Full Judgment
2. Brief facts of the case are that the respondents manufactured mill board and claimed the benefit of Notification No. 70/76. The res-pendents used 3% to 5% of straw and less than 1% jute cuttings alongwith other materials for the manufacture of the goods. The Assistant Collector held that the use of straw and jute cuttings disentitled the respondents to the benefit of the said notification.
For convenience of reference the said notification is set out as under : "In exercise of the powers conferred by Sub-rule
(1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 24/74~Central Excises, dated the 1st March, 1974, the Central Government hereby exempts straw board and mill board, falling under sub-item
(2) of Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), taken together, upto a quantity specified in Column
(1) of the Table hereto annexed, cleared by any manufacturer for home consumption during any financial year, from so much of the duty of excise leviable thereon as is in excess of the duty specified in the corresponding entry in Column
(2) of the said Table : THE TABLE ----------------------------------------------------- Quantity Duty -----------------------------------------------------
(1)
(2) On the first next 500 15 per cent ad valorem metric tonnes On the next 500 25 per cent ad valorem metric tonnes Provided that where a factory producing strawboard or mill board, or both, is run at different times of any financial year by different manufacturers, the quantity of such boards cleared from such factory in any such financial year at concessional rates of duty shall not exceed in the aggregate the limits specified in Column
(1) of the Table : Provided further that any quantity of mill board exempted from duty of excise under the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance), No. 181/72-Central Excises, dated the 29th July, 1972, shall be taken into account for computing the quantity referred to in Column
(1) of the Table appended to this notification.
(a) 'mill board' means any unbleached homogeneous board, having a thickness exceeding 0.50 millimetres and made out of mixed waste papers with or without screenings and mechnical pulp but without any colouring matter being added thereto; (b) 'straw board' means a board made wholly or predominantly from partially cooked unbleached straw or bagasse or grasses or other agricultural residues or a mixture of these: provided that - (i) the quantity of any other material used shall not exceed one third in weight of the total weight of the ingredients, and (ii) such board shall not be specially compressed and shall not have any paper pasted on either surface.
Provided also that for the financial year beginning with first day of April, 1975 and ending on the 31st day of March, 1976, for determining the rate of duty applicable, under this notification, for strawboard and millboard cleared on or after the 16th day of March, 1976, the quantity of the said strawboard and millboard already cleared prior to the said date under the provisions of Notification No. 24/74-Central Excises, dated the 1st March, 1974, shall also be taken into account." The Collector (Appeals) however, allowed the plea that the goods were covered by the notification.
3. The learned departmental representative, Shri L.C. Chakrabarti, JDR, stated that in terms of the notification mill board produced should conform to the specification as given therein. He stated inasmuch as straw and jute had been used and these being not specified material for the purpose of notification, the mill board manufactured by the respondents was not eligible for the concessional assessment. It was pointed out to him that the Collector (Appeals) has accepted the respondents contention as made by them before the Assistant Collector that jute and straw were made into mechanical pulp, a permissible raw material in terms of notification, for the reason that the straw and jute used by the respondents was mechanically digested in their own mill and that therefore mechanical pulp was produced therefrom and utilised for the manufacture of mill board. In that view of the matter, he was asked as to how it could be said that the specified raw materials had not been used for the manufacture of mill board. He could not say whether mechanical pulp was indeed produced and used.
4. Shri N.C. Jain, the learned Consultant for the respondents stated that the straw and jute was first converted into mechanical pulp by a mechanical process and later by using hot water stirrer and grinder and no chemical was used for making this pulp. He pleaded inasmuch as in terms of notification use of mechanical pulp for the manufacture of mill board was allowed, merely because the mechanical pulp was prepared out of straw and jute in their own factory cannot bar the goods from the benefit of the said notification. He drew our attention in this regard to the material in the Book on 'Pulp and Paper' by James P.Casey, Volume I : Pulping and Papermaking : Interscience Publisher Inc., New York 1952; under the heading "Types of Pulping Processes" it is set out as under : "Pulping processes are of three principal types, mechanical, chemical and semi-chemical. The mechanical process involves the reduction of wood or other raw material to the fibrous state by mechanical means, generally by grinding wood to a pulp against a large grindstone. The chemical process involves a cooking of the wood with chemicals which selectively remove lignin and other impurities, isolate, and partially purify the individual fibers.
There are three major chemical processes of commercial importance, namely, the soda, sulfate, and sulfite. The semi-chemical process involves an initial treatment for softening the wood, followed by mechanical reduction to the fibrous state. The initial treatment may vary from a simple steaming of the wood to a mere drastic treatment with chemical.
The chemical pulping of wood is described first because wood is the most important raw material. The mechanical and semi-chemical processes of pulping wood are discussed after the chemical processes. Later a description is given of the cooking of rags, straw and other special materials." "Logs of wood are held with pressure against the surface of the stone, and as the stone grinds the wood into fibers, a stream of water is sprayed on the stone to carry the pulp away and to absorb the heat generated. Temperature in the grinding zone can be over 150C. The logs are held against the stone in transverse fashion with the length of the log parallel to the axis of the grindstone so that the fibers in the wood are at right angles to the direction of movement of the stone. In this way the longest-fibered pulp is obtained. Friction forces tear fibers from the logs, and the fibers are carried in grooves in the pulpstone to the grinder pit. Since cheap power is essential to economical operation of a ground-wood mill, much of the groundwood production is in Canada where there is abundant cheap hydroelectric power." He stated that as in the case of wood, non-wood fibers like straw and jute are also used to produce mechanical pulp. He referred to the Paper on Pulping and Bleaching of Non-wood Fibers by D.K. Misra, Ph.D., Director General "Thossalian" Pulp and Paper Industries Limited, Athens, Greece and referred to the following : "Non-wood plant fibers for pulp are classified in three main categories, in terms of their source, availability, and fiber characteristics : (1) Agricultural and agro-industrial waste, which include cereal and rice straws and sugarcane bagasse.
