Full Judgment
2. We have heard Shri V. Sreedharan, Advocate, for the appellants and Shri L.C. Chakraborty, DR, for the respondent and have read the record.
(i) laminated jute bags have jute as the predominant constituent, they are known in the trade as jute products and, as such, fall under item No. 22A, CET ("Jute manufactures, all sorts") but are exempted from duty under notification No. 53/65-CE dated 20-3-1965; (ii) the goods are manufactured by manually operated machines and are, therefore, exempt also under notification No. 51/67-CE dated 1-4-1967.
4. Shri Sreedharan, counsel for the appellants, drew our attention to the Tribunal's decision in Innes Watson & Co. Private Ltd. v. Collector of Central Excise, Calcutta 1987 (9) ETR 363. The goods and the contentions for the appellants in that case were similar, save for the plea of manufacture by manually operated machines. The Tribunal, relying on its decision in Birla Jute Manufacturing Co. Ltd. v.Collector of Central Excise, Calcutta, 1986 (8) ETR 514, held that the goods fell under the residuary heading item No. 68, CET, and not under item No. 22A ibid. This decision was based on the Calcutta High Court judgment in Dallhousie Jute Co. Ltd. v. Union of India holding that laminated jute bags were not jute manufactures within the meaning of item No. 22A, CET. With the creation of the residuary item "No. 68, CET, with effect from 1-3-1975, the Tribunal held, the goods became classifiable under that item.
5. In the above context, Shri Sreedharan also drew our attention to the judgment of the Andhra Pradesh High Court in International Packing Industry v. CBEC and Ors. wherein the Court held that laminated jute bags in which jute predominated answered to the description of "jute manufactures" in item No. 22A, CET.6. Shri Sreedharan submitted that, if laminated jute bags were held to fall under item No. 22A, CET, they would be exempt under notification No. 53/65 dated 20-3-1965 which exempted inter alia laminated jute products from so much of the duty leviable thereon as was in excess of the duty payable on the unprocessed jute manufactures used in their manufacture.
7. Insofar as classification under item No. 68 was concerned, it was Shri Sreedharan's submission that the lower authorities had not recorded a finding on the appellants' contention that no power had been used in the manufacture of the subject laminated jute bags which were, therefore, eligible for duty exemption.
8. Shri Chakraborti, DR, for the respondent, agreed that the point about non-use of power in the manufacture of the subject goods, though agitated before the lower authorities, had not been looked into by them. The applicablity of Notification No. 53/65 had been considered by the Tribunal in the case of Birla Jute Manufacturing Co. Ltd. (supra) and it had been ruled that the notification was inapplicable.
9. We have carefully considered the submissions of both sides. At the outset, we may note that the Revenue has not appealed against the finding of the Appellate Collector that the demand for duty was barred by limitation in respect of the period prior to 5-1-1979. So, the period of the dispute before us narrows down to 5-1-1979 to 5-6-1979.
There are two lines of decisions on the classification of laminated jute bags before us--one of the Calcutta High Court following which the Tribunal has, in a number of cases, held that the goods fall under item No. 68 and not 22A, CET and the other, that of the Andhra Pradesh High Court holding the goods to fall under item No. 22A, CET. We find that in the cases of Shri Ram Jute Mills Innes Watson & Co. 1987 (9) ETR 363, Birla Jute Manufacturing Co. , the aspect of predominance of jute in laminated jute bags was not considered. This aspect has been considered at length in the Andhra Pradesh High Court's judgment in the case of International Packing Industry (supra) wherein the Court has held that laminated jute bags in which jute predominated answered to the description of "jute manufactures" in item No. 22A, CET. The test of predominance of jute was written into the tariff entry by the Finance Bill (No. 2) of 1977 and it is this entry which was considered by the Andhra Pradesh High Court. On the other hand, in the case of Dalhousie Jute Co. before the Calcutta High Court, tariff item No. 22A, CET, did note have the predominance test. Construing the entry as it stood then, the Court held that laminated jute bags did not fall under item No. 22A, CET. It was against this background that the Tribunal held in a series of decisions that, with effect from 1-3-1975, when the residuary item"" No. 68 was created in the CET, the goods would fall under that item.
Though the aspect of predominance of jute came up for mention in the previous decisions of this Tribunal (cited before us), the changes made to the entry in item 22A by the Finance Bill, 1977, were unfortunately not brought to notice by either party and were, therefore, not taken into account by the Tribunal. By this Finance Bill, the test of predominance of jute was added in item 22A in the following words:-- Jute Manufactures (including manufactures of Bimilipatnam jute or of Mesta fibre), all sorts, not elsewhere specified, in which jute (including Bimilipatnam jute or Mesta fibre) predominates in weight.
It is this amended entry that was construed by the Andhra Pradesh High Court in the International Packing Industry case (supra). It will thus be seen that the Andhra Pradesh High Court's judgment is more apposite to the present case. We, therefore, hold that the goods fell for classification under item No. 22A, CET. And, as laminated jute products, the subject goods were eligible for the benefit of notification No. 53/65 dated 20-3-1965.