<CITATION> )

1. Special Bench 'C' consisting of three Members, heard the appeal (513/80 of <ORG>) earlier. One of the Members prepared an order suggesting that the issue in dispute may be referred to a Bench of more than three Members in view of certain conflict between earlier orders of the <ORG>. One of the other Members agreed with this proposal, though the third Member did not. Subsequently, under orders of the President, this appeal was directed to be heard by a Bench of five Members, and that is how this appeal has been placed for hearing before us. Since another appeal (174/80 of <ORG>) also involved a similar issue, the same had also come, under the orders of the President, to be heard along with appeal No. 513/80.

2. At the hearing of these two appeals, <ORG> (Appeal No. 111/82-C) and <ORG> (Appeal No. 941/82) were, on their application, heard as interveners.

3. We have heard <NAME>, Bar-at-law, for <ORG> ; <NAME>, Advocate for <ORG>; <NAME>, Advocate, for <ORG> ; and <NAME>, Advocate for <ORG> and also <NAME>, JDR for the department.

4. The product manufactured by <ORG>, consists of two layers of kraft paper joined together by a layer of polythene. The product manufactured by <ORG> <ORG> is bituminized laminated paper, consisting of two layers of kraft paper joined together by bitumin as adhesive. The period in dispute in the case of <ORG> is 1-4-1970 to 28-2-1974. The period in dispute in the case of <ORG> is 16-3-1976 to 26-5-1976. It may, therefore, be noted that, so far as the period in dispute in the case of <ORG>, there was no Tariff Item 68 CET in existence during that period. There is also no dispute that it was by employment of extrusion process that the product of <ORG>, came into existence.

5. Tariff item 17 CET had been undergoing amendments now and then. For a proper appreciation of the issues involved and the submissions made, the Tariff item, as it stood from time to time, is reproduced below : Tariff Item 17 as it stood prior to 1974 :

Description of Goods Rate of Duty ------------------------------------------------------------------- 17. Paper, all sorts (including pasteboard, millboard, straw-board and cardboard) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power : (1) Cigarette tissue One rupee per kilogram. (2) Blotting,toilet, target, tissue other than Fifty paise per cigarette tissue, teleprinter,typewriting, kilogram, manifold, bank,bond,art paper,chrome paper, tubsized paper, cheque paper, stamp paper, cartridge paper, parchment and coated board (including art board, chrome board and board for playing cards) (3) Printing and writing paper, packing and wrap- Thirty-five paise ping paper (strawboard and pulpboard, includ- per kilogram. ing grey board, corrugated board, duplex and triplex boards, other sorts) (4) All other kinds of paper and paper board Fifty paise per not otherwise specified. kilogram. -------------------------------------------------------------------------- Position in 1975 : ---------------------------------------------------------------------- Description of goods Rate of Duty -------------------------------------------------------------------------- 17. Paper, all sorts (including paste board, mill-board, strawboard and scardboard), in or in relation to the manufacture of which any process is ordina- rily carried on with the aid of power- (1) Cigarette tissue Rs. 3 per kg. (2) Blotting, toilet, target, tissue other than ciga- Re. 1 and 20 paise rette tissue, teleprinter, typewriting ; mani- per kg. fold, bank, bond, art paper, chrome paper, tubsized paper, cheque paper, stamp paper, cartridge paper, (waxed paper, polythelene coated paper), parchment and coated board (including art board, chrome board and for playing cards) (3) Printing and writing paper, packing and 90 paise per kg. wrapping paper, strawboard and pulp board, including grey board, corrugated board, duplex and triplex boards, other sorts (4) All other kinds of paper and paper board, not Rs.1 and 20 paise otherwise specified per kg. ---------------------------------------------------------------------- Position in 1976 : ----------------------------------------------------------------------- Item No. Tariff description Rate of duty ----------------------------------------------------------------------- 17. Paper and Paper Board, All sorts (including paste- board, mill-board straw-board, cardboard and corrugated board), in or in relation to the manu- facture of which any process is ordinarily carried on with the aid of power- (1) Uncoated and coated printing and writing Twenty-five per paper (other than poster paper) cent ad valorem (2) Paper board and all kinds of paper (includ- Thirty per cent ing paper or paper boards which have been ad valore subjected to various treatments such as coat- ing, inpregnating corrugation, creping and design printing), not elsewhere specified. --------------------------------------------------------------------------

6. In respect of the product of <ORG>, they had been referring to the same in their correspondence as coated paper and had been claiming that in respect of such coated paper they were entitled to rely upon Trade Notice No. 94/Paper-VI/CE/1975 dated 8-8-1975 of <ORG>. <NAME> also in his arguments referred to this Trade Notice. But it would be seen that the Trade Notice dealt with paper coated or laminated on one side only with polythene. No doubt the word 'laminate' had been used with reference to the polythene material and the heading read polythene coated/laminated paper. <NAME> contended that in the circumstances the product of M/s. Guardian Plasticote should also be described and treated as coated paper only and would, therefore, be entitled to exemption. When it was pointed out to him that in their correspondence they had referred to the product as laminated paper, he stated that it might have been so described in certain places but it would not really matter as the two processes are both referred to without distinction in the Trade Notice. But, as earlier seen, the Trade Notice referred to a product with a polythene film on one side of the paper, whereas, in the present instance, polythene film is pressed between two layers of kraft paper. It could, therefore, be described only as laminated paper rather than coated paper.

7. Two further facts relied upon by <NAME>, with reference to which there appeared to be no dispute, are that the product manufactured by <ORG>, was being supplied to <ORG> for packing ammunition, and that kraft paper was being supplied by the customers and the lamination was being done by the appellants as job work.

8. The first argument of <NAME> was that the product of his clients did not fall under T.I. 17, as it stood at the relevent time and did not further fall in any of the other items as the Tariff" then stood, and, therefore, the product was not excisable, in the absence of any residuary item at that time. He sought to support his arguments on three different lines of reasoning. He first contended that if coated paper fell under T.I. 17(4) in 1974 (as the Assistant Collector held), there was no need to bring it under T.I. 17(2) in 1975, since duty was the same under 17(2) and 17(4) in 1975. It may be noted that ''waxed paper and polythene coated paper" were introduced in T.I. 17(2) in 1976. But in connection with this argument it should be noted that the product in question is really not coated paper but laminated paper with polythene laminated between two layers of paper. Therefore, this contention of <NAME> is not acceptable as a basis for rejecting the classification in 1974.