(2) Natural-growing plants which include bamboo, reeds, esparto, and sabai grass.
(3) Cultivated fiber crops, which include leaf fibers, such as abaca (Manila hemp), sisal, and henequen; and bast or stem fibers, such as jute, true hemp, sunn hemp, flax-tow and their salvaged products.
Bagasse, bamboo, cereal straw, esparto grass, and reeds are the dominant materials among the non-wood fibers for the production of pulp and a range of papers and boards. These pulps are used either wholly or blended kraft long-fiber pulp or wastepaper to produce corrugated medium liner insulating boards, Sack paper, imitation kraft," "The pulping chemicals used for annual plant fibers and other non-wood materials are basically the same as used in the pulping of wood. The pulping processes include : Selection of a particular process is determined by techno-economic and ecological factors, which vary with the geographical location of a mill." He pleaded that the appellants had made this submission before the Collector (Appeals) and he took note of the fact of manufacture of mechanical pulp in their unit. He pleaded that as it is under the notification in terms of the proviso to the Explanation, l/3rd of the material other than the specified material could be added for the manufacture of the mill board. He stated question as to whether this clause of the proviso is available to mill board or not, has been decided by the Hon'ble High Court of Allahabad in the case of R.G.Paper and Straw Board and Anr. v. Union of India and Ors. : 1985 (19) ELT 64 (All.) and the Hon'ble High Court of Allahabad has held that this proviso is applicable to mill board also as to the straw board. He pleaded even if it is taken that mill board covered under the notification should be made out of the specified material as given in the Explanation in the notification, the addition of straw and jute which did not exceed l/3rd of the weight of other materials as seen from the record did not militate against the respondent's claim for benefit of concessional assessment. He pleaded looking at the matter either way, the benefit of the concession notification is available to them.
5. Learned SDR stated that in terms of CCN under Chapter 47.0.1, the word mechanical pulp referred to has been amplified only to be wood pulp.
6. We observe that the respondents have all along been maintaining that part of specified raw materials, straw and jute used by them in manufacture of mill board was first converted into mechanical pulp and then in admixture with other specified raw materials they processed the same into mill board. There is no denial from the Revenue in this regard. There is no plea that the process of conversion of the jute and straw by the respondents was not a mechanical one and that the pulp produced as claimed by them was not mechanical pulp. The respondents have produced evidence to show that the mechanical pulp can be produced out of non-wood raw material liker straw and jute also. The Revenue has not produced any evidence to show that the mechanical pulp is invariably produced from wood only. The learned SDR has primarily relied upon Chapter 47 of CCN to show that the mechanical pulp referred to only mechanical wood pulp. In the context the relevant portion of the Chapter Notes is reproduced below : "This pulp consists essentially of cellulose fibres obtained from various vegetable materials, or from waste textiles of vegetable origin.
The most important pulp in international trade is wood pulp, termed "mechanical wood pulp" or "chemical wood pulp" according to its method of preparation. The woods mostly used are pine, spruce, poplar and aspen, but the use of harder woods such as beech and chestnut is extending.
Mechanical wood pulp is obtained by disintegrating or grinding wood, freed of its bark and sometimes of its knots, into fibres by mechanical milling under a flow of water.
Milling without prior steam treating produces the so-called "white" mechanical wood pulp in which the fibres are broken and weakened.
The wood may be steam treated before grinding, this giving stronger fibres or brown colour (brown mechanical wood pulp)." It is seen that CCCN Notes do not deal with various other types of pulp that are available and has only referred to the most important pulp available in the international trade as wood pulp and described the two varieties of the same as are available. No inference can be drawn from this that mechanical pulp would invariably be wood pulp only. From the evidence produced before us it is seen that the pulp could be prepared from non-wood material also and two of these mentioned are straw and jute as seen from the references cited by the respondents. The respondents however have not produced any literature to show the method by which the mechanical pulp from these materials is prepared. In fact, the method of preparation of pulp from these materials in another reference cited by the respondents is described as mechno-chemical. The Appellant Collector has not done any verification as to the claim of the method of production of pulp by the respondents from jute and straw as being a mechanical one. In the absence of any contention to the contrary, we have to accept the respondents plea. Looking at the matter from other angle as pleaded by the respondents it is seen that in terms of notification in addition to the specified materials l/3rd of other materials can also be added for the manufacture of mill board. The respondents have cited the Hon'ble Allahabad High Court judgment in which the Hon'ble High Court has held that the proviso under which the use of l/3rd of other material by weight is permissible is applicable both for mill board and straw board. No judgment to the contrary has been brought to our notice in this regard. In view of specific findings of the Hon'ble High Court and the fact that respondents use of straw and jute is not more than l/3rd weight of the weight of other material, the benefit of the notification would be available to them. In view of the above, we find no merit in the plea of the Department and reject the appeal.