which figure in these Chapters have a definite configuration. He has pleaded the essential character of the paper in those cases stands lost and the use of the goods is by reason of the form in which the paper by its use has emerged. He has pleaded, in the present case the essential character of the paper is not lost and it continues to be converted paper and its use is also by reason of its being as a paper as the ECG output is recorded on the paper by a stylus as just as it would be by writing or other purposes. He has pleaded just because the paper has got converted does not by itself take it out of the purview of the paper, its identity is not lost as a paper. In this connection he has referred us to the case of System Packaging v.C.C.E. reported in 1990 (45) E.L.T. 165 and in the case of Pirolite Industries Ltd. v. C.C.E. reported in 1990 (45) E.L.T. 91. He has pleaded, in the case of Systems Packaging referred to supra, the Tribunal has clearly held that the paper which was slitted continues to remain as paper and could be considered as a converted type of paper.
In this connection he referred us to para 20 which is reproduced below for convenience of reference : 20. Some discussion centred round the issue whether slitting amounts to a process of conversion for the purpose of Notification No. 49/87, dated 1-3-1987. Our attention was drawn to the Circular F. No. B11 /6/1982-TRU, dated 17-5-1982, issued by the Central Board of Excise & Customs, which is to be found in the CBEC Bulletin for April-June, 1982. It has been explained therein that the term 'Converting' as is used in paper industry refers to the processing of raw paper in order to produce an improved grade of paper or finished paper articles. There are two processes of paper converting, namely, 'wet converting' (processes like coating, impregnating etc.) and 'dry converting' (Processes like slitting etc.). The circular goes on to explain that the exemption contained in Notification No. 63/82 (the predecessor to Notification 49/87) is not confined to any particular variety of converted type of paper but to all varieties of converted types of paper made by independent converters. Next, our attention was drawn to the meaning of the term 'conversion' in the Indian Standards 4661 published by Indian Standards Institution. (Supreme Court has held more than once that the glossaries of terms published by the Indian Standards Institution may be taken as an index to the trade and commercial understanding of the terms explained therein). Conversion is stated to be a general term descriptive of processes or operations applied to paper or board after the normal paper making operations to meet specific end-use requirements such as waxing, coming-off-machine coating for the manufacture of bags, envelopes, boxes, containers etc. According to the Condensed Chemical Dictionary by Gessner G. Hawley, 'Converting' is a term used specifically in the paper industry to refer to (1) modification or raw paper by coating, impregnating, laminating and corrugating (wet converting) and (2) fabrication of a multitude of finished products such as bags, cartons, packaging materials, napkins, facial tissues, cups, plates and the like (dry converting). A couple of other similar authorities have been cited before us which are almost on similar lines. There is little doubt, therefore, that the process of slitting is a process of conversion as understood in the paper industry. If this be so, then, the slitted paper in reels manufactured by the appellants fall within the description of converted types of paper for the purpose of Notification No. 49/87, dated 1-3-1987. The subject goods are, therefore, eligible for duty exemption in terms of the said notification.
8. He has pleaded in the latter case of Pirolite Industries Ltd., it has been held that slitting, cutting of impregnated filter paper does not amount to manufacture. He has pleaded, it is for the limited purpose of the proceedings he is not putting forth any detailed arguments as to whether the slitting and cutting of ECG rolls as Jumbo rolls would amount to manufacture. The point he is highlighting is that by reason of the emergence of the goods in a roll form after its slitting from a Jumboroll, the character of the goods continues to remain as paper. He has further pleaded that the Tribunal in the case of Tansi Engineering Works reported in 1996 (88) E.L.T. 407 following the Hon'ble Supreme Court judgment in the case of Moti Laminates Pvt.
Ltd. v. C.C.E., Ahmedabad reported in 1995 (76) E.L.T. 241 (S.C.), has held that merely cutting of the angles etc., into specified lengths and even drilling of holes etc., would not amount to manufacture inasmuch as under Chapter 73 mere cutting of angles, channels etc., to lengths has not been described as a process of manufacture in the case of iron and steel products. He has pleaded, even though in that case a note was taken that Chapter Heading 7308 covers parts of structurals which may be cut to lengths, the Tribunal held that cut lengths will not be excisable under 7308. He has further pleaded that the ratios of the decisions cited by the learned JDR would not be applicable to the facts of this case inasmuch as in those cases the Tribunal took note of the fact that there was a specific entry for pancakes as also for tapes of similar lengths and, therefore, by reason of that it was held in that case they were cut from Jumbo Rolls to paper and similar pieces of tapes, the same cannot be excisable.
9. We have considered the pleas made by both the sides. We observe that the issue in the appeal relates to the classification of the goods which have been described as Electro Cardio Graph recording paper.
There is no dispute to the main tariff heading. Both the sides accept that the goods would fall under Tariff Heading 4823. The question that is posed is whether sub-heading applicable would be 4823.19 or 4823.90.