9. He next pointed out that T.I. 17(2) dealt with coated board even as the item stood in 1974, but that there was no such provision for coated paper under any of the four sub-divisions of T.I. 17. He, therefore, contended that this itself should suffice to establish that coated paper was not considered under the Tariff to be an excisable product. In this connection, as well as in connection with several other arguments of the two appellants, the contention of <NAME> is that in the Tariff as it stood in 1974, 1975 and even later, the main heading was Paper, all sorts. He, therefore, contended that each type of paper, whether specially enumerated or not, fell within the Tariff description and, therefore, the question of duty would have to be resolved on the consideration whether the resultant product was the result of manufacture, as defined in the Central Excises and Salt Act , and not on the basis whether the said product is specifically enumerated in the item or not. This argument appears to us to be quite proper and sound. Therefore, the mere fact that there was no reference to laminated paper (or even coated paper) in T.I. 17, as it stood in 1974, would not render the product non-excisable for that reason.

10. <NAME> further contended that whereas under the amendment of 1980 there were specific amendments with reference to T.I. 19 and T.I. 22, as to the various enumerated processes as would amount to manufacture, there was no such amendment even then with reference to T.I. 17. He, therefore, contended that in the absence of such enumeration as to processes (to which an excisable commodity may be subjected) all processes (such as laminating process in his case) cannot be said to result in manufacture as would attract duty liability.

11. But in connection with this argument, we have to take into account the recent decision of <ORG> in the case of <CITATION> 1985 (20) E.L.T. 179 (S.C.). In that decision they had taken into consideration several earlier decisions of various High Courts including the decision of <ORG> in the case of <ORG> (1983 E.L.T. 1736 Bom.). In the said decision <ORG> had dealt with the question whether several processes, such as, bleaching, dyeing, printing etc. carried out on cotton fabrics would result in manufacture of a new excisable commodity. They had considered the question with reference to first principles as well as statutory provisions. <ORG> had held that even on first principles such processes would amount to manufacture. Referring to this conclusion <ORG> observed in the case cited supra in para 34 (we observe that there appears to be some discrepancy in respect of the paragraph numbers in the judgment as reported in the several journals in which the report has appeared. We have adopted the paragraph numbers as they appear in <ORG>).

"This question has been elaborately considered by <ORG> in the case of <ORG>, and 24 other petitions heard along with the same and are under appeal to this Court by Special Leave. We are in respectful agreement with the conclusions reached by the learned Acting Chief Justice of <ORG> in that decision."

In paragraph 33, they had further held -

" it appears in the light of the several decisions and on the construction of the expression that the process of bleaching, dyeing and printing etymologically also means manufacturing process".

In paragraph 30, they had observed-

"the moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, "manufacture" takes place and liability to duty is attracted."

In paragraph 31, they had further observed-

"Whatever may be the operation it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of manufacture. Any process or processes creating something else having a distinctive name, character and use would be "manufacture."

In paragraph 38, they observed-

"in that view of the matter etymologically the word "manufacture" properly construed would doubtless cover the transformation".

12. In the light of the above observations of <ORG> it would not be proper to hold that unless a particular process is enumerated in the definition section it would not amount to a process of manufacture, as would attract levy of duty. The proper question would be whether by reason of the said process another distinctive product having a distintive name, character and use had emerged. If this question is answered in the affirmative the process would have to be classified as manufacture within the meaning of the Central Excises and Salt Act .

13. It had been already seen that the very argument of <NAME> himself was that when kraft paper was subjected to the process of lamination by laminating two layers of kraft paper with polythene, a new product had emerged, which was not enumerated in any of the several subheadings of T.I. 17. That argument itself would suffice to prove that <NAME> could not contest the position that after the lamination process the kraft paper ceased to be mere kraft paper and that a new and distinctive commodity had emerged. It may be noted that with reference to the present issue itself. <ORG> <ORG>, had approached <ORG> at Calcutta at an earlier stage for some relief. A copy of their Writ petition has been filed in the paper book. It is seen that in paragraph 6(a) of that petition <ORG> Guardian Plasticote had mentioned "the said products which are processed at the said factory of your petitioner were not covered by any of the items of goods of the description specified in Tariff Item 17. Such products are neither paper nor paper board of any sort. These products are new and distinct commercially known articles" ( emphasis supplied). Therefore, judged by the test laid down by <ORG> mentioned supra, there can be no doubt that by subjecting kraft paper to the process of lamination in the manner mentioned earlier, <ORG> <ORG> were manufacturing a new commodity. The absence of mention of this process in any of the sub-items of T.I. 17, as it then stood, would not render the new product not a manufactured product.

14. But <NAME> contended that in any event the process was one of coating and as coated paper it was exempt. He relied upon the Trade Notice cited earlier in this connection. But it has been already seen that the process was one of lamination and not mere coating (as was the case dealt with under the Trade notice). This argument also is hence not acceptable.

15. <NAME>, further referring to the decision of <ORG> in <ORG> case, submitted that the judgment dealt with the question of manufacture under the deeming provisions introduced by way of amendments to the Act and on that basis only held that treated fabrics were to be held as falling under T.I. 19. He contended that in the absence of any such deeming provisions so far as T.I. 17 is concerned, the same result would not follow with reference to the processes carried out by <ORG>, on kraft paper received by them for conversion into laminated paper.

16. Sri <NAME>, for M/s. <ORG> also raised a similar contention. He stated that three rules would have to be applied in interpreting provisions in statutes and also in following the judgments with reference to such statutory provisions. According to him, they were (i) when an Act is amended the intention is deliberate to change pre-existing law, (ii) when a constitutional issue is not necessary to be decided the <ORG> would not do so ; and (iii) every judgment has to be read in the light of the facts proved in that case and the <ORG> cannot be said to have decided a question which was not required to be decided. He stated that, applying the said principles, the amendment under the 1980 Act with reference to products covered by T.I. 19 and 22 would go to establish that but for such amendments the processes enumerated would not have amounted to manufacture, and that, therefore, the observations of the Supreme <ORG> in the <ORG> case would have to be read in that background. He further contended that the observation of the Bombay High <ORG> relating to their decision being on first principles led to conclusions about manufacturing processes but not about liability for duty. He contended that with reference to textiles the amendment of 1980 made excisable each of the several processes mentioned in Tariff Items 19 and 22, but that in the absence of such an amendment in Section 2(f) with reference to T.I. 17, no duty would become payable irrespective of the several processes carried out in the absence of reference to such processes in the tariff entry itself.

17. <NAME>, for <ORG>, laid stress on the concluding words in paragraph 20 of the judgment in the <ORG> case which read "If the impugned act is valid then no other question need be examined except the question as to what should be the actual levy of the duties". He contended that, therefore, <ORG> concerned itself with the question whether the Amendment Act was intra vires and having come to an affirmative conclusion on that point further concerned itself thereafter with reference to the actual levy only. He, therefore, contended that no general principles as to what would constitute manufacture can be spelt out of the said judgment.

18. But none of the above arguments appears to us to be acceptable. We have extracted earlier the several passages in the judgment of <ORG> which lay down general principles as to whether processes carried out on an already manufactured product could result in manufacture of another distinct excisable commodity. <ORG> has held that such a result is possible, and permissible, and that even the fact that the new excisable commodity would also fall under the same tariff item, or even under the same sub-heading of the same tariff item, would not make any difference as to the liability for duty with reference to the new excisable commodity. We may in this connection refer to a later judgment of <ORG> in the case of <CITATION> 1985 (21) E.L.T. 633, S. C.. In that judgment <ORG>, referring to the amendment of Section 2(f) in 1980, observed-

This observation by <ORG> itself would support Our finding that the absence of amendment to Section 2(f) with reference to T.I. 17 need not rule out our conclusion as to the process adopted by the appellants amounting to manufacture as defined in the Act.

19. Therefore, what remains to be considered at this stage is the further argument of <NAME> (as also one of the submissions of <NAME>) that even if the process carried out resulted in the emergence of a new distinct commercial commodity, whether duty liability would fasten on the same in the nature of the tariff entry as it was worded at the relevant time. The tariff entry, as it stood in the period relevant for the case of <ORG>, has been already extracted. The tariff entry at that time did not in terms refer to laminated paper. <NAME> pointed out that coating or lamination were known as processes even earlier, and were, in suitable cases, taken care of in the relevant tariff entries. His comment was that in the absence of any such entry in T.I. 17, the process of lamination, even if it is to be considered as a process of manufacture, would not, for that reason, attract duty liability.

20. <NAME> had filed extracts from Industrial and Speciality papers (lamination and laminated paper products) (Chapter 15) as also extracts from "Coating of papers and boards" by <NAME> published in <ORG> 1964, to establish that the processes of coating and lamination were known processes for bringing into existence a special commodity with special characteristics not to be found in the original paper. He further pointed out, with reference to extracts from "Paper Trade Manual" (paper and allied trade Hand Book) by <ORG>, that paper is generally classified according to uses to which the particular variety is to be put, the broad categories being writing, printing, wrapping, paper other sorts, newspaper printing and board. He pointed out that there are different definitions in the glossary of the said book relating to coated, kraft union, water-proof paper and tarred paper. Kraft union was defined water-proof packing paper made of two kraft papers conjoined by a layer of tar, to make it impervious to water. He also pointed out that <ORG> has issued different specifications, for instance, IS 1397/67 for kraft paper; IS 1398/82 for bituminised water proof paper and IS 6615/72 for wrapping and packing paper. On the basis of all the above facts, he contended that the laminated product manufactured by <ORG>, as well as the bituminised paper manufactured by <ORG>, are distinct commercial marketable commodities and the manufacture thereof would, therefore, attract duty liability, since T.I 17 at all times referred to paper, all sorts. His contention is that when paper of one sort is, by a process of manufacture, converted into a paper of another sort duty liability would arise (subject to other safeguards such as, set off etc). In making this submission he relied on the decision of <ORG> in the <ORG> case where duty liability was held to arise though, according to the assessees in that case, the initial product was cotton fabrics and the processed product was also cotton fabrics. <ORG> held that even though there was no jump from one tariff entry to another, or even from one sub-heading to another in the same entry, yet duty liability would arise so long as (i) the process engaged in amounted to manufacture and (ii) the resultant product was a commercially distinct marketable commodity.

21. As earlier seen, <ORG> themselves admitted in their own writ petition that the laminated product manufactured by them was commercially distinct from kraft paper received by them or the polythene used in the process of lamination. This process of lamination made the two layers of kraft paper impervious to water and oil and the resultant product was, therefore, specially suited for packing ammunition; That was why the same was being exclusively supplied to <ORG>. Since therefore, the process of lamination, which amounted to manufacture, led to the emergence of a new and distinct commercial product, marketable as such, the conclusion is inevitable that this new product would invite imposition of duty, though there may not be any move away from tariff item 17 or even from one sub-heading to another. The argument of <NAME> is that Tariff Item 17(3), as it then stood, related to packing and wrapping paper and since kraft paper was packing and wrapping paper and the laminated product was also packing and wrapping paper, there was no case made out for imposition of duty once over on the resultant product. This argument, for the reasons stated earlier, cannot be accepted.

22. As earlier mentioned there were conflicting judgments of this <ORG> on the question of laminated paper. They are (1) <CITATION> 1983 (2) E.T.R. 147] and (2) <CITATION> ., 1984 (4) E.T.R. 118. The judgment of <ORG> in the <ORG> case is subsequent to both the above decisions. Since we have based our decision mainly on the observations of <ORG> in its decision we have not made special reference to the two judgments of this <ORG> above referred to, while taking note of the reasons stated therein.

23. <NAME>, appearing in the appeal of <ORG> United Paper Products contended that bituminising process carried out by his clients did not amount to manufacture as would invite imposition of excise duty. In support of this contention, he relied on the decision of <ORG> in the case of <ORG> 1980 E.L.T. 579, Madras] and that of <ORG> in the case of <ORG> (20) E.L.T. 314 (A.P.). He contended that these judgments related to bituminised paper itself, and, therefore, in the absence of any judgment to the contrary by any other <ORG>, we are bound to follow the said decisions and grant relief to his clients. But in considering these arguments we have to take into consideration the judgment of <ORG> in the <ORG> case, which had been rendered subsequent to the above said two decisions. No doubt the judgment of <ORG> did not deal with bituminised paper, but the observations in the said judgment as to whether any particular process would amount to manufacture, have been considered earlier in this judgment. It had been seen that judged by the tests laid down by <ORG> in the said judgment, the process of laminating two layers of paper with an adhesive between the two in order to manufacture a new commodity, known differently under a distinct name, and meant for distinct use, would amount to manufacture of a new distinct excisable commodity. Judged by the said test, the process of bituminisation carried out by <ORG> United Paper Products would also amount to manufacture of a new excisable commodity i.e., bituminised paper, the process of bituminisation being carried out in order to impart additional qualities, such as strength and impermeability to water. Therefore, though the two decisions relied on by Sri <NAME> may have been with reference to bituminised paper, the conclusion in the said judgments cannot hold good subsequent to the decision of <ORG> cited supra, for the reasons more fully stated even earlier.

24. Other submissions relating to the case of <ORG> have to be now looked into. These relate to eligibility under certain notifications, as also the bar of limitation in respect of the demand. So far as <ORG> No. 45/73 concerned, the Collector as well as the <ORG> have found in favour of the appellants. So far as <ORG> No. 67/76 is concerned (relating to set-off of duty) there is no dispute on the applicability of the notification. The finding of the lower authorities is that the set-off under <ORG> No. 67/76 should be applied first and then the slab exemption under <ORG> No. 45/73. In view of the words of the <ORG> No. 45/73 (which speak of exemption to paper from so much of the duty leviable under item 17 read with any <ORG> for the time being in force issued under Rule 8) we agree with the conclusion of the lower authorities on this question.

25. So far as the bar of limitation is concerned, the contention of <NAME> is that the period for which the duty demand had been raised was 16-3-1976 to 26-5-1976, but the show cause notice had been issued on 10-7-1978 only and that in the absence of any allegation or proof of suppression or fraud or mis-statement of facts the demand must be held to be barred by time. On the other hand the case for the department is that as the bituminised paper manufactured and cleared by the appellants was not disclosed (in the classification list filed) even as a non-excisable product, the demand under Rule 9 for the period in question was justified and within time. No doubt <NAME> comments that in the site plan filed with the department there is a reference to a place for manufacture of bituminised water proof paper and hence the manufacture of this product had been disclosed to the <ORG> and was within its knowledge. In this connection <NAME> submitted that he relied on the citations mentioned in the order of <ORG>, in pursuance of which the matter has been referred to this Five Member Bench. He points out that, as held in 1983 E.C.R. 969 non-disclosure of relevant information would amount to suppression of facts. He further points out that as held by <ORG> in the case of <CITATION> 1977 Tax Law Reporter N.O.C. 31 Cal. when clearance is made without payment of duty and without observing the necessary excise formalities duty would be demandable under Rule 9(2). He further relies on the judgment of <ORG> in <CITATION> (1983 E.L.T. 338) wherein it had been held that it is only in cases where there had been assessment that Rule 10 would apply. He contends that since there had been no assessment in the present instance it is only Rule 9 that would be applicable.

26. As mentioned earlier, the appellants had not disclosed in their classification list the bituminised kraft paper as an item manufactured by them but not excisable. They had not disclosed the same at all in their classification list. In the circumstances we hold following the above noted authorities that the demand under Rule 9 was justified and the plea of bar of limitation cannot be upheld.

27. In the light of the above discussion we hold that neither appellant is entitled to any relief in these appeals. Both the appeals are accordingly dismissed.

<NAME>, Member (T)

28. Once a duty has been paid on an article, that duty cannot be recovered again on that article whatever form or shape it changes into. This, in my opinion, is a fundamental rule of taxation. If duty A is leviable on articles X, Y, Z grouped in an item/sub-item, and X has paid it, X will never have to pay this duty again, whether it changes into Y or Z or even into any other thing. Similarly, if Z has once paid duty A, it will never need to pay this duty again whether it changes into Y or X or into anything else. However, if duty A is leviable on X, Y and Z and duty B leviable on P, Q and R, and if X having paid duty A changes into P, it will have to pay duty B, regardless of the fact that duty A may be equal to duty B and P is nearly the same as X.

29. If the tariff item groups a number of commodities in an item or sub-item and one duty is specified against the group, it means each one in the group is liable to the same duty, though the individuals may differ in one or more particulars. But if one of them has paid the duty, leviable against the group, it cannot be subjected to that duty agian in future. If it is, it would be double taxation and this is not permitted by law at present. The Customs Tariff of 1975 recognizes this problem and to prevent it, makes elaborate sub-items of goods, all subject to different duties. The <ORG> on which the Customs Tariff is modelled, makes the list even more elaborate and detailed, the objective being segregation of commodities into separate headings, subheadings, so that whatever the change or process, there will be a heading for the new article. This avoids the problem covered by an article that has undergone a change or process, remaining in the same group heading or sub-heading.

30. <ORG> is gradually recognizing this. A look at the Item 25, for iron and steel, will show that instead of the old system of a number of totally disparate products like bars and wires, to name just two, being grouped in one head [26AA(ia)], today's iron and steel items are more rationally arranged under Heading 25. For example, plates and sheets are under one item, while galvanized plates and sheets are given another item under the same Heading 25. For this reason, no manufacturer can claim that a galvanized plate was only a plate and that no manufacture was involved in galvanizing. Whether or not manufacture was involved, the moment a plate is galvanized it is drawn into the "galvanized" item as a new entry, not having paid that duty before, to pay that duty.

31. It is the head or item of the tariff that determines "manufacture" for Central Excise purposes. But this has been interpreted frequently to mean that whenever a manipulation or a processing or a change takes place, an article that has already borne a duty must bear that duty again. Under this doctrine, there have been cases when sodium silicate was charged to same duty it had already paid because it had been purified. Disputes frequently arise when an artificial resin that had paid duty as a solid was charged duty again when it was reduced, to a powder state. By this reasoning, when this powder is then formed into a paste, the same resin duty must be paid for the third time. Can there be a more irrational taxation project ? The argument perhaps goes something like this : this solid resin by being turned to powder has become resin a second time and when it is reduced to a paste, it becomes resin for the third time.

32. The decision of <ORG> in the <CITATION> , 1985 (20) E.L.T. 179 has been read and understood as not merely a validation of the retrospective amendment of Item 19 I of the Central Excise Tariff, among other things, but also as an approval of levy of duty on processed/ printed cotton fabric even without the amendment. In other words, the judgment is said to consider that the retrospectivity was unnecessary since charging of duty on printed fabric which has already paid duty as grey fabric was completely lawful. I have found nothing in the judgment that would encourage such a perception. At paragraph 20, the <ORG> lists three points that arose before it. In the first point, the last sentence runs :

"In other words whether these various processes carried out by the petitioner company amount to bringing into existence different and distinct goods, commercially known as such, to attract levy of duty under Section 4 of the Central Excises and Salt Act , 1944."

The paragraph ends with the words :

"If the impugned Act is valid, then no other question need be examined except the question as to what should be the actual levy of the duties."

33. There was no pronouncement that duty on processed cotton fabric was valid under the old unamended item. On the other hand, the direction of the arguments and the court's attention was on whether the amending Act, with its retrospectivity, was valid, when a processed cotton fabric was no more and no less a cotton fabric ; there had been no manufacture to call down fresh duty on it when it had already suffered duty as a cotton fabric. The court after a very detailed examination and search, announced that fresh duty was leviable on the processed fabric because it became subject to the coverage of the new heading of processed fabric as soon as it was printed etc., and hence was a manufacture for the purpose of Central Excise Duty.

34. Paragraph 46 of the judgment is, in my opinion, the index of the judgment. The <ORG> approved "small repairs" of this kind, as not acting harshly, as not being arbitrary or discriminatory. And repairs, we should remind ourselves, are not undertaken except when a damage or a fault is detected. There is not a word in the whole judgment that the "small repairs" were unnecessary and that the old unamended item was capable of coping with the problem. And the legislature itself, by this use of a retrospective amendment, recognised the fault and accordingly repaired it. It is not for nothing that the Hon'ble judges took note of the fact, recorded in paragraph 15, that the processors had been collecting processing duty, and, after the Gujarat High <ORG> judgment, claiming refund.

35. It is believed that <ORG> agreed with the <ORG> judgment in 1983 E.L.T. 1736 and signified its assent to duty on processed fabric even without the retrospective amendment. However, the <ORG> arrived at its decision on fresh duty only on the basis of the retrospective amendment, and nothing else. It noted the "small repairs" (paragraph 15) and approved them. It did not say the repairs were unnecessary, which it would have done, had it seen them so. A phrase that appears in paragraph 17 of the <ORG> judgment has been quoted by some to reinforce their interpretation that the Court thought the amendment unnecessary. This phrase runs "...it was not necessary to make any separate amendment in the substantive Item No. 19". This phrase does not substantiate duty on printed fabric even under the unamended item, but refers to the argument put forward by the factories that the Item No. 19 description "cotton fabrics" remained unamended and hence the amendment had not had the desired effect. The Court rejected the arguments saying that as the item had been amended by substituting a new 191, the amendment of the description under 19 cotton fabrics, was not necessary.

36. The <ORG> judgment has also been understood to approve duty on processed fabric under the unamended item 19 because it quotes and approves another judgment of the same court in Kores (India) Limited 1982 E.L.T. 253 which said that a teleprinter roll out from large jumbo rolls Writing printing paper a new manufacture and therefore, should pay duty as such teleprinter roll. The item for this product was 17 CET and while printing paper was specified under heading 17(3), teleprinter roll was entered in 17(2). In these circumstances, there cannot be any question that when printed paper was cut into teleprinter roll it left its home 17(3) and had to fall into 17(2) a new head, with a new duty. It paid, as teleprinter roll, a new duty, not the same duty it paid as printing paper under item 17(3). The decision supports what I have been writing all this time.

37. There cannot be a good reason for exacting the same duty twice over on the same commodity or product, under the law at present. The law can make every little change, every fine alteration, every new appearance, dutiable, and no one can say it is wrong. But the scheme for that is a heading/ sub-heading for every time of such duty levy, to make each one a duty attracting "manufacture" ; not putting a number of products together as liable to one duty, and then clamping down tax every time a "change" takes place. Change cannot serve as the duty levying test-only a tariff heading can do that. The true qualification for a duty is not a "manufacture" or a "change" but a manufacture or a change that results in entry into a head or item, a head or item that had not till then been qualified for. That is the ratio of <ORG> <ORG> judgment on vegetable oil.

38. I rule that the reformed, coated, laminated etc. paper, which has paid duty cannot be charged the same duty again.

<NAME>, Vice President (J)

39. I have carefully gone through the majority order proposed by Brother <NAME> in which Brothers <NAME> and <NAME> have concurred and minority order proposed by Brother <NAME>. I have not been able to persuade myself into concurring with the majority order and to a large extent though with some qualification I am in agreement with the minority views of Brother <NAME>, I consider it proper to record my views in brief separately.

In <ORG> case 1985 (20) E.L.T. 179 (S.C.) a three Judge Bench of <ORG> was mainly concerned, as would appear from para 20 of the judgment setting out the main points falling for consideration, with the question whether in respect of cotton fabrics and man-made fabrics as mentioned under Item 19 or 22 of the Schedule to the Central Excises and Salt Act , 1944, certain processes like bleaching, dyeing etc. amounted to manufacture within the meaning of the Act as it stood prior to passing of Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980-whether these various processes carried out by the petitioner in that case amounted to bringing into existence different and distinct goods, commercially known as such, to attract levy of duty under Section 4 of the Central Excises and Salt Act , 1944 and whether after the amendment of the Act the levy is valid and whether the amendment of the Act could be said to be intra vires under Entry 84 of List I of the Seventh Schedule to the Constitution or if not it could be said to be valid under Entry 97 of List I of the Seventh Schedule to the Constitution and whether the impugned Act violated Article 14 or Article 19(1)(g) of the Constitution. In Para 21 (as reproduced in Excise Law Times of June 85 part) <ORG> set out the question for examination in the following words :

"It is, therefore, necessary to examine the amendment of the definition of 'manufacture' in Section 2(f) of the Central Excises and Salt Act , 1944 and Tariff Items 19(1) and 22(1) of the First Schedule to the Central Excise Tariff."

The above would show that the Hon'ble Supreme Court was examining the question of 'manufacture' in Section 2(f) of the Central Excises and Salt Act , 1944 with reference to Tariff Items 19(1) and 22(1) dealing with cotton fabrics and man-made fabrics and the observations made in the later part of the judgment should be read in this context and not in isolation calling out a few sentences divorced from the specific questions formulated by <ORG> in paras 20 and 21 of the judgment as reproduced in E.L.T. (supra). I need not emphasise that Section 2(f)(v) and (vii) in relation to cotton fabrics and man-made fabrics define certain processes like bleaching, mercerising etc. specifically as the processes of manufacture. I am aware that <ORG> in this decision approved the <ORG> decision in <CITATION> . (1983) E.L.T. 1736 (Bom.). In this decision the <ORG> on first principles held that processes of bleaching, dyeing and printing did bring into existence a new marketable commodity different from the grey cloth which is handed over to the processors. I am also aware that in <CITATION> 1985 (21) E.L.T. 633 (S.C.), referring to the 1980 amendment in Clause (vii) of Section 2(f) the observation "This amendment has only attempted to explain the obvious and to put the question beyond dispute." What I have said about <ORG> case would also be true of this decision. From these decisions all that I can gather about the position before the Amendment 1980 is that according to <ORG> and <ORG> even before the amendment processes of bleaching, dyeing and printing did bring into existence a new marketable commodity different from the grey cloth which is handed over to the processors. From the <ORG> case (para 18 of the decision) it is seen that the amendment made in 1980 inter alia provided- "sub-item covering such 'cloth', 'cotton cloth or 'cotton fabrics' not subjected to any process mentioned in Sub-clause (v) of clause (f) of Section 2 of the Central Excise Act, as amended by this Act; and (B) a sub-item covering such 'cloth', 'cotton cloth', or 'cotton fabrics' subjected to any such process or any two or more such processes and the rate or duty specified in such Act with respect to such cloth, cotton cloth, or 'cotton fabrics' had been specified separately with respect to each of the aforementioned sub-items thereof". Similar provision was also made in clause (iii) of Sub-section (1) of Section 5 in respect of "rayon or artificial silk fabrics" or "man-made fabrics." The decision nowhere says that even without these amendments duty would have been collectable separately deeming that the products mentioned therein had been specified separately with respect to each of the sub-items mentioned therein. In my view, there has been no such amendment with respect to other sub-items of the First Schedule to the Central Excises and Salt Act , 1944 (hereinafter called Central Excise Tariff) and in absence of such amendment the conservative Central Excise understanding reflected in Brother <NAME>'s order with respect to Central Excise duty should continue. I might, at this stage, state that Section 3(1) of the Act inter alia provides for duties of excise being levied and collected on all excisable goods other than salt produced or manufactured in India. Section 2(d) defines "excisable goods" to mean goods specified in the First Schedule as being subject to a duty of excise and including salt. Having regard to these provisions duty liability attaching to any goods on their transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name be it the result of one process or several processes could only be attracted when the goods are excisable goods as set out above. For the purpose other relevant provisions' of the Act, the Rules, Central Excise Tariff, its scheme, division, groupings, items and sub-items and exemption notification, if any, would have all to be taken into consideration and then only the duty liability determined. In the <ORG> decision I have found nothing to dispense with these requirements. In fact, a 4 Member Bench of <ORG> in the <CITATION> AIR 1976 (S.C.) 800 (not cited by any of the parties before us and not noticed in the <ORG> decision), dealing with a Sales Tax matter in para 13 of the judgment held as follows :

"Is is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the <ORG>, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the <ORG> law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of <ORG> is also concerned with "goods" of various descriptions. It, therefore, becomes necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description."

In view of the aforesaid <ORG> decision before a product in a sub-item of the Central Excise Tariff is sought to be taxed again, it would have to be seen whether taxable description has changed. In absence of which it may not be legal or proper to tax the item mentioned in the sub-item again. In fact, in June part of E.L.T. 1985 itself there is another <ORG> decision in <CITATION> 1985(20) E.L.T. 202 (S.C.), dealing with plywood and plywood circle falling under Item 16B of the Central Excise Tariff. The question formulated by the <ORG> in first part of the decision is whether the plywood manufactured by the respondent and utilised in manufacturing plywood circles to be used as component parts of packing material for wires and cables is exigible to excise duty. In Para 16 of the decision after stating whether cutting of plywood blocks or panels into circles constitute a manufacturing process and whether circles made out of plywood blocks or panels constituted a different product from the plywood may be debatable, the Hon'ble <ORG> at later part in the same para observed "No question of double taxation arises as duty is leviable only once on the plywood as it comes out of the press in the panel or block stage and no further duty is to be levied on the circles which are made out of the plywood blocks or panels".

40. <CITATION> . AIR 1978 S.C. 945, <ORG> held as under :

"We do not think that it is fair to so interpret a taxing statute as to impute an intention to the legislature to go on taxing what is virtually the same product in different forms over and over again. Such a result would be contrary to basic axioms of taxation. Unless the language of the taxing statute was absolutely clear, it should not, be given an obviously unfair interpretation "against the assessee."

Keeping the aforesaid in mind, while with respect to cotton fabrics and man-made fabrics the taxing statute is absolutely clear regarding different processes and stages at which duty is to be levied separately, with regard to other items and sub-items the position is not the same. Unless in any particular item or sub-item of the Tariff language is clear manifesting intention to charge duty separately at each stage or on each product mentioned in the sub-item, the principle enunciated in <ORG> case, regard being had to other decisions of <ORG> as set out above, may not be applicable.

41. Particular reference in this connection may be made to the decision of <ORG> in <CITATION> known as Ramlal Mansukhrai, Rewari and Anr. 1978 E.L.T. J 389 where in relation to Copper (Item 26A of the Tariff) in Sub-item 2 the word 'manufactures' was used with reference to plates, sheets, circles, strips and foils.

42. Taking up the appeals before us in question from the order of the majority it is seen that in the case of <ORG> on the basis of arguments advanced by <NAME> conclusion was reached subjecting kraft paper to the process of lamination by laminating two layers of kraft paper with polythene a new distinctive commodity had emerged and absence of the mention of the process of lamination in any of the sub-items of tariff item 17 would not render the new product not a new manufactured product. Even though this product was not mentioned in T.I. 17 as the relevant item at the material time cover paper (all sorts), this product will merit duty under T.I. 17. For the purpose of these appeals it is not necessary for me to discuss whether a classification which operates in rem and affects other parties should be decided on the basis of an admission made during arguments to score a point. I would, however, say that the taxable description of the newly emerged product had not changed and regard being had to the <ORG> decision of <ORG> above, the product would not attract duty again. If the alternative argument of this appellant be accepted that the product remained the same as it was earlier before lamination then also no case for levying duty twice would be made out.

43. As for the other appellant M/s. <ORG>, reliance has been placed on two <ORG> decisions in <ORG> (1980 E.L.T. 579 <CITATION> 1985 (20) E.L.T. 314 (A.P.). The two decisions hold that there is no transformation into bonding together of the bitumen and kraft paper. The two decisions are directly applicable to the product in question before us. For the reasons set out above I am of the view that the decision of <ORG> has not the effect of overruling these two decisions. Relying on these two decisions I would allow the appeal of this appellant. With these observations I am generally in agreement with the views expressed by Brother <NAME>.

44. In my view no case for revision of the decision of the Tribunal in <CITATION> (1983 E.L.T. 1123) by this Bench is made out and I would maintain that the decision is correct,

45. However, in view of the decision of the majority the appeals have to fail.


ORDER (1) This judgment will dispose of Civil Writs No. 342-D of 1958 No. 343-D of 1958 in which the points raised are identically the same.

(2) <NAME> petitioner was appointed by the Director, <ORG>, Kharagpur, before the <ORG> (Kharagpur) Act, 1956, (hereinafter to be referred to as the Act) came into force, as a peon (General Central Services (Non-Gazetted Class IV). His post was declared permanent and personable and the place of duty was designated as the <ORG>, Kharagpur, but it was mentioned that he might be required to serve under the Central Government anywhere in India, vide Annexure 'A'.

On 14th November 1956 there was another office order issued by the Register, <ORG>, Kharagpur, according to which the petitioner was confirmed in his post with effect from 30th September 1954 against the post of office peon in the scale of Rs. 30-1/2-35.

(3) The other petitioner, <NAME>, was originally appointed in the office of the Director General, <ORG>, New Delhi, on 23rd December, 1942 and then his services were transferred from the <ORG> to <ORG> and he was appointed with effect from 8th June 1950 as a temporary <ORG> Clerk. Thereafter he was confirmed in that post towards the end of March 1951 with effect from 1st April 1951. He was promoted as an Assistant with effect from 1st April 1951 in the scale of Rs. 160 to 450/- per month and was confirmed in that post on or about 11th September 1951.

(4) The Act came into force on 15th September 1956. According to the preamble, the Act was to declare the institution known as <ORG>, Kharagpur, to be an institution of national importance and to provide for its incorporation and matters connected therewith. Section 5 was in the following terms:

"5. (1) Subject to the provisions of this Act every person who is permanently employed in <ORG> at Kharagpur immediately before the commencement of this Act shall, on and from such commencement, become an employee of the <ORG> and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension, leave, gratuity, provident fund and other matters as he would have held the same on the date of commencement of this Act if this Act had not been passed.

(2) Notwithstanding anything contained in sub-section (1) the <ORG> may, with the prior approval of the visitor, alter the terms and conditions of any employees specified in sub-section (1) and if the alteration is not acceptable to such employee, his employment may be terminated by the <ORG> in accordance with the terms of the contract with the employee or, if no provision is made there in this behalf, on payment to him by the <ORG> of compensation equivalent to three months remuneration.

(3) Every person employed in <ORG> at Kharagpur other than any such person as is referred to in sub-section (1) shall, on and from the commencement of this Act, become an employee of the <ORG> upon such terms and conditions as may be provided for in the statutes, and until such provision is made, on the terms and conditions applicable to him immediately before such commencement."

The main grievances of the petitioners were that by virtue of Section 5 of the Act they would cease to be Government servants and would lose the lien which they had acquired under the Fundamental Rules to the posts to which they had been appointed. According to the petitioners, their services could not be terminated in the manner in which it had been done by a statutory enactment but under Art. 309 of the Constitution it was the President alone who could terminate their services as Government employees subject to other safeguards in the Constitution. The validity of S. 5 was also questioned on the ground that it was violative of Art. 14 of the Constitution. The petitioners moved <ORG> at Calcutta under Art. 226 of the Constitution for appropriate writs and directions but the rule was finally discharged on 12-8-1958 primarily on the ground that <ORG> did not reside within the jurisdiction of that Court.

The petitioners have prayed for writs in the nature of mandamus directing the respondents to forbear from giving effect to and from continuing to give effect to S. 5 of the Act and, in the alternative, for writs of prohibition directing the respondents to forbear from exercising jurisdiction vested in them by refraining from giving effect to S. 5 of the Act and such other writs, orders or directions as the <ORG> may deem fit and proper. Mr. <NAME>, the learned counsel for the petitioners, has rightly abandoned the prayer for writs of prohibition as admittedly there are no judicial or quasi-judicial proceedings pending in the present cases with regard to which a writ of prohibition will lie.

(4) The first question that has been canvassed by Mr. <NAME> is that the essential result and effect of S. 5 of the Act is to terminate the services of the petitioners under the <ORG> and to transfer them to the Institute which is body incorporate but which is not a Department of the <ORG> and is quite a distinct and independent body. It is said that the wider avenues of promotion which were open to the petitioners as <ORG> servants have been permanently blocked so far as the petitioners are concerned although according to the provisions of the Act they are to hold their office or service by the same tenure and at the same remuneration and upon the same terms and conditions etc. which they would have held on the date of the commencement of the Act.

It is further contended that under Art. 310 of the Constitution it was the President of India alone who could terminate the services of the petitioners as Government servants as they held office during the President's pleasure and this could not be done by the <ORG> by Legislation. It is also urged that under Entry 70 in List I (Seventh Schedule) in the Constitution the <ORG> <ORG> could legislate with regard to <ORG> Public services but that could not be done in derogation of the provisions of Art. 310 which contains a clear provision that except as expressly provided by the Constitution, every member of a civil service of the <ORG> etc. holders office during the pleasure of the President which implies a right in the Government servant not to be removed by anyone else except the President and a poser in the President alone to remove him or terminate his services.

(5) The learned counsel for the <ORG> submits that the legislation in question was perfectly competent under Art. 309 read with Art. 242 and Entry 70 of List I (Seventh Schedule) already referred to before. It is pointed out that in substance and effect the services of the petitioners have not been terminated but on the other hand they are to hold office on the same tenure, at the same remuneration and upon the same terms and conditions and have the same rights and privileges as to pension, leave, gratuity, provident fund and other matters as they would have held on the date of the commencement of the Act. There is thus no change of the conditions of service or of tenure.

(6) On giving the matter due consideration, I am of the opinion that there is no force in the above contentions raised on behalf of the petitioners. Article 310 corresponds to the English rule that all service under the <ORG> in England is held at the pleasure of the <ORG>. In our Constitution the above rule is qualified by the words "except as expressly provided by the Constitution." Thus dismissal, removal and reduction in rank of civil servants must comply with the procedure laid down in Art. 311. There are other Articles which deal with other offices and services e.g. Art. 214 relating to persons who had been appointed by the Secretary of <ORG> or by the Secretary of <ORG> in Council to a civil service of the <ORG> in India Art. 148 with regard to the office of the Comptroller and Auditor-General of India, Art. 124 which provides for the tenure of Judges of <ORG> and Art. 217 relating to the tenure of Judges of <ORG> etc. Article 309 empowers the legislature to regulate the conditions of services of persons appointed to public services subject to the provisions of the Constitution. That has reference of these Articles of the nature mentioned before which contain special provisions with regard to the tenure and conditions of service of persons holding particular offices. Under Art. 309 the legislature would be competent to provide for and to regulate the conditions of service by even altering them, and although S. 5 of the Act expressly preserves and guarantees the same conditions as governed the petitioners before the enactment of that statute, but even if it puts an end to the service of the petitioners, as Government employees, the plenary power of the legislature in his behalf conferred by Entry 70 in List I would entitle the legislature to provide for any change or even for termination of service subject to Art. 311 of the Constitution and other Articles.

Surely Art. 310 cannot stand in the way of the legislature regulating the conditions of service in any manner it chooses fit in its wisdom. The proviso appearing in Art. 309 fortifies this conclusion as the President is empowered in case of services and post in connection with the affairs of the Union to make rules regulating the conditions of service of persons appointed until provision in that behalf is made by or under an Act of legislature under the aforesaid article and any rules so made would be subject to the provisions of any such Act enacted by the legislature. It is noteworthy that S. 5(2) of the Act makes the prior approval of the Visitor necessary for any alternation of terms and conditions of any employee by the <ORG>.

That would has been defined by S. 9 to mean the President of India. Thus all the matters stated in sub-s. (1) of S. 5 with regard to conditions of service of the employee cannot be altered except after prior approval of the President. In fact, it is not the case of the petitioners that their existing terms and conditions of service have been altered to their prejudice but what they say is that they have ceased to be members of the public services of the <ORG> and it is in that manner that the conditions of their service have been affected. This, as held before, the legislature was competent to do.

(7) In view of what has been stated above, it is unnecessary to examine the argument whether the assent given by the President to the Indian Institute of Technology (Kharagpur) Bill had the effect of terminating the status of the petitioners as Government servants by the President. It is equally pointless to examine the ancillary argument raised on behalf of the petitioners that their lien had been terminated under the Fundamental Rules which could not ordinarily be done even with their consent.

(8) The other contention on behalf of the petitioners that has been pressed is that S. 5 is violative of Art. 14 of the Constitution. It is urged that there was no justification whatsoever for depriving the Government employees who were working in the <ORG> of their status of Government servants and there has been discriminatory treatment because other <ORG> employees are still members of the public services of the Union whereas the petitioners have ceased to be so. Reference has been made to Fundamental R. 129 of S. 3 according to which the petitioners could be treated as Government servants on foreign service. It is further pointed out that the <ORG> employees who are in the service of the <ORG> are still being treated as Government servants on foreign service and their status as Government servants has not been terminated. It is submitted that the classification made is not founded on any intelligible differential and that differential does not have a rational relation to the object sought to be achieved by the statute in question.

There is hardly any force in these contentions. In the first place the classification that has been made is founded on a relational basis. Section 5 of the Act applies to all the permanent employees of the <ORG>. Thus these employees who were working in the <ORG> could form a class by themselves. As regards the question whether there exists a nexus between the basis of classification and the object of the Act, there can equally be no doubt that the Act was intended to provide for the incorporation of the <ORG> and matters connected therewith. The services of all the Government servants who were permanently employed there had to be put at the disposal of the <ORG> apparently because of their special experience and training for work in the <ORG> and because they were working there.

Thus it can be said that the tests have been laid down by their Lordships of <ORG> in <CITATION> , AIR 1958 SC 538, have not been satisfied. While examining these matters it has also to be borne in mind what has been laid down by their Lordships, namely, that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles and that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds.

(9) No other point was urged before me.

(10) In the result, these petitions fail and are dismissed, but taking into consideration the entire circumstances, I leave the parties to bear their own costs.

BD/D.H.Z.

(10) Petitions dismissed.