4823.19 figures under the description other paper, paper board, cellulose wadding and webs of cellulose fibres cut to size or shape, while 4823.90 covers all other items other than those are specified under the above Sub-heading 4823. This heading also covers under its ambit articles of paper. To appreciate the scope of the tariff heading, we feel it necessary to refer to the scope of the tariff entry under HSN inasmuch as the Central Excise Tariff is designed on the scheme of HSN. The main Tariff Heading under 4823 in HSN and the Central Excise Tariff are similar worded. However, under the HSN we have more sub-heading than what are set out under Tariff Heading 48.23. The Chapter Heading 48.23 under HSN is reproduced below for convenience of reference : 10. It is seen from this, we observe that the main heading as it is in both the Central Excise Tariff and HSN has two portions. The first portion deals with paper, paper board, wadding webs of cellulose fibres, cut to size or shape and after the second portion it deals with other articles of paper pulp etc. We observe that Tariff Heading 4823 both under the HSN and Central Excise Tariff are residuary tariff headings and all types of papers or articles of paper which are not covered under the headings upto 48.22 are to be classified under this heading. There is no dispute that the goods in question are not covered under any of the headings upto 48.22 under Chapter 48. Therefore, for classifying any goods, primarily we have to find the key in the wordings of this Tariff Heading itself. While we find that certain items like toilet paper which are also paper in rolled form have been identified under articles of paper under Tariff Heading 48.18, taking into consideration the wording of the tariff heading, the same position must apply when it comes to the interpretation of the Tariff Heading 48.23. Under 48.23, paper cut to size or shape is categorised as the first type of items under 48.23. In the HSN the headings as we glance through start with gum or adhesive paper, in strips or rolls and two Sub-headings 19 and 23 covers this range of products. Thereafter, we have specified items which are filter paper, paper boards, cards, not punched and rolls. Then under 4823.40 we have rolls, sheets, dials, printed for self-recording apparatus and thereafter, we have another sub-heading which covers other paper and paper board of a kind used for writing and graphs. Thereafter, we have two Chapter Headings 4823.51 which covers printed, embossed or perforated and after that other i.e.
other type of paper. Thereafter, we have certain items which clearly stand-out as articles of paper etc. 4823.60 covers trays, dishes, plates, cups and the like, of paper or paper board and 4823.70 covers moulded or pressed articles of paper pulp and then 4823.90 which covers other.
11. From the scheme of the HSN, it appears that residuary items of papers and paper boards under 48.23 stand covered upto 4823.59 and thereafter, the articles of paper stand covered. Rolls, sheets and dials printed for self recording apparatus to us appear to be covered under the category of other paper, paper board rather than as articles.
Following the scheme of the HSN, therefore, on which our tariff is based, we are of the view that the ECG rolls would be covered under the heading other paper, paper board as set out under Tariff Heading 48.23 and would be covered under category falling under 4823.19. The case law cited by the learned Advocate also supports this view that the item in question, after cutting and slitting continues to answer to the description of paper. We observe that the Hon'ble Supreme Court in the case of Wood Craft Products reported in 1995 (77) E.L.T. 23 (S.C.) has held that while interpreting the Central Excise Tariff, resort can be had to the scheme of the HSN. At para 18, the Hon'ble Supreme Court has held as under :- 18. We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression "similar laminated wood" in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention.
12. We are, therefore, of the view that taking into consideration the scheme of the Tariff and the wording of the Tariff Entry 48.23 and the view held by the Tribunal earlier and the case laws cited by the learned Advocate, the goods would be correctly classifiable under Tariff Heading 4823.19.
13. We also take note of the fact that a tariff Advice had been earlier issued holding the ECG paper as paper and eligible for the benefit of Notification 68/76 dated 16-3-1976. The learned lower authority has rightly held that the departmental officers are bound by the Tariff Advice otherwise issued. However, we are holding the classification under 4823.19 based on our analysis of the decision as above.
14. After 1-3-1994, the learned Advocate has pleaded that the appellants under this Tariff Heading are liable to duty in view of the rescinding of the exemption notification. He, however has pleaded that the demand should be raised after quantification of the same in accordance with law as there was some calculation errors while working out the amount under the show cause notice. In this regard we, therefore, direct that the learned original authority shall put the appellants on notice as to the duty by reason of the classification of the goods under 4823.19 based on the rate applicable, and allow them to put-forth their plea only on the limited aspects of the figures having been correctly taken for commutation of the duty. So far as the cross appeals are concerned, this is one of the points referred therein and the cross appeals to this extent are allowed. The appellants plea in the cross appeal for the benefit of the re-computation of the duty as sale price as cum-duty price and the benefit of the Modvat credit will also be required taken into consideration in accordance with law. The cross appeals are, therefore, allowed in the above terms.
15. The appeals and the cross appeals are, therefore, disposed of in the above terms